Day 44: 1/20/05
8990
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
- - - - - - - - - - - - - - - X
UNITED STATES OF AMERICA : CR-02-589 (RJD)
-against- U.S. Courthouse
:
Brooklyn, New York
AHR ELGINDY
and
:
JEFFREY ROYER
Defendants :
January 20, 2005
- - - - - - - - - - - - - - - X 10:00 a.m.
BEFORE:
HONORABLE RAYMOND J. DEARIE
United States District Judge
and a jury
APPEARANCES:
For the Government: ROSLYNN R. MAUSKOPF, ESQUIRE
United States Attorney
One Pierrepont Plaza
Brooklyn, New York 11201
BY: KENNETH BREEN, ESQUIRE
SETH LEVINE, ESQUIRE
VALERIE SZCZEPANIK, ESQUIRE
Assistant U.S. Attorneys
8991
For the Defendant: KRAMER LEVIN NAFTALIS
Ahr Elgindy & FRANKEL
919 Third Avenue
New York, New York 10022
BY: BARRY BERKE, ESQUIRE
ERIC TIRSCHWELL, ESQUIRE
For the Defendant: LAWRENCE D. GERZOG, ESQUIRE
Jeffrey Royer ILISSA BROWNSTEIN, ESQUIRE
251 East 61st Street
New York, New York 10021
Court Reporter: RONALD E. TOLKIN, RMR
Official Court Reporter
225 Cadman Plaza East
Brooklyn, New York 11201
Minutes Taken Stenographically. Transcript Produced
By Computer Aided Transcription.
8992
1 THE CLERK: United States of America against Elgindy
2 and Royer.
3 (Time: 10:15 a.m.)
4 THE COURT: Good morning.
5 First of all, what do we have?
6 MR. LEVINE: The jury has asked for the 302, written
7 by Special Agent Gonzalez.
8 THE COURT: It is not in evidence, is it?
9 MR. LEVINE: The 302 was not put in evidence itself.
10 However, we had offered as part of the compilation of
11 materials that Wingate looked at, a redacted version of all of
12 the -- some of the sensitive stuff. Within those documents,
13 within the report that was reviewed by Wingate, the entire 302
14 is contained in its entirety. It is uploaded into the system.
15 That document was offered, and we believe it is in. So
16 technically that 302 is, in fact, in evidence.
17 MR. GERZOG: Your Honor, our position is that that
18 302 was received to show the jury what it was that Ms. Wingate
19 accessed, and for that limited purpose only. To put it in
20 here as though it was evidence of what Agent Gonzalez was
21 saying, it is inappropriate to have it in evidence. It
22 wouldn't have come into evidence, but for the fact that Ms.
23 Wingate apparently saw it when she accessed ACS.
24 And both because it wouldn't have come into evidence
25 to buttress what Agent Gonzalez said or support what Agent
8993
1 Gonzalez said, and because there may be an opportunity for the
2 jury to misunderstand, although it was the government's
3 theory, that when Ms. Wingate accessed the 302 she gave that
4 information to Royer. It is our theory and our version of the
5 facts that Royer did not hear, did not have that. That that
6 is only something Ms. Wingate saw.
7 So for that purpose, I think it would be appropriate
8 to tell the jury that the 302 itself is not in evidence and/or
9 is not properly considered by them, that what they are to
10 consider is Agent Gonzalez's testimony about his interview.
11 MR. LEVINE: But Your Honor, that assumes improperly
12 that what the jury is asking for -- first of all, it is in
13 evidence. Second of all --
14 THE COURT: I am sorry?
15 MR. LEVINE: The jury is asking questions now about
16 the obstruction counts. When the testimony is that Mr. Royer
17 requested that Ms. Wingate look at the 302 in the computer
18 system to see whether or not the interview of Mr. Gonzalez --
19 was interviewed by Special Agent Gonzalez was favorable to
20 Royer. The jury is now inquiring on topics we believe it is
21 about obstruction, to see the actual document that was
22 reviewed by Wingate.
23 THE COURT: The first question, is it in evidence?
24 MR. BREEN: Yes.
25 THE COURT: Was it received for a limited purpose?
8994
1 I think that is fair.
2 So why don't I write an instruction to the jury to
3 that effect. It was received for a limited purpose and not
4 for the contents of it. But for the proof of the content they
5 should refer, as has been requested, to Mr. Gonzalez's
6 testimony, which we are prepared to give them. It was
7 received simply to show what were the documents that Special
8 Agent Wingate searched.
9 MR. LEVINE: Reviewed.
10 THE COURT: Isn't that the appropriate way to do it?
11 MR. GERZOG: As far as I am concerned, yes, Your
12 Honor.
13 THE COURT: Anything else then?
14 MR. BREEN: No.
15 THE COURT: I will try to write something out.
16 (Recess taken.)
17 (Matter continued on the next page.)
18
19
20
21
22
23
24
25
8995
1 (Time noted: 11:40 a.m.)
2 THE COURT: Okay. Where do we stand.
3 MR. BREEN: Your Honor, we ask you to resolve quick
4 issues. We want to get some of this material to the jury. It
5 has been a while. So the things that we have together, we
6 wanted just to hand up and present a couple of issues to the
7 Court.
8 First, with the Court's Exhibit Number 18, with
9 regard to the testimony of Ray Gonzalez.
10 THE COURT: Right.
11 MR. BREEN: We clipped that testimony and we have
12 that. We believe that that is ready. And I believe there is
13 no objection from the defense on that particular selection.
14 MR. GERZOG: Correct, we are in agreement on that,
15 Judge.
16 MR. BREEN: So that one is ready.
17 THE COURT: Put a clip on it, Ellie, and send it in.
18 THE CLERK: Okay.
19 MR. LEVINE: The only issue about Mr. Gonzalez, Your
20 Honor, is after the Court sent back the Court's note
21 concerning 302, the jury sent out another note.
22 THE COURT: Send us the testimony.
23 MR. LEVINE: Right. What we hear is really the
24 testimony that they asked for in their first note, is very
25 specific as to the 302 and all cross by Mr. Gerzog. In our
8996
1 view, the jury never requested the entire body of rest of the
2 Gonzalez testimony. Mr. Gerzog disagrees with that.
3 MR. GERZOG: What I think they meant was just hurry
4 up and send us what we asked for, when they said send the
5 testimony of S.A. Gonzalez in Note 20.
6 THE COURT: In Note 20.
7 Bear with me a second.
8 I see what you are saying. The initial request was
9 the cross.
10 MR. LEVINE: On the 302.
11 THE COURT: The question is now, do you want all of
12 it? Well, we will send in the cross. Do you have the cross?
13 MR. GERZOG: Yes, Judge.
14 MR. LEVINE: The initial direct and the cross, the
15 portion of the direct they want, he whole cross is in there.
16 The question is, do they want the rest of the testimony, the
17 rest of the cross, Isaacson's cross.
18 THE COURT: They asked for the cross examination of
19 Gonzalez by Gerzog.
20 MR. GERZOG: Yes. But they also asked for portions
21 of the direct.
22 THE COURT: Oh, I beg your pardon. Where?
23 MR. LEVINE: Top of Note 18.
24 MS. SZCZEPANIK: In Note 18.
25 THE COURT: I beg your pardon.
8997
1 MR. GERZOG: That is being given, Judge.
2 THE COURT: Direct testimony, okay. Fine.
3 MR. GERZOG: That has been being given. That was
4 handed up.
5 THE CLERK: Mr. Levine, is that what you just handed
6 me?
7 THE COURT: The direct examination of Mr. Gonzalez,
8 these would be the interviews and all of this cross?
9 MR. LEVINE: All of the cross by Gerzog.
10 THE COURT: Okay.
11 MR. GERZOG: Okay. So with respect to 18 and with
12 respect to 20, we are complete.
13 MR. BREEN: Then we have Court's Exhibit 16, which
14 is the note that deals with --
15 THE COURT: Hold on one second.
16 THE CLERK: Hold on just one second. 16, okay.
17 MR. LEVINE: Judge, on 20, do you want to ask if
18 they want more of Gonzalez for Note 20 or just leave it?
19 THE COURT: Here comes another note.
20 THE CLERK: No, it isn't.
21 THE COURT: No. We will just leave it the way it
22 is. Is it ready?
23 MR. GERZOG: Yes, Judge. I believe it is there on
24 the witness stand.
25 THE CLERK: I will give it to them.
8998
1 MR. BREEN: The next one, Your Honor, is Court's
2 Exhibit 16, which deals with a series of requests that focus
3 on the financial relationship between Mr. Royer and Mr.
4 Cleveland.
5 We have taken specific testimony of Mr. Mitchell and
6 Ms. Sarkey, with respect to two different aspects. With
7 Ms. Sarkey talking about the financial relationship, with Mr.
8 Mitchell referring to the phone call that is the basis for
9 witness tampering.
10 THE COURT: Right.
11 MR. BREEN: In addition to that, some of the
12 Mitchell testimony also is evidence of the payments between
13 Mr. Royer and Mr. Cleveland. So we've clipped those as well.
14 And we also have Derrick Cleveland's testimony with
15 regard to the payments between Mr. Cleveland and Mr. Royer, as
16 well as the checks and wire transfers.
17 I don't believe there is any dispute on the checks
18 and wire transfers. There is some disputed portions of the
19 transcripts. We have clipped them, we've reacted the brief
20 objections and we've noted on tabs here -- if this is
21 appropriate for the Court to look at it and see what the
22 objections are that the defense has made.
23 MR. LEVINE: We also have the board, Your Honor, of
24 all of the checks.
25 THE COURT: Okay.
8999
1 The defense objects to these three pages, is that
2 correct?
3 I will put this in context. 3100 begins on line
4 one, "Did Mr. Royer tell you who he was talking to?"
5 MR. GERZOG: That has reference to conversations
6 between Jeff Royer and the Oklahoma guy and the San Diego guy.
7 THE COURT: Did he tell you that meaning did he tell
8 you that during his phone conversation with me?
9 MR. GERZOG: No.
10 MR. BREEN: No, that particular one is a reference
11 to issue number one on the jury's list. That would be the
12 evidence of the payments between Royer and Cleveland. Where
13 they are talking about the financial relationship and money
14 and trading together.
15 THE COURT: That is -- sure. Okay. Let me finish
16 reading it.
17 3100, 3101 and 3102 up to and including line 12.
18 Okay.
19 MR. BREEN: Your Honor, do you want us to redact
20 after that?
21 THE COURT: Yes.
22 MR. BREEN: The practice we have been kind of taking
23 is if it is a complete page, because it is testimony, we are
24 not redacting above and below.
25 THE COURT: It is innocuous testimony. So that is
9000
1 fine with me.
2 MR. BREEN: Okay.
3 THE COURT: All right. Moving right along.
4 Who objects.
5 MR. GERZOG: Those are all defense objections, I
6 believe, Judge.
7 THE COURT: Is this an objection to the page 3189 to
8 the line?
9 MR. GERZOG: I think to the entire page.
10 THE COURT: I see.
11 3189 is fine. They are talking about the phone
12 call.
13 I don't have a problem with any of this.
14 Now, does this Sarkey's testimony relate to the
15 first request or the fourth request?
16 MR. BREEN: Actually, I think that there are
17 substantial overlaps, so it would be both.
18 THE COURT: Okay. There are certain things in here
19 that aren't responsive. The page is the page. But asking
20 Sarkey about gifts that Jeff gave her.
21 MR. BREEN: Oh, I consider that as innocuous. That
22 is not anything that was included other than just being on the
23 page.
24 THE COURT: I understand that Mr. Gerzog's objection
25 is for that reason.
9001
1 MR. BREEN: Oh, I didn't understand that.
2 MR. GERZOG: Yes, Judge, I was.
3 MR. BREEN: It is a little awkward, I think, to
4 actually redact the transcript of admitted testimony.
5 MR. GERZOG: Not if it is not responsive to the
6 request.
7 MR. BREEN: We don't care about it. I mean, it's
8 fine.
9 MR. LEVINE: Your Honor, there is testimony in there
10 about the gifts that relate to the fact that Mr. Royer that
11 had money, he was having financial problems, he is testifying
12 that he is getting money from Cleveland.
13 THE COURT: If it is about money from Cleveland, it
14 is clearly responsive. But I don't see any references to
15 that.
16 MR. LEVINE: I think there was testimony that he had
17 money. And Cleveland --
18 THE COURT: There is one question an answer that is
19 just clearly -- and it is 3041 line 19 to line 24. It is
20 about gifts that Jeff gave her. Then they go into back about
21 investing and Derrick helped him setup his E-Trade account.
22 MR. BREEN: We will take that out.
23 MR. LEVINE: We can take that out.
24 THE COURT: The handwritten notes of his trading. I
25 don't see any reference to Derrick.
9002
1 MR. BREEN: It probably fits in the category if it
2 is on the page, it was discussion.
3 THE COURT: I don't see anything on page 3043 that
4 is particularly responsive.
5 MR. BREEN: Okay. We will just take that whole page
6 out.
7 THE COURT: I don't see anything on 3077.
8 MR. BREEN: 3077?
9 THE COURT: Yes.
10 With the exception of -- yes, 3077, you can leave
11 out.
12 MR. BREEN: Leave out?
13 THE COURT: 3078 is okay. 3079 is okay. I cannot
14 picture Ms. Sarkey. Oh, I beg your pardon. I am in the pages
15 that are not in dispute.
16 MR. BREEN: In 3077, Your Honor, looking at that
17 one, that is a reference to a conversation about things she
18 overheard and short selling and --
19 THE COURT: Okay. Let me go to 3088. Those are
20 fine. If it is not in dispute, it is fine.
21 MR. BREEN: Okay.
22 THE COURT: 3088 and the testimony at line 10.
23 MR. BREEN: Okay. Your Honor, on 3043, there is a
24 few words that carry over from the very relevant question and
25 answer at the end of 3042 regarding trading strategy for
9003
1 himself and everything else.
2 THE COURT: Hold on a second.
3 Yes. What does trading strategy have to do with it?
4 MR. BREEN: That is the context for what they are
5 talking about in terms of payments and the relationship.
6 MR. GERZOG: We object to that, Judge. On the
7 ground that the question is about payment arrangement, and not
8 anything else.
9 THE COURT: I agree with you.
10 MR. BREEN: So what is the ruling on that, that
11 question?
12 THE COURT: It is not responsive.
13 MR. BREEN: So we will remove that question from the
14 prior page.
15 MR. GERZOG: Judge, I am sorry. Can I just ask you
16 to -- never mind.
17 THE COURT: I see an objection here to some
18 innocuous discussion on page 464. Objection by somebody to
19 lines 5 through 25.
20 MR. GERZOG: Judge, I don't object in the sense that
21 I care. It just has nothing to do with anything. I thought
22 it might be redacted. If it is easier, we can just leave it
23 in.
24 THE COURT: All right. Leave it in.
25 621 is okay.
9004
1 (Whereupon Mr. Gerzog speaks to Mr. Breen.)
2 THE COURT: What is this business about page 629?
3 With what does that refer to, line 13? "You mentioned before
4 that during a Vegas trip that Mr. Royer simply spoke to Mr.
5 Elgindy about a stock called Juna." Is it responsive to
6 anything they asked for?
7 MR. GERZOG: Not in our view.
8 MR. BREEN: I think that is just something that is
9 contained in other discussions.
10 THE COURT: So that is out. All right.
11 Get it together. I will be inside if you need me.
12 MR. LEVINE: Judge, there are a few other issues.
13 MR. BERKE: We covered them already, I think.
14 MR. BREEN: Let's get this one done and get this one
15 back to them.
16 THE COURT: I will be inside. Let me know when you
17 need me.
18 MR. GERZOG: On the Sarkey, Judge, I just want to
19 have a chance to confer briefly with Mr. Breen about it, and
20 then we will speak to you if we need your guidance.
21 THE COURT: All right. I am not going anywhere.
22 This is ready to go in?
23 MR. LEVINE: I think we will bring it in with all of
24 the other stuff. We will bring it in all together.
25 THE COURT: All right.
9005
1 (Recess taken at 12:02 p.m.)
2 (Matter continued on the next page.)
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9006
1 (Time noted: 1 p.m.)
2 MR. BREEN: Your Honor, it is the government's view
3 that this process is just going much too slow.
4 THE COURT: It sure is.
5 MR. BREEN: We are trying to look at ways to speed
6 it up. We do have the Mitchell testimony, which is something
7 that they asked for.
8 THE COURT: You've got it?
9 MR. BREEN: I have that. Here, Your Honor.
10 (Handing.)
11 MR. BREEN: One of the things that we're -- one of
12 the things that we've kind of hit a wall on is this request
13 asking for the front running charts and documents. We have
14 charts, and those are ready. And we think that those should
15 go back. And the other things that we've collected should go
16 back. There is some dispute on that. And there is a lot of
17 chat logs that the defense is pulling together. And that we
18 will need to pull together, too, which promises to take, we
19 think, quite a long time, maybe hours to get all of the
20 various chat logs in the form to send back.
21 Our proposal is that we send back the different
22 things that we pull together and collected that are
23 responsive. I can hand those up to the Court.
24 THE COURT: Do you have the terms of use?
25 MR. BREEN: The terms of use. This is together.
9007
1 (Handing to the Court.)
2 MR. BREEN: As well as the orientation guide which
3 deals with the issue of front running, specifically, if you
4 remember, from Mr. Rubenstein's testimony. A portion of it
5 was admitted. That portion has been plucked out of the rest
6 of the document. It is contained there and the defense
7 doesn't have a dispute about it being in evidence, but a
8 dispute as to whether that is responsive to this particular
9 issue.
10 MR. BERKE: Judge, we have an objection to that. It
11 was never introduced and identified as any kind of orientation
12 guide. In fact, Mr. Hansen, the site administrator, wasn't
13 even asked about it. None of that was introduced as terms of
14 use.
15 MR. BREEN: It is in evidence. It was introduced as
16 orientation. He said it was orientation.
17 MR. BERKE: Judge, how it came in -- he did not say
18 that. The testimony of Rubenstein was he was shown this, he
19 didn't know what it was. He hadn't seen it. He was then
20 asked if he saw something like this or something similar to
21 this. He said he believed he did. That portion was
22 introduced solely for that purpose. So there is no testimony
23 by any of the government's witnesses at all that this was an
24 orientation guide. There is no other document, at all.
25 THE COURT: What is it?
9008
1 MR. BREEN: It is an orientation guide.
2 THE COURT: Show me the testimony.
3 MR. BERKE: All of the people who are in the
4 position to know what an orientation guide never testified to
5 that. The terms of use showed that everybody agreed they
6 exist, are right there before you in Exhibit 3003.
7 THE COURT: Why isn't this marked as Exhibit 3003,
8 if I may I ask?
9 MR. BREEN: It is a thick binder. That was the
10 beginning part of it.
11 THE COURT: All right. I will give them these
12 documents, please.
13 MR. BERKE: Judge, I believe there is also the -- I
14 am sorry.
15 THE COURT: Take these in.
16 THE CLERK: Yes.
17 THE COURT: All right. The front running charts.
18 MR. BERKE: And I should say, Judge, in terms of the
19 chats, again, the front running charts we've argued that the
20 specific chat, etc., that it relates to the specific calls are
21 taken out of context. And you need to have the other chat
22 around it to understand what is said. We have now pulled
23 that. We have it identified it, we have it ready. The
24 government needs to look at it.
25 THE COURT: I want to see the charts.
9009
1 MR. BREEN: I have the charts and I have the
2 testimony for Your Honor.
3 THE COURT: I want to see the charts.
4 MR. BREEN: Here are the charts. They are in
5 evidence.
6 (Handing.)
7 THE COURT: The front running chart.
8 Why are these not going in?
9 MR. BERKE: Judge, we think they should go in with
10 the chat that we now have to pull that put that chat in
11 context.
12 THE COURT: Let's give it to the jury.
13 MR. BERKE: Judge, we ask that this goes in with the
14 broadcast e-mails that everybody agrees go in and are relevant
15 that the binder goes in as well.
16 MR. BREEN: Broadcasts e-mail are like chats.
17 MS. SZCZEPANIK: I have them right here, Your Honor.
18 (Handing to the Court.)
19 MR. BERKE: Judge, I have another document.
20 THE COURT: Hold on a second.
21 MR. BERKE: We have another document.
22 THE COURT: Hold on a second.
23 MR. BERKE: I am sorry, Judge. I didn't realize you
24 were talking to me.
25 THE COURT: What documents? What are we addressing
9010
1 now? Which note? 19 and -- just 19? Ellie.
2 THE CLERK: Yes.
3 THE COURT: I think I may be missing a note up here.
4 MR. BREEN: Here is 19.
5 THE COURT: I have 19. Is there a 20?
6 LAW CLERK: 20 is what they wrote back to us on
7 yours.
8 THE CLERK: I think 20 was our response to -- here
9 it is. Here is 20.
10 THE COURT: Is there a 21?
11 MR. BREEN: Yes.
12 THE CLERK: That's as far as I got.
13 THE COURT: Mitchell's testimony.
14 THE CLERK: No, I have to go downstairs.
15 THE COURT: All chat and e-mail as described on
16 pages 45 and 46 of the indictment.
17 Deborah, I don't have the indictment that went into
18 them.
19 LAW CLERK: I will get it.
20 MR. LEVINE: We have it, Your Honor.
21 THE CLERK: I gave you the indictment.
22 MS. SZCZEPANIK: Here, Your Honor.
23 (Handing to the Court.)
24 THE COURT: Okay. This is relevant and
25 straightforward. They told us what chat they want.
9011
1 Is there a problem with it?
2 MS. SZCZEPANIK: No.
3 MR. BREEN: No.
4 THE COURT: Where is it?
5 MR. BREEN: Where is the chat?
6 THE COURT: Yes.
7 MR. BREEN: We are pulling it together.
8 MS. SZCZEPANIK: It is right here, Your Honor.
9 (Handing.)
10 THE COURT: That's it?
11 MR. BREEN: But there is other chats which is the
12 subject of further review and discussion and argument among
13 counsel.
14 THE COURT: I don't understand the nature of the
15 dispute. Is this the chat?
16 MS. SZCZEPANIK: Yes, Your Honor.
17 THE COURT: That relates to the pages 45 and 46 of
18 the indictment?
19 MS. SZCZEPANIK: Yes, it is.
20 THE COURT: All right. And there is no dispute
21 about that?
22 MR. BERKE: There is no dispute that that should go
23 in, no.
24 THE COURT: For the record, we are talking about
25 JX-80, JX-133, JX-152, JX-199, JX-244.
9012
1 Deborah, give that to the Marshal.
2 MR. BREEN: The reference to Mr. Rubenstein's
3 testimony with respect to 4105, where after I show it to him,
4 I ask him the question, do you recognize it. He says it looks
5 like, I guess, some of the information on the website.
6 THE COURT: Is it on the website?
7 MR. BREEN: That is what he says. He says, "Is this
8 the information that would have been provided to people as an
9 orientation guide? Yes. I don't know if this was there at
10 the beginning when I joined, so I'm not sure I read it when I
11 joined. It might have been put up after that. But I guess
12 that's what it is, yes." We offered it and it was admitted.
13 MR. BERKE: But Judge, we have what was on the site.
14 This witness couldn't authenticate that this was anything --
15 it looks like it was on the site. We have what was on the
16 site. Bob Hansen and all of the people with knowledge of what
17 actually was used and what was on the site never
18 authenticated, were never even asked by the government.
19 This is the only testimony by Mr. Rubenstein. He
20 was unclear. He said it looks like what was on the site. We
21 have what was on the site. We would object, Judge, to giving
22 this as the terms of use. We have the actual terms of use.
23 And everyone agrees these are the terms of use, the site
24 administrator says it is the terms of use.
25 MR. BREEN: It is not for terms of use. It is for
9013
1 the other things, as well. It deals with the front running
2 and the other documents. That is the other documents.
3 MR. BERKE: Your Honor --
4 THE COURT: Hold on a second, gentlemen. Please.
5 You know, the trial is over.
6 May I have see that testimony?
7 MR. BREEN: Yes, Judge.
8 MR. BERKE: I should say Judge, our belief was that
9 it was never used and there was never testimony to the
10 contrary.
11 MR. TIRSCHWELL: I have it right here.
12 MR. BREEN: The page?
13 MR. TIRSCHWELL: 5655. It continues and there is a
14 side-bar about that for about five or six pages.
15 THE COURT: We are not going to relitigate issues
16 and decisions that I have already made.
17 MR. BERKE: I understand. But I think it was -- if
18 they had asked for the testimony of Rubenstein or the
19 testimony about these things, then you would see for what
20 purpose it was introduced in its limited purpose, but there is
21 no basis to say this was an orientation guide.
22 MR. TIRSCHWELL: Line 13 on 5655.
23 THE COURT: Where did you get this from?
24 MR. BREEN: We got this from the defendant. It was
25 in discovery. It was admitted, just as we are talking about
9014
1 it as, whether he wants to call it an orientation guide or
2 not, we think quite obviously it is. We think that is why the
3 Court admitted it. It is in evidence, it is obviously
4 responsive. If you just look at it --
5 THE COURT: Just answer my question.
6 MR. BREEN: Yes.
7 MR. BERKE: Are you sure of that?
8 MR. BREEN: We talked about this.
9 MR. BERKE: Judge, this is not something that was
10 obtained from the site itself. There is no indication about
11 how it was obtained, that it was in any way published or used
12 or created by Mr. Elgindy.
13 MR. BREEN: Just look at the first page. "This
14 guide is intended to help new members."
15 MR. BERKE: It refers to Mr. Elgindy in the third
16 person, indicating it wasn't written by him.
17 Judge, for what it's worth on, page 55662, the
18 middle of the page is where we think we get to the crux of the
19 issue.
20 MR. TIRSCHWELL: Starting on line 7.
21 MR. BERKE: Yes, starting on line 7, Judge.
22 THE COURT: Is there any cross on this?
23 MR. TIRSCHWELL: This is the cross.
24 THE COURT: What I just read?
25 MR. BERKE: This is the defense witness Rubenstein.
9015
1 That is the most he could say about it. None of the
2 government witnesses testified about this.
3 MR. BREEN: Of course, Mr. Rubenstein was the one
4 who raised the defense of trading around the core and
5 everything else that was something that we directly responded
6 to. There was evidence in our direct case about --
7 THE COURT: I am a little uncomfortable with it.
8 MR. BREEN: Your Honor, this is evidence that the
9 witness testified was the kind that was presented to the site.
10 That he remembered to that extent. This is evidence that was
11 admitted at trial.
12 THE COURT: Read me that testimony. Maybe I made a
13 mistake. Maybe I shouldn't have let it in. Why compound the
14 error by sending it in to them?
15 MR. BREEN: I handed up my transcript. The one that
16 I read first off, I show it to him and I say do you recognize
17 this as being the new orientation, the people in the AP site.
18 THE COURT: Do you recognize -- I beg your pardon.
19 MR. BREEN: Let me backup. There was a question
20 where he answered yeah or yes. It is on 5655. "Is this the
21 information --
22 MR. BERKE: You have to go to the question before
23 that.
24 MR. BREEN: Maybe I can just --
25 MR. BERKE: Maybe you can go there.
9016
1 THE COURT: I have read it. I have read it so often
2 I know it.
3 MR. BREEN: "Is this the information that would have
4 been provide to people as an orientation guide?
5 ANSWER: Yes."
6 MR. BERKE: But then he goes on to explain.
7 MR. BREEN: I got --
8 THE COURT: I have read it, gentleman. Stop
9 bickering. Will you?
10 The testimony taken as a whole doesn't give me the
11 warm toasty feeling that I want. Maybe I made a mistake.
12 Maybe the foundation wasn't properly established. It is a
13 close call. But if we compound the error, then it could be a
14 serious matter.
15 MR. BERKE: Judge, can I make a note about a
16 different document? There is no dispute. It should be go in,
17 but I just want to state -- DX 10536. This is the training
18 class. There was some issue as to whether the entire document
19 was in or not or the first three pages. We have reviewed with
20 the government. They don't object to the entire ten-page
21 document of the chat on the training class go into the jury.
22 THE COURT: Okay.
23 MR. BREEN: I don't object in the context of
24 thinking that the whole picture is going to be going in,
25 including what we are presenting here.
9017
1 I mean, to take their arguments out of context the
2 way they want to present it and not present what we think is
3 something that was well established in the record with part of
4 this testimony with a defense witness who said that this was
5 inconsistent with the defense witness's testimony in terms of
6 what he was describing on the site. We just think it is
7 unfairly tieing the government's hand when properly admitted
8 evidence like this, Your Honor, which is clearly responsive.
9 I don't think --
10 THE COURT: Where did you get it? Where did it
11 originate?
12 MR. BREEN: We got it off of a computer seized from
13 Mr. Elgindy's house.
14 THE COURT: Maybe it is a draft of something he
15 intended to put on the website.
16 MR. BREEN: Well, that's why we asked the witness
17 about it and he said it was the kind of information that was
18 on the site.
19 THE COURT: Yes, it is the kind of information that
20 is reflected in the documents I just sent back. The kind of
21 information.
22 MR. BREEN: But, Your Honor, that goes to weight and
23 not admissibility. It is something that the jury is able to
24 address it.
25 THE COURT: I understand.
9018
1 What is the problem with this then?
2 MR. BREEN: Well, the problem is merely that this is
3 a similar thing that raises issues where the defense wants to
4 argue from that to the extent that they are making an argument
5 on certain language, we don't think that that is any different
6 than the evidence that we presented and the thing that we have
7 been talking about.
8 MR. BERKE: Judge, this is the site class. We have
9 argued this throughout the whole thing that states
10 Mr. Elgindy's position. We have argued it. And we asked it
11 to be introduced with Derrick Cleveland. We have asked all
12 the witnesses about it. We went over our position --
13 THE COURT: Here, Deborah, give it to the guard.
14 MR. BERKE: Judge, the other issue is that I don't
15 -- I believe we identified -- our position with the front
16 running allegations is that they take in line about Mr.
17 Elgindy's position with reference to the stock out of context
18 in terms of what he is telling the site he is doing and what
19 he generally says is his position about trading.
20 We have now pulled up the JX and DX exhibits,
21 primarily chats, but also a few other document that explain
22 his position regarding front running, trading at the site, as
23 well as specifically what he is telling the site about his
24 views and his positions as to the specific stocks in which the
25 allegations are that he was trading against his advice or
9019
1 trading ahead of it.
2 Which when they have asked for the chart and
3 documents regarding front running and trading against advice.
4 And we have it here ready to go.
5 MR. BREEN: Well, a lot of the things that they have
6 ready to go are things that either I haven't seen yet because
7 we haven't had the time to do it, or things that relate to
8 Silicon Investors. Which isn't the site we are talking about
9 with the front running at all. We have a series of objections
10 on that.
11 MR. BERKE: There is one document, Judge, that is a
12 Silicon Investors thread policy, but it specifically refers to
13 things about the private chat and there are specific
14 references.
15 THE COURT: I am going to ask the jury when they
16 request documents regarding front running and trading against
17 the site, they mean to include chat. They tell us yes, then
18 we'll iron it out.
19 MR. BREEN: One last thing, Your Honor. There are
20 transcript excerpts regarding front running. I don't know
21 whether there is an objection.
22 MR. BERKE: Judge, again, our view as we know, the
23 site consists of three things, audio broadcasts, chat and
24 e-mail broadcasts. Our view is you cannot consider the audio
25 broadcasts without having the chat where he is speaking about
9020
1 those very topics.
2 THE COURT: The jury is asking for specific ones.
3 MR. BERKE: Right, Judge. Then I would ask that if
4 Your Honor is going to ask them whether they want the chat
5 that relates to these very topics, we clarify whether that is
6 what they want, because we think -- contemporaneous to these
7 audio broadcasts, you have chats in which Mr. Elgindy is
8 talking about what front running is, what is means, and the
9 like. So we have no objection to that going into it, as long
10 as the corresponding chat that is also covering the same topic
11 goes in. Otherwise it is just a piece of what the issue,
12 obviously, is --
13 THE COURT: I am going to ask. These are documents
14 received in evidence. They go directly with their request.
15 They are going to go, Deborah, it is on the jury.
16 I am going to ask them what they when they say
17 documents, do they want all chats that is responsive to front
18 running and trading against the site. If they yes, so be it.
19 MR. BREEN: At a certain point in the case we said
20 that these were -- these had been admitted with the
21 transcript. There was a discussion at side-bar where there
22 was some discussion on whether they were aids or whether they
23 were evidence. I just wanted to raise that before they went
24 back. I don't think it is an issue, but --
25 MR. BERKE: These are the transfers. We think it is
9021
1 the tapes can go back. And the transcripts can go as an aid
2 to the tapes.
3 MR. BREEN: If they would like us to send the tapes
4 too, we can send the tapes.
5 THE COURT: You know, you guys are shifty. You
6 know. Half or three quarters or 80 percent of the transcripts
7 came in without so much as a peep out of anybody. Now all of
8 a sudden we have disputes about transcript and I am giving
9 typical transcript instructions, which I ought to give at the
10 beginning of the trial.
11 You have audiotapes? Fine. I will put that in my
12 note.
13 It is not the time to relitigate the case,
14 gentlemen. It is the time to respond to the jury.
15 Frankly, I am losing patience with you.
16 (Whereupon the Judge leaves the bench.)
17 (Whereupon a recess was taken at 1:20 p.m.)
18 (Matter continued on the next page.)
19
20
21
22
23
24
25
9022
1 (Time Noted: 4:20 p.m.)
2 THE COURT: When you thought you have seen it all.
3 Where is that note?
4 MR. LEVINE: Here, Your Honor.
5 THE COURT: I am not sure I know what they mean.
6 That is my first reaction to it. When I first read it, I
7 thought I knew what they meant.
8 MR. GERZOG: We in the defense have a similar
9 experience.
10 MR. LEVINE: I think why there might be some
11 question, I have a thought of what I think it means, might
12 help us resolve this.
13 MR. TIRSCHWELL: Judge, we had the prior note that
14 they are waiting the chat, as to the front line. I wonder if
15 can just try to get that addressed. I know the government has
16 some issues. We have been through everything we have, since
17 they seem to be focused on that.
18 THE CLERK: That is Court Exhibit 22.
19 THE COURT: I will give that back to Mr. Levine.
20 MR. TIRSCHWELL: That one, I think, is easy. But
21 there is a note even before that that we are still addressing.
22 THE COURT: The chat regarding front running and
23 trading against the site?
24 MR. TIRSCHWELL: Yes. Judge, what we have done is
25 we have identified and gone through with the government and
9023
1 showed them what have identified, a bunch of chats from the
2 joint exhibit and a bunch of separate chats that the defense
3 put in, which we believe provide the critical context to these
4 allegations. A lot of the chats show that, for example, that
5 the government alleges Mr. Elgindy was "front running", that
6 the stock had been discussed in detail and often times
7 repeatedly on the site prior to that point.
8 And, Judge, I am sure you recall from the summations
9 and during the trial, we have a very different view about what
10 front running meant when discussed on the site. Especially
11 the view that we put forth and that we've argued means that if
12 there is a discussion about a stock and it is clear to
13 everybody on the site that Mr. Elgindy and/or others on the
14 site and are in and out of a particular stock for weeks and
15 sometimes months, that it is not front running if on one
16 particular day at some later point Mr. Elgindy takes a
17 position and then later says something about it.
18 We also argued that. The government would need to
19 prove, which they didn't even really try to, they really
20 didn't try, that he reversed his position. But even leaving
21 that aside, we do think it is critical context to the front
22 running. I think that is the gist of the disagreement. Mr.
23 Breen thinks it is not directly responsive, but other than
24 that, I think in general, we are on the same page.
25 THE COURT: That is a big other than that. Because
9024
1 the question is -- it is not about the context. It is about
2 responding to their note.
3 The question seems to me is, when they ask for a
4 chat about front running and trading against the site, do they
5 mean literally discussion on chat about that subject matter or
6 do they mean to encompass all discussions that may relate to
7 the parties various argument as to whether or not a particular
8 statement or a particular transaction was trading against the
9 site or front running or a false statement made in connection
10 with. Isn't that really what it is about?
11 MR. BREEN: That is.
12 THE COURT: If that question is as broad as you
13 interpret it? They had want, in effect, to see all of the
14 evidence.
15 MR. TIRSCHWELL: About front running.
16 Well, I think we may need to go back one note,
17 because this 19-A was responding to a request that I think was
18 brought. I will pull it out.
19 MR. BREEN: The specific thing that they've asked
20 for was in response to the Court's question, "by document do
21 you mean to include chats that specifically addresses the
22 subject of front running and trading against the site." And
23 that is what they said yes to. This doesn't even -- I hear
24 Mr. Tirschwell in the argument he makes, but respectfully,
25 what we are looking at, is we are looking at for some
9025
1 instances, a discussion about the same stock that happened two
2 months earlier that doesn't relate to front running or
3 anything, but relates to this --
4 THE COURT: I understand what the dispute is. I
5 understand why the parties are making these positions. I
6 think I tend to interpret the note more narrowly than does Mr.
7 Tirschwell. But, far be it for me, I don't want to
8 misinterpret what the jury means. I will bring them out and I
9 will ask them.
10 MR. BREEN: Okay. That is fine.
11 MR. TIRSCHWELL: There is a subset, I think, of what
12 we looked at, even under the narrow definition, will respond.
13 But we can try to put that together, pull those out and get
14 those ready while you are calling the jury out.
15 THE COURT: Half a loaf is better than none at all.
16 Now, what about the other question?
17 MR. BERKE: Another quick thing on this. We also
18 have two documents, one is a 15 commandment and the other is
19 thread policies for the year 2000 on the Silicon Investors.
20 THE COURT: Why don't we just skip the summations.
21 Start them all over again.
22 What do you think, Mr. Berke?
23 MR. BERKE: No, thank you. I don't think that
24 anyone would.
25 But on this, which is very clear to the year 2001,
9026
1 it talks about the private site.
2 It refers to, 7, "I never cover any short calls.
3 Ever. That is against everything that I stand for." Which we
4 think is relevant to what they are talking about the front
5 running allegation. We've argued it. It goes in on that
6 issue. It is related to front running, we submit. And the 15
7 commandments on different language on similar issues.
8 MR. BREEN: He is talking about Silicon Investors.
9 It is apples and oranges. The rules on Silicon Investors --
10 no one has argued or could really claim that those would be
11 the rules on the private site.
12 THE COURT: Let's stick with my topic. My topic is
13 this most recent note. What is it? What do you propose I do
14 or say?
15 MR. BREEN: To say yes, that they could consider the
16 facts that were presented in support of Counts 23 through 25
17 and 27 through 32, in connection with Count 16 through 22.
18 Because they all involve the same portion of the indictment
19 that deals with Mr. Elgindy defrauding his site members.
20 MR. LEVINE: Your Honor, I agree with my colleague,
21 as always. I think the only issue --
22 THE COURT: Then why are you speaking?
23 MR. LEVINE: There is one clarification. I believe
24 the way to understand this note is to begin at the end. And
25 what the note asks is whether or not in considering the wire
9027
1 fraud charges, which starts on 23 and goes through 32, whether
2 or not in considering that question may they consider the same
3 evidence that they considered in Counts 16 through 22 about
4 front running. The note ends by essentially asking whether or
5 not the defendant -- whether a finding of wire fraud that a
6 defendant knowingly devised or participated in a scheme to
7 defraud can be found based on the evidence that they have
8 already considered relating to the securities fraud charges
9 relating to that same subject.
10 In the government's view, and I believe there is
11 instruction that the Court makes clear, that trading against
12 advice or front running, as they are a fraud, can in this
13 context be, if the jury so deems them, a scheme to defraud. I
14 think the jury's question is whether or not something which in
15 this case may or may not based upon their finding, constitute
16 securities fraud. It also constitute a scheme or artifice to
17 defraud under the meaning of the wire fraud statute. And that
18 is why they ask in their note, in considering the wire fraud
19 counts, are the front running and trades against advice. And
20 they then list the securities fraud charges, applicable to the
21 wire fraud.
22 I think they are -- potentially, what they are
23 asking is a scheme to defraud, can that be found from front
24 running and trading against the site in the same way that one
25 can find those to be a securities fraud violation? The
9028
1 government's view is, and the evidence shows, the answer is
2 obviously yes.
3 And in fact, the way the counts are set out, the
4 misrepresentations that form the basis of the wire fraud
5 counts are, in fact, Mr. Elgindy's misrepresentations to the
6 site that are sent over wire communications. And so I think
7 that they are just seeking clarification that the evidence can
8 be used both for securities fraud and wire fraud. I think
9 that is the fairest interpretation of the note.
10 THE COURT: Anybody dispute that?
11 MR. BERKE: We do, Judge. In that we do, and sort
12 of came out where you came out, Judge, and we don't really
13 understand what they are referring to. You look at the
14 specific count, they are together. I think there is a real
15 risk of interpreting, if we try to interpret it, and take the
16 interpretation that the government argues, that will be
17 pushing them in the direction that they are not necessarily
18 asking about. And it would be a better course to actually
19 seek to ask them to clarify what they are asking, so that
20 there will be no confusion as to what specific guidance they
21 are seeking.
22 MR. TIRSCHWELL: They don't use the word evidence,
23 can evidence of one be used in considering the other. That is
24 interpretation, so we don't think it is only interpretation.
25 MR. LEVINE: What is an interpretation?
9029
1 MR. TIRSCHWELL: That they have a question about the
2 charge or something else. It is easy to ask. If they wanted
3 to use other evidence, they probably would have used other
4 evidence.
5 MR. LEVINE: It is not a question of evidence, Your
6 Honor. It is a question of the legal requirements for wire
7 fraud and whether or not they may consider the concepts of
8 trading against the site and front running as concepts, which
9 if they find that those things occurred constitute a scheme or
10 artifice to defraud.
11 THE COURT: Well, both require a scheme or artifice
12 to defraud as an element. In the event each requires other
13 elements separate and apart from the two categories.
14 MR. LEVINE: The other point that I think is
15 important, Your Honor, is that --
16 THE COURT: Go ahead. I am resting. Go ahead.
17 MR. LEVINE: Is that the chart that they are also
18 asking a question about the charts that we have given them.
19 And I think that one important point is that the charts
20 provide some instances, for example, for the security fraud
21 violations of improper activity. The government alleges that
22 they are improper. But they are exemplars. They are not --
23 do not constitute all of the evidence.
24 THE COURT: They are not exemplars. They are the
25 specific charges on the per count basis. They don't
9030
1 constitute all of the evidence of the scheme perhaps. But
2 they have to -- they can't just go well, it is a scheme,
3 therefore all of these counts have been proven. Not by a long
4 shot. That is how you cast the indictment.
5 MS. SZCZEPANIK: Right. And to make it clear, the
6 indictment -- we would contend that the chart shows more
7 examples than the indictment. All of the examples in the
8 indictment are on the chart, but the charts also have
9 additional examples.
10 THE COURT: All right. I am going to inquire of the
11 jury. I am going to bring them out on both notes.
12 In the meantime, work on your half a loaf
13 compromise, the fall back position.
14 Where is Ellie? I think she has retired.
15 LAW CLERK: She just stepped out.
16 THE COURT: I need the jury.
17 Please ask the marshal to bring them in.
18 MR. TIRSCHWELL: Judge, I was inquiring about the
19 chat. There are even within the chat --
20 THE COURT: Oh, I need those last notes, the chat
21 notes.
22 Yes, sir.
23 MR. TIRSCHWELL: I guess there are really three
24 categories that we can identify. One is general statements or
25 chat about front running do I do it, don't I do it, what is
9031
1 it. There are also chats that specifically address specific
2 allegations. In other words, the government may have three
3 lines of chat on a particular day. And an allegation of front
4 running. And we may have, you know, ten minutes before and
5 ten minutes after to put that in context.
6 As to the second category, we think it specifically
7 addresses the particular allegation and sometimes suggests
8 that something difference is going on.
9 And then the third category, which I think is what
10 the government's principal objection to it would be, the chat
11 that is not on the same day, but shows something about the
12 same stuff.
13 (Jury enters the courtroom at 4:35 p.m.)
14 THE COURT: Please be seated.
15 Folks, I hear the grunts and groans. I know you are
16 working hard. We all know that and we all appreciate it.
17 I could not begin to tell you how impressed we are
18 with your specificity of your notes and your obvious focus on
19 the issues in the case.
20 I called you out here for a couple of reasons, to
21 give you a little fresh, relatively speaking, fresh air. But
22 more specifically, to address two notes.
23 One, your most recent, which I will get to in just a
24 moment, Court Exhibit 23. And another going back to our
25 exchange of notes regarding your request for charts and
9032
1 documents regarding front running and trading against the
2 site.
3 And then you will recall my note about chats and so
4 forth. I wrote to you, "Do you mean to include chat that
5 specifically addresses the subjects of front running and
6 trading against the site?" And you said, "Yes, to each of the
7 above." The other one being the audio, which you have since
8 received.
9 Before I ask you the question, yet another question,
10 just by way of preface want to say, first of all, if I ever
11 respond to you in a way that doesn't quite connect, if you
12 have any concern that perhaps you haven't been understood
13 precisely, do not hesitate to say so. You are a very
14 courteous lot, put courtesy aside. If I haven't connected
15 with you, and you are not satisfied with my response, tell me.
16 As I said, none of us goes anywhere, we are working on these,
17 we are working diligently on these, and we want to please. We
18 want to be able to give you what you are seeking.
19 For the most part these questions have been so
20 specific and focused, you've made our jobs somewhat easier.
21 But on this question of chat, I think we can put
22 chat as it relates to front running and trading against the
23 site into three general categories. And obviously, I am going
24 to ask you which one, two or three are you interested in.
25 One, would be a very narrow category, and that is
9033
1 specific discussions on the chat about front running or
2 trading against the site. Okay?
3 The second would be perhaps related to a specific
4 transaction that the government perhaps alleges evidences that
5 practice. And chat related to it, as well as chat offered by
6 the defense, which the defense maintains explains it. You
7 see? A specific transaction the government would argue
8 evidences that Mr. Elgindy traded contrary to the advice he
9 gave his members; whereas the defense then offered chats and
10 then argued on the basis of that chat that it suggested that
11 he did not. That would be my second, somewhat broader
12 category.
13 And then ultimately, throughout the chat, there are
14 any number of examples, you have heard them repeatedly for
15 these many weeks, generally speaking about transactions and
16 the relationship between Mr. Elgindy and the members about
17 trading calls and etcetera, that one might argue or maintain
18 evidence or do not evidence trading against the site or
19 trading against advice or about front running.
20 So we have three categories increasing breadth.
21 One, a specific discussions about the issues of front running
22 or trading against the site. Two, more broadly specific
23 transactions that the sides argue about and exchange chat
24 about on the issue of whether or not it evidences that
25 practice. And then third, the broadest of categories, any
9034
1 chat that could arguably be interpreted to suggestion that Mr.
2 Elgindy does or does not engage in such a practice.
3 I hope I have made it easier, rather than more
4 difficult for you. We want to know what it is that you want.
5 If you want that first category, fine. The second category,
6 whatever it is, all categories, that is fine, too. Okay?
7 Now -- and confer with one another and let us know
8 and we will do our best to respond. We have done a lot of
9 work, as you might expect, lending all sorts of
10 interpretations to your notes. We don't want to mislead you
11 by misinterpreting your note. And that is why I take the time
12 and try to explain the various options that you have in terms
13 of your request.
14 Now finally, your most recent note asks the
15 following question, and hereto I am going to frankly ask you
16 if you could perhaps elaborate or clarify somewhat. Again,
17 not because we don't have a pretty good idea what you are
18 getting at, but because we don't want to make a mistake in
19 interpreting it, that in turn misleads you. Okay? That is
20 why I take such precaution.
21 Your question reads: "In considering the charges of
22 wire fraud, Counts 23 to 25 and 27 to 32, are the front
23 running and trading against advice Counts 16 to 22 charges
24 applicable to the wire fraud charges in determining that the
25 defendant knowingly devised or participated in the scheme or
9035
1 artifice to defraud?"
2 Well, obviously all of these counts generally deal
3 with the issue of Mr. Elgindy's relationship to the members of
4 his site. All right, we can all agree on that. In each of
5 these groups, we have two groups, have different elements. I
6 refer you to the instructions.
7 "An element common to both groups is, of course, a
8 scheme or artifice to defraud." All right? We don't know
9 whether or not you are asking whether or not you can consider
10 the evidence relevant to Counts 23, relevant to the wire fraud
11 counts in determining whether or not there was a scheme or
12 artifice to defraud, relative to the other counts or vice
13 versa. We are not quite sure what it is you are asking. All
14 right?
15 Each count has specific elements, each count
16 requires specific elements of proof and specific allegations.
17 If you will recall the boxes in the indictment. Okay? All of
18 which must be proven beyond a reasonable doubt. If your
19 question is simply may you consider the evidence received as
20 it may relate to one group of counts in determining whether
21 the elements of a scheme or artifice to defraud exists
22 relative to the other group of counts, if that is your
23 question, let us know. We are prepared to answer. Okay?
24 If you have something else in mind, do the best you
25 can. And if you can improve upon the question, that is fine,
9036
1 too. Tell us that.
2 But you are obviously into it in great detail. And,
3 as I said before, the reason I take this precaution with the
4 full consent of counsel is because we don't want to
5 inadvertently mislead you.
6 And with that, I'd ask you to return to the jury
7 room and we will await to further hear from you.
8 THE CLERK: All rise.
9 (Jury leaves the courtroom at 3:45 p.m.)
10 THE COURT: Anybody have any problems with what I
11 just did?
12 MR. BREEN: No, Your Honor.
13 MR. LEVINE: No, Your Honor.
14 MR. TIRSCHWELL: The only thing that I would say is
15 that in the categories, we will see what the note is. It may
16 moot any problems. But in terms of -- our position is, that
17 even if that is two or three weeks before, it is not the same
18 company, he is talking about shorting it and talking about the
19 prices insured at, two or three weeks before, that that would
20 undermine the allegation that at some later date that it would
21 be properly using front running with respect to that stock.
22 THE COURT: It would. And if that is what they
23 want, that is what they will get.
24 (Recess taken at 4:45 p.m.)
25 (Matter continued on the next page.)
9037
1 (Time noted: 5:10 p.m.)
2 THE COURT: Well, I believe the answer to their
3 question is yes.
4 MR. BREEN: Yes.
5 MR. LEVINE: Yes, Your Honor.
6 THE COURT: Any descending votes? I think it is the
7 safest answer from both sides.
8 MR. BERKE: Judge, if I could address it. The one
9 thing that I find confusing about their response is that they
10 don't say evidence, they have say elements. I am not sure,
11 because they are obviously elements to the charge.
12 THE COURT: Okay. Fine. Then I am going to make it
13 clear to them, because it is quite clear to me what they are
14 getting at. It is quite clear to me what they are getting at.
15 It is true they consider it elements. I will emphasis, yes,
16 they can use the evidence, but each of the counts has its own
17 elements. And the government has to prove each of those
18 elements beyond a reasonable doubt.
19 MR. LEVINE: I also ask the Court to refer the jury
20 to Paragraph 71 of the indictment for the following reason:
21 The securities and wire fraud counts against Mr. Elgindy are
22 introduced in a common first paragraph.
23 THE COURT: Yes.
24 MR. LEVINE: And I think that that way they will
25 know that we have always said that our theory --
9038
1 THE COURT: It is clear that they are aware of that,
2 because that is what underwrites their question.
3 MR. LEVINE: Yes.
4 MR. BERKE: Judge, I will object. I don't know what
5 Your Honor is going to do, but I object to referring to the
6 charge.
7 THE COURT: I am not referring to the charge.
8 Clearly they understand it, because that is why they ask the
9 question. Both groups require the scheme and artifice to
10 defraud. And they consider the evidence that has been
11 received that relates to one set as they may consider it as to
12 whether or not a scheme or artifice to defraud related to the
13 other count. But each sets of counts, each count requires
14 proof of specific elements as outlined. That addresses your
15 concern.
16 MR. BERKE: Yes, and proven.
17 MR. LEVINE: Your Honor, the one concern that I have
18 and I think the answer, as we said before, was yes. It's just
19 this question -- they are asking, though, whether the concepts
20 of front running and trading against advice, whether those
21 concepts are applicable to these charges. And the reason I
22 suggest that there is an issue in the indictment is because
23 there seems to be a possibility that the jury believes that we
24 haven't alleged, or isn't part of our theory that front
25 running and trading against the site, is the essence in our
9039
1 defraud theory. I looked in your charge and it doesn't
2 incorporate that particular paragraph of the indictment that
3 says the security and the wire fraud charges are based on --
4 as the indictment says, misleading subscribers.
5 THE COURT: Bring them in.
6 THE CLERK: Yes, Your Honor.
7 THE COURT: How do which stand as to part two?
8 MR. BREEN: We started to go through that, Your
9 Honor. We haven't gotten very far, just because a lot of the
10 examples that the defense has shown, are examples that we
11 think fall into the third category. It is not things they are
12 interested in. Things like well --
13 THE COURT: Whoa. You start with the transaction
14 you allege as evidence of front running or trading against the
15 site.
16 MR. BREEN: Yes.
17 THE COURT: That is the starting point.
18 MR. BREEN: Yes.
19 THE COURT: That is Group Two.
20 MR. BREEN: Okay.
21 THE COURT: Then they get to put in their aspects of
22 the chat, if they didn't during the trial, that undermines, in
23 their view, your allegation that these specific transaction
24 evidenced that practice.
25 MR. BREEN: Okay. But I just wanted to explain,
9040
1 some of the things that they are saying undermine it are
2 things like -- well, with HDGV --
3 THE CLERK: All rise.
4 MR. BREEN: I will bring it up later.
5 (Jury enters the courtroom at 5:15 p.m.)
6 THE COURT: Please be the seated, folks.
7 Thank you for your -- by this time, your now
8 typically speedy response to my question.
9 With respect to the question regarding the two
10 different groups of counts, the simple answer to your question
11 is yes. Yes, you may consider the evidence.
12 Each group requires proof of a scheme or artifice to
13 defraud. You may consider the evidence in the case in
14 determining whether or not the government has proven a scheme
15 or artifice to defraud, whether it relates to the first group
16 or whether it relates to the so called wire fraud group. You
17 may consider the evidence, as you interpret it and weigh it
18 and consider it and evaluate it, in determining whether that
19 scheme or artifice has been proven.
20 The answer to your question, in the shortest term,
21 is yes. But please remember each group, and indeed each count
22 within the group, requires proof of specific elements beyond a
23 reasonable doubt. We are only talking about one element
24 common to all of them, which is the alleged existence of a
25 scheme or artifice to defraud. I hope that satisfies you. If
9041
1 it doesn't, tell me.
2 As to your second, we are hard at work, and I think
3 it is likely that we will probably not get to it until the
4 morning. And we will work with counsel throughout the balance
5 of the day, and hopefully be ready for you first thing in the
6 morning, and have that chat to you. Okay?
7 Thank you, folks. Let us know if we have satisfied
8 you. Actually, let us know if we haven't satisfied you.
9 (Jury leaves the courtroom 5:18 p.m.)
10 THE COURT: Okay. What was it you were saying, Mr.
11 Breen?
12 MR. BREEN: To give an example, when HGVB, they are
13 focusing on the charges, the day before. Here, it is a front
14 run. And they want to put in the chat the day before the
15 trade and then the broadcast where Mr. Elgindy makes a comment
16 that no one needing to cover that specific stock. And from
17 that, they take that well, if Mr. Elgindy is saying there is
18 no need to cover, then that means that Mr. Elgindy is saying
19 that he is short or he is going to short. So that it is
20 something that somehow impacts this broadcast.
21 If you recall the front running charges were very
22 specific in focusing on broadcasts. That was the testimony
23 that we elicited from the witnesses. It wasn't that there was
24 no discussion in the chat rooms, it was that whenever there
25 was an official broadcast, that there couldn't be a trade that
9042
1 front ran that broadcast. And we were very specific in
2 charging it that way. We are specific in our charts. We were
3 specific with each of our witnesses that testified that that
4 was their understanding of what it was in the site.
5 Including, Mr. Hansen, who actually taught the training
6 classes and made that distinction.
7 So we just think that it doesn't address the
8 government's charges and it doesn't then fit in to category
9 two. It is more category three of things that might, by some
10 stretch of the imagination, be relevant the same way -- or
11 barely the same way all evidence would be relevant in chat
12 when it deals with a specific stock.
13 Of course, not every time Mr. Elgindy talked about a
14 stock in the chat room did he then make a broadcast. But the
15 defense's position presupposes that there must have been that
16 and that, in effect, there would be no reason for broadcasts
17 at all. Because all you have to do is mention it in the chat
18 log. And that is not what the evidence shows.
19 THE COURT: Yes.
20 MR. TIRSCHWELL: Judge, the government may be very
21 specific in their theory, but we are very specific in our
22 defense. Our defense is that the theory is wrong. Our
23 defense is of the contextual is crucial for the jury to
24 understand it. And taking Mr. Breen's one example, it is a
25 perfect example. They allege a short at 149 and then two
9043
1 hours later a broadcast. So we go back to the day before
2 which is a couple of hours in the trading world before hand,
3 and show he is talking about the facts that people shouldn't
4 cover and the stock is a scam.
5 The question is whether site members would have been
6 misled knowing that a few hours before in the trading world,
7 the day before, he is talking all about the same stock. He is
8 saying it is a scam. He is saying we don't need to cover.
9 Which I don't think it is a big leap to suggest that that
10 would convey to his members that he is short or may be short.
11 And the question is, the next day, are they
12 defrauded by or misled by. So I think it is a question of we
13 disagree about the persuasiveness of the evidence. But I
14 don't see the disagreement that it is our theory of how it is
15 disputed.
16 MR. BREEN: But or charge is very specific. It is
17 that the people on the site had reason to believe what Mr.
18 Elgindy told them, that Mr. Elgindy wouldn't be trading ahead
19 of his broadcasts. Not that he wouldn't be trading ahead of
20 these other things. Just because the defense can't address
21 what we have. So they are looking for other things that we
22 think would be confusing to the jury and is not responsive to
23 category number two, as requested by them.
24 I mean, granted this is their defense, but this does
25 not fit into this category of something that addresses the
9044
1 government's charges. It is in the category of contextual, as
2 Mr. Tirschwell says. Contextual is, in a way that is much
3 broader beyond the allegations.
4 THE COURT: You are saying it to me in plain English
5 and I don't understand what you are saying.
6 MR. BREEN: Okay.
7 THE COURT: The question is, I believe, are these
8 people being defrauded by Mr. Elgindy.
9 MR. BREEN: Yes.
10 THE COURT: So I am not certain I understand how and
11 why you can limit it to specific broadcasts when he is saying
12 things on the chats which was, in effect, educate the members
13 to know that he is trading against his own advice.
14 MR. BREEN: Well, because the charges are specific
15 to Mr. Elgindy saying I don't front run. I am not going to
16 trade ahead of my broadcast call. So if there is something
17 that where he is telling them that he is doing that, then that
18 addresses the charges. But if it is something that is just
19 discussion in the chat room that is not a broadcast, it is
20 apples and oranges, because it is a clear distinction between
21 chat discussion and broadcasts calls. The broadcasts calls
22 are much more formal. And that is what the main members get,
23 that is what people get if they are not in the chat room at
24 the minute --
25 THE COURT: Are you suggesting to me that from day
9045
1 one in the chat Mr. Elgindy says something that makes it clear
2 that he is doing something, okay, trading, if you will,
3 against the site were he not to disclose it, but he is
4 disclosing it in chat. And then two or three days later, he
5 makes a broadcast call.
6 Are you suggesting to me that that chat wouldn't be
7 relevant if when they hear it they know that he is not trying
8 to cheat them?
9 MR. BREEN: Well, not all of the members are in
10 chat. Some of the members are just getting the e-mails. Some
11 of the members have days jobs. Some of the members --
12 THE COURT: There are chat logs.
13 MR. BREEN: Well, they have chat logs, but they are
14 limited to some extent.
15 THE COURT: That is an argument. Fair enough.
16 But you are suggesting the jury doesn't get that.
17 The jury doesn't listen to that.
18 MR. BREEN: What I am suggesting is it doesn't fit
19 into the category directly addressing the allegation.
20 THE COURT: You put in your category as you see fit.
21 You put in your chat.
22 This is what I want. And I want it first thing in
23 the morning. Your chat. I want what the defense maintains is
24 responsive to your chat, on a per allegation basis.
25 We are not going to open the doors for all of this
9046
1 chats. You notice how we are many notes into this? And it is
2 only very late in the game does he even get to this chat,
3 which the jury does not, no doubt, either put to memory,
4 discounted, I don't know what they are doing with it. But it
5 is taking us a long time for us to get to an aspect of the
6 proof that we spent weeks and weeks on trial. What that
7 means, I don't know.
8 But can we do that now?
9 MR. BREEN: Yes.
10 THE COURT: Thank you.
11 I will be around.
12 MR. TIRSCHWELL: Judge, you want to us submit
13 something for you to look at?
14 MR. BREEN: I understand.
15 THE COURT: Give me the pages and whatever it is, so
16 I can read it. And I will make a ruling so that we are ready
17 for them in the morning. That is all I want.
18 MR. LEVINE: Your Honor, we have a note.
19 THE COURT: Guess who wants to go home?
20 (Note handed to the Court.
21 THE COURT: The note reads as follows: "Thank you
22 for the clarification." Taking a word out of Mr. Berke's
23 vocabulary. "That answered our questions. We would like to
24 know if we can finish for the day," I am going to let them go.
25 "We are making good progress." Do you want to mark it?
9047
1 THE CLERK: Yes, that is Court Exhibit 25.
2 THE COURT: May I do it informally, and send them
3 home?
4 MR. BREEN: Yes, Your Honor.
5 MR. LEVINE: Yes, Your Honor.
6 MR. BERKE: Yes, Your Honor.
7 MR. TIRSCHWELL: Yes, Your Honor.
8 (Whereupon the judge leaves the bench at 5:25 p.m.)
9 (Court concluded at 6:00 p.m.)
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