In United States v. Hussain, --- F.3d ---, No. 19-10168 (9th Cir. 2020), the Court affirmed the defendant's convictions and sentence for wire fraud, conspiracy to commit wire fraud, and securities fraud.
The defendant served as Chief Financial Officer of Autonomy Corporation, a U.K. technology company that Hewlett-Packard acquired in 2011. Prior to the acquisition, the defendant and others fraudulently inflated revenue through a series of elaborate accounting schemes.
"As relevant here, during the course of HP’s due diligence leading up to the Autonomy acquisition, Hussain and his coconspirators used emails, press releases, and video and telephone conference calls to speak with HP executives in the United States and fraudulently misrepresent Autonomy’s finances. On the cusp of finalizing the HP deal, Hussain signed a letter warranting that an HP press release announcing the acquisition contained truthful financial information about Autonomy, when it did not. When the deal closed, Hussain earned approximately $16 million."
The defendant moved to dismiss the indictment, arguing that his wire fraud charges involved an impermissible extraterritorial application of U.S. law and that the securities fraud charge was too attenuated to U.S. securities. The district court rejected these legal challenges and the Ninth Circuit affirmed.
First, it held that the "wire fraud and conspiracy convictions are not impermissibly extraterritorial because they are based on conduct that occurred in the United States." The Court explained, "the Supreme Court has held that '[a]bsent clearly expressed congressional intent to the contrary, federal laws will be construed to have only domestic application.' But if the object of a federal law is conduct that occurs in this country, the concerns associated with a potentially extraterritorial application of our laws do not come into play."
Turning to the wire fraud statute, the Court noted, "[s]ection 1343 is not a general fraud statute, but instead criminalizes frauds that specifically involve the misuse of the wires." The Court held, "the 'focus' of the wire fraud statute, 18 U.S.C. § 1343, is the use of the wires in furtherance of a scheme to defraud." Thus, "[s]o long as Hussain’s use of the wires in furtherance of his fraud had a sufficient domestic nexus, we must uphold his convictions as 'permissible domestic application[s]' of the statute." On the facts, the Court found this standard satisfied.
The Court also rejected the defendant's challenges to his conviction for securities fraud under 18 U.S.C. § 1348.
"As relevant here, the securities fraud criminal statute prohibits executing a 'scheme or artifice' 'to defraud any person in connection with any' U.S.-registered security, 18 U.S.C. § 1348(1), or 'obtain, by means of false or fraudulent pretenses, representations, or promises, any money or property in connection with the purchase or sale of any' U.S.-registered security, id. § 1348(2)."
The defendant argued the evidence was legally insufficient to prove he acted with the "requisite fraudulent intent." "But Hussain below barely raised this issue in passing in his Rule 29 motion, and the district court unsurprisingly did not address it. Hussain thus waived the argument, and we review a waived ground for acquittal only 'to prevent a manifest miscarriage of justice.'"
[My note, I have never seen the Court apply this standard to an issue that was actually raised below.]
The Court found no miscarriage of justice.
The defendant also argued the government failed to prove his fraudulent scheme was “in connection with” the purchase or sale of HP securities. The Court disagreed: "we have explained that 'in connection with' is construed broadly, ‘not technically and restrictively.'"
"In this case, and based on these precedents, the evidence presented at trial was sufficient for the jury to find that the 'in connection with' element was met."
"We cannot accept Hussain’s arguments that his scheme falls outside § 1348 because it was only 'in connection with' Autonomy securities, and that his misrepresentations were directed at HP’s management and not its investors. These arguments reflect an unduly narrow interpretation of § 1348. And they likewise reflect a cramped view of the import to the investing public of a press release about a major acquisition, as well as Hussain’s personal role in verifying the accuracy of the Autonomy financial information included in the press release. The jury was entitled to reject Hussain’s efforts to minimize the press release and his level of involvement in it."
