[00:00:00] Speaker 01:
Good morning.

[00:00:00] Speaker 00:
Good morning, Your Honor.

[00:00:02] Speaker 00:
May it please the Court, I represent Siva Bharama, and I'd like to reserve three minutes for you.

[00:00:09] Speaker 00:
How many?

[00:00:09] Speaker 00:
Three.

[00:00:10] Speaker 00:
Okay, thank you.

[00:00:10] Speaker 00:
Three, Your Honor.

[00:00:12] Speaker 00:
So today, I'd like to talk about two of the issues in the brief.

[00:00:16] Speaker 00:
First, whether there was sufficient evidence to sustain the convictions for securities fraud under 1348.

[00:00:21] Speaker 01:
Could you get a little closer to the mic, or maybe we can turn it up a little bit, because you know the acoustics in here are.

[00:00:26] Speaker 00:
Usually I'm very loud.

[00:00:29] Speaker 00:
Now you're good.

[00:00:30] Speaker 00:
That's unusual.

[00:00:30] Speaker 00:
You're good now.

[00:00:31] Speaker 00:
That's never been a problem.

[00:00:33] Speaker 00:
Anyway, I would like to address the two issues.

[00:00:37] Speaker 00:
One, going to the sufficiency of the evidence under 1348, too, and the second,

[00:00:42] Speaker 00:
the question of this constructive amendment by including the language regarding omitted facts.

[00:00:49] Speaker 00:
So the defendant's conviction cannot be sustained based on his misstatement of his trading volume to the person who was himself the embezzler.

[00:00:59] Speaker 00:
And I think it's important to look at what the jury did in this case.

[00:01:03] Speaker 00:
The jury acquitted him of conspiracy.

[00:01:06] Speaker 00:
So we can't have a basis for liability.

[00:01:09] Speaker 00:
There's no Pinkerton liability here.

[00:01:12] Speaker 00:
Um, and the jury essentially said, well, we can't find that he was in a conspiracy with the center, the tip or the insider, which Mr. Nalor, who actually got the confidential information from Palo Alto networks.

[00:01:28] Speaker 00:
And, and in fact, this is also not a case, a traditional tip or tippy case where we can say, well,

[00:01:35] Speaker 00:
The tip war, you know, got a benefit from the tipi because he didn't get any benefit.

[00:01:40] Speaker 00:
He, for some reason, he wasn't even friends with Mr. Nalour.

[00:01:44] Speaker 00:
They started out working together.

[00:01:46] Speaker 00:
They had tea occasionally.

[00:01:47] Speaker 00:
My client left and then he, you know, called him up and said, you know, texted him and said, I'd like to get some.

[00:01:56] Speaker 01:
Council, as you know, as an experienced lawyer, we have a paucity of

[00:02:01] Speaker 01:
guidance in this area about what the TIPOR has to benefit from if at all.

[00:02:07] Speaker 01:
Right.

[00:02:08] Speaker 01:
And as you know, the Second Circuit's gone all over the place on it.

[00:02:11] Speaker 01:
We have very little on it.

[00:02:12] Speaker 01:
What's your best argument that in our situation here that the TIPOR must or must not receive a benefit?

[00:02:24] Speaker 01:
And if so, what kind of benefit would qualify?

[00:02:27] Speaker 00:
Well, I think it's clear.

[00:02:28] Speaker 00:
That's actually, I mean, that's not my argument, but I'd like to answer your question.

[00:02:32] Speaker 00:
So I think that it's not clear if that rule still survives under 1348, because it's a different statute than 10b5.

[00:02:42] Speaker 00:
And the Dirks holding, which said there has to be a benefit, is under 10b5.

[00:02:46] Speaker 00:
So, but I think the problem here is more, but in this court and the Supreme Court in Salomon has said, well, it has to be, it doesn't have to be like a monetary benefit.

[00:03:01] Speaker 00:
It can be something like you give your family or friend some misappropriated information and they use it to trade on.

[00:03:09] Speaker 00:
That's just the same as giving a gift.

[00:03:12] Speaker 00:
And that would work if the the two men had a relationship here, but they didn't really they weren't friends They didn't socialize.

[00:03:21] Speaker 04:
So what why did he give him that information?

[00:03:23] Speaker 00:
We don't really know your honor.

[00:03:24] Speaker 00:
We really I mean, it's we I don't know I mean I could guess I could but I really don't know but really that's not the question here.

[00:03:32] Speaker 00:
I think the point is is did did my client

[00:03:37] Speaker 00:
do something that brings him within the rubric of 1348-2, which requires a means.

[00:03:45] Speaker 00:
You have to use a means of false pretense as a false statement.

[00:03:49] Speaker 03:
Imagine a case where the defendant has a friend who is at an investment bank or something and has lots of inside confidential information.

[00:03:58] Speaker 03:
And he says to his friend, I'm interested in academic study of the securities markets.

[00:04:06] Speaker 03:
And I want to test the strong form of the efficient markets hypothesis.

[00:04:10] Speaker 03:
So please give me the inside information that you have, and I'll study it.

[00:04:14] Speaker 03:
I'm not going to trade on it.

[00:04:16] Speaker 03:
And the friend then gives him the inside information.

[00:04:20] Speaker 03:
But in fact, he goes out and trades on it.

[00:04:23] Speaker 03:
Has that defendant violated 1348-2?

[00:04:27] Speaker 00:
I don't think so.

[00:04:28] Speaker 00:
Why not?

[00:04:30] Speaker 00:
Because the false statement he made is not to the victim.

[00:04:34] Speaker 03:
It says to obtain.

[00:04:38] Speaker 03:
by means of false or fraudulent pretenses.

[00:04:40] Speaker 03:
So there's a false statement there, right?

[00:04:41] Speaker 00:
Right.

[00:04:41] Speaker 00:
There's a false statement.

[00:04:42] Speaker 03:
And he has to obtain any money or property.

[00:04:45] Speaker 03:
And Carpenter says that confidential information is property.

[00:04:49] Speaker 03:
Is property.

[00:04:50] Speaker 03:
So he's obtained money or property by false or fraudulent pretenses.

[00:04:54] Speaker 03:
And it has to be in connection with the purchase or sale of a security.

[00:04:59] Speaker 03:
He was doing it to trade securities.

[00:05:01] Speaker 03:
So what's missing?

[00:05:03] Speaker 00:
I guess I have to concede to you there.

[00:05:05] Speaker 00:
I think that would be.

[00:05:07] Speaker 03:
OK, then my question is, what's different here?

[00:05:09] Speaker 00:
What's different about my case?

[00:05:10] Speaker 00:
I think what's different about this case is that at least, and again, this is part of the argument, it's at least as to counts to, not counts

[00:05:22] Speaker 00:
counts the three through five, there were no false statements.

[00:05:27] Speaker 00:
They were just omissions in his exchanges with Nalor.

[00:05:33] Speaker 03:
On a sufficiency challenge, we have to draw all inferences in favor of the verdict.

[00:05:38] Speaker 03:
The jury could have inferred that this whole scheme never would have gotten going if he had said at the outset, like

[00:05:45] Speaker 03:
I'm going to be placing large volume trades on this information when you give it to me.

[00:05:49] Speaker 00:
But it's still an omission, Your Honor.

[00:05:51] Speaker 00:
It's still an omission.

[00:05:53] Speaker 03:
Well, there was an affirmative false statement as to the amount of money in his account.

[00:05:57] Speaker 03:
He said I have $22,000 in the account.

[00:05:59] Speaker 00:
It may not have been affirmatively false.

[00:06:01] Speaker 00:
It may have been true for one account.

[00:06:02] Speaker 00:
He had several accounts.

[00:06:04] Speaker 00:
So I mean, I don't think that that is not, I mean, again, we're in this gray area.

[00:06:10] Speaker 00:
What's an affirmative?

[00:06:11] Speaker 00:
I mean, how precise does my client have to be?

[00:06:16] Speaker 01:
Well, that's where you run into the presumption, isn't it?

[00:06:19] Speaker 00:
I'm sorry?

[00:06:20] Speaker 01:
Isn't that where you run into the presumption in favor of the government in this case?

[00:06:24] Speaker 00:
Of the government?

[00:06:25] Speaker 00:
Well, yes and no.

[00:06:26] Speaker 00:
I mean, I suppose you can say that, but again, we still, and again, I still come back to the,

[00:06:35] Speaker 00:
I would concede that he would have been guilty under, and frankly, it's difficult to understand the verdict.

[00:06:43] Speaker 04:
Under a conspiracy charge?

[00:06:46] Speaker 00:
Oh, well, not the conspiracy charge.

[00:06:47] Speaker 00:
No, but under one.

[00:06:48] Speaker 00:
I know he wasn't guilty.

[00:06:49] Speaker 00:
I mean, the jury found it.

[00:06:52] Speaker 04:
Yeah, my question is, do we even have to look to his lie?

[00:06:55] Speaker 04:
I think there was an aiding and abetting charge also, right?

[00:06:58] Speaker 04:
So all these are under the aiding and abetting theory.

[00:07:00] Speaker 04:
And so he doesn't have to personally lie, as long as, I forget the other gentleman's name, Nalor, had lied.

[00:07:07] Speaker 04:
And then he could be charged for those lies.

[00:07:10] Speaker 00:
He could, again, under the scheme to defraud, or even under the second part.

[00:07:15] Speaker 00:
But the problem is, you have to have aiding and abetting.

[00:07:17] Speaker 00:
How did this client, how did Mr. Buramas,

[00:07:20] Speaker 00:
misstatement, if such it was, to allure, aid and abet the fraud.

[00:07:25] Speaker 00:
It didn't aid and abet.

[00:07:26] Speaker 04:
Well, it induces him to continue to pass on tippy information, insider information.

[00:07:33] Speaker 00:
But that's not the... But it doesn't... Well, I think that that's not quite the... I think he has to do something that induces the scheme, because the scheme was getting information from Palo Alto networks.

[00:07:49] Speaker 00:
And it wasn't just giving it to him.

[00:07:52] Speaker 00:
That wasn't the charge scheme.

[00:07:54] Speaker 00:
There were unindicted co-conspirators in this case.

[00:07:59] Speaker 04:
Right, but it just seems like if Nalor keeps on giving him inside information, something that he is doing is inducing that, right?

[00:08:09] Speaker 04:
It makes no sense otherwise.

[00:08:13] Speaker 00:
Except that I think that there's really

[00:08:17] Speaker 00:
I suppose that, I'm not sure that that's the case.

[00:08:20] Speaker 00:
I think that Mr. Nalour was, honestly, I don't know why he gave him the information given that they didn't have a personal relationship and he wasn't getting anything out of it, perhaps for some kind of ego-driven thing.

[00:08:33] Speaker 01:
You've said that a couple of times, they had no personal relationship.

[00:08:36] Speaker 01:
Perhaps I misunderstand, but I thought

[00:08:39] Speaker 01:
that the evidence showed that because these folks had a, they came from the same general area of I believe India, they had all kinds of cultural connections, they had lunch together, they had tea together, they talked about a lot of different things.

[00:08:53] Speaker 01:
How can you say they had no relationship?

[00:08:56] Speaker 00:
Pretty easily because Nalor testified that they never had lunch together.

[00:09:01] Speaker 00:
They had tea on occasion.

[00:09:02] Speaker 00:
The commonality that they have was they were speakers of the same language.

[00:09:08] Speaker 00:
But they did not socialize.

[00:09:10] Speaker 00:
They did not.

[00:09:12] Speaker 01:
You mean that when you have tea together, you're not socializing?

[00:09:14] Speaker 00:
Well, they didn't socialize together outside of work.

[00:09:17] Speaker 00:
They only worked together for a very limited period of time.

[00:09:20] Speaker 00:
And then Mr. Barama left.

[00:09:22] Speaker 01:
The claimed offenses occurred after they were working at different

[00:09:26] Speaker 01:
That's right.

[00:09:28] Speaker 00:
That's right.

[00:09:28] Speaker 00:
But they did not, but again, there wasn't, they didn't have a social relationship in the sense that they communicated only about trading, mostly over text message and WhatsApp.

[00:09:38] Speaker 00:
They didn't, I'm just watching my time here.

[00:09:41] Speaker 00:
They didn't, you know, they didn't like, unlike, especially when you compare him to the other people that Mr., that Nalor gave information to, he had

[00:09:51] Speaker 00:
He was friends with them, their families hung out together, they visited each other, they had long standing relationships.

[00:10:00] Speaker 00:
He traded in their accounts.

[00:10:02] Speaker 00:
They opened accounts for him.

[00:10:04] Speaker 00:
It was a much stronger case.

[00:10:05] Speaker 04:
So, Ken Steele, you would agree if your client paid Nalor money, then that would easily meet the aiding and bedding.

[00:10:13] Speaker 04:
Absolutely.

[00:10:13] Speaker 04:
So why couldn't we say that something, why couldn't the jury find that something in the relationship, even though it's not a monetary gain, led Nalor to continue to give him insider information?

[00:10:27] Speaker 00:
Well, I think that would really require that there was some psychological need on Nalor's part.

[00:10:33] Speaker 00:
And I don't think that would be sufficient.

[00:10:34] Speaker 04:
I guess I would say that there is enough evidence of some sort of relationship that clearly induced him to do this.

[00:10:40] Speaker 04:
And so in the light most favorable to the jury, why couldn't they find that there is an inducement there?

[00:10:46] Speaker 04:
Therefore, you don't even have to rely on your client's specific lies.

[00:10:50] Speaker 04:
You could rely on Nalor's lies.

[00:10:56] Speaker 00:
I don't, there's just no evidence.

[00:11:00] Speaker 00:
There's just not enough evidence of that.

[00:11:01] Speaker 00:
There's just no- There's some evidence of some relationship.

[00:11:03] Speaker 00:
I mean, it's sort of, you know, it's just sort of, I mean, I think it's just too vague and weak.

[00:11:08] Speaker 00:
It doesn't meet the standard that the Supreme Court set.

[00:11:11] Speaker 00:
I mean, if you look at Salmon, which is the more recent case on tip-or-tippy liability,

[00:11:18] Speaker 00:
It was a familiar relationship where you could say, well, it was a gift.

[00:11:26] Speaker 00:
But there was something to back it up.

[00:11:28] Speaker 00:
And they still stood by the holding in Dirks.

[00:11:30] Speaker 01:
But again, forgive me.

[00:11:33] Speaker 01:
My wife and I were in India about a year ago.

[00:11:35] Speaker 01:
And I learned that there are over 1,000 languages in India.

[00:11:38] Speaker 01:
The only common one is English.

[00:11:41] Speaker 01:
And they even have different movies

[00:11:44] Speaker 01:
filmed the different parts of India, because people don't understand the other.

[00:11:47] Speaker 01:
But these two knew each other.

[00:11:48] Speaker 01:
They understood each other.

[00:11:49] Speaker 01:
They had the same language.

[00:11:51] Speaker 01:
There was a connection.

[00:11:53] Speaker 01:
Isn't that enough?

[00:11:54] Speaker 00:
No, Your Honor, because Telugu, as a matter of fact, is actually one of the most commonly spoken tongues in India.

[00:12:00] Speaker 00:
It's spoken by a very large proportion.

[00:12:05] Speaker 00:
Telugu and Hindi are probably the two most commonly

[00:12:11] Speaker 00:
use languages in India.

[00:12:13] Speaker 01:
Could the jury have understood something different?

[00:12:17] Speaker 01:
In other words, could they have understood that, wow, here's somebody who understands me, understands my language, and they had a connection that way.

[00:12:23] Speaker 01:
Is that enough?

[00:12:26] Speaker 00:
Your Honor, I'm not going to agree with that, especially given the other evidence in the record that he didn't, especially when he listened to Nalora's testimony about his lack of a relationship with Ms.

[00:12:36] Speaker 00:
Strong.

[00:12:36] Speaker 00:
You want to say you said two mentions?

[00:12:37] Speaker 00:
I do.

[00:12:37] Speaker 00:
I do.

[00:12:38] Speaker 00:
So I will sit down.

[00:12:38] Speaker 00:
Thank you, Your Honor.

[00:12:40] Speaker 01:
All right, let's hear from Mr. Farnham.

[00:12:47] Speaker 02:
Good morning.

[00:12:49] Speaker 02:
Good morning, Your Honors.

[00:12:51] Speaker 02:
May it please the Court, my name is Lloyd Farnham, appearing on behalf of the United States.

[00:12:57] Speaker 02:
This Court should affirm and find that the jury convictions were supported by sufficient evidence here.

[00:13:01] Speaker 02:
Brahma does not dispute

[00:13:03] Speaker 02:
that the evidence at trial proved that he made profitable trades based on the confidential business information.

[00:13:08] Speaker 02:
He doesn't dispute that he knew that the information was confidential.

[00:13:13] Speaker 02:
And contrary to Nalor's promises that he made to palo out the networks to keep it confidential, they don't even dispute that Burama acted with an intent to defraud, an intent to deceive and cheat.

[00:13:24] Speaker 02:
We're only talking about the false pretenses in their brief.

[00:13:28] Speaker 02:
And that's what I heard today about the appellant's argument.

[00:13:33] Speaker 02:
But the evidence for that, the sufficiency argument here, can be more direct even than Barama's false statements to Nalor.

[00:13:42] Speaker 02:
The most direct theory of sufficiency here is that Barama himself executed a scheme in artifice to obtain the money or property by false pretenses because his scheme depended on Nalor's false pretenses to palo alto networks.

[00:14:00] Speaker 01:
Let me ask you this.

[00:14:02] Speaker 01:
As I understand it, Barama didn't tell Nalor how much he was trading.

[00:14:06] Speaker 01:
Do you agree with that?

[00:14:06] Speaker 01:
That's correct.

[00:14:08] Speaker 01:
The quantum.

[00:14:09] Speaker 01:
The quantum.

[00:14:10] Speaker 01:
He misled Nalor about the volume and extent.

[00:14:13] Speaker 01:
So does that not support his argument that the jury could have improperly convicted him based on the omitted facts, language, and the jury instructions?

[00:14:24] Speaker 02:
Well, I would characterize what Barama did to Nalor about his trading volume as misleading him.

[00:14:31] Speaker 02:
I think there's always, you can always look at some misleading conduct and deceptive conduct as omissions, but you can also look at it as affirmative acts.

[00:14:40] Speaker 02:
And here, before the trading scheme, before the trading in the charge counts, Burama affirmatively told Nalor a lie about his trading volume.

[00:14:50] Speaker 02:
And particularly in August 2016, Nalor asked him what he had traded.

[00:14:55] Speaker 02:
He said five contracts.

[00:14:57] Speaker 02:
Nalor understood it to mean five contracts.

[00:15:00] Speaker 02:
That was false.

[00:15:01] Speaker 02:
It was many times more than that.

[00:15:02] Speaker 01:
Let me be more specific then.

[00:15:04] Speaker 01:
What role, if any, did the, in quotes, omitted facts in the jury instructions play, according to the government?

[00:15:12] Speaker 01:
Sure.

[00:15:13] Speaker 02:
This is the phrase and omitted facts that was on the government's part inadvertently left in that instruction.

[00:15:22] Speaker 02:
It wasn't objected to, right?

[00:15:24] Speaker 02:
Well, my position is it was waived by the defense because they actually proposed that same instruction.

[00:15:31] Speaker 02:
But at the very least, it was forfeited.

[00:15:34] Speaker 02:
And so it would be reviewed on plain error.

[00:15:36] Speaker 02:
Those three words don't, they certainly are not a constructive amendment because it doesn't materially change what was alleged in the indictment and the proof at trial, the government's theory, the government's arguments.

[00:15:50] Speaker 02:
The appellant has challenged those words on a constructive amendment grounds and I think that it's far from that standard, certainly on plain air.

[00:15:59] Speaker 02:
the appellant can't meet that argument.

[00:16:02] Speaker 02:
I don't think that made a difference because the government didn't pursue that theory.

[00:16:05] Speaker 02:
We didn't talk about omitted facts anywhere in the evidence or in the argument.

[00:16:12] Speaker 02:
What we talked about was that Nalor used and disclosed the confidential business information of Palo Alto Networks contrary to his explicit promises to keep it confidential and that he feigned loyalty

[00:16:26] Speaker 02:
that he feigned adherence to those promises in order to gain continued access to that information.

[00:16:32] Speaker 02:
That was the evidence and that was the theory.

[00:16:34] Speaker 02:
And so the inclusion of the omitted facts in that jury instruction, I don't think it made a difference and it didn't affect his substantial rights.

[00:16:42] Speaker 01:
This is maybe only tangential to the omitted facts issue, but is there any evidence in the record from Melora that said that if he had known

[00:16:52] Speaker 01:
that Burama was trading millions of dollars he would not have shared any more of the confidential information?

[00:16:59] Speaker 01:
Or is that just speculative?

[00:17:01] Speaker 01:
It's inference.

[00:17:02] Speaker 02:
So Nalor did not directly testify to that, but he talked about the fact that he was surprised.

[00:17:06] Speaker 02:
He talked about the fact that he was misled about the trading volume.

[00:17:11] Speaker 02:
And Nalor also, his trading was much more conservative and often in other people's accounts in order to conceal it.

[00:17:18] Speaker 01:
So the inference that

[00:17:21] Speaker 01:
As I recall, he told Barama, you need to keep this small so we don't draw attention, right?

[00:17:28] Speaker 01:
Or is that just an inference?

[00:17:29] Speaker 01:
That's an inference.

[00:17:30] Speaker 01:
I don't think there's direct testimony of Nalour on that question.

[00:17:32] Speaker 01:
So there's nothing in the record that you can say that Nalour definitely would not have provided additional confidential information if he had known the quantum of trades in which Barama was engaged.

[00:17:46] Speaker 02:
That's correct, but I don't think direct evidence is necessary on that.

[00:17:49] Speaker 02:
I think it's a fair and it's an inference on sufficiency.

[00:17:52] Speaker 02:
It's an inference from that, from the testimony.

[00:17:55] Speaker 04:
So, so you started off saying that your theory is that it all depends on the lawyers lies to a Palo Alto.

[00:18:01] Speaker 04:
Correct.

[00:18:01] Speaker 04:
So under aiding your betting theory is, is that right?

[00:18:05] Speaker 02:
I think that's a direct executing a scheme and artifice to defraud Barama executed a fraud that depended on those, on those false pretenses.

[00:18:14] Speaker 02:
But we also have aiding and abetting.

[00:18:15] Speaker 02:
I think those are two ways to get to the sufficient question.

[00:18:18] Speaker 04:
Wait, so you're saying you don't need aiding and abetting.

[00:18:21] Speaker 04:
What's your theory on that?

[00:18:22] Speaker 02:
On without aiding and abetting?

[00:18:25] Speaker 02:
Yes.

[00:18:26] Speaker 04:
Without aiding and abetting, how do you depend on the law's lies?

[00:18:29] Speaker 02:
So the scheme or artifice that was executed by Burama, there are two ways to think about that.

[00:18:35] Speaker 02:
One is a direct execution of a scheme that depended on false pretenses that Burama was completely aware of.

[00:18:41] Speaker 02:
This would be a different situation

[00:18:43] Speaker 02:
if Nalor was using false pretenses that Barama was unaware of.

[00:18:49] Speaker 02:
But he knew that the scheme depended on Nalor's false pretenses because, of course, Barama was a former employee under the same obligation.

[00:18:58] Speaker 04:
So you're saying knowledge of the false pretenses is enough?

[00:19:03] Speaker 02:
with additionally with all the other elements.

[00:19:06] Speaker 02:
Yes, that's correct.

[00:19:07] Speaker 04:
But I don't know, is there cases that say that the false pretenses or lies can be done by someone else as a direct offense?

[00:19:17] Speaker 02:
Well, I've been talking about direct liability, I think, that he executed.

[00:19:22] Speaker 02:
I also think that co-schemer liability under the federal fraud statutes under Title 18 is another way of thinking about primary liability.

[00:19:31] Speaker 02:
And here, at the very least, even if he didn't directly execute a scheme or artifice that depended on the lores

[00:19:38] Speaker 02:
He was a co-schemer with Nalor.

[00:19:42] Speaker 02:
What statute are you referring to?

[00:19:45] Speaker 04:
The co-schemer liability?

[00:19:47] Speaker 02:
The best case would be the Stapleton case.

[00:19:51] Speaker 02:
That establishes that under mail and wire fraud there's this concept of co-schemer liability.

[00:19:56] Speaker 04:
What's the difference between aiding and abetting and co-schemer liability?

[00:20:01] Speaker 02:
Aiding and abetting is under section two and so has specific statutory and legal requirements.

[00:20:08] Speaker 02:
Co-schemer doesn't necessarily rely on aiding and abetting.

[00:20:12] Speaker 02:
It's the idea that you are responsible and culpable for the acts that you don't directly commit but that you know are happening and that are part of the scheme.

[00:20:22] Speaker 03:
And how is that different from Pinkerton?

[00:20:25] Speaker ?:
Yeah.

[00:20:25] Speaker 02:
Pinkerton would be more like a conspiracy and you have to have the agreement to... So you can be a co-schemer without proof of agreement?

[00:20:37] Speaker 02:
I think you can.

[00:20:37] Speaker 02:
I think if you act in concert, if you know all the things that your co-schemer is doing and you are actively participating in the scheme, you can be a co-schemer.

[00:20:51] Speaker 04:
That's hard to square with the jury found no conspiracy, but interesting.

[00:20:56] Speaker 04:
But you also put forward an aiding and vetting theory, right?

[00:20:59] Speaker 04:
Yes.

[00:21:00] Speaker 04:
And how does that work?

[00:21:01] Speaker 04:
What inducement was there?

[00:21:04] Speaker 02:
So Barama reached out affirmatively to Nalor to engage in the conversation.

[00:21:10] Speaker 02:
And from the first conversations they had, they talked about financial information and the performance of Palo Alto networks.

[00:21:16] Speaker 02:
Repeatedly, Barama reached out to Nalor to get that information.

[00:21:21] Speaker 02:
And in addition, he made the false statements about his trading volumes that we talked about previously in order to actually induce Nalor to provide the information.

[00:21:34] Speaker 02:
The other interesting part of this is the- Can I just ask you on that?

[00:21:38] Speaker 03:
The false statement, the one that you mentioned a moment ago was about the first trade and the volume that he had traded.

[00:21:46] Speaker 03:
That was after the trade that he made that statement.

[00:21:50] Speaker 03:
Or do I have the chronology right?

[00:21:53] Speaker 03:
He said I believe that's correct.

[00:21:54] Speaker 03:
So then how did that by that point?

[00:21:56] Speaker 03:
He already had the information So how did that induce?

[00:22:00] Speaker 02:
the sharing of the information that had come earlier It would have well, so they actually didn't during that We didn't charge that was not a charged count the August 30th 2016 how many did you buy that that?

[00:22:17] Speaker 02:
That time period was not a chart account charged count

[00:22:21] Speaker 02:
The first charged count was November, and earnings released in November 2016.

[00:22:25] Speaker 02:
So those lies were actually before all the charged trading.

[00:22:29] Speaker 02:
So that's another inducement to Nalour to provide the information and continue to provide it for each of the quarters that were charged counts.

[00:22:39] Speaker 04:
Did the government have a theory on why Nalour provided all that information to Burama?

[00:22:44] Speaker 02:
I think the clear inference is that it was a gift of valuable information.

[00:22:48] Speaker 02:
He was providing it in order to provide a benefit to Burama.

[00:22:53] Speaker 04:
As a friend or kinsman, what's the theory?

[00:22:57] Speaker 02:
I would call it a close personal relationship, certainly sufficient under insider trading law for the personal benefit analysis, although I don't think that is necessary and applies here.

[00:23:10] Speaker 02:
But if we're talking about why he gave it to him,

[00:23:12] Speaker 02:
You know, Nalor did testify, quote, we were not friends.

[00:23:17] Speaker 02:
But if you look at the facts and circumstances of their relationship, it was long term.

[00:23:22] Speaker 02:
They were from the same area in India.

[00:23:24] Speaker 02:
They spoke the same language.

[00:23:25] Speaker 02:
They connected at work.

[00:23:26] Speaker 02:
And they reconnected after he left Palo Alto Networks.

[00:23:29] Speaker 02:
And they spoke frequently, hundreds of times, by phone and text over the next two years.

[00:23:35] Speaker 02:
That is a close personal relationship.

[00:23:37] Speaker 02:
Nights and weekends, they were talking about trading and other things.

[00:23:40] Speaker 01:
It's certainly enough for the jury to infer that that's what was involved, right?

[00:23:45] Speaker 02:
I think that's correct.

[00:23:47] Speaker 02:
And I think that provides a significant motivation for why Nalor was providing the information.

[00:23:52] Speaker 02:
It was a gift of value to Mr. Burama.

[00:23:56] Speaker 02:
Significant value, it turns out.

[00:23:59] Speaker 01:
I'd kind of beg credulity to suggest that when there are hundreds of contacts over a period of time, they had no relationship.

[00:24:07] Speaker 01:
It just doesn't make any sense.

[00:24:11] Speaker 01:
I would agree with that.

[00:24:15] Speaker 02:
I'd like to briefly talk about the, well let me briefly talk about the materiality, excuse me, the personal benefit element.

[00:24:26] Speaker 02:
We argued in the brief that that is not an element required for a 1348 securities fraud.

[00:24:32] Speaker 02:
I think that it's the reasoning of Blazak and the Second Circuit is compelling and this court should follow that.

[00:24:38] Speaker 02:
There really is just the plain reading of the text and applying the federal Title 18 fraud principles here as we should for 1348.

[00:24:50] Speaker 02:
There's just no reason to add the additional element of a personal benefit.

[00:24:53] Speaker 01:
Let's just say you're right.

[00:24:54] Speaker 01:
We don't have controlling law right now.

[00:24:58] Speaker 01:
Under plain error, if you're correct, they were okay because the law wasn't plain.

[00:25:04] Speaker 01:
Even the Second Circuit has just different views about it.

[00:25:07] Speaker 01:
But do we need to reach this issue about whether personal benefit is up to the tip or is required?

[00:25:16] Speaker 01:
Or can we just go on plain error?

[00:25:19] Speaker 01:
In my view, it's plain error.

[00:25:20] Speaker 01:
Yeah.

[00:25:22] Speaker 01:
In other words, do we need to write an opinion that says that for the Ninth Circuit,

[00:25:26] Speaker 01:
that you don't have to have a direct personal benefit.

[00:25:29] Speaker 01:
I don't think you need to reach it, I think, on Plain Air Review.

[00:25:31] Speaker 03:
Why didn't he?

[00:25:32] Speaker 03:
I mean, why do you think that he didn't request that?

[00:25:36] Speaker 03:
Because in his proposed instructions, looking at 1178, he says that the indictment says, and the lawyer tipped the traders for his own benefit.

[00:25:47] Speaker 03:
And then they say that that conduct should be included in the jury instruction.

[00:25:52] Speaker 03:
So it seems like a request for an instruction about personal benefit.

[00:25:58] Speaker 02:
Well, I think it was on a different grounds.

[00:26:00] Speaker 02:
So the indictment actually said that Nalor, a factual allegation, Nalor tipped other traders, including Burama, quote, for his own benefit and the benefit of others.

[00:26:11] Speaker 02:
That was a factual allegation.

[00:26:12] Speaker 02:
I don't think that was

[00:26:14] Speaker 02:
a legal requirement.

[00:26:16] Speaker 02:
It was not recited in the count language.

[00:26:19] Speaker 02:
So as a factual allegation, that was made in the indictment.

[00:26:23] Speaker 02:
And the argument that the defendant made at trial, that Brahma made at trial, was that that was why it should be included, not because there is this additional element that should be imported from Dirks and the Title 15 insider trading cases.

[00:26:38] Speaker 02:
That wasn't the argument.

[00:26:39] Speaker 02:
And so I think they forfeited the argument that they're making now.

[00:26:42] Speaker 02:
And I think it should be on plain error.

[00:26:49] Speaker 02:
Finally, I'd like to address sentencing briefly.

[00:26:52] Speaker 02:
I think that for the arguments we made in our brief, that using the gain here is a reasonable calculation of loss.

[00:27:02] Speaker 02:
not only under the commentary, which should be binding here because it does not conflict with and is not inconsistent with.

[00:27:09] Speaker 01:
What role counsel does the fact that the Sentencing Commission ultimately took the commentary and put it into the text of the guidance, what role should that play in our decision on this issue?

[00:27:22] Speaker 02:
Well, of course, the old guidelines would be applicable here, but it does point to the reasonableness, I think, of the idea of using gain instead of loss when there is a loss and you can't calculate it.

[00:27:34] Speaker 02:
I think it goes to the reasonableness.

[00:27:36] Speaker 02:
As does the concept in Section 2B1.4, where in Title 15 insider trading cases, the Sentencing Commission said

[00:27:46] Speaker 02:
loss is too hard to calculate in these cases and you should use gain.

[00:27:50] Speaker 02:
I think that also goes to the reasonableness of using this profit.

[00:27:55] Speaker 02:
I wouldn't even call it gain because it really is the profit, the conversion of the valuable information into money.

[00:28:03] Speaker 04:
Just real quick.

[00:28:05] Speaker 04:
I think the government pointed out there was other cases that are pending on this issue and should we wait for those in the Ninth Circuit?

[00:28:12] Speaker 02:
I'm not aware of what those cases are, so I apologize.

[00:28:15] Speaker 04:
I think there's other cases dealing with how Kaiser applies to the guidelines and things of that nature.

[00:28:22] Speaker 03:
In your view, who suffered the loss?

[00:28:26] Speaker 03:
Was it Nalora's employer or was it the counterparties to Barama's transactions?

[00:28:33] Speaker 02:
Under a 1348 securities fraud theory, the government's theory is that the company who had the control of the information and had the right to keep it confidential suffered the loss.

[00:28:43] Speaker 02:
And that was an economic loss because the company that it was, they were not doing it for any other reason than economic reasons to maintain the confidentiality of that information.

[00:28:53] Speaker 02:
And so our theory is that it was a loss to pal about the networks, but very difficult to quantify.

[00:28:58] Speaker 03:
Right.

[00:28:59] Speaker 03:
So I guess one way of thinking of it, I had been thinking, was the counterparties suffered a loss because they sold not knowing that it was about to go up or bought not knowing it was about to go down.

[00:29:16] Speaker 03:
And there, the loss exactly matches the gain.

[00:29:19] Speaker 03:
But if you're thinking of it in terms of the company's information, why is there any relationship?

[00:29:26] Speaker 03:
The information has some value to the company, but I don't see... Why should we think that that is any relationship to how much gain Burama was able to make by trading on it?

[00:29:41] Speaker 03:
It just seems completely arbitrary.

[00:29:43] Speaker 02:
It is a reasonable estimate.

[00:29:47] Speaker 02:
And it is to the value of the information, because that's what was taken from Palo Alto Networks.

[00:29:52] Speaker 02:
Um, an analogy that I've, that I've thought about in this, in this area, if you think about a fraudster tricks a family out of a priceless family heirloom that cannot be assigned a dollar value to the family, fraudster sells it at an arm's length auction for a million dollars.

[00:30:08] Speaker 02:
I don't think that there would be any question that if we had to assign a monetary loss to the family that we should use the value that the fraudster sold it for, a million dollars.

[00:30:19] Speaker 02:
And that's a similar thing here.

[00:30:21] Speaker 02:
I think at the very least we could say that the value of the information was what Burama was able to convert it for.

[00:30:28] Speaker 02:
A better trader or someone with more access to capital might have made even more money, but at least it's worth the $6.6 million here.

[00:30:37] Speaker 02:
that Barama was able to use to convert the information.

[00:30:41] Speaker 01:
Do either of my colleagues have additional questions?

[00:30:42] Speaker 01:
Thank you.

[00:30:43] Speaker 01:
All right, thanks very much.

[00:30:44] Speaker 01:
Thank you, Your Honors.

[00:30:45] Speaker 01:
All right, Ms.

[00:30:46] Speaker 01:
Landau, you have a few minutes of rebuttal.

[00:30:54] Speaker 00:
I just want to make just a couple of points.

[00:31:02] Speaker 00:
One of the judges, and I think it was Judge Bumutai, you asked about, is knowledge of false pretenses enough?

[00:31:12] Speaker 00:
And I don't think it is.

[00:31:13] Speaker 00:
And I also think it's important to say, well, because if you look at, so most recent case that sort of addresses this is Milheiser, which said, well, first of all, false pretence isn't enough.

[00:31:26] Speaker 00:
Even if you get what you want from it, it has to go to the nature of the bargain.

[00:31:30] Speaker 00:
And I think that there's a difference.

[00:31:33] Speaker 00:
It sort of plays into the fact that if you're looking at mail fraud, for example, you judge each count individually, even though there's a scheme.

[00:31:40] Speaker 00:
So here we have securities fraud.

[00:31:42] Speaker 00:
We have no conspiracy, because the jury acquitted him.

[00:31:48] Speaker 00:
And we have these four counts.

[00:31:50] Speaker 00:
So how does a false statement as to quantity on one, how does that translate to the other, unless you can find that there's some

[00:32:02] Speaker 00:
there's some kind of, there's something that, I mean, basically, here's what we have, is there's no honor among thieves.

[00:32:09] Speaker 00:
And so why would, you know, Nalour, who said he didn't consider Barama a friend, is that even, is it even reasonable that he would have believed that he was trading in a court?

[00:32:24] Speaker 01:
Your counsel, with respect, you know, we all have

[00:32:29] Speaker 01:
relationship we have with people.

[00:32:30] Speaker 01:
This is a situation where Nalor and Barama apparently hundreds of time communicated.

[00:32:37] Speaker 01:
They had tea together.

[00:32:38] Speaker 01:
How can you say there was no relationship?

[00:32:40] Speaker 00:
And here's the thing, they had tea together when they worked together, not thereafter, and they only communicated in these text messages and only about money.

[00:32:50] Speaker 00:
Is that a personal relationship?

[00:32:52] Speaker 00:
I don't consider my financial involvement.

[00:32:54] Speaker 01:
What kind of relationship is it?

[00:32:56] Speaker 00:
I don't know.

[00:32:57] Speaker 01:
It certainly was a relationship, right?

[00:32:59] Speaker 00:
Well, any relationship is a relationship.

[00:33:02] Speaker 00:
I have a relationship with one of my financial advisors.

[00:33:05] Speaker 00:
I call her when I want her to trade for me, but I certainly don't consider it a personal relationship.

[00:33:11] Speaker 01:
Do you need a personal relationship in this setting?

[00:33:14] Speaker 00:
No, I don't think you do.

[00:33:16] Speaker 01:
There was something here.

[00:33:20] Speaker 00:
Well, I'm not going to convince you on that, so I'm going to move on.

[00:33:25] Speaker 04:
Can you talk about that loss issue?

[00:33:28] Speaker 00:
Actually, yeah, sure.

[00:33:29] Speaker 00:
I'd be happy to talk about that.

[00:33:32] Speaker 00:
Well, actually, one other point.

[00:33:33] Speaker 00:
The personal benefit, it's not plain error.

[00:33:36] Speaker 00:
Plain error review, the request for the jury instruction was made.

[00:33:41] Speaker 00:
We look at plain error review on a claims basis.

[00:33:44] Speaker 00:
The fact that he may not have argued, may not have presented the right, cited the exact right case is not.

[00:33:52] Speaker 03:
Well, it's not just not setting the right cases.

[00:33:57] Speaker 03:
First of all, did you propose specific language for the instruction that you wanted on that point?

[00:34:02] Speaker 03:
Because I didn't see that.

[00:34:03] Speaker 00:
Well, I wasn't trial counsel, so I wouldn't have been me.

[00:34:06] Speaker 00:
But I don't honestly recall, Your Honor.

[00:34:08] Speaker 00:
But I do recall there was a lengthy memo about why it should be.

[00:34:14] Speaker 03:
But the relevant portion of the memo was not lengthy.

[00:34:18] Speaker 03:
And it quoted the sentence from the indictment and said, the conduct alleged in the indictment should be included.

[00:34:25] Speaker 03:
But nothing about because an element of the offense is that there be a benefit to the tipper.

[00:34:35] Speaker 00:
Honestly, I don't recall, Your Honor, but I

[00:34:38] Speaker 00:
I do recall that trial counsel cited the relevant case, and I could be wrong.

[00:34:44] Speaker 00:
I may be misremembering, but that was my memory.

[00:34:46] Speaker 01:
And what is, from your perspective, the relevant case?

[00:34:50] Speaker 00:
It would be Chiarella or Dirks.

[00:34:53] Speaker 01:
I get that, but... If you cite those cases... It's all over the map, though.

[00:34:57] Speaker 01:
Other people have interpreted it differently.

[00:34:59] Speaker 00:
No, but if you cite Dirks, you know that that stands for... That there has to be a benefit to the...

[00:35:05] Speaker 00:
The tip B has to give a benefit.

[00:35:07] Speaker 01:
In a 10-by-5 setting.

[00:35:09] Speaker 00:
Yeah.

[00:35:09] Speaker 00:
I mean, that's what the holding is.

[00:35:11] Speaker 00:
That's sort of what it stands for.

[00:35:13] Speaker 00:
You asked about gain.

[00:35:16] Speaker 00:
It's a long and complicated issue, but I guess I would sum it up by saying the Ninth Circuit has held that Kaiser applies to the guidelines.

[00:35:27] Speaker 00:
in Castillo, and so have several other circuits.

[00:35:30] Speaker 00:
There's a three-way split.

[00:35:32] Speaker 00:
The Ninth Circuit has also said that loss can be ambiguous, so you could turn to the commentary.

[00:35:38] Speaker 00:
But still, under Kaiser, the term loss, any ambiguity, there's a zone of ambiguity.

[00:35:45] Speaker 00:
And as I argued in my brief, gain does not fall in the zone of ambiguity.

[00:35:50] Speaker 01:
Can the law be plain if it's ambiguous and you've got all these different views?

[00:35:56] Speaker 00:
Well, it's not plain error because this was raised at sentencing.

[00:35:59] Speaker 00:
So we're not on plain error review.

[00:36:02] Speaker 00:
And, um, and I think, and, and, and so, so a, the issue is preserved so that.

[00:36:08] Speaker 00:
I think the answer's there.

[00:36:09] Speaker 00:
Why not?

[00:36:10] Speaker 03:
I mean, forgetting the commentary and the Kaiser question, if the district court just has to figure out what's the best approximation of loss, we don't know exactly what the value of the information to the company was, but why isn't it reasonable to think, well, it would have been worth at least as much to them as what he was able to get out of it?

[00:36:33] Speaker 00:
Well, I think you could say that if, well, first of all, I guess, so we're stuck with the guidelines.

[00:36:43] Speaker 00:
We have the guidelines.

[00:36:45] Speaker 00:
The guidelines say a reasonable estimate of loss.

[00:36:48] Speaker 00:
And you're only supposed to... Why isn't it in this context?

[00:36:51] Speaker 00:
Well, why isn't it?

[00:36:52] Speaker 00:
Because the government is, it's really only when loss can't be estimated.

[00:36:56] Speaker 00:
And the government didn't even try to estimate loss.

[00:36:58] Speaker 00:
And I've been in other cases where, not securities fraud cases, but comparable cases where, for example, like, OK, I'll just give you an example.

[00:37:08] Speaker 00:
I represented a guy who hacked LinkedIn.

[00:37:16] Speaker 00:
And they decided not to bother estimating the amount of loss.

[00:37:21] Speaker 00:
But they could have said, well, he made this much money.

[00:37:24] Speaker 00:
But they couldn't do that.

[00:37:26] Speaker 00:
And so those are the steps.

[00:37:27] Speaker 00:
So here, the government was just like, well, we'll just use gain because it's easy.

[00:37:32] Speaker 00:
And that's not what the guidelines require.

[00:37:34] Speaker 01:
OK, your time is up.

[00:37:37] Speaker 01:
Let me ask my colleagues, does either of you have additional?

[00:37:39] Speaker 01:
It's a fascinating issue.

[00:37:40] Speaker 01:
We thank both counsel for your argument in the case.

[00:37:43] Speaker 01:
The case just argued is submitted.