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United States v. Georgiou

September 29, 2010

UNITED STATES OF AMERICA
v.
GEORGE GEORGIOU



The opinion of the court was delivered by: Robert F. Kelly, Sr. J.

MEMORANDUM

Presently before this Court is the "Supplemented and Amended Motion for New Trial Pursuant to Rule 33" filed by Defendant George Georgiou ("Georgiou"). For the reasons set forth below, the Motion will be denied.

I. FACTS

On February 12, 2010, following a three-week trial, a jury found Georgiou guilty of one count of conspiracy, four counts of securities fraud and four counts of wire fraud.*fn1 On May 7, 2010, Georgiou filed the instant Motion, arguing that this Court must grant him a new trial on the following grounds: (1) the Court erred in permitting interpretation testimony; (2) the Government presented improper opinion testimony through its lay witness in violation of Federal Rule of Evidence 701; (3) Georgiou's Fifth and Sixth Amendment rights were violated as a result of the Court's denial of Georgiou's request to present testimony regarding the "other crimes" of the Government's cooperating witness, Kevin Waltzer ("Waltzer"); (4) the Court's jury instructions constituted reversible error; (5) the Government made improper arguments which unfairly prejudiced Georgiou; and (6) the Government made arguments that were inconsistent with the evidence known to it.

1. Interpretation Testimony

In his Motion, Georgiou asserts that the Court improperly permitted the Government to elicit interpretation testimony from four Government witnesses: (1) the undercover Federal Bureau of Investigation ("FBI") agent referred to during the investigation and trial as "Charlie" (the "UC"); (2) Securities Exchange Commission ("SEC") employee Daniel Koster ("Koster"); (3) Waltzer; and (4) the Government's rebuttal witness, Alex Barrotti ("Barrotti").

A. The UC

On January 25, 2010, with the agreement of Georgiou's counsel, the Government played a recorded conversation between Georgiou and Waltzer while the UC was on the witness stand. (Trial Tr. vol. 1, 61, Jan. 25, 2010.) The UC's testimony was as follows:

Q: Having heard this, what was the role that you assumed at this meeting, having heard this recording? What about this recording informed that?

A: I assumed that the defendant knew what he was going --

Defense: Objection, Your Honor. That calls for conclusion. He said he assumed.

The Court: Yes, but he's telling us that he assumed that for the purposes of the part he was playing. Objection overruled.

Q: You can answer.

A: For the part I was playing, I could tell from the discussion that the defendant was -- by him saying is this guy a cop, not once, but I think twice, just from hearing what I do led me to believe that it was clear this is something illegal. Also, do we have to meet in person is kind of strange. If you're doing a legitimate deal you would want to meet somebody in person. It seemed like he didn't want to meet in person, so it led me to believe to prepare for this meeting that he was a very cautious individual who knew what he was doing, all right? He knew this was pay to play, he knew the only thing that motivated me was getting paid for what I was going to do, and so preparing for the meeting I knew that he might suspect that I was a cop, because we were going to be discussing something illegal.

(Id. at 67-68.)

The Government then asked the UC to describe his August 7, 2007 conversation with Georgiou memorialized in Government Exhibit 410:

Q: Before we get too far into this, can you describe to the jury what you're discussing with the defendant with regard to the open market buying, and the second piece that he's describing?

Defense: Your Honor, I oppose this. The words speak for themselves. If there's a term that needs interpretation and the agent wants to say what he understood, we can't object. But he's trying to say what Mr. Georgiou understood. I do object, because that's opinion testimony.

(Id. at 71.) The Court overruled the objection based on the Government's representation that the agent would describe only his own understanding of what they were discussing. (Id. at 71-72.) The UC continued:

A: Okay. What was being said here [was] that there was going to be two aspects of buying[]. . . . The volume that was being created, that first open market buying to suck up that float, that would be buying that really wasn't -- that was artificial. It was buying that was being done because I was getting paid thirty points, or whatever would be negotiated. So, that artificial buying, to get the price from four to six so the defendant could sell at a higher price, was all just a scheme.

Defense: Your Honor, object and move to strike as non-responsive. The witness is now arguing to the jury what the case is, not interpreting terms.

The Court: Overrule the objection. It should have been made earlier, but it's overruled.

(Id. at 72-73.) When the Government asked the UC to describe his understanding of the term "ratchet," Georgiou's counsel stated a continuing objection to the "agent interpreting terms as to what was happening, as opposed to simply describing the facts." (Id. at 73.) The Court replied: "[T]his is a me[e]tng he attended. . . . [H]e's part of the conversation and he may tell us what he understood it to mean." (Id. at 73-74.)

When asked to describe his understanding of "a mailer, or e-mail, with regard to bringing awareness to a company[]. . . . as it relates to this conversation," the UC stated:

Mailers and e-mail blasts are ways of bringing awareness to companies, and typically they are done in coordination with these programs to manipulate stocks.

It brings awareness to people to know about the stock, and you're hoping that they will go and buy the stock. You know, the liquidity that we've been showing them, the investor will go, they will see this liquidity, they will get their mailer, their e-mail blasts, and say wow, this is something maybe I should invest in, when, in fact, all that volume was false and the price is artificial. (Id. at 80.) When the UC was asked to explain what he meant when he said "this was a risky business" and the purported brokers he represented "aren't doing it for free," he testified: "[T]hat's what I was referring to, that it was illegal. The brokers are taking a big risk because they could be arrested." (Id. at 86.) When asked to explain his understanding of Georgiou's recorded statement about a "prearranged" sale of 200,000 shares, the UC testified that Georgiou was proposing "an illegal stock transaction." (Id. at 87.) The UC's testimony continued:

Q: [T]here was some final discussion about doing this with only people that you trust for obvious reasons. The defendant said, "For a whole lot of reasons." What did you understand that to mean?

A: Because this was totally illegal. . . . . . . .

Q: The defendant says to you, "I guess what I am trying to understand is not so much your method as to gain an appreciation of how cautious one's approach is to this. That's really what I'm trying to understand. I mean, what is the likelihood of one of these brokers having fifty thousand dollars come into one of their accounts or a hundred and fifty thousand dollars come into one of their accounts and coming all the way back through the trail?"

A: My understanding is that the defendant knows that this is an illegal payment, and that if the payment ultimately goes to a broker, could it be traced back to me, who ultimately got the money, and then could it ultimately be traced back to him who sent the money? That was his concern. . . . . . . .

Q: The defendant says to you, "If somebody were wiring to the U.S. would they be wiring to a dummy company." What is your understanding of this?

A: A dummy company would be a company just created and established for purposes of receiving these payments. Dummy companies wouldn't be used for legitimate, you know, securities transactions or dealings. . . . . . . .

Q: What are you discussing there, when you are discussing the reason that Northern Ethanol works is because it is completely tight?

A: Because it is completely tight, meaning that the defendant has control of those shares, and he can do volume and manipulate and get that price increased. He has control. He knows what is going on with that deal, the DTCs. He can control the whole deal.

Q: And when there is some discussion about HyHy having leftovers, what do you understand that to mean?

A: The leftovers are the shares that he doesn't have control over. So the more desirable deal that he wants to start with is the one he controls, because he can manipulate that one. The one with leftovers, if there is buying, he will be buying other peoples' stock, and it's not necessarily good for the manipulation. (Id. at 105-08.) After playing a recording memorialized as Government Exhibit 431, the Government asked the UC: "What is your understanding of what you are talking about there?"

A: A classic market manipulation scheme. To rev up this deal, he is going to put press releases to come out. We are going to [do] something that dwarfs HyHy, which was the campaign they did. They sent out, you know, million piece mailers to generate interest. I mean, it's the same thing as the HyHy deal that he was involved in. . . .

Q: And at one point the defendant states, "My position is the way the shareholders are registered is the way they are," and then he says, "Nobody is wearing a wire." What was your understanding of the communication from the defendant to you on that?

A: That he knew he was talking about illegal activities, and his reaction was that Kevin was asking him a question that was really blatant, like that you and your partner had control over the stock. And he said, "Well, my position is the shareholders are the shareholders and is anybody wearing a wire." I mean, you would only be afraid of somebody wearing a wire if -- Defense: Objection, Your Honor.

A: -- you are afraid of something being recorded.

The Court: Sustained.

Q: Yes, let's talk about what you understood, rather than what you think he may have meant. (Id. at 108-10.)

B. Koster

On February 3, 2010, upon being asked to describe what was depicted on a slide he prepared, Koster testified:

If you look at the way these trades were executed, it's very interesting. You can see that on July 16th, that account in the name of Starport Landing and others sold thirty-nine thousand Avicena shares to Jason Aintabi for about a hundred and fifty-two thousand dollars. But what is significant about that is the executions were at progressively higher prices. There was a portion at three dollars . . . and seventy-five cents. Then there was a portion at three dollars and eighty cents. Then there was a portion at three dollars and ninety-two cents, and then a portion at four dollars.

Q: So by these transactions, the prices are slowly being elevated?

A: That's right.

Q: And is that also known as stair stepping?

A: Yeah.

Q: And is that also a manipulative technique?

A: It is. (Trial Tr. vol. 8, 19-20, Feb. 3, 2010.)

C. Waltzer

On January 26, 2010, when asked during direct examination if Waltzer had an "understanding of why [he and Georgiou] did more [communicating] on the phone as opposed to email," Waltzer testified:

Yeah, because George was very nervous and paranoid about what we were doing, because I believe that he knew what we were doing was illegal, and that was -- an example of that is the emails where I would -- he would get very annoyed at me when I would email things that we were doing. (Trial Tr. vol. 2, 242, Jan. 26, 2010.) On the following day, also during direct examination, the Government asked Waltzer what his understanding was of Georgiou's statement in a recorded conversation that he "can't tell" Waltzer the identity of certain stock promoters in Florida. In response, Waltzer testified:

Well, two reasons in my opinion. The first is that I believe that he knows the extent of the illegality that is happening here. I also believe that there is possibly a concern in the back of his mind that I might call them directly and try to do a deal with them directly. So, I think there is [sic] a couple of different factors at work.

(Trial Tr. vol. 3, 187-88, Jan. 27, 2010.)

D. Barrotti

During the direct examination of Barrotti on the subject of Brett Salter, a party to certain transactions relevant to the case, Barrotti's testimony was as follows:

Q: Okay. Did you have some discussion with him with regard to an individual by the name of Brett Salter?

A: Yes.

Q: And who -- do you know Brett Salter?

A: No, I never met him.

Q: And what did -- what did that discussion involve?

A: On one of my many trips to George, either in Miami or in New York, I believe it was in Miami at one point, he says to me well you know that ten, ...


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