United States v. Archer ( 2020 )

18-3727
United States v. Archer
In the
United States Court of Appeals
for the Second Circuit
______________
AUGUST TERM 2019
Docket No. 18-3727
UNITED STATES OF AMERICA,
Appellant,
v.
DEVON ARCHER,
Defendant-Appellee,
JASON GALANIS, GARY HIRST, JOHN GALANIS, AKA YANNI, HUGH DUNKERLEY,
MICHELLE MORTON, BEVAN COONEY,
Defendants. *
______________
ARGUED: November 18, 2019
DECIDED: October 7, 2020
______________
Before: WALKER, SULLIVAN, Circuit Judges,
NATHAN, District Judge. †
*The Clerk of the Court is directed to amend the caption as set forth above.
†Judge Alison Nathan, of the United States District Court for the Southern District of New York, sitting
by designation.
______________
The government appeals from an order of the United States District Court
for the Southern District of New York (Ronnie Abrams, J.) granting Defendant
Devon Archer’s motion for a new trial pursuant to Federal Rule of Criminal
Procedure 33, following Archer’s conviction for conspiracy to commit securities
fraud, in violation of 18 U.S.C. § 371, and securities fraud, in violation of 15 U.S.C
§§ 78j(b) and 78ff, 17 C.F.R. § 240.10b-5, and 18 U.S.C. § 2. Because the weight of
the evidence presented at trial did not preponderate heavily against the jury’s
verdict, we find that the district court abused its discretion in vacating the
judgment and granting a new trial. Accordingly, the decision of the district court
is REVERSED, and the jury verdict is reinstated. The case is REMANDED to the
district court for sentencing.
______________
SARAH K. EDDY (Rebecca
Mermelstein, Negar Tekeei, on the
brief), Assistant United States
Attorneys, for Audrey Strauss, Acting
United States Attorney, for Appellant.
MATTHEW L. SCHWARTZ, Boies
Schiller Flexner LLP, New York, NY,
for Defendant-Appellee.
RICHARD J. SULLIVAN, Circuit Judge:
The government appeals from an order of the United States District Court
for the Southern District of New York (Ronnie Abrams, J.) vacating Defendant-
Appellee Devon Archer’s conviction and granting his motion for a new trial
pursuant to Federal Rule of Criminal Procedure 33. The operative indictment,
filed March 26, 2018, charged Archer with conspiracy to commit securities fraud,
2
in violation of 18 U.S.C. § 371, and securities fraud, in violation of 15 U.S.C §§ 78j(b)
and 78ff, 17 C.F.R. § 240.10b-5, and 18 U.S.C. § 2. After a month-long trial, the jury
found Archer guilty on both counts. On appeal, the government argues that the
district court abused its discretion in setting aside the jury’s verdict under Rule 33
as against the weight of the evidence. We agree.
I. BACKGROUND
A. Facts 1
This case concerns a scheme engineered by Jason Galanis (“Galanis”) and
others to defraud a tribal entity, the Wakpamni Lake Community Corporation of
the Oglala Sioux Tribe (the “Wakpamni”), of the proceeds of a series of bond
offerings worth approximately $60 million. In doing so, the conspirators harmed
not only the Wakpamni but also several investors upon whom they foisted the
Wakpamni bonds – which had no secondary market – in order to generate cash
for their own personal use.
1 “Because this is an appeal from a judgment of conviction entered after a jury trial, the . . . facts are drawn
from the trial evidence and described in the light most favorable to the [g]overnment.” United States v.
Litwok, 678 F.3d 208, 210–11 (2d Cir. 2012). Since a key component of Archer’s defense at trial and his
argument on appeal is his intent (or lack thereof), this section provides only a broad overview of the
scheme, focusing primarily on the undisputed facts. We discuss the details of Archer’s role and what the
jury could infer from the evidence regarding his knowledge and intent in the following section.
3
In early 2014, Jason Galanis, Archer, Bevan Cooney, and others were
working together to acquire financial services companies that they could “roll up”
into a large financial conglomerate with Archer at the helm. They began by
investing in Burnham Financial Group (“Burnham”), a well-established financial
services company with a prominent name that they sought to leverage in building
their own conglomerate. But to purchase additional so-called “roll-up”
companies, they needed capital.
So, in February 2014, Galanis informed Archer and Cooney that he had been
“brought a deal” for tax-free bonds from the Ogala Sioux Tribe, to which the
Wakpamni belonged. App’x 848. The next month, John Galanis, Jason Galanis’s
father, met with a representative from the Sioux Tribe and convinced the
Wakpamni to issue a series of bonds, promising that the proceeds from the sale of
these bonds would be placed into an annuity. The Wakpamni understood that the
annuity “would be like an insurance wrapper that would protect the principal
investment and generate annual income to cover the interest on the bonds as well
as generate income for” the Wakpamni’s economic development projects. Tr.
1836; see also Tr. 1850. The scheme had an air of legitimacy: John Galanis
represented to the Wakpamni that Wealth Assurance-AG, a legitimate insurance
4
company that Archer, Cooney, Jason Galanis, and others had acquired, would be
the annuity provider. The transaction documents, however, listed Wealth
Assurance Private Client Corp. (“WAPC”), a shell entity that John Galanis falsely
represented to be a subsidiary of Wealth Assurance-AG, as the annuity provider.
In June 2014, one of Archer’s co-defendants opened a bank account in the name of
WAPC (the “WAPC account”) and designated Hugh Dunkerley, another of
Archer’s eventual co-defendants, as a signatory of that account. Finally, John
Galanis represented to the Wakpamni that Burnham Securities Inc., a legitimate
registered broker-dealer, would serve as the “placement agent” responsible for
“undertak[ing] due diligence on the bonds, do[ing] a lot of legal [work] putting
together . . . the contracts[,] and then finally find[ing] investors for the bonds.” Tr.
1005.
Once John Galanis set up the Wakpamni scheme, Jason Galanis, Archer, and
others went about finding buyers for the bonds. A company with which Archer
was affiliated financed the purchase of an investment adviser, Hughes Asset
Management (“Hughes”), and Galanis installed another one of the co-defendants,
Michelle Morton, as Hughes’s CEO. In August 2014, based on John Galanis’s
promise that the proceeds would be invested in an annuity, the Wakpamni issued
5
their first set of bonds. Morton purchased the entire issue, worth $28 million, on
behalf of Hughes’s unsuspecting clients – without disclosing that the same
individuals who induced the Wakpamni to issue the bonds also controlled Hughes
and the purported placement agent. Placing the bonds in this manner, without
investor knowledge or permission, also violated several of Hughes’s clients’
investor agreements. Most importantly, the bond proceeds were then placed into
the WAPC account – not an annuity.
Unaware that the proceeds from the first bond offering had been diverted
to the WAPC account and not invested in an annuity, the Wakpamni launched a
second issuance the following month. This time around, Archer and Cooney
collectively purchased $20 million worth of bonds from the Wakpamni – with
Archer doing so through his real estate company, Rosemont Seneca Bohai LLC
(“RSB”) – using proceeds from the first offering that had been diverted to the
WAPC account. After buying the bonds, Archer and Cooney used them to satisfy
the net capital requirements of two other Archer-controlled companies, without
disclosing that the bonds were purchased with the proceeds of an earlier bond
issuance. The Financial Industry Regulatory Authority (“FINRA”) would later
6
condemn Archer’s use of the bonds in this way because the Wakpamni bonds had
“no active market.” Tr. 2097.
In April 2015, the Wakpamni issued their third and final set of bonds for $16
million. As with the first bond offering, Burnham Securities was selected as the
supposed placement agent for the bonds. At around that same time, Archer and
Cooney acquired a second investment adviser company, Atlantic Asset
Management (“Atlantic”), which (like Hughes) was led by Morton. Ultimately,
Morton and Atlantic arranged for the purchase of the entire $16 million in bonds
by a single client of Atlantic, the Omaha School Employees Retirement System
(“OSERS”). As with the first bond offering, Morton did not seek or receive
approval from OSERS for the transaction, which did not align with its investment
goals, nor did she inform OSERS of the inherent conflicts of interest that
permeated the transaction.
Once again, instead of being used to purchase an annuity for the Wakpamni,
as John Galanis had promised, the proceeds from the third bond issuance were
diverted to the WAPC account, where they were used by various conspirators for
their own personal benefit and interests. Some, like Jason Galanis and his father,
used the bond proceeds to purchase “jewelry and luxury cars,” Tr. 58, and a new
7
condo in New York City; others, like Archer and Cooney, used the bonds and the
proceeds “to further their [own] schemes,” Tr. 59, which included building “a big
financial services company” that Archer was to control, Tr. 59–60.
In the fall of 2015, the Wakpamni scheme began to unravel when the first
set of interest payments on the Wakpamni bonds became due. In September 2015,
Archer transferred $250,000 from one of his companies to the WAPC account,
which was then used to help pay the interest on the bonds from the first offering.
Soon thereafter, Galanis was arrested on unrelated charges. In October 2015, some
of the conspirators created a new entity named Calvert Capital (“Calvert”) to cover
up the scheme. As part of this effort, they fabricated backdated documents
suggesting that WAPC invested in Calvert and that Calvert lent Cooney and
Archer the $20 million to purchase the bonds from the second offering.
In the end, the Wakpamni were left with $60 million in debt, and the fund
investors lost over $40 million.
B. Procedural History
On March 26, 2018, the government filed the operative, superseding
indictment charging Archer and four others with conspiracy to commit securities
fraud, in violation of 18 U.S.C. § 371 (“Count One”), and securities fraud, in
8
violation of 15 U.S.C. §§ 78j(b) and 78ff, 17 C.F.R. § 240.10b-5, and 18 U.S.C. § 2
(“Count Two”). Count One alleged that the Defendants conspired to defraud the
Wakpamni by inducing them to issue bonds on the false promise that the proceeds
would be invested into an annuity, which the Defendants instead misappropriated
for their own use. It also charged the Defendants with conspiring to defraud
Hughes’s and Atlantic’s clients by “gaining ownership and control” of those
investment advisers “and causing client funds to be invested in the [Wakpamni]
bonds, without disclosing the material facts to these clients, including that the
bonds did not fit within the investment parameters of certain clients’ investment
advisory contracts and that certain substantial conflicts of interest existed.” App’x
136. Count Two accused the Defendants of substantive securities fraud for making
false statements and omitting material facts while “engag[ing] in a scheme to
misappropriate the proceeds of several bond issuances by the [Wakpamni]” and
in “caus[ing] investor funds” of Hughes’s and Atlantic’s clients “to be used to
purchase the bonds.” App’x 134–56; see also Tr. 4146. Alternatively, Count Two
alleged that the Defendants aided and abetted the securities fraud.
Four Defendants charged in the case – Jason Galanis, Gary Hirst, Hugh
Dunkerley, and Michelle Morton – pleaded guilty prior to trial, with Dunkerley
9
doing so pursuant to a cooperation agreement with the government. 2 Archer
proceeded to a jury trial along with two of his co-defendants, John Galanis and
Bevin Cooney. A key issue at trial, which forms the basis of this appeal, was
whether Archer, a businessman with connections to high-profile business and
political leaders, was a knowing participant in the scheme or was simply a victim
of Jason Galanis’s fraud.
Trial commenced on May 22, 2018 and ended on June 28, 2018, at which time
the jury convicted Archer, John Galanis, and Cooney on both counts. After trial,
Archer and his trial co-defendants moved for acquittal under Federal Rule of
Criminal Procedure 29 or, in the alternative, for a new trial under Rule 33. The
district court denied all motions except Archer’s motion for a new trial. See Galanis,
366 F. Supp. 3d 477.
With respect to Archer’s Rule 29 motion, the district court recognized that,
“drawing every inference in the government’s favor, as the [c]ourt is required to
do under Rule 29, [it] [could not] conclude that no reasonable jury could have
convicted [Archer], particularly because the primary issue was intent and the
government presented a substantial amount of circumstantial evidence to that
2Jason Galanis was charged in the original indictment but pleaded guilty before the government filed the
operative indictment.
10
effect.” Id. at 492. Nevertheless, in addressing Archer’s motion for a new trial
pursuant to Rule 33, the district court concluded that while “[t]he government's
reliance on circumstantial evidence is of course perfectly appropriate” and “the
government’s case against Archer is not without appeal at first blush[,] . . . when
each piece of evidence in this indisputably complex case is examined with scrutiny
and in the context of all the facts presented, the government’s case against Archer
loses much of its force.” Id.
Concerned that Galanis deceived many of those around him, including
those knowingly involved in his schemes, the district court determined, as a
factfinder would do, “that Galanis viewed Archer as a pawn to be used in
furtherance of his various criminal schemes.” Id. The district court was further
troubled “by the government’s inability throughout trial to articulate a compelling
motive for Archer to engage in this fraud,” noting that “Archer never received
money from the purported annuity provider, nor did he profit directly from the
misappropriation of the bond proceeds.” Id. And while the district court
acknowledged that the government’s theory regarding Archer’s motive – his
“admitted interest in the roll up being successful” – could not be “dismiss[ed] . . .
entirely,” it nevertheless concluded that this motive was not “compelling” and
11
was “mitigated” by the fact that Archer ultimately lost a significant portion of the
funds that he himself had invested into the scheme. Id. at 492–93.
The district court stated that, because the evidence was subject to multiple
interpretations, it “remain[ed] unconvinced that Archer knew that Jason Galanis
was perpetrating a massive fraud.” Id. 493. It emphasized “the unique
considerations pertaining to [Archer’s] relationship with Jason Galanis” – namely,
what it saw as Galanis’s efforts to keep Archer in the dark while simultaneously
touting Archer’s political and business connections – as well as “potential juror
confusion over a government summary chart admitted as an exhibit.” Id. at 505.
The district court announced that, “when viewing the entire body of evidence,
particularly in light of the alternative inferences that may legitimately be drawn
from each piece of circumstantial evidence, . . . [it] harbor[ed] a real concern” that
Archer did not have the requisite intent and was instead “innocent of the crimes
charged.” Id. at 507. The district court therefore granted Archer’s Rule 33 motion
and ordered a new trial. Id. The government timely appealed.
II. STANDARD OF REVIEW
“We review the decision of the district court to grant a new trial for abuse
of discretion.” United States v. Ferguson, 246 F.3d 129, 133 (2d Cir. 2001). A district
12
court abuses its discretion “when (1) its decision rests on an error of law (such as
application of the wrong legal principle) or a clearly erroneous factual finding, or
(2) its decision – though not necessarily the product of a legal error or a clearly
erroneous factual finding – cannot be located within the range of permissible
decisions.” United States v. Forbes, 790 F.3d 403, 406 (2d Cir. 2015).
III. DISCUSSION
On appeal, the government argues that the district court abused its
discretion in granting Archer’s Rule 33 motion because the evidence did not
“preponderate heavily against the verdict.” Gov. Br. at 33. It further argues that
in assessing the evidence, the district court inappropriately disregarded the jury’s
resolution of conflicting evidence and failed to consider the weight of the evidence
in its entirety. We agree. 3
A. To Grant a Rule 33 Motion Based on the Weight of the Evidence Alone, the
Evidence Must Preponderate Heavily Against the Verdict
Under Rule 33, “the court may grant a new trial to [a] defendant if the
interests of justice so require.” Fed. R. Crim. P. 33. While we have held that a
3The government also contends that the district court failed to consider that Archer’s guilty knowledge
could be proved by conscious avoidance, as the jury was instructed. Because we hold that the district court
applied the incorrect standard and that the jury was entitled to conclude that Archer knowingly
participated in the scheme, we need not reach this argument.
13
district court may grant a new trial if the evidence does not support the verdict,
we have emphasized that such action must be done “‘sparingly’ and in ‘the most
extraordinary circumstances.’” Ferguson, 246 F.3d at 134 (quoting United States v.
Sanchez, 969 F.2d 1409, 1414 (2d Cir. 1992)). Nevertheless, we have not always been
clear about what constitutes an “extraordinary circumstance” that can justify a
district court’s decision to overturn a jury’s verdict. We now clarify that rule and
hold that a district court may not grant a Rule 33 motion based on the weight of
the evidence alone unless the evidence preponderates heavily against the verdict
to such an extent that it would be “manifest injustice” to let the verdict stand. See
Sanchez, 969 F.2d at 1414.
The “preponderates heavily” standard finds support in our decision in
Sanchez, 969 F.2d 1409. There, we considered the district court’s grant of a Rule 33
motion based on what the district judge considered to be perjured testimony. We
first concluded that the district court erred in finding that several police officers
committed perjury simply because their recollection of the events at issue differed.
Id. at 1415. Since the testimony shared many consistent aspects, “the differences
in testimony” presented, at most, “a credibility question for the jury.” Id. But even
discounting that testimony, we emphasized that “[i]t surely cannot be said . . . that
14
the evidence ‘preponderate[d] heavily against the verdict, such that it would be a
miscarriage of justice to let the verdict stand.’” Id. (quoting United States v.
Martinez, 763 F.2d 1297, 1313 (11th Cir. 1985)).
The “preponderates heavily” standard is not limited to cases like Sanchez in
which a district court, after discounting certain questionable evidence, must assess
the weight of the remaining evidence supporting the conviction. It also applies
with equal, if not stronger, force to cases in which a district court examines the
weight of the evidence as a whole – all of which the jury reasonably and
appropriately relied on in reaching its verdict. Our clarification that the
“preponderates heavily” standard applies in such cases is in accord with the
standard used by several of our sister circuits. See United States v. LaVictor, 848
F.3d 428, 455–56 (6th Cir. 2017) (“A motion for a new trial . . . is . . . granted only
in the extraordinary circumstances where the evidence preponderates heavily
against the verdict.” (internal quotation marks omitted)); United States v. Robertson,
110 F.3d 1113, 1118 (5th Cir. 1997) (“The evidence must preponderate heavily
against the verdict, such that it would be a miscarriage of justice to let the verdict
stand.”); United States v. Alston, 974 F.2d 1206, 1211–12 (9th Cir. 1992) (agreeing
with the Eighth Circuit’s conclusion that the district court, in granting a new trial
15
based on the sufficiency of the evidence, should look to whether the evidence
“preponderates sufficiently heavily against the verdict” (quoting United States v.
Lincoln, 630 F.2d 1313, 1319 (8th Cir. 1980)); United States v. Reed, 875 F.2d 107, 114
(7th Cir. 1989) (“[T]his is not one of those ‘exceptional cases’ where the evidence
preponderates so heavily against the defendant that it would be a manifest
injustice to let the guilty verdict stand.”); Martinez, 763 F.2d at 1313 (“The evidence
must preponderate heavily against the verdict, such that it would be a miscarriage
of justice to let the verdict stand.”).
We stress that, under this standard, a district court may not “reweigh the
evidence and set aside the verdict simply because it feels some other result would
be more reasonable.” Robertson, 110 F.3d at 1118; see also Van Steenburgh v. Rival
Co., 171 F.3d 1155, 1160 (8th Cir. 1999) (holding that a district court may not grant
a new trial “simply because it believes other inferences and conclusions are more
reasonable”). To the contrary, absent a situation in which the evidence was
“patently incredible or defie[d] physical realities,” Ferguson, 246 F.3d at 134
(quoting Sanchez, 969 F.2d at 1414), or where an evidentiary or instructional error
compromised the reliability of the verdict, see id. at 136–37, a district court must
“defer to the jury’s resolution of conflicting evidence,” United States v. McCourty,
16
562 F.3d 458, 475–76 (2d Cir. 2009). And, as it must do under Rule 29, a district
court faced with a Rule 33 motion must be careful to consider any reliable trial
evidence as a whole, rather than on a piecemeal basis. See, e.g., United States v.
Middlemiss, 217 F.3d 112, 117 (2d Cir. 2000).
Importantly, we do not find this standard to conflict with our holding in
Ferguson. In Ferguson, the district court not only explicitly applied the
preponderates heavily standard that we adopt today, see United States v. Ferguson,
49 F. Supp. 2d 321, 323 (S.D.N.Y. 1999), aff’d, 246 F.3d 129 (2d Cir. 2001), it did so
following a trial infected by several errors, none of which are present here. In
Ferguson, the defendant was convicted of committing a violent crime in aid of
racketeering, which requires that one use or threaten violence for at least one of
three possible purposes: (1) pecuniary gain, (2) “gaining entry” into an
“enterprise,” which in that case was a gang, or (3) “maintaining or increasing
[one’s] position” in that enterprise. 18 U.S.C. § 1959(a); see Ferguson, 246 F.3d at
134. Although the district court instructed the jury as to all three possible motives,
Ferguson, 49 F. Supp. 2d at 324, it recognized, in granting the defendant’s Rule 33
motion, that there was legally sufficient evidence supporting only the pecuniary
gain motive, id. at 327–30, and it was therefore “error to have charged on all three
17
of the motivational alternatives,” id. at 324 n.5. The district court further explained
that the only evidence supporting the pecuniary motive was the vague, suspect
testimony of an interested witness, which alone was simply “too slender . . . to
support a guilty verdict.” Id. at 328–29. Moreover, the district court stated that its
denial of Ferguson’s motion to sever his trial from that of his co-defendants was
reversible error alone, as it exposed the jury to “weeks of testimony regarding
successful murders and assaults, none of which involved” the defendant. Id. at
330.
In short, Ferguson was an “exceptional” case warranting a new trial.
Ferguson, 246 F.3d at 134–35. While we did not explicitly acknowledge that the
evidence preponderated heavily against the verdict, the standard we laid out in
Ferguson is not in tension with the “preponderates heavily” standard that we
explicitly adopt today. Moreover, the factual circumstances underlying our
decision in Ferguson are simply not present here.
In sum, while we review a district court’s decision to grant a new trial based
on the weight of the evidence for abuse of discretion – not a “more stringent
standard of review,” id. at 133 n.1 – the district court’s discretion in such cases is
18
not without limit. Instead, the “preponderates heavily” standard circumscribes
that discretion, and provides much needed guidance to district courts.
B. The Evidence Here Did Not Preponderate Heavily Against the Verdict
The evidence introduced at trial did not preponderate heavily against the
jury’s verdict. In ruling on Archer’s Rule 33 motion, the district court found that
it “was clear that material misstatements and omissions were made in connection
with the sale of securities,” and therefore focused on “[t]he only seriously disputed
element” – Archer’s intent. S. App’x 11. For Count Two, the substantive securities
fraud charge, this was whether Archer acted “[w]illfully” and with the “[i]ntent to
defraud,” Tr. 4153, 4161–62, or, in the event the jury found him guilty of aiding
and abetting, whether he “willfully, knowingly associated himself in some way
with the crime and that he willfully and knowingly would seek by some act to
help make the crime succeed,” Tr. 4159. And with respect to Count One, the
conspiracy charge, the government was required to prove Archer “willfully and
knowingly became a member of the conspiracy, with intent to further its illegal
purposes – that is, with the intent to commit the object of the charged conspiracy.”
Tr. 4165. Thus, the government was required to show that Archer had “at least
the degree of criminal intent necessary for the substantive offense itself,” United
19
States v. Feola, 420 U.S. 671, 686 (1975), but was not required to show that he “knew
all of the details of the conspiracy, so long as he knew its general nature and
extent,” United States v. Torres, 604 F.3d 58, 65 (2d Cir. 2010) (internal quotation
marks omitted) (quoting United States v. Huezo, 546 F.3d 174, 180 (2d Cir. 2008)).
In concluding that the evidence did not support the jury’s finding, the
district court relied on this Circuit’s prior case law on the proper standard, which
we are clarifying today. But when the facts of this case are assessed under the
preponderates heavily standard outlined above, we are left with the unmistakable
conclusion that the jury’s verdict must be upheld.
1. The Promise of an Annuity and Misappropriation of Funds
During trial, the jury reviewed a wealth of emails in which Archer, Cooney,
and Galanis discussed the progression of the Wakpamni scheme, which the
government argued reflected Archer’s knowledge of the scheme and intent to
misappropriate the bond proceeds.
Throughout the first half of 2014, Galanis ensured that Archer stayed up to
date on the deal with the Wakpamni, including by informing Archer that the
proceeds from the sale of the bonds were supposed to be placed into an annuity.
Yet Galanis also repeatedly emphasized that the proceeds from the bonds would
20
provide them with “discretionary liquidity” to use to further their financial
empire. See, e.g., App’x 862, 866. As the government argues, the idea that they
could use bond proceeds however they chose stood in sharp tension with the
conservative annuity investment that the Wakpamni were promised and about
which Archer was fully apprised.
Nonetheless, in setting aside the jury’s verdict, the district court found that
this evidence did not reflect Archer’s intent, contending that the language in the
emails was “facially innocuous or, at best, most naturally subject to innocent
interpretations.” Galanis, 366 F. Supp. 3d at 495. But while much of the language
in these emails, such as the term “discretionary liquidity,” could be subject to both
legitimate and nefarious interpretations, the jury did not “misinterpret[]” the
emails in concluding the latter. Id. at 496. One email, the import of which the
parties hotly disputed during oral argument, provides a key example: On July 20,
2014, Galanis sent Archer an email alerting him that “the indians signed . . . our
engagement” and sending him the contact information of the lawyer advising the
Wakpamni on the deal. App’x 786. Galanis instructed Archer that while there
was “[n]othing for [Archer] to do at this point,” it “may[ ]be good for [the
Wakpamni’s counsel] to know that you [(Archer)] are associated with the
21
insurance company at the right moment,” which “might be nice icing on the cake.”
Id. He further added that “[t]he use of proceeds is to place the bonds into a Wealth
Assurance annuity,” which would then be “invested by an appointed manager on
a discretionary basis.” Id. While the district court concluded that this email was
better read as “exculpatory because Galanis is specifically representing that the
bond proceeds would be placed in an annuity,” Galanis, 366 F. Supp. 3d at 497, it
could also reasonably be read as Galanis providing tacit instructions to Archer
regarding their cover story. Either way, it was not the province of the district court
to reweigh the evidence in that regard. See Van Steenburgh, 171 F.3d at 1160 (“On
a motion for new trial, the district court is entitled to interpret the evidence and
judge the credibility of witnesses, but it may not usurp the role of the jury by
granting a new trial simply because it believes other inferences and conclusions
are more reasonable.”).
Moreover, the government did not present this email to the jury in isolation.
Instead, it introduced a string of emails connecting the bond deal with Galanis’s
apparent intent to spend the funds as he saw fit – not only on other financial
services companies but also on a condo in Manhattan’s Tribeca neighborhood. For
instance, on July 11, 2014, Galanis and Archer emailed about the closing date of
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the Wakpamni deal. In the course of this same email chain, Galanis stated they
were “[s]o close” and that he was “[m]assively motivated” because his attorney,
Clifford Wolff, was “running the stall for [him] on [his] nyc mansion,” and he did
not want to live in a “1750 square foot cage.” App’x 869. Once the deal closed,
Galanis did in fact purchase a new condo in Tribeca – in the name of an LLC
bearing Archer’s name and business address – using approximately $1 million of
funds from the WAPC bank account.
While the district court discounted the email evidence linking Galanis’s
purchase of a Tribeca condo with the closing of the bond deal because it was “not
convinced” that this showed Archer’s knowledge, Galanis, 366 F. Supp. at 499, it
was not for the district court to second guess the jury’s clear choice of a different
inference – namely, that Archer knew Galanis diverted the money meant for the
purported annuity for his own personal use.
These emails can reasonably be read to demonstrate both that Archer knew
the proceeds were supposed to be invested into an annuity and that Galanis
demonstrated no restraint in spending the funds for personal gain. Thus, when
taken as a whole, they provided strong support for the jury to find that Archer
knew that the bond proceeds were being misappropriated. We are therefore
23
confident that the trial evidence, while circumstantial, did not “preponderate[]
sufficiently heavily against the verdict that a serious miscarriage of justice may
have occurred.” Alston, 974 F.2d at 1211 (internal quotation marks omitted).
2. Hughes and Atlantic
The evidence also strongly supported an inference that Archer intended to
help the conspirators defraud Hughes’s and Atlantic’s clients by purchasing the
bonds without informing them of the conflicts of interest that riddled the
transactions – in violation of the terms of the clients’ investment agreements.
As even the district court acknowledged, there was ample evidence
showing that Galanis, Archer, and Cooney acquired control of Hughes and
Atlantic specifically to place the Wakpamni bonds with their clients so that they
could generate funds to acquire various roll-up companies. See Galanis, 366 F.
Supp. 3d at 498. For instance, Jason Galanis emailed Archer and Cooney in May
2014, alerting them to the possibility of acquiring Hughes, which he said would be
“possibly useful,” App’x 854, and he kept Archer updated about the deal to
acquire Hughes as it progressed, repeatedly alluding to the Wakpamni bonds in
doing so. Galanis told Archer that he “believe[d] Hughes would take $28 million”
of the Wakpamni bonds. App’x 871–72. And that is precisely what transpired:
24
The Hughes acquisition closed on or about August 11, 2014, and on August 22,
2014, Hughes purchased the entire first Wakpamni bond offering, worth $28
million, on behalf of its clients.
The email evidence told a similar story with respect to the Atlantic
acquisition. Before the deal had closed, Morton sent Galanis an email – which
Galanis forwarded to Archer – stating that she was reviewing Atlantic’s portfolio
to determine where the Wakpamni bonds could be placed. Atlantic then bought
$16 million in Wakpamni bonds on behalf of one of its clients, OSERS.
The district court stressed that there was “nothing inherently illegal or
illegitimate about these transactions;” rather, the fraud was that “bonds were
purchased for their clients without disclosure of all of the potential conflicts of
interest and [that] the bonds fell outside certain clients’ investment parameters.”
Galanis, 366 F. Supp. 3d at 498. And it found that Archer had “no indication . . .
that the individuals in control of the investment advisers . . . would fail to disclose
the conflicts of interest or violate the terms of the clients’ investor agreements.” Id.
at 498–99.
But direct evidence was not required, as “[b]oth the existence of a conspiracy
and a given defendant’s participation in it with the requisite knowledge and
25
criminal intent may be established through circumstantial evidence.” United States
v. Stewart, 485 F.3d 666, 671 (2d Cir. 2007). The jury was entitled to credit the
circumstantial evidence that Archer knew that his co-defendants – with whom he
had worked to acquire these companies specifically to offload the Wakpamni
bonds – would then place the bonds into their investors’ accounts without
disclosing the conflicts of interest. The very nature of the transactions was surely
suspect, particularly in light of Galanis’s questionable reputation and regulatory
troubles, of which Archer was well aware. Indeed, while Galanis had not yet been
charged criminally at the time of the scheme, he had previously been barred from
serving as a director of a public company “due to accounting irregularities” with
another organization with which Galanis was involved. Tr. 905. There was
testimony at trial that this fact was readily available on the internet, and Archer
specifically acknowledged how “challenging” it was to “defend[]” Galanis in light
of his questionable reputation. App’x 905–08. And the record clearly
demonstrates that the companies were acquired specifically to offload the bonds.
For instance, the trial evidence included the email – which Galanis forward to
Archer – in which Morton sought to place the bonds in the investor accounts before
the bond deals had even closed. Additionally, just days before the OSERS
26
purchase, Galanis noted the need to “finesse” an Atlantic managing director who
would have to be “marginalized,” prompting Archer to inquire how they could
“get ahead of” the director. App’x 900.
At a minimum, the email exchange reflected Archer’s awareness that
Galanis and Morton were investing in ways that would be objectionable to the
directors – which can reasonably support a finding of his nefarious intent. When
considered together and as a whole, there was ample circumstantial evidence from
which the jury could conclude that Archer knew that Galanis and the other
conspirators were dumping Wakpamni bonds on unsuspecting investors who
were oblivious to the serious conflicts of interest that infected the transactions.
More to the point, the evidence certainly did not preponderate heavily against
such a finding.
3. The Source of Funds for the Second Bond Purchase
The jury was also entitled to find that Archer, in Ponzi-like fashion, intended
to promote the scheme by knowingly purchasing the bonds from the second
issuance with proceeds from the first. Soon after the initial offering, John Galanis
advised the Wakpamni to issue a second set of bonds worth $20 million, falsely
assuring them that additional investors wanted to invest “right away.” Tr. 1853–
27
54; see also Tr. 221. After again saying that the proceeds would be used to purchase
an annuity, John Galanis represented that a “Burnham client who was excited
about what had occurred with the first bond issue” wanted to purchase the
additional bonds. Tr. 221. In reality, there was no “Burnham client” interested in
purchasing the bonds; instead, Archer, through his real estate company RSB,
purchased $15 million in Wakpamni bonds with funds that originated in the
WAPC account – the proceeds from the first bond offering, which were supposed
to be invested in an annuity.
To accomplish this, Archer represented to the Wakpamni in a letter that he
was a sophisticated investor purchasing the bonds “for [his] own account and for
investment only,” App’x 618–19; Cooney signed a similar letter. And while the
parties vigorously disputed whether this was a material misstatement in its own
right, the jury was certainly entitled to endorse the government’s view “that these
statements were themselves deceptive, given that, in making them, Archer
portrayed himself (through RSB) as a legitimate investor . . . using its own funds
to invest.” (16-cr-371, Doc. No. 623 at 54 n.16.) The jury’s conclusion was amply
supported by the fact that the funds used to purchase the bonds were not Archer’s
at all; instead, the $15 million came from Jason Galanis, who transferred the bulk
28
of the proceeds from the first bond offering out of the WAPC account, through
numerous intermediaries, to an account controlled by Archer’s company, RSB.
Significantly, the last link in the chain of intermediaries was Galanis’s attorney,
Clifford Wolff, whom Archer knew to be the lawyer involved in Galanis’s Tribeca
condo purchase.
Focusing on the circuitous route by which the funds reached RSB’s account,
the district court drew the opposite inference to conclude that Archer was a victim
of Galanis’s deception, unaware that the funds were derived from the
misappropriated bond proceeds. Galanis, 366 F. Supp. 3d at 493–94. But while the
complex transaction and use of intermediaries strongly suggested that Galanis
intended to conceal the source of the funds, the jury was not required to conclude
that he intended to conceal the source of the funds from Archer. At the very least,
Archer knew that the money he was using to purchase Wakpamni bonds “for [his]
own account and for investment only” came from Galanis; he also had some
insight into the complex route the money would take, and knew that Galanis
would be transferring funds into one of his own accounts and sending them
through Wolff so that Wolff could transfer them to Archer’s RSB account. From
29
this constellation of facts, the jury was certainly free to draw the inference that
Archer knew that the transactions were part of a fraudulent scheme.
The district court also emphasized that Dunkerley, despite being more
involved in the fraud than Archer, did not realize that the funds used for the RSB
purchases were from the misappropriated proceeds of the first bond offering. Id.
But Dunkerley’s knowledge had no bearing on Archer’s, particularly since Galanis
shared with Archer – and not Dunkerley – concerns about his lack of capital prior
to transferring the $15 million to Archer. The sudden appearance of $15 million –
just weeks after Galanis had repeatedly told Archer that he needed “discretionary
liquidity,” App’x 866, and money to buy his “nyc mansion,” App’x 869 –
supported a finding that the $15 million came from the first bond offering. There
would, of course, typically be a distinction between one’s personal liquidity and
the liquidity of the company that person manages. But here the jury could
justifiably conclude that there was no such distinction for Galanis, and that,
instead of investing the proceeds, he was diverting the funds for his own personal
use, including the purchase of a luxury New York condominium in the name of
“Archer Diversified TRG, LLC.” S. App’x 914; see also App’x 869 (discussing the
closing of the deal and the condo purchase in the same chain). The jury could also,
30
then, conclude that the $15 million that appeared in Archer’s account just one
month later, from the same attorney who was handling Galanis’s condo purchase,
was from the same source – the proceeds from the first bond offering that had been
diverted to the WAPC account.
The jury was certainly entitled to rely on this evidence to conclude that
Archer knew the source of the $15 million he received from Galanis to purchase
the second set of Wakpamni bonds. Absent exceptional circumstances, a district
court confronted with a Rule 33 motion may not act as the factfinder, discounting
substantial circumstantial evidence or making contrary factual findings based on
inferences that the jury clearly rejected. See McCourty, 562 F.3d at 475–76 (“Because
the courts generally must defer to the jury’s resolution of conflicting evidence and
assessment of witness credibility, ‘[i]t is only where exceptional circumstances can
be demonstrated that the trial judge may intrude upon the jury function of
credibility assessment.’” (quoting Sanchez, 969 F.2d at 1414)); see also Robertson, 110
F.3d at 1118. No such exceptional circumstances were present here.
4. Archer’s Lies During the Conspiracy
Perhaps the strongest evidence of Archer’s guilty knowledge were his lies
to two banks and the board of directors of the Burnham Investors Trust (the “BIT
31
Board”) concerning the source of the funds for the second bond purchase and his
relationship with Galanis. See United States v. Anderson, 747 F.3d 51, 60 (2d Cir.
2014) (“[A]cts that exhibit a consciousness of guilt, such as false exculpatory
statements, may . . . tend to prove knowledge and intent of a conspiracy’s purpose
. . . .” (internal quotation marks omitted)). In late September and early October
2014, Archer made several false representations regarding the source of the funds
used to purchase the bonds from the second bond offering. Specifically, he told
Deutsche Bank that his company had “come to own these bonds” through a “Real
Estate Sale.” App’x 781. Similarly, he told Morgan Stanley, where he ultimately
deposited the bonds, that the $15 million used to purchase the bonds was
“generated through [the] sale of real estate.” App’x 658–59. At trial, the
government introduced a “Client Representation Letter” completed by a Morgan
Stanley employee who communicated with Archer in connection with the bonds;
the business record summarized Archer’s statement that the “funds used to
purchase the bonds were from real estate sales through [his] business, Rosemont
Seneca Bohai, LLC.” App’x 663. That same employee testified at trial that she
“would not have written something [in that document] that a client did not say.”
Tr. 867. And Archer told that employee in an email that he came to know of the
32
purchase because he was a “shareholder” of Burnham Financial, which “packaged
the issuance.” App’x 658–59. Later, after depositing his bonds at a different bank
“without a hitch,” Cooney told Archer that Archer “[n]eed[ed] to get . . . out of
Morgan Stanley,” App’x 787, which could reasonably be read to suggest that
Archer should move the bonds to a bank that would less closely scrutinize his
transactions.
The district court stated that it “remain[ed] unconvinced” that these lies
reflected Archer’s knowledge that Galanis was stealing the bond proceeds, Galanis,
366 F. Supp. 3d at 493, speculating that Archer “may well have repeated a lie told
to him by Galanis,” id. at 501, or that perhaps the Morgan Stanley employee who
completed the form indicating the source of the funds simply assumed they came
from Archer’s real estate transactions. But the first explanation is not supported
by the record, as there was no evidence that Galanis ever told Archer that the
bonds were from real estate transactions. And the second explanation is at odds
with the employee’s testimony that she would not have written such information
down unless it came from the client. The district court also speculated that Archer
may have been trying to hide that Galanis sent him the bonds because of Galanis’s
“well-documented checkered past,” which made him a “highly controversial
33
figure.” Id. But the jury was the factfinder, and the district court was not permitted
to create a different narrative by crediting inferences that the jury clearly rejected.
And Archer not only lied to the banks. Around this same time, he also
misled the BIT Board about Galanis’s involvement with the Burnham companies.
Again, Archer and the others sought to acquire control of various Burnham
companies in order to leverage the prominent Burnham name in building their
own conglomerate. When Archer requested the BIT Board’s approval to acquire
another Burnham subsidiary, the BIT Board sought certain assurances. Then,
during a BIT Board meeting on October 1, 2014, Archer warranted that Galanis
“w[ould] not be involved with any of the Burnham entities[,] their ‘affiliated
persons[,]’” or “their successors or assigns.” App’x 748. He further pledged that
Galanis “w[ould] have no interest of any kind, direct or indirect, in any of the
Burnham entities,” and that “the Burnham entities will not invest with or in,
directly or indirectly, any business or enterprise in which Mr. Galanis has any
association, affiliation, or investment, pecuniary or otherwise, directly or
indirectly.” App’x 748.
While Archer did not make this warranty in the context of the Wakpamni
scheme directly, his response, at a minimum, was misleading. Galanis, of course,
34
spearheaded the Wakpamni scheme, and Burnham entities, including the
placement agent, Burnham Securities Inc., were intimately involved in that
scheme. Galanis also supplied money for Archer to buy the bonds from the second
offering, which Archer would use to support the net capital of companies he
controlled, including a Burnham entity.
The district court nevertheless “remaine[d] unconvinced” that Archer made
these statements “because he knew that Jason Galanis was stealing the bond
proceeds.” Galanis, 366 F. Supp. 3d at 501. But a trial court “must defer to the
jury’s resolution of the weight of the evidence,” Sanchez, 969 F.2d at 1414 (internal
quotation marks omitted), and may not weigh the competing inferences and
choose the one it finds “[m]ore likely,” Galanis, 366 F. Supp. 3d at 501. And the
mere fact that competing inferences existed does not compel a finding that the
evidence preponderated heavily against the verdict.
5. The Cover-up
Finally, there was persuasive evidence that Archer knowingly performed
two key actions in furtherance of a cover-up designed to delay discovery of the
scheme. First, on September 1, 2015, he transferred $250,000 to WAPC – the
purported annuity provider – when the first set of interest payments were due.
35
These funds were then used to help pay the interest on the bonds, thereby delaying
disclosure of the fraud. Jason Galanis later repaid Archer in part, which he did
using money from entities that had received proceeds from the third offering.
The district court found the “inference urged by Archer” – that he was
simply providing needed short-term liquidity – “equally if not more compelling”
than the government’s contention that Archer intended to prop up the scheme to
forestall the revelation that would come with defaulting on the payments. Id. at
503. But even Archer does not dispute that he had no legitimate affiliation with
WAPC, which, despite the similar name, was not connected to Wealth Assurance
Holding, with which Archer was affiliated and which had been falsely represented
to the Wakpamni as the annuity provider. Thus, while it may have been true, as
the district court observed, that Archer often infused cash into his companies for
legitimate purposes, WAPC was not one of Archer’s companies. Whether or not
Dunkerly or Galanis ever discussed the true nature of WAPC with Archer, the jury
was certainly entitled to infer that Archer’s transfer of $250,000 to a company with
which he was not affiliated, completed shortly before the interest on the first bonds
was due, reflected his knowledge of the scheme and was designed to prevent it
from unraveling in the event of a default.
36
Second, Archer made false statements concerning Calvert, the fraudulent
entity created to cover the conspiracy’s tracks and delay discovery of the scheme.
While the government acknowledges that it did not present any direct evidence
showing that Archer created any fake Calvert documents or gave any to
regulators, as Cooney had done, it did present clear evidence that Archer explicitly
used Calvert’s name in furtherance of the scheme. Specifically, on November 25,
2015, Archer sent an email to an employee at a roll-up company that had taken
possession of some of the bonds from the second offering, stating that the bonds
needed “to be replaced/returned to Calvert” as “the lender and beneficial owner”
of the bonds. App’x 912. Obviously, Calvert was not the “lender and beneficial
owner” of the bonds, as Archer claimed, since it had not even existed when Archer
purchased the bonds and never lent Archer money for the bond purchases or
anything else.
The district court downplayed this email, reasoning that “a single reference
to Calvert in an email does not establish” Archer’s knowledge. Galanis, 366 F.
Supp. 3d at 504. It further concluded that “the weight of the evidence undercuts
the notion that Archer was aware of the Calvert cover-up” since “Jason Galanis
and Hugh Dunkerley came up with the idea for the entity,” “Dunkerley testified
37
that neither he nor anyone else discussed Calvert with Archer,” and Archer was
not involved in backdating the Calvert forms. Id. But Archer clearly knew that
Calvert was not the beneficial owner of the bonds, as he was involved in the bond
issuance. Perhaps “a single reference” to Calvert would be insufficient if the
record were otherwise devoid of evidence, but it was not, and the jury was entitled
to draw inferences as to Archer’s knowledge and intent from his explicit lie to a
third party made during the course of and in furtherance of the cover-up.
***
The review of the evidence above illuminates two broader concerns we have
with the district court’s ruling. First, the preponderates heavily standard
specifically requires that the district court make a comprehensive assessment of
the evidence. While the district court acknowledged that the “case must be
assessed as a whole, rather than taking each piece of evidence in isolation,” id. at
507, its analysis veered into a piecemeal assessment of the evidence that
understated the weight of the proof in its totality. Indeed, in rejecting Archer’s
Rule 29 motion, the district court recognized that there was “a substantial amount
of circumstantial evidence” showing Archer’s intent, which was subject to
competing inferences. Id. at 492. This evidence, when viewed as a whole, strongly
38
supported that Archer knew at least the general nature and extent of the scheme
and intended to bring about its success. At a minimum, that evidence did not
preponderate heavily against the verdict in this regard.
Second, the preponderates heavily standard does not permit a district court
to elevate its own theory of the evidence above the jury’s clear choice of a
reasonable competing theory. Specifically, the district court here adopted the
defense’s theory that Archer was duped by Galanis, and in doing so improperly
discredited the competing arguments regarding Archer’s reasons for participating
in the fraud. The district court noted that “Jason Galanis operated to keep people
in the dark, even those who were undoubtedly willful participants in his various
crimes.” Id. at 505. It noted that “his efforts as to Archer were even more
concerted,” citing Galanis’s attempts to keep Archer away from Dunkerely and
how “the members of the conspiracy spoke of Archer when he was not present,
burnishing his credentials to others and describing him, among other things, as
‘the biggest show pony of all time’ whose involvement would ‘add layers of
legitimacy’ to the various deals.” Id. It noted that, “[a]t the same time Archer was
spoken of in this manner, Galanis was simultaneously operating to ingratiate
himself with Archer,” which “further suggests that Archer was not a party to this
39
conspiracy but was instead being manipulated by a skillful con artist.” Id. While
this theory was by no means outlandish and does find some support in the record,
the fact remains that defense counsel promoted it at length during trial, and the
jury rejected it. Moreover, while there assuredly was evidence that Galanis
paraded Archer’s credentials to facilitate the fraud, there was also evidence that
Archer both knew this and willingly allowed Galanis to do so.
The government, by contrast, presented a competing theory regarding
Archer’s motive to engage in the fraud that the jury found “compelling” even if
the district court did not. Id. at 492. In its opening statement, the government
argued that the Defendants “needed money . . . to fund their business empire,” Tr.
54, and that they “planned to use [the $60 million bond purchase] for themselves
and for their own businesses,” Tr. 56. Although the prosecution contrasted John
Galanis’s goals with those of Archer and Cooney – that is, while John Galanis spent
money on “jewelry and luxury cars, . . . Archer and Cooney planned to make that
money work for them quietly,” Tr. 58 – the distinction was hardly exculpatory.
The government’s theory that Archer and Cooney intended “to use the bonds for
themselves to further their schemes,” Tr. 59, which included building “a big
40
financial services company under the Burnham name,” Tr. 59–60, was fully
consistent with the evidence in the case.
During summation, the government again emphasized that “[t]he
Wakpamni bonds were a massive fraud, a scam, a scheme . . . to fund the luxurious
lifestyles of the few, [and] to fund personal business ventures” of others. Tr. 3595.
It repeated, yet again, that Archer and Cooney benefited from using the $20 million
worth of bonds “for their own business purposes” and to support their “financial
empire.” Tr. 3650. Although Archer may not have received an envelope of cash
or a condo from the scheme, the district court’s finding that there was no
“compelling” motive presented to the jury was simply incorrect. While the district
court placed considerable emphasis on the extent to which Archer knew of
Galanis’s personal gain from the fraud, it is clear that the fraud had multiple
motivations, and it was not necessary that Archer be fully versed in all of them.
The jury had before it considerable evidence from which it could conclude that a
second motive, more personal to Archer, existed and was furthered by the
scheme. 4
4Although the district court further concluded that the summary chart reflecting the chain of payments in
the scheme was so misleading that it supported overturning the jury’s verdict and granting a new trial, we
are unpersuaded. The summary chart showed a payment that was accidentally made to Archer’s company,
RSB, and reversed twelve days later. Even if arguably somewhat confusing, the chart was accurate, as it
41
In sum, the preponderates heavily standard requires that the district court
determine whether all the evidence at trial, taken as a whole, preponderated
heavily against the verdict. It does not, however, permit the district court to elect
its own theory of the case and view the evidence through that lens. Having now
clarified the standard to be applied by a district court in assessing a Rule 33
motion, we find that the evidence here did not preponderate heavily against the
verdict. Because we conclude that there is only one result available upon proper
application of the preponderates heavily standard – reinstatement of the jury
verdict – there is no need to remand for further consideration of this issue by the
district court.
CONCLUSION
For the reasons stated above, we reverse the district court’s grant of the
Rule 33 motion, reinstate the conviction, and remand the case to the district court
for sentencing.
explicitly listed that this payment was reversed. See United States v. Citron, 783 F.2d 307, 316 (2d Cir. 1986)
(recognizing that a chart must “fairly represent and summarize the evidence upon which [it was] based”
to avoid misleading the jury). And as the district court recognized, the threat of prejudice was mitigated
by the cross-examination, which highlighted the payment reversal. Consequently, the error, if there was
one, was harmless, and not a basis to take the “exceptional” step of granting a new trial.
42