Petition for Writ of Certiorari — Pablo Calderon, Petitioner v. United States

i

Appendix

17-1956 (L)

United States v. Calderon, et al.

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

August Term 2018

Decided: December 3, 2019)

(Argued: February 5,2019

Nos. 17-1956,17-1969,17-2844,17-2866

United States of America,

Appellee,

-v.Pablo Calderon, Brett C. Lillemoe,

Defendants-Appellants.

Before:

Kearse, Pooler, and Livingston, Circuit Judges.

Defendants-Appellants Pablo Calderon and Brett C. Lillemoe appeal from

judgments entered in the United States District Court for the District of

Connecticut (Hall, /.), convicting them of conspiracy to commit bank and wire

fraud, and wire fraud in violation of 18 U.S.C. §§ 1349, 1343. On appeal, the

Defendants argue that (1) there was insufficient evidence supporting their jury

convictions under both statutes; (2) the district court erred in giving a "no ultimate

The Clerk of Court is respectfully directed to amend the caption as set forth

above.

App.l

harm" instruction to the jury; (3) the district court plainly erred in failing to charge

the jury that actual, potential, or intended harm is an element of bank fraud, 18

U.S.C. § 1344(2); and (4) the district court abused its discretion in giving a modified

Allen charge to the deadlocked jury.

The Defendants also appeal from

postjudgment orders of the district courts setting restitution amounts, contending

that the court abused its discretion in directing the Defendants to pay over $18

million in restitution pursuant to the Mandatory Victims Restitution Act of 1996,

18 U.S.C. § 3663A. We conclude that (1) there was sufficient evidence supporting

the jury convictions; (2) the district court did not err in giving the jury a "no

ultimate harm" instruction; (3) the district court did not plainly err in charging the

jury on the elements of bank fraud; (4) the district court did not abuse its discretion

in giving a modified Allen charge to the jury; but (5) the district court abused its

discretion in ordering a restitution amount of over $18 million to be paid to the

United States Department of Agriculture because the Defendants did not

proximately cause financial losses equating to that amount.

Accordingly, the restitution orders are REVERSED; the judgments of

conviction are VACATED to the extent that they ordered the Defendants to pay

restitution, and are otherwise AFFIRMED. We REMAND for entry of amended

judgments omitting the requirement for restitution.

For Appellee:

For Defendant-Appellant

Brett C. Lillemoe:

Michael S. McGarry (John Pierpont,

Sandra S. Glover, on the brief), Assistant

United States Attorneys, for John H.

Durham, United States Attorney for the

District of Connecticut, New Haven, CT.

David C. Frederick (Brendan J. Crimmins,

Andrew E. Goldsmith, Benjamin S. Softness,

on the brief), Kellogg, Hansen, Todd, Figel &

Frederick PLLC, Washington, D.C.

App.2

For Defendant-Appellant

Pablo Calderon:

Douglas M. Tween, Linklaters LLP, New

York, NY, submitted an opening brief;

Pablo Calderon, Darien, CT, submitted a

reply brief pro se and argued orally.

Debra Ann Livingston, Circuit Judge:

Defendants-Appellants Brett C. Lillemoe ("Lillemoe") and Pablo Calderon

("Calderon") (together, "Defendants") appeal from their convictions for

conspiracy to commit wire and bank fraud, 18 U.S.C. § 1349, and wire fraud, 18

U.S.C. § 1343, following a jury trial in the United States District Court for the

District of Connecticut (Hall, /.).

The Defendants' convictions arose from their

involvement in a scheme to defraud two financial institutions—Deutsche Bank

and CoBank—in connection with an export guarantee program administered by

the United States Department of Agriculture ("USDA").

The Defendants

falsified shipping documents and presented these documents to the banks,

thereby facilitating the release of millions of dollars in USDA-guaranteed loans to

foreign banks.

The Defendants argue that the Government failed to produce sufficient

evidence at trial to support their convictions.

Specifically, they argue that the

Government failed to demonstrate that, in altering these shipping documents, the

App.3

Defendants made material misrepresentations that deprived the banks of

economically valuable information, as required to support a conviction for wire or

bank fraud, or conspiracy to commit those offenses.

They also argue that the

district court erred in giving the jury a "no ultimate harm" instruction, see infra

Part II. A, plainly erred in charging the jury on the elements of bank fraud, 18 U.S.C.

§ 1344(2), and abused its discretion in giving the jury a modified Allen charge, see

infra Part III. Finally, they assert that the district court abused its discretion in

ordering the Defendants to pay over $18 million in restitution pursuant to the

Mandatory Victims Restitution Act of 1996 ("MYRA"), 18 U.S.C. § 3663A.

We conclude that there was sufficient evidence presented at trial to support

the jury's conclusion that the Defendants violated the wire fraud and conspiracy

statutes. We also hold that the district court did not err in giving the jury a "no

ultimate harm" instruction, did not plainly err in charging the jury on the elements

of bank fraud, and did not abuse its discretion in giving a modified Allen charge

to the jury.

Finally, however, we conclude that the district court abused its

discretion in holding that the USDA was entitled to a restitution amount of

$18,501,353 under the MVRA because the Defendants did not proximately cause

financial losses equating to that amount.

App.4

Accordingly, for the reasons given

herein, we reverse the orders of restitution, vacate so much of the judgments as

order restitution, and remand for the entry of amended judgments without such

orders.

BACKGROUND

I.

Factual Background2

International business transactions involving the sale of physical goods are

presently carried out by use of unique documents and contracts that serve to

mitigate risk among the geographically disparate parties.

Such transactions

remain highly dependent upon the compilation and presentation of certain

physical documents at different stages in the sales process.

Indeed, so crucial are

the documents underlying these sales that "international financial transactions"

have long been said to "rest upon the accuracy of documents rather than on the

condition of the goods they represent." Banco Espanol de Credito v. State St. Bank

& Tr. Co., 385 F.2d 230,234 (1st Cir. 1967). The Defendants falsified bills of lading,

one such category of shipping documents, so as to render them compliant with

contractual and regulatory requirements before their presentation to two U.S

2 The factual background presented here is derived from the parties' submissions

and the uncontroverted evidence presented at trial.

App.5

based financial institutions.

A. Letters of Credit in International Sales

Understanding the Defendants' scheme requires a basic comprehension of

the use of letters of credit in international sales, in this case sales of agricultural

goods.

"Originally devised to function in international trade, a letter of credit

reduce [s] the risk of nonpayment in cases where credit [is] extended to strangers

in distant places." Mago Int'l v. LHB AG, 833 F.3d 270, 272 (2d Cir. 2016) (internal

quotation marks and citation omitted). As relevant here, the process begins with

the contract for the sale of goods negotiated between a domestic exporter and a

foreign importer.

A typical contract at issue in this prosecution would be one for

the sale of soybeans between an American exporter and a Russian importer.

To avoid the risk of nonpayment by the foreign importer, the American

exporter bargains for and includes in the contract a term that requires payment by

a confirmed and irrevocable letter of credit. The foreign importer then applies to

an "issuing bank" (usually a foreign bank) to receive that letter of credit.

The

foreign-based bank then "issues" the letter of credit in favor of the American

exporter, also referred to as the "beneficiary."

The letter of credit itself

constitutes an "irrevocable promise to pay the []beneficiary when the latter

App.6

presents certain documents... that conform with the terms of the credit." Alaska

Textile Co. v. Chase Manhattan Bank, N.A., 982 F.2d 813, 815 (2d Cir. 1992). At the

same time, the domestic exporter often works with a domestic bank (also referred

to as the "confirming" bank) and assigns its right to payment on the letter of credit

to that domestic bank in exchange for immediate payment of the contract price.

The payment on the part of the confirming bank to the beneficiary triggers the

issuing bank's obligation to reimburse the confirming bank.

Thus, the domestic

exporter receives immediate payment for the sale from the domestic bank, and the

domestic bank is repaid over time and with interest by the foreign bank. The

letter of credit thereby mitigates risk by assigning the rights and obligations of the

original contract to financial institutions rather than individual importers and

exporters. Alaska Textile, 982 F.2d at 815.

To obtain immediate payment of the contract price upon assigning its right

to payment to a domestic bank, an exporter must compile a complete set of

documents and present them to that confirming bank. Among the documents

necessary to cause a bank to release funds in conformity with a letter of credit is

the final contract of relevance here, the "bill of lading."

The bill of lading is a

contract between either the exporter or the importer and an international carrier

App.7

of goods, obligating the carrier to transport the goods to the importer's location or

some other distant place.

A bill of lading "records that a carrier has received

goods from the party that wishes to ship them, states the terms of carriage, and

serves as evidence of the contract for carriage." Norfolk S. Ry. Co. v. James N. Kirby,

Pty Ltd., 543 U.S. 14, 18-19 (2004).3 The Defendants' presentation of documents,

including bills of lading, to confirming banks for inspection in order to induce the

banks to honor their obligations under various letters of credit provided the basis

for the prosecutions here.

When a confirming bank examines documents submitted to it for the

purpose of obtaining payment on a letter of credit, the confirming bank has two

duties: (1) to determine whether these documents conform to the terms of the letter

of credit; and (2) to respond if it finds any discrepancies.

J.A. 893.

The

confirming bank never sees the goods at issue, only the documents (including the

3 According to the Defendants' expert, negotiable bills of lading allow for the

flexibility of selling goods while they are in transit; non-negotiable bills do not.

Regardless of whether a bill of lading is negotiable or non-negotiable, only an original

bill of lading serves as a document of title; a copy of a bill of lading functions primarily

as a receipt. Conversely, the Government's expert explained at trial that bills of lading

are issued in sets that typically consist of three originals and any number of copies, which

are referred to as "copies non-negotiable." In any event, the experts agree that a "copy

non-negotiable" bill meaningfully differs from either a "negotiable" or "original" bill,

and we need not decide which expert is correct in order to resolve the Defendants'

sufficiency of the evidence challenge.

App.8

bill of lading). J.A. 391.

Because of this, it inspects the documents rigorously to

determine that they comply exactly with the requirements of the letter of credit—

for the documents are its only protection. Id.

Indeed, under the law of the majority of jurisdictions (including this one) if

the documents provided by the seller to the confirming bank did not "strictly"

comply with the requirements of the letter of credit, the issuing bank is entitled to

refuse to honor the letter of credit, and the confirming bank is therefore unable to

recover the money "assigned" to it by the seller.

See Voest-Alpine Int'l Corp. v.

Chase Manhattan Bank, N.A., 707 F.2d 680, 683-85 (2d Cir. 1983); see also Mago Int'l,

833 F.3d at 272 (noting that the "absolute duty" to honor the letter of credit "does

not arise unless the terms of the letter have been complied with strictly" (internal

quotation marks and citation omitted)).

"This rule [of strict compliance] finds

justification in the bank's role in the transaction being ministerial, and to require

it to determine the substantiality of discrepancies would be inconsistent with its

function." Alaska Textile, 982 F.2d at 816. If the documents were nonconforming

but honored, an issuing bank could sue a confirming bank for "wrongful honor."

See, e.g., Bank of Cochin, Ltd. v. Mfrs. Hanover Tr. Co., 808 F.2d 209 (2d Cir. 1986)

(dismissing on the ground of estoppel only because the issuing bank did not

App.9

comply with the requirements of the International Chamber of Commerce's

Uniform Customs and Practice for Documentary Credits ("UCP"), Article 8,

calling for timely notice of discrepancies in the documents).

As the Defendants themselves note, in a letter of credit transaction "'[blanks

deal with documents and not with goods, services or performances to which the

documents may relate/"

Br. Def.-Appellant Lillemoe at 5 (quoting Int'l Chamber

of Commerce, ICC Uniform Customs and Practice for Documentary Credits art. 5

(2007)); see also S.A. 98.

In sum, "because the credit engagement is concerned only

with documents,... [t]here is no room for documents which are almost the same,

or which will do just as well." Alaska Textile, 982 F.2d at 816 (internal quotation

marks and citation omitted).

B. The GSM-102 Program and the Defendants' "Structured" Transactions

The GSM-102 program—which is administered by USDA's Foreign

Agricultural Service on behalf of the Commodity Credit Corporation ("CCC"), the

USDA entity that issues the credit guarantees—provides an incentive for United

States banks to participate in letters of credit export transactions with developing

nations. As already made clear, the seller in such a transaction enjoys immediate

payment for the sale, but the domestic bank must accept the risk that a foreign

bank will default on its payment obligations, and in circumstances in which

App.10

redress may be difficult, if not impossible, to obtain.

To encourage U.S.-based

banks nevertheless to participate in such transactions, the CCC, through the GSM102 program, guarantees the foreign bank's repayment to the domestic bank,

generally covering ninety-eight percent of the foreign bank's obligation under the

letter of credit.

Every fiscal year, the USDA makes $5.5 billion available under

the GSM-102 program.

The Defendants were not the exporters of agricultural goods, but instead

participated in the GSM-102 program as financial intermediaries, creating

"structured" or "third party" transactions.

Essentially, the Defendants would

pay a fee to "rent" or "purchase" program-eligible "trade flows," i.e., the actual

shipments of goods guaranteed by the GSM-102 program, from physical exporters

and importers.

Having secured the requisite "trade flow," the Defendants would

arrange for letters of credit between foreign and domestic banks backed by the

USDA guarantee. In exchange, they received fees from the foreign banks.

In

orchestrating these GSM-102 transactions, the Defendants were also responsible

for the presentation of complying documents to the confirming (in this case the

domestic) banks.

See J.A. 1020 (Testimony of Lillemoe stating "[It's] not exactly

a simple process ... So my role is to put together a lot of different pieces and make

App.ll

the transaction work ... we describe it as sort of lining up the sun, the moon and

the stars to align everything and put it all together").

C. Altering Bills of Lading and the "Cool Express" Transaction

Participating in the GSM-102 program as a financial intermediary is not

itself illegal.

The Defendants were convicted of wire fraud and conspiracy to

commit wire and bank fraud for falsifying bills of lading before presenting them

to two banks, Deutsche Bank and CoBank, in order to make the documents facially

compliant with the terms of the relevant letters of credit and the requirements of

the GSM-102 program. According to the evidence presented by the Government

at trial, the Defendants applied for the GSM-102 program guarantees before

acquiring the requisite "trade flow."

They would then purchase shipping

documents and arrange for letters of credit between foreign and domestic banks

backed by this USDA guarantee.

If the purchased documents failed to comply

with the USDA's requirements as well as those provided for in the relevant letters

of credit, the Defendants would simply falsify the documents to make them

compliant.

Of central importance are two types of alterations, which were

explored at length in the trial described below: (1) the Defendants' redaction of the

phrase "copy non-negotiable" and the stamping of the word "original" onto bills

of lading; and (2) the Defendants' changing of certain bills of ladings' "on-board"

App.12

dates.

Finally, all of the counts of wire fraud on which the Defendants were

convicted involved conduct relating to a GSM-102 transaction between CoBank

and the International Industrial Bank located in Russia ("IIB").

The letter of

credit for that transaction was issued by IIB, and the goods were shipped on a

vessel called the "Cool Express."

J.A. 1074, 1077.

To facilitate this "Cool

Express" transaction, Lillemoe "whited out" the word "copy non-negotiable" on

some of the bills of lading and placed an "original" stamp on them. J.A. 1092-94.

These modified documents were forwarded to Calderon for his review before their

submission to CoBank.

J.A. 1093-94.

Following the global financial crisis in

2007, IIB defaulted on its $6,000,000 in obligations to CoBank under the letter of

credit.

The USDA reimbursed the full amount available under the guarantee

(ninety-eight percent of the loan value).4

II. Procedural History

On February 20, 2015, a grand jury returned a twenty-three-count

indictment against Lillemoe, Calderon, and their associate, Sarah Zirbes.

The

Indictment charged Lillemoe with one count of conspiracy to commit bank fraud

4 The Defendants paid CoBank an upfront fee of three percent.

App.13

and wire fraud, nineteen counts of wire fraud, one count of bank fraud, and one

count of money laundering.

It charged Calderon with one count of conspiracy to

commit wire fraud and bank fraud, nineteen counts of wire fraud, one count of

bank fraud, one count of money laundering, and one count of making a false

statement.

The Indictment alleged, in part, that Lillemoe and Calderon

conspired to commit bank fraud and wire fraud by materially altering shipping

documents.

A. The Trial

At trial, the Government offered a variety of evidence to demonstrate that

the Defendants applied for guarantees under the GSM-102 program, purchased

"trade flows" from third-parties that would not have been compliant with the

terms of the program, arranged letters of credit between foreign and domestic

banks, falsified bills of lading, and then presented those altered documents to

Deutsche Bank and CoBank, causing the banks to disburse funds to a U.S. exporter

according to the terms of letters of credit associated with ten GSM-102

transactions.

The Government introduced, inter alia, (a) the GSM-102 program

files that contained the documents that were submitted to the American banks

along with (b) the unaltered bills of lading that were provided to Lillemoe and

App.14

Calderon and the subsequently altered versions.

The Government also

introduced the testimony of CoBank representative Holly Womack, Deutsche

Bank representative Rudolph Effing, USDA official John Doster, and Federal

Bureau of Investigation Special Agent Steven West.

The Government and the

Defense introduced competing experts on letters of credit transactions, and

Lillemoe testified in his own defense. 5

Because the significance of the

Defendants' alterations of the bills of lading is the central issue on this appeal, we

catalogue the evidence offered on this question below.

1. Stamping

The Government submitted evidence that the Defendants falsified bills of

lading by redacting the word "copy non-negotiable" or "certified true copy"

(usually via white out) and stamping the word "original" onto a number of them.

The Defendants do not dispute that they modified the bills of lading in question

nor that the respective letters of credit governing these altered bills of lading

required presentation of a "copy of original on board . . . bill(s) of lading." J.A.

1851.

Moreover, the Government presented evidence at trial that in order to

submit a claim of loss to the GSM-102 program, a bank would need to submit a

5 The Defendants also introduced various character witnesses.

App.15

copy of an original bill of lading.

J.A. 1791.

The Government also submitted

evidence as to the Defendants' knowledge of this requirement.

See, e.g. J.A. 3617-

18 (Email from Lillemoe stating "just checked with the bank financing the GSM

deal.

They need the copy of the [bill of lading] to state 'Original' in order to

accept it").

CoBank representative Womack and Deutsche Bank representative

Effing testified respectively at the Defendants' trial that they would not have

accepted the Defendants' bills of lading (and therefore would not have released

funds on the transactions) had they known that the Defendants had stamped the

word "original" onto "copy non-negotiable" bills of lading. That is, if their banks

"didn't have a copy of an original" they "wouldn't have paid the funds."

J.A.

458. At trial, however, the Defense attempted to characterize the modifications

to the bills of lading as insignificant, trivial changes that could not have affected

the confirming banks' decisions as to whether to honor the letters of credit.

Lillemoe testified that he stamped the word "original" in blue ink on the bills of

lading in order to make it "easier for everybody."

J.A. 1010. The Government

and Defense also offered competing expert testimony as to the significance of the

stamping activity.

2. Date Changes

The GSM-102 program guarantees also had restrictions limiting them to

App.16

shipments that occurred within specific date ranges.

The Government

introduced substantial evidence at trial demonstrating that Lillemoe and Calderon

changed the "on-board" notation printed on three bills of lading associated with

two GSM-102 transactions to state October 6, 2008, instead of October 5, 2008.

J.A. 1057. The Defendants' alterations placed the shipments within an acceptable

range.

See 7 C.F.R. §§ 1493.20(d), 1493.60(f) (2012) (GSM-102 regulations stating

that "datejs] of export prior to the date" of the guarantee application "are ineligible

for... guarantee coverage" and defining a "date of export" as a bill of lading's "on

board date"). Thus, the Government argued at trial that the Defendants altered

dates on bills of lading to ensure each underlying transaction's eligibility for a

GSM-102 guarantee.

The parties contest neither that the relevant goods were

aboard the ships on October 6th, nor that they were actually shipped on October

5th.

According to the Defense experts and Lillemoe, the "on-board" date on a

bill of lading has a functional significance and can fall on any date that the goods

are "on board" the ship.

The Government presented a great deal of evidence,

however, in support of its claim that the "on-board" date can only represent the

date the goods are actually shipped, and that this understanding was shared by all

App.17

parties involved.

For example, the Government's expert, Professor James Byrne,

testified at trial:

A. [The on-board date] is deemed to indicate the date that the goods

are shipped. The date of shipment is extremely important in letter

of credit practice. It is important to banks. It is important to

applicants in most cases. And so the date which is given as the on

board or loaded on board date is deemed to be the date of shipment

or shipping. Shipping date....

Q. Can that be a range of dates?

A. No. It is the date they are loaded on board.

J.A. 1246.

USDA Official Doster, who was responsible for ensuring that

"registrations were properly issued for the GSM-102 program," J.A. 522, also

testified to that effect, as well as to that date's importance with regard to the USDA

guarantee. J.A. 455,526 ("Q: [D]oes the program ever guarantee [with respect to]

shipments before the on board date? A: No"); see also J.A. 396 (defining

"registration" as a record reflecting "that the CCC has shipped that guarantee and

received the fee and then they recorded that guarantee in their books as ... a

guarantor obligation on behalf of the CCC").6

6 The Government also presented evidence at trial that the Defendants shaded

blank "consignee" fields (which designate the receiving party of the goods) on six bills of

lading, allegedly to make it less "obvious" that the consignee fields had been whited-out.

J.A. 1018. The Defense offered evidence that the fields were whited-out to protect the

confidentiality of the consignee. See J.A. 887-88. The Defendants were acquitted of all

App.18 '

B.

The Jury Verdict and Post-Trial Motions

On November 3, 2016, after hearing eighteen days of evidence, the jury

began its deliberations. The jury deliberated for about a week, before stating that

it had "concluded" deliberations, but informing the court that it was "deadlocked"

on some counts. J.A. 1352. The court decided to give a modified Allen charge,

which encouraged the jury to continue deliberating (discussed, infra Part III).

After receiving the Allen charge, the jury returned a verdict of guilty

for Lillemoe on Count One of conspiracy and Counts Two through Six of wire

fraud, and it returned a verdict of guilty for Calderon on Count One of conspiracy

and Count Six of wire fraud.7 The Defendants were acquitted on the other counts

of wire fraud, bank fraud, money laundering, and false statements.

Following

the guilty verdict, the district court sentenced Lillemoe to fifteen months'

imprisonment to be followed by three years of supervised release, and it sentenced

Calderon to five months' imprisonment. The Court also ordered forfeiture in the

amount of $1,543,287.60 from Lillemoe and $63,509.97 from Calderon.

Lillemoe and Calderon each filed a motion for a judgment of acquittal

of the substantive counts of wire fraud that were connected to this "shading" activity.

7 The jury acquitted Zirbes on all counts.

App.19

pursuant to Rule 29 of the Federal Rules of Criminal Procedure and a motion for a

new trial pursuant to Rule 33.

denied both motions.

2017).

In an order dated March 16,2017, the district court

United States v. Lillemoe, 242 F. Supp. 3d 109,115 (D. Conn.

On September 11, 2017, the district court entered separate restitution

orders as to both Defendants.

United States v. Lillemoe, No. 15-CR-25 (JCH), 2017

WL 3977921, at *1 (D. Conn. Sept. 11,2017). The district court held that the USDA

was entitled to an order of restitution of $18,501,353 after reimbursing the banks

in the GSM-102 program for various transactions with which the Defendants were

involved.

$305,743.33.

Id.

The district court also ordered the Defendants to pay CoBank

Id. at *2.

Each defendant filed timely notices of appeal from the

judgment and the restitution order entered against him.

DISCUSSION

The Defendants raise a variety of challenges to their respective convictions

and the ensuing restitution orders imposed by the district court.

Many of these

challenges relate to the Defendants' central contention that their alterations of the

bills of lading were not and could not have been fraudulent.

Ultimately, we reject

that central contention. We do conclude, however, that the district court abused

its discretion in fashioning the restitution orders at issue here.

App.20

I.

The Defendants first challenge the sufficiency of the evidence underlying

their convictions for wire fraud and conspiracy to commit wire and bank fraud.

The Defendants concede that they modified bills of lading in connection with

various international transactions guaranteed by the GSM-102 program, but they

argue that the Government failed to produce sufficient evidence at trial to support

the jury's determination that this conduct satisfied the elements of wire or bank

fraud (or conspiracy to commit the same). We disagree and find no reason to

upset the jury's determination on this question.

We note at the outset that a defendant who challenges the sufficiency of the

evidence to support his conviction "faces an uphill battle, and bears a very heavy

burden." United States v. Mi Sun Cho, 713 F.3d 716, 720 (2d Cir. 2013) (internal

quotation marks and citation omitted). In considering such a challenge, "[w]e

must view the evidence in the light most favorable to the government, crediting

every inference that could have been drawn in the government's favor, and

deferring to the jury's assessment of witness credibility." United States v. Baker,

899 F.3d 123, 129 (2d Cir. 2018) (internal quotation marks and brackets omitted).

"Although sufficiency review is de novo, we will uphold the judgment of

App.21

conviction if any rational trier of fact could have found the essential elements of

the crime beyond a reasonable doubt."

United States v. Martoma, 894 F.3d 64, 72

(2d Cir. 2017) (internal quotation marks and brackets omitted).

The essential elements of wire fraud are "(1) a scheme to defraud, (2) money

or property as the object of the scheme, and (3) use of . . . wires to further the

scheme." Fountain v. United States, 357 F.3d 250, 255 (2d Cir. 2004) (internal

quotation marks and brackets omitted).

Similarly, the federal bank fraud statute

criminalizes the '"knowing execution' of a scheme to 'defraud a financial

institution.'"

United States v. Bouchard, 828 F.3d 116, 124 (2d Cir. 2016) (quoting

18 U.S.C. § 1344) (brackets omitted).

Thus, both wire fraud and bank fraud

require the Government to prove that the defendant had an intent to deprive the

victim of money or property. Moreover, to establish the existence of a scheme to

defraud, the Government must prove the materiality of a defendant's false

statements or misrepresentations.

United States v. Weaver, 860 F.3d 90,94 (2d Cir.

2017). The Defendants argue that (1) the Government failed to offer sufficient

evidence as to the "materiality" of their alterations to the bills of lading; and (2)

that the Government failed to present sufficient evidence that they intended to

App.22

deprive the victim banks of money or property.

We take each of these

arguments—and reject them—in turn.

A.

We first consider the Defendants' materiality claim.

The wire and bank

fraud statutes do not criminalize every deceitful act, however trivial.

As noted

above, to sustain a conviction under these statutes, the Government must prove

that the defendant in question engaged in a deceptive course of conduct by making

material misrepresentations.

Neder v. United States, 527 U.S. 1, 4 (1999). "To be

'material' means to have probative weight, i.e., reasonably likely to influence the

[bank] in making a determination required to be made."

490 F.3d 208, 234 (2d Cir. 2007).

United States v. Rigas,

As the Supreme Court has put it, a material

misrepresentation has "a natural tendency to influence, or [is] capable of

influencing, the decision of the decisionmaking body to which it [is]

addressed."

Neder, 527 U.S. at 16 (internal quotation marks and citation

omitted). Where, as here, a "bank's discretion is limited by an agreement, we

must look to the agreement to determine what factors are relevant, and when a

misstatement becomes material."

Rigas, 490 F.3d at 235.

App.23

All of these

specifications of the materiality inquiry target the same question: would the

misrepresentation actually matter in a meaningful way to a rational decisionmaker?

The Defendants argue that their alterations to the bills of lading could not

have been material to the banks.

They point to United States v. Litvak, 808 F.3d

160 (2d Cir. 2015), where we held that a defendant's admitted misstatements were

not material to the Treasury Department because the Government had submitted

no evidence demonstrating that these misstatements were capable of influencing

a Treasury Department decision. Id. at 172.

Instead, the evidence presented at

trial established that the Treasury was "kept. . . away from making buy and sell

decisions" and retained "no authority to tell investment managers which

[security] to purchase or at what price to transact."

brackets, and citation omitted).

Id. (internal quotation marks,

Similarly, in Rigas, we held that because there

was no evidence that the Defendants' misstatements there would have influenced

the banks' investment decisions as to what interest rate to charge, those

misstatements were not material. 490 F.3d at 235.

The Defendants argue that the banks here, like the Treasury Department in

Litvak and the banks in Rigas, retained limited discretion in rejecting the

documents, and that the Government offered insufficient evidence that the

App.24

changes made to the bills of lading were capable of influencing the banks'

decisions.

Specifically, the Defendants first argue that the domestic banks'

decisions as to whether to release the funds for these transactions were not

discretionary at all, but were instead governed by the terms of the letters of credit,

and contingent only on the banks' being presented with evidence that the

shipment was program compliant.

Thus, because the bills of lading appeared to

be compliant with the letters of credit and the GSM-102 program requirements,

the argument goes, the banks had no discretion to reject them and any alterations

were immaterial.

We reject this argument. As the court below described it, the Defendants

essentially assert that "if the bank is presented with a document altered carefully

enough," the bank lacks discretion to decline to honor the letter of credit and the

misrepresentations therefore lack materiality.

Lillemoe, 242 F. Supp. 3d at 117.

In other words, under the Defendants' theory, the better the fraudster, the less

likely he is to have committed fraud.

We decline to reverse the jury's rejection of

this argument, which would entail countenancing any and all falsifications of

documents involved in these or similar transactions, as long as they were carried

out with sufficient skill.

App.25

The Defendants next argue that the bills of lading they provided fulfilled

the obligations of the letters of credit prior to their altering them. Therefore, their

theory goes, the Defendants needlessly modified the documents because, in any

event, the bills of lading already fulfilled the function of the "required

document[s]" even if they were altered in minor ways.

Br. Def.-Appellant

Lillemoe at 27. The Government offered substantial evidence at trial, however,

that the banks could have and would have rejected the bills of lading had they not

been altered or had the banks known of the specific alterations at issue.

The

relevant letters of credit clearly called for "copies of original" bills of lading, as did

the GSM-102 program, see, e.g. J.A. 1851-54 (requiring a copy of an "original on

board . . . bill(s) of lading"), 1791 (requiring "a true and correct copy" of "the

negotiable . . . bill(s) of lading"), and the program guarantees had restrictions

limiting them to shipments that occurred within specific date ranges. J.A. 526.

Given these requirements, it is not surprising that CoBank representative

Holly Womack and Deutsche Bank representative Rudolph Effing testified that

their respective banks would have declined to go through with the transactions at

issue had they known about the specific alterations the Defendants made to the

bills of lading.

See, e.g. J.A. 458 (testimony of Womack that if the confirming bank

App.26

"didn't have a copy of an original on board, original bill of lading" it "wouldn't

have paid the funds" because "we [wouldn't] have a complying set of documents

so we wouldn't have an obligation under the [letter of credit] [from the] issuing

bank"); J.A. 470 (testimony of Womack that she would not have accepted the

unaltered bill of lading prior to the Defendants' date change because it would have

made the document non-compliant and "[w]e wouldn't be able to file a claim [with

the USDA] and be paid if the bank defaulted on the obligation"); J.A. 421

(testimony of Effing that "if any of the information that's on that document is not

in compliance with the requirements on the program or letter of credit, then we

just can't accept it").

After all, to submit a claim to the USDA, the banks had to

submit these documents and certify that they were "true and correct copies of the

originals that [they] received."

J.A. 463.

The testimony of USDA Official

Doster, moreover, buttressed this testimony as to the materiality of the

Defendants' changes, J.A. 548-49, as did the Government's expert, who testified as

to the functional significance of the Defendants' changes.

J.A. 1248-49.

For

example, to qualify for the already-secured USDA guarantee, the shipments

involved had to have occurred on or after October 6, 2008.

alterations implicated compliance with that requirement.

App.27

The Defendants'

Additionally, the Government produced several of the Defendants' own

communications, which spoke to the materiality of the Defendants' changes.

See

J.A. 3616 (e-mail from Lillemoe stating that "we'll need a copy [of] the ORIGINAL

[bill of lading]. We cannot execute with the 'Non-Negotiable' version"); J.A. 361718 (e-mail from Lillemoe stating "just checked with the bank financing the GSM

deal. They need the copy of the [bill of lading] to state 'Original' in order to accept

it."); J.A. 1907 (e-mail from Lillemoe stating "[f]or us we need [bills of lading] to

state 'Original' and that are signed.

We'll simply white out the 'Copy Non-

Negotiable' on the signed copies and stamp 'Original' ourselves.

So we're now

OK on the [bills of lading]."); J.A. 2343 (e-mail from Lillemoe to Calderon

describing a date change as "[n]ot my best work, but good enough for now").

These statements provide additional evidence that the confirming banks needed

to receive copies of "original" bills of lading with specific "on-board" dates in

order to honor their obligations under the letters of credit.

They therefore

provide further support for the conclusion that the banks could have and would

have rejected nonconforming documents such as those at issue here, and that the

discrepancies were material to the GSM-102 guarantees.

In sum, the Government produced a variety of testimonial and

App.28

documentary evidence demonstrating that the Defendants falsified documents in

* order to make them appear to be compliant with the terms of the governing letters

of credit and the USDA program.

The jury was also presented with substantial

evidence that had the bank officials known about those specific types of alterations

they would not have accepted those documents and therefore would not have

entered into the transactions at issue.

We conclude, in light of the evidence

described above and marshalled at trial, that the Government presented sufficient

evidence for the jury to conclude that the Defendants' misstatements were

material.

B.

The Defendants next argue that the Government failed to produce sufficient

evidence to support the jury's conclusion that their scheme "contemplated some

actual harm or injury to their victims,"

United States v. Novak, 443 F.3d 150, 156

(2d Cir. 2006) (emphasis, quotation marks, and citation omitted), a necessary

element of their offenses of conviction.

As we have often observed, for the

purposes of satisfying the elements of mail, wire, or bank fraud, a victim can be

deprived of "property" in the form of "intangible" interests such as the right to

control the use of one's assets.

United States v. Carlo, 507 F.3d 799, 801-02 (2d Cir.

App.29

2007).

"[Misrepresentations or non-disclosure of information" can support a

conviction under the "right to control" theory if "those misrepresentations or non­

disclosures can or do result in tangible economic harm."

850 F.3d 94, 111 (2d Cir. 2017).

United States v. Finazzo,

In particular, this Court has upheld convictions

where misrepresentations "exposed the lender ... to unexpected economic risk."

United States v. Binday, 804 F.3d 558, 571 (2d Cir. 2015).

The Government produced a variety of evidence to support the jury's

finding that the Defendants' falsifications exposed the confirming banks to severe

economic risks across two dimensions.

First, the Government produced

evidence that the modifications to the bills of lading exposed the banks to risk of

default or non-reimbursement from the foreign banks because these modifications

sought to hide the true nature of the non-conforming documents.

See, e.g., J.A.

459 (CoBank representative Womack testifying that "we need to have [compliant]

documents to have the issuing [letter of credit] . . . repay us"); J.A. 1249

(Government expert Professor Byrne stating that only the issuing bank can

propose a change to the terms of a letter of credit).

As recounted above, a

confirming bank must determine if the presentation is compliant with the terms of

a letter of credit, and it can reject non-compliant documents.

App.30

This Circuit has

emphasized in the civil context that documents' compliance with the terms of a

relevant letter of credit should generally be analyzed under a standard of "strict

compliance," a standard followed by a majority of courts.

See Mago Int'l, 833 F.3d

at 272. And the economic significance of the precise accuracy of the documents

(including the bills of lading) was testified to at trial.

See, e.g., J.A. 405 (testimony

of Deutsche Bank representative Effing, noting that accuracy is "[sjuper important.

Because that's how we determine .. . whether all the [letter of credit's] terms and

conditions are fulfilled").

The Defendants highlight that:

Our cases have drawn a fine line between schemes that do no more

than cause their victims to enter into transactions they would

otherwise avoid—which do not violate the mail or wire fraud

statutes—and schemes that depend for their completion on a

misrepresentation of an essential element of the bargain—which do

violate the mail and wire fraud statutes.

Binday, 804 F.3d at 570 (quoting United States v. Shellef, 507 F.3d 82, 108 (2d Cir.

2007)).

According to the Defendants, the victim banks got "what [they]

bargained for" because they made "valid, 98%-guaranteed, interest-bearing loans

to USDA-approved, developing-world foreign banks."

Lillemoe at 24.

Br. Def.-Appellant

But the Defendants ignore that the confirming banks did not

receive "what they bargained for" because they bargained for a set of documents

App.31

that complied with the letters of credit and satisfied the USDA guarantee

requirements.

Second, the modifications increased the risk that the USDA would decline

to reimburse the banks in the event of a foreign bank's default.

The evidence

amply established that the Defendants falsified documents that were not in

accordance with the governing GSM-102 regulations to make them guaranteeeligible.

For example, the Government produced evidence at trial that, on three

bill of lading copies associated with two GSM-102 transactions, the Defendants

changed the printed "on-board" date of October 5, 2008, to October 6, 2008.

For

the transactions at issue to qualify for the already-secured USDA guarantee, the

shipments involved had to have occurred on or after October 6, 2008.

As noted

above, several parties testified to the significance of this change at trial.

instance, USDA official Doster testified as follows:

A: When the [good] is loaded onto the vessel, a bill of lading is

issued. And on that bill of lading is what's called a clean on board

date. The clean on board date is the date that's stamped that is

considered the date of the export.

Q: Is that an important date?

A: This is an important date. For one, it is important because it can

determine ownership . . . The on board date . . . established] that

ownership has passed. Our guarantee specifies the date range . . .

App.32

For

through which you may export. So the on board date on the bill of

lading is the date you would look at to determine if the exporter is

falling within the terms of the guarantee ....

Q: And does the program ever guarantee [with respect to] shipments

before the on board date?

A: No.

No.

J.A. 524; see also 7 C.F.R. §§ 1493.20(d), 1493.60(f) (2012) (GSM-102 regulations

stating that "date[s] of export prior to the date" of the guarantee application "are

ineligible for . . . guarantee coverage" and defining a "date of export" as a bill of

lading's "on board date").

Doster's testimony was supported by that of the

Government's expert, Professor James Byrne, who stated at trial that an "on board

date" is "extremely important in letter of credit practice" and refers only to "the

date [the goods] are loaded on board," and that he had "never" heard of the on­

board date as being a "range" of dates. J.A. 1246-47.

Similar testimony was also

offered as to the significance of the Defendants' "stamping" activity on the banks'

ability to obtain reimbursement from the USDA. See, e.g., J.A. 459.

For example,

the Government presented substantial evidence that in order to submit a claim of

loss to the GSM-102 program, a bank would need to submit a copy of an original bill

of lading. J.A. 1791.

The GSM-102 regulations in effect at the time provided that an assignee

App.33

could not be held liable for an exporter's misrepresentations of which the assignee

lacked knowledge.

See 7 C.F.R. § 1493.120(e) (2012). This provision, however,

does not remotely suggest, as the Defendants would have it, that there was

insufficient evidence that they contemplated any harm to the banks.

As the

district court noted, a confirming bank seeking indemnification pursuant to the

GSM-102 program can rely on this provision only if "the assignee . . . has no

knowledge."

Lillemoe, 242 F. Supp. 3d at 119.

Such a question could certainly

have resulted in "protracted and costly litigation" as to whether the confirming

bank "had knowledge of the nature of the documents it had accepted."

Id.) see

also United States v. Frank, 156 F.3d 332, 335 (2d Cir. 1998) (finding intended harm

proven where defendant waste disposers made misrepresentations to their

customer that "could have subjected the [customer] to fines and to the loss of its

environmental permit").

And the jury did not need to speculate as to the

likelihood of such a dispute: USDA official Doster, who again, was responsible

for ensuring that registrations were properly issued for the GSM-102 program,

specifically testified that the Defendants' changes put the banks at risk of non­

reimbursement.

See J.A. 548; see also J.A. 2586.

The Government presented a great deal of evidence that the Defendants'

App.34

submission of falsified, non-compliant documents exposed the victim banks to the

risk of "actual harm or injury" on multiple dimensions.

We therefore decline to

reverse the jury's determination that the Defendants' scheme contemplated

economic harm.

II.

The Defendants next challenge two jury instructions issued by the district

court, only one of which they objected to at trial.

"[W]e review a properly

preserved claim of error regarding jury instructions de novo," but we will reverse

"only where, viewing the charge as a whole, there was a prejudicial error.'"

United States v. Coplan, 703 F.3d 46,87 (2d Cir. 2012) (internal quotation marks and

citation omitted).

If a defendant fails to object to a jury instruction at trial,

however, a plain error standard of review applies on appeal.

30(d), 52(b).

Fed. R. Crim. P.

With these standards in hand, we consider and reject each of these

challenges in turn.

A.

First, the Defendants challenge the district court's decision to give a "no

ultimate harm" charge to the jury. A "no ultimate harm" instruction advises the

jury that "where some immediate loss to the victim is contemplated by a

App.35

defendant, the fact that the defendant believes (rightly or wrongly) that he will

'ultimately' be able to work things out so that the victim suffers no loss is no excuse

for the real and immediate loss contemplated to result from defendant's

fraudulent conduct."

United States v. Rossomando, 144 F.3d 197,201 (2d Cir. 1998)

(quoting 2 Leonard B. Sand et al., Modern Federal Jury Instructions § 44.01 at 44-35).

Such a charge is "proper where (1) there was sufficient factual predicate to

necessitate the instruction, (2) the instruction required the jury to find intent to

defraud to convict, and (3) there was no evidence that the instruction caused

Confusion."

United States v. Lange, 834 F.3d 58, 79 (2d Cir. 2016).

The district

court declined to include a "no ultimate harm" charge in the preliminary jury

instructions, but it changed course after the Defendants' attorneys made several

references at trial to the fact that the banks were ultimately insulated against

immediate financial loss by the USDA guarantees.

See, e.g., J.A. 501 (calling on

witness to confirm that banks were "covered 101 percent on this deal").

The district court's "no ultimate harm" instruction satisfies all three of the

above-mentioned factors.

First and foremost, the Defendants' trial strategy,

which focused on the fact that the banks were "ultimately" reimbursed for their

losses by the USDA, see Br. Def.-Appellant Lillemoe at 42; Br. Def.-Appellant

App.36

Calderon at 52, created the "factual predicate" necessitating the charge.

Lange,

834 F.3d at 79. The district court simply instructed the jurors that they should not

acquit on the basis of the Defendants' asserted belief that things would all work

out in the end—that the USDA would, in any event, guarantee the transactions—

if they nonetheless found that the Defendants intended to deceive the banks as to

the economic risks involved ex ante. That instruction comports with our holding

in United States v. Ferguson, 676 F.3d 260 (2d Cir. 2011), where we upheld a "no

ultimate harm" instruction that "ensured that jurors would not acquit if they

found that the defendants knew the [transaction] was a sham but thought it

beneficial for the stock price in the long run."

Id. at 280.

In Ferguson, we

reasoned that "the immediate harm in such a scenario is the denial of an investor's

right to control her assets by depriving her of the information necessary to make

discretionary economic decisions," and that the absence of ultimate harm to the

stock price did not vitiate that more immediate harm to victims.

Id. (internal

quotation marks and citation omitted). We reason similarly here.

The second and third factors are even more easily satisfied.

The district

court's instruction indisputably required the jury to find intent to defraud to

convict.

See, e.g., J.A. 1310 ("A genuine belief that the scheme never exposed the

App.37

victim to loss or risk of loss in the first place would demonstrate a lack of

fraudulent intent.").

confusion.

Finally, there was no evidence that the instruction caused

Cf. Rossomando, 144 F.3d at 199,203 (jury request that the court clarify

its "no ultimate harm" instruction demonstrated "evident confusion" resulting

from instruction).

Given the foregoing analysis, we find no error in the district

court's "no ultimate harm" instruction under the circumstances of this case.

B.

The Defendants also challenge—without having done so below—the district

court's jury instructions regarding the elements of bank fraud.

Because the

Defendants did not object to this portion of the jury charge at trial, we review the

district court's instructions for plain error here.

See Fed. R. Crim. P. 52(b); accord

Johnson v. United States, 520 U.S. 461, 466-67 (1997). Under the plain error

standard:

[A]n appellate court may, in its discretion, correct an error not raised

at trial only where the appellant demonstrates that (1) there is an

error; (2) the error is clear or obvious, rather than subject to reasonable

dispute; (3) the error affected the appellant's substantial rights, which

in the ordinary case means it affected the outcome of the district court

proceedings; and (4) the error seriously affects the fairness, integrity

or public reputation of judicial proceedings.

United States v. Marcus, 560 U.S. 258, 262 (2010) (internal quotation marks and

citation omitted); see also United States v. Botti, 711 F.3d 299, 308 (2d Cir. 2013).

App.38

Under 18 U.S.C. § 1344, bank fraud is defined as the knowing execution of

"a scheme or artifice—(1) to defraud a financial institution; or (2) to obtain any of

the moneys, funds, credits, assets, securities, or other property owned by, or under

the custody or control of, a financial institution, by means of false or fraudulent

pretenses, representations, or promises/'

The district court instructed the jury on

these elements, specifically explaining that the defendant must have "executed or

attempted to execute the scheme with the intent to obtain money or property from

Deutsche Bank."

J.A. 1315 (emphasis added).

With respect to that intent

requirement, the court elaborated that "the Government must prove that the

defendant you are considering executed or attempted to execute the scheme

knowingly and willfully and with the intent to obtain money or property owned

by or under the custody or control of Deutsche Bank." J.A. 1316.

The Defendants argue that the district court should have instructed the jury

that a bank fraud conviction requires a finding that the defendant "contemplated

harm or injury to the victim."

Br. Def.-Appellant Calderon at 58.

In advancing

this argument, the Defendants rely on Second Circuit precedent stating that "[t]he

failure to instruct on an essential element of the offense generally constitutes plain

error." United States v. Javino, 960 F.2d 1137,1141 (2d Cir. 1992).

App.39

In response, the

Government asserts that, even assuming Second Circuit precedent requires the

instruction the Defendants' belatedly argue should have been provided, the

Supreme Court's decision in Loughrin v. United States has adopted a more limited

construction of the elements of bank fraud.

See 573 U.S. 351, 356 (2014) (holding

that the Government need not prove that a defendant charged with § 1344(2)

intended to defraud a bank); see also United States v. Bouchard, 828 F.3d 116,124 (2d

Cir. 2016).

The parties dispute whether Loughrin affects the Second Circuit's

preexisting interpretation of the bank fraud statute, see United States v. Nkansah,

699 F.3d 743, 748 (2d Cir. 2012) (holding that "intent to victimize a bank" is an

element of bank fraud), and whether the Defendants' proposed instruction was

required under either interpretation.

We need not wade into this debate.

Even assuming arguendo that the

district court erred in not including the Defendants' proposed instruction, the

failure to include that instruction did not constitute plain error under the standard

articulated above. Most obviously, the absence of the proposed instruction did

not affect the Defendants' "substantial rights," Fed. R. Crim. P. 52(b), because the

jury acquitted the Defendants on the substantive bank fraud charge, convicting

them only of several substantive wire fraud charges and conspiracy to commit

App.40

wire fraud and bank fraud. Because we have already concluded that there was

sufficient evidence to sustain the Defendants' convictions for wire fraud, see supra

Part I, their convictions for conspiracy could have rested on those grounds alone.

The bank fraud instructions therefore did not prejudice the Defendants.

Ferguson, 676 F.3d at 277.

See

Moreover, given the district court's detailed

instructions on the elements of bank fraud that tracked the language of the bank

fraud statute, as well as the ambiguities regarding the elements of bank fraud in

the caselaw described above, any error in the jury instructions was certainly not

"clear or obvious."

Marcus, 560 U.S. at 262.

Finally, the Defendants have not

explained how any alleged error in the jury instructions could have "seriously

affect[ed] the fairness, integrity or public reputation of judicial proceedings."

Id.

Accordingly, we reject the Defendants' argument that the district court plainly

erred in instructing the jury on the elements of bank fraud.

III.

The Defendants next argue that their convictions should be vacated because

the district court issued an improper jury charge encouraging the jury to continue

deliberating after reaching an apparent deadlock.

A defining characteristic of a

so-called Allen charge is that "it asks jurors to reexamine their own views and the

App.41

views of others."

Spears v. Greiner, 459 F.3d 200, 204 n.3 (2d Cir. 2006).

This

Court reviews a district court's decision to give an Allen charge for abuse of

discretion.

United States v. Vargas-Cordon, 733 F.3d 366, 377 (2d Cir. 2013).

During their deliberations, the jurors sent out two notes to the court

indicating that they were struggling to reach a unanimous verdict on some of the

counts charged in the indictment. After almost a full week, the jury announced

via a third note to the court that it had "concluded [its] deliberations."

J.A. 1352.

After consulting with the jury foreman, the district court determined that the jury

was still deadlocked on some counts and decided to give a modified Allen charge.

The district court instructed the jury, inter alia, that:

It is desirable for you to keep deliberating and to reach a verdict if you

can conscientiously do so.

However, under no circumstances

should any juror abandon his or her conscientious judgment. It is

understandable and quite common for jurors to disagree....

[T]here appears to be no reason to believe if the charge were to be

submitted to another jury, that jury would be more intelligent, more

impartial or more competent to decide it than you are. However, I

stress to you, that your verdict must reflect the conscientious

judgment of each juror. Under no circumstances should any jur[or]

yield his or her conscientious judgment. Do not ever change your

mind because the other jurors see things differently or just to get the

case over with.

J.A. 1358.

App.42

"An Allen charge is unconstitutional if it is coercive in the context and

circumstances under which it is given." United States v. Haynes, 729 F.3d 178,192

(2d Cir. 2013).

Considering the "different factors" we have enumerated to

determine an Allen charge's "coercive effect," Vargas-Cordon, 733 F.3d at 377, we

are confident that the district court's carefully crafted Allen charge did not

constitute reversible error. At the start, we recognize a distinction between "the

original Allen charge," which conveys "the suggestion that jurors in the minority

should reconsider their position," and the modem trend toward "'modified'

Allen charges that do not contrast the majority and minority positions."

459 F.3d at 204 n.4.

Spears,

Neither the Government nor the Defendants contest that the

district court gave a "modified" Allen charge, rather than the traditional Allen

charge, in this case.

A "modified" Allen charge is already a less explosive version

of the "dynamite" Allen charge, and therefore carries with it a lesser threat of

coercing jurors to abandon their conscientious beliefs. Id.

Moreover, the district court's Allen charge contained all of the safeguards,

and none of the pitfalls, that we have previously recognized as relevant to an

assessment of its propriety.

For instance, "we generally expect that a trial judge

using an Allen-type supplemental charge will . . . both urge jurors to try to

App.43

convince each other and remind jurors to adhere to their conscientiously held

views."

United States v. McDonald, 759 F.3d 220, 225 (2d Cir. 2014).

The district

court did just that: "repeatedly wam[ing] the jurors not to surrender their

conscientiously held beliefs, which is an instruction we have previously held to

mitigate greatly a charge's potential coercive effect."

378.

Vargas-Cordon, 733 F.3d at

Moreover, the district court did not inform the jury that it was required to

reach an agreement; it did just the opposite.

fail to agree.").

See J.A. 1358 ("[I]t is your right to

It thereby avoided the "incorrect and coercive" impression that

"the only just result was a verdict." Haynes, 729 F.3d at 194; see also id. at 192-94

(holding that an Allen charge was impermissibly coercive where the court stated

that it "believe[d]" that the jury would "arrive at a just verdict on Monday")

(internal quotation marks omitted).

The Defendants claim that the district court's Allen charge was improper

because it failed to reinstruct the jury on the burden of proof.

We note first that

while the court did not mention the burden of proof specifically in its Allen charge,

it did remind tire jury to "follow all the instructions" it had "[previously] given,"

referencing the written jury instructions that the jury had on hand, which

themselves recited the burden of proof. J.A. 1358. Moreover, this factor, on its

App.44

own, is not dispositive proof of coercion.

See Vargas-Cordon, 733 F.3d at 377.

The

district court's Allen charge encouraged the members of the jury to continue

deliberating on the deadlocked counts to see if a verdict could be reached without

coercing them into abandoning their consciously held beliefs regarding the

Defendants' guilt or innocence.

As such, it resembles other Allen charges we

have previously approved and its issuance was not an abuse of discretion.

IV.

Finally, the Defendants argue the district court acted improperly in ordering

Lillemoe and Calderon to pay $18,807,096.33 in restitution with respect to five

GSM-102 loans on which the Russian Bank, IIB, defaulted.

This sum included

$18,501,353 to be paid to the USDA, which had reimbursed CoBank and Deutsche

Bank for 98% of their losses on these transactions, see 18 U.S.C. § 3664(j)(l) ("If a

victim has received compensation from insurance or any other source with respect

to a loss, the court shall order that restitution be paid to the person who provided

or is obligated to provide the compensation."), and $304,743.33 to be paid to

CoBank, which included $137,422 for losses associated with the transactions and

$168,321.33 for costs and attorneys' fees incurred in connection with the

investigation and prosecution of the case, see id. § 3663A(b)(4) (authorizing

App.45

reimbursement of "the victim for... expenses incurred during participation in the

investigation or prosecution of the offense or attendance at proceedings related to

the offense").

discretion.

We review a district court's order of restitution for abuse of

United States v. Pearson, 570 F.3d 480, 486 (2d Cir. 2009).

abuses its discretion when it rests its decision on an error of law."

"A court

United States

v. Archer, 671 F.3d 149,169 (2d Cir. 2011).

"The Mandatory Victims Restitution Act ('MVRA'), 18 U.S.C. § 3663A, is

one of several federal statutes empowering courts to impose restitution obligations

on criminal defendants."

2015).

United States v. Thompson, 792 F.3d 273, 277 (2d Cir.

Under the MVRA, in the case of an "offense resulting in . . . loss or

destruction of property," the court shall "order restitution to each victim in the full

amount of each victim's losses as determined by the court and without

consideration of the economic circumstances of the defendant."

3663A(b)(l), 3664(f)(1)(A).

See 18 U.S.C. §§

Where intended loss is incorporated to punish a

culpable defendant, "restitution is designed to make,the victim whole... and must

therefore be based only on the actual loss caused by the scheme."

United States v.

8 The Court also ordered forfeiture in the amount of $1,543,287.60 from Lillemoe

and $63,509.97 from Calderon. The Defendants do not challenge the forfeiture amount.

App.46

Lacey, 699 F.3d 710, 721 (2d Cir. 2012) (citation omitted).

The Defendants argue that the district court's order was improper because

CoBank and Deutsche Bank do not qualify as "victims" under the Act.9

A

"victim" for the purposes of the MVRA is "a person directly and proximately harmed

as a result of the commission of an offense for which restitution may be ordered."

18 U.S.C. § 3663A(a)(2) (emphasis added).

To qualify as a "victim," then, a party

must have endured a financial loss that was "directly and proximately" caused by

a defendant's fraud.

See United States v. Paul, 634 F.3d 668, 676 (2d Cir. 2011) ("In

determining the proper amount of restitution, a court must keep in mind that the

loss must be the result of the fraud." (internal quotation marks, brackets, and

citation omitted)).

"[P]roximate cause, as distinct from actual cause or cause in fact"

(commonly labeled "but-for" causation) is a "flexible concept" that "defies easy

summary."

Paroline v. United States, 572 U.S. 434, 444 (2014) (internal quotation

marks and citation omitted); see also CSX Transp., Inc. v. McBride, 564 U.S. 685, 701

(2011) (labeling proximate cause "a term notoriously confusing"). "Proximate

9 The Government bears the burden of establishing by a preponderance of the

evidence that each individual it claims is entitled to restitution was actually a "victim."

Archer, 671 F.3d at 173.

App.47

cause" is in essence a "shorthand for a concept: Injuries have countless causes, and

not all should give rise to legal liability."

CSX Transp., 564 U.S. at 692.

The

central goal of a proximate cause requirement is to limit the defendant7s liability

to the kinds of harms he risked by his conduct, the idea being that if a resulting

harm was too far outside the risks his conduct created, it would be unjust or

impractical to impose liability.

See Prosser & Keeton, The Law of Torts 281 (5th

ed. 1984).

We have accordingly viewed the MVRA's proximate cause requirement as

a "tool[]" to both "limit a person's responsibility for the consequences of that

person's own acts" and to promote efficiency in the sentencing process.

United

States v. Reifler, 446 F.3d 65, 135 (2d Cir. 2006).10 When interpreting the MYRA,

we have clarified that "a misstatement or omission" is the "proximate cause" of an

investment loss for the purposes of imposing restitution, "if the risk that caused

the loss was within the zone of risk concealed by the misrepresentations and

omissions alleged by a disappointed investor." United States v. Marino, 654 F.3d

310, 321 (2d Cir. 2011) (internal quotation marks and citation omitted).

The

10 The Supreme Court has indicated that the definition of "proximate cause" may

vary depending on the statute in question. See CSX Transp., 564 U.S. at 700 (recognizing

a unique test for "proximate causation applicable in FELA suits").

App.48

MVRA's proximate causation requirement is therefore "akin to the wellestablished requirement that there be 'loss causation' in securities-fraud cases and

not merely transaction ('but-for') causation." Archer, 671 F.3d at 171 n.16; see also

Marino, 654 F.3d at 321 (equating "proximate causation" under the MVRA to "loss

causation" in the securities context). And to establish loss causation, "a plaintiff

must allege that the subject of the fraudulent statement or omission was the cause

of the actual loss suffered." Lentell v. Merrill Lynch & Co., 396 F.3d 161,173 (2d Cir.

2005) (internal quotation marks, ellipses, and citation omitted).11

Given the above standard, we are confident that the banks do not qualify as

"victims" under the MVRA because the Defendants did not proximately cause

their losses. As catalogued above, the Defendants fraudulently altered shipping

documents in order to make them facially compliant with the relevant letters of

credit.

Their fraud concealed two risks from the domestic banks: (1) that the

issuing (foreign) banks would refuse to honor the letters of credit on the ground

that the domestic banks had failed to demand a valid, conforming presentation;

11 To take one example from the securities context, in Citibank, N.A. v. K-H Corp.,

968 F.2d 1489 (2d Cir. 1992), we dismissed a civil claim asserting violations of securities

laws where the complaint alleged that a fraud "induced" the plaintiff to enter into a

transaction but failed to allege facts supporting a "causal connection between the fraud

alleged and the subsequent loss that it suffered." Id. at 1492,1495.

App.49

and (2) that the USDA would decline to reimburse the banks for their losses

because the transactions were not compliant with the GSM-102 program

requirements.

materialized.

See supra Part I.B.

Neither of these risks even arguably

Instead, the foreign banks defaulted on their obligations due to

their financial inability to fulfill them following a global financial crisis.

The

fraudulent shipping documents had no bearing whatsoever on the foreign banks'

potential to default in such circumstances, which is the risk that actually

materialized here.

This case is thus distinct from those contexts where we have found that a

defendant's fraud "proximately caused" an injury for purposes of the MYRA. To

take one example, in Paul, the defendant artificially inflated the value of his stock

holdings in order to secure a loan.

634 F.3d at 670.

Once his scheme was

discovered, the price of those holdings plummeted, and he was unable to repay

his loans. Id. We concluded that the defendant's fraud "proximately caused"

his lenders' losses (and that they were therefore "victims" under the MYRA

entitled to restitution equaling the full amount of the loan) because his

misrepresentations bore directly on "the making of the loans in the first instance,"

even if "market forces may have contributed to the decline in" the value of the

App.50

collateral. Id. at 677-78. Put differently, because Paul misrepresented his own

creditworthiness, his financial inability to repay his loans was quite clearly within

the zone of risk concealed by his fraud.12

Here, by contrast, the Defendants' misrepresentations were not even

arguably related to CoBank's and Deutsche Bank's assessment of the foreign

banks' creditworthiness. We can say this with complete certainty because before the

Defendants presented the fraudulent documents to the confirming banks, the

USDA and the banks had pre-approved the relevant foreign banks for participation

in these transactions.

This pre-approval process included the foreign banks'

submission of three years of audited financial statements, and a "rigorous"

independent analysis spearheaded by the USDA's Risk and Asset Management

branch that could take "six or seven months" to complete. J.A. 595; see also S.A.

11 (the district court noting that the bank made its determination as to the foreign

12 Thus, if the Defendants here had, say, misrepresented the value of collateral

held by the foreign banks and those banks had then defaulted on their loans, we would

not hesitate to conclude that they "proximately caused" the banks' losses, even if the

banks' ability to repay the loans was also affected by market forces. Cf. United States v.

Turk, 626 F.3d 743, 748-51 (2d Cir. 2010) (affirming the district court's loss calculation as

to the total value of a loan where the defendant lied to lenders as to whether they were

secured creditors and never repaid them their principal).

App.51

banks' likelihood of default "before any of the altered documents were

presented").

The Government argues that the banks would not have gone through with

the transactions without the Defendants' involvement, and therefore that the

Defendants proximately caused the banks' losses on those transactions.

This

argument confuses "but-for" causation with proximate causation. To take one

analogous example from the securities context, in Bennett v. United States Trust Co.,

770 F.2d 308 (2d Cir. 1985), the plaintiffs "went to [a bank] with the idea of

borrowing money to purchase public utility stock already in mind" when that

bank misinformed them that the Federal Reserve's "margin rules" did not apply

to their intended stock purchases. Id. at 313-14. The bank's error allowed the

plaintiffs to borrow money to purchase the stock, but when the market value of

the stock subsequently decreased, the plaintiffs were unable to repay their loans.

Id. at 310. We held that even if the bank's misrepresentation regarding the margin

requirements was a "but-for" cause of the plaintiffs' investment, the plaintiffs had

still failed to plead loss causation because "the loss at issue was caused by the

[plaintiffs']

own

misrepresentation."

unwise

investment

Id. at 314.

decisions,

not

by

[the

bank's]

Similarly, here, the Defendants presented

App.52

fraudulent documents to the confirming banks after those Banks had already

decided to offer loans to the relevant foreign banks pursuant to comprehensive

financial analyses conducted by the confirming banks and the USDA.

That

financial decision—to offer the foreign loans—was not influenced by the

Defendants' misconduct.

The MVRA provides redress to the victims of fraud, but it does not supply

a windfall for those who independently enter into risky financial enterprises

through no fault of the fraudsters. As we stated in Archer:

"[I]f a person gives

the defendant his money to bet, knowing that the bet might lose, his later loss, for

purposes of restitution, is, in this fundamental sense, caused not by the defendant

accepting his money but by the outcome of the bet."

671 F.3d at 171.

The

domestic banks here made a bet that the foreign banks would be able to repay the

relevant loans with interest, and their assessments as to die advisability of that bet

were completely unrelated to the risks concealed by the Defendants' fraud.

The

banks therefore do not qualify as "victims" under the MVRA and the district court

erred in finding to the contrary. Accordingly, neither the USDA nor the banks

are entitled to any restitution for losses caused by participation in the transaction

App.53

or for expenses incurred during participation in the investigation, prosecution, or

related proceedings. The entire restitution award must be reversed.

CONCLUSION

We have considered the parties' remaining arguments and find them to be

without merit. For the foregoing reasons, we AFFIRM the district court's

judgments of conviction but REVERSE the restitution orders.

We REMAND the

case with instructions that the judgments be amended to omit that portion stating

that the defendant must pay restitution.

App.54

Case 17-1956, Document 311, 03/10/2020, 2798057, Pagel of 1

UNITED STATES COURT OF APPEALS

FOR THE

SECOND CIRCUIT

At a stated term of the United States Court of Appeals for the Second Circuit, held at the

Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York, on the

10th day of March, two thousand twenty.

United States of America,

ORDER

Appellee,

v.

Docket No: 17-1956, 17-1969,

17-2844, 17-2866

Pablo Calderon, Brett C. Lillemoe,

Defendants-Appel lants.

Appellant Pablo Calderon, filed a petition for panel rehearing, or, in the alternative, for

rehearing en banc. The panel that determined the appeal has considered the request for panel

rehearing, and the active members of the Court have considered the request for rehearing en banc.

IT IS HEREBY ORDERED that the petition is denied.

FOR THE COURT:

Catherine O'Hagan Wolfe, Clerk

App.55

18 U.S.C. § 1343

§ 1343. Fraud by wire, radio, or television

Whoever, having devised or intending to devise any scheme or artifice to

defraud, or for obtaining money or property by means of false or fraudulent

pretenses, representations, or promises, transmits or causes to be

transmitted by means of wire, radio, or television communication in

interstate or foreign commerce, any writings, signs, signals, pictures, or

sounds for the purpose of executing such scheme or artifice, shall be fined

under this title or imprisoned not more than 20 years, or both. If the

violation occurs in relation to, or involving any benefit authorized,

transported, transmitted, transferred, disbursed, or paid in connection

with, a presidentially declared major disaster or emergency (as those terms

are defined in section 102 of the Robert T. Stafford Disaster Relief and

Emergency Assistance Act (42 U.S.C. 5122)), or affects a financial

institution, such person shall be fined not more than $1,000,000 or

imprisoned not more than 30 years, or both.

28 U.S.C. § 1652

§ 1652. State laws as rules of decision

The laws of the several states, except where the Constitution or treaties of

the United States or Acts of Congress otherwise require or provide, shall

be regarded as rules of decision in civil actions in the courts of the United

States, in cases where they apply.

App.56

C.R.S.A. § 4-5-107

§ 4-5-107. Confirmer, nominated person, and adviser

(a) A confirmer is directly obligated on a letter of credit and has the rights

and obligations of an issuer to the extent of its confirmation. The confirmer

also has rights against and obligations to the issuer as if the issuer were

an applicant and the confirmer had issued the letter of credit at the request

and for the account of the issuer.

C.R.S.A. §4-5-108

§ 4-5-108. Issuer's rights and obligations

(a) Except as otherwise provided in section 4-5-109, an issuer shall honor a

presentation that, as determined by the standard practice referred to in

subsection (e) of this section, appears on its face strictly to comply with the

terms and conditions of the letter of credit. Except as otherwise provided in

section 4-5-113 and unless otherwise agreed with the applicant, an issuer

shall dishonor a presentation that does not appear so to comply.

App.57

C.R.S.A. § 4-5-109

§ 4-5-109. Fraud and forgery

(a) If a presentation is made that appears on its face strictly to comply with

the terms and conditions of the letter of credit, but a required document is

forged or materially fraudulent, or honor of the presentation would

facilitate a material fraud by the beneficiary on the issuer or applicant:

(1) The issuer shall honor the presentation, if honor is demanded by (i) a

nominated person who has given value in good faith and without notice of

forgery or material fraud, (ii) a confirmer who has honored its confirmation

in good faith, (iii) a holder in due course of a draft drawn under the letter

of credit which was taken after acceptance by the issuer or nominated

person, or (iv) an assignee of the issuer's or nominated person's deferred

obligation that was taken for value and without notice of forgery or

material fraud after the obligation was incurred by the issuer or nominated

person; and

(2) The issuer, acting in good faith, may honor or dishonor the presentation

in any other case.

OFFICIAL COMMENT

1. This recodification makes clear that fraud must be found either in the

documents or must have been committed by the beneficiary on the issuer

or applicant. See Cromwell v. Commerce Energy Bank, 464 So.2d 721 (La.

1985).

Secondly, it makes clear that fraud must be "material." Necessarily courts

must decide the breadth and width of "materiality." The use of the word

requires that the fraudulent aspect of a document be material to a

purchaser of that document or that the fraudulent act be significant to the

participants in the underlying transaction. Assume, for example, that the

beneficiary has a contract to deliver 1,000 barrels of salad oil. Knowing that

it has delivered only 998, the beneficiary nevertheless submits an invoice

showing 1,000 barrels. If two barrels in a 1,000 barrel shipment would be

an insubstantial and immaterial breach of the underlying contract, the

beneficiary's act, though possibly fraudulent, is not materially so and would

not justify an injunction. Conversely, the knowing submission of those

App.58

invoices upon delivery of only five barrels would be materially fraudulent.

The courts must examine the underlying transaction when there is an

allegation of material fraud, for only by examining that transaction can one

determine whether a document is fraudulent or the beneficiary has

committed fraud and, if so, whether the fraud was material.

Material fraud by the beneficiary occurs only when the beneficiary has no

colorable right to expect honor and where there is no basis in fact to support

such a right to honor. The section indorses articulations such as those

stated in Intraworld Indus, v. Girard Trust Bank, 336 A.2d 316 (Pa. 1975),

Roman Ceramics Corp. u. People's Nat. Bank, 714 F.2d 1207 (3d Cir. 1983),

and similar decisions and embraces certain decisions under Section 5-114

that relied upon the phrase "fraud in the transaction." Some of these

decisions have been summarized as follows in Ground Air Transfer v.

Westate's Airlines, 899 F.2d 1269, 1272-73 (1st Cir. 1990):

We have said throughout that courts may not "normally" issue an

injunction because of an important exception to the general "no injunction"

rule. The exception, as we also explained in Itek, 730 F.2d at 24-25,

concerns "fraud" so serious as to make it obviously pointless and unjust to

permit the beneficiary to obtain the money. Where the circumstances

"plainly" show that the underlying contract forbids the beneficiary to call a

letter of credit, Itek, 730 F.2d at 24; where they show that the contract

deprives the beneficiary of even a "colorable" right to do so, id., at 25; where

the contract and circumstances reveal that the beneficiary's demand for

payment has "absolutely no basis in fact," id.; see Dynamics Corp. of

America, 356 F. Supp. at 999; where the beneficiary's conduct has "so

vitiated the entire transaction that the legitimate purposes of the

independence of the issuer's obligation would no longer be served," Itek, 730

F.2d at 25 (quoting Roman Ceramics Corp. v. Peoples National Bank, 714

F.2d 1207, 1212 n.12, 1215 (3d Cir. 1983) (quoting Intraworld Indus., 336

A.2d at 324-25)); then a court may enjoin payment.

2. Subsection (a)(2) makes clear that the issuer may honor in the face of the

applicant's claim of fraud. The subsection also makes clear what was not

stated in former Section 5-114, that the issuer may dishonor and defend

that dishonor by showing fraud or forgery of the kind stated in subsection

(a). Because issuers may be liable for wrongful dishonor if they are unable

to prove forgery or material fraud, presumably most issuers will choose to

honor despite applicant's claims of fraud or forgery unless the applicant

procures an injunction. Merely because the issuer has a right to dishonor

and to defend that dishonor by showing forgery or material fraud does not

App.59

mean it has a duty to the applicant to dishonor. The applicant's normal

recourse is to procure an injunction, if the applicant is unable to procure an

injunction, it will have a claim against the issuer only in the rare case in

which it can show that the issuer did not honor in good faith.

App.60

GSM-102

TERMS AND PROCEDURES FOR LETTER OF CREDIT REFINANCING

INTRODUCTION

A.

INTERNATIONAL INDUSTRIAL BANK (“Borrower”) has been approved for participation in

the Export Credit Guarantee Program (GSM-102) of the Commodity Credit Corporation (“CCC”),

of the U.S. Department of Agriculture.

B.

COBANK, ACB (“COBANK”) has extended a line of credit to Borrower (the “Credit Extension”)

with respect to the refinancing of Borrower’s obligations under certain letters of credit (the

“Repayment Obligations”) to be issued by Borrower under GSM-102 allocations.

C.

These terms and procedures (the “Terms”) shall remain in effect, so long as COBANK continues to

extend credit to the Borrower under the GSM-102 program. Provided, however, that the Terms may

be amended by agreement between the parties hereto, and that either party may terminate its

agreement hereto at any time.

Section 1. Operating Procedures

1.1

Honoring the Letters of Credit. Upon receipt by COBANK of the documents called

for under a particular letter of credit pursuant to the Credit Extension, CoBank will honor the drawing in

accordance with the letter of credit. COBANK shall be authorized, however, to waive receipt of any or all of

the documents required under item 3 of the Special Instructions to Advising Bank and Repayment

Obligation (the “Special Instructions”), as set forth in a letter to Borrower, as revised and amended from

time to time, advising the amount of the GSM-102 Line of Credit and outlining the Special Instructions. The

honoring of a drawing and the disbursement of the funds shall constitute an advance (“Loan”) under the line

of credit and obligate Borrower to repay the Loan in accordance with the provisions of the letter of credit

and the Terms. At the time of the drawing, COBANK will notify Borrower using tested telex, SWIFT, or

facsimile, of the exact amount loaned, the principal repayment dates, the dates interest is due and the rate of

interest to be charged for the first “Interest Period” as described below.

1.2

Prepayments. Any Loan hereunder may be prepaid on any Interest Payment Date

(as defined in Section 2.1) upon two business days advance notice. With respect to prepayments made other

than on the Interest Payment Date, the Borrower agrees to pay to CoBank a prepayment surcharge in

accordance with methodology established by CoBank which shall include administrative costs and the

present value of any funding losses incurred by COBANK as a result of such payment.

Section 2. The Loans

2.1

Definitions. For purposes hereof (i) “Interbank Offered Rate” shall mean, in

relation to any Interest Period the rate per annum resulting from the arithmetic average of the London

Interbank Offered Rate (“LIBOR”) as quoted by REUTERS, British Bankers Association—Interest

Reference Rates, at approximately 11:00 a.m. (London time) two Banking Days prior to the first day of such

Interest Period (or, in the case of the initial Interest Period for such Loan, the rate per annum quoted on the

date of the payment of the draft), for deposits in dollars for a term equal to such Interest Period and in

LGjw/G/agreement/(Revised 6/99)

App.61

GSM-102 Terms and Procedures for Letter of Credit Refinancing

Page -2-

amounts comparable to the principal amount outstanding in such Interest Period. On the same date that

CoBank determines the applicable interest rate for an Interest Period, CoBank shall give notice to the

Borrower using tested telex, SWIFT, or facsimile, of such rate, which rate, absent manifest error, shall be

final, conclusive, and binding on Borrower; (ii) “Merest Period” shall mean, as to any Loan, the period

from the date of the Loan to the first Merest Payment Date thereafter in respect of any Loan, and thereafter

each period from the last day of the immediately preceding Merest Period for the Loan to the next

succeeding Merest Payment Date for the Loan; (iii) ‘Merest Payment Date” shall mean each date which is

an integral multiple of three months or six months, as selected mutually by Borrower and COBANK, after the

earlier of the Date of Export (as hereinafter defined) or the date of payment of the draft that shall give rise to

the Loan, except that if any such date is not a Banking Day, the respective Merest Payment Date in respect

of the Loan shall be the next preceding Banking Day; (iv) “Banking Day” shall mean a day on which

dealings in U.S. dollar deposits are carried out in the London interbank market and which is also a day on

which commercial banks are open for business in New York; and (v) “Date of Export” shall mean the

onboard date of an ocean bill of lading or airway bill or onboard ocean carrier date of an Mermodal bill of

lading, or if exported by rail or track, the date of entry shown on an authenticated landing certificate or

similar document issued by an official of the government of the importing country.

2.2

Delinquent Payments. Overdue principal and, to the extent permitted by applicable

law, overdue Merest, shall bear Merest at a rate of one percent per annum in excess of the rate in effect for

each Merest Period.

2.3

Change of Law, etc. If due to either (i) the introduction of or any change in, or in

the Merpretation of any law or regulation (including, without limitation, the imposition or increase of any

reserve or similar requirement) or (ii) the compliance with any direction from or requirement of any

governmental or monetary authority whether or not having the force of law, there shall be any increase in

the cost to COBANK of agreeing to make or making, funding or maintaining any advance, or any reduction

in the amounts received or receivable by CoBank hereunder (such increase or reduction hereinafter

“Increased Cost”) then Borrower shall from time to time pay to COBANK additional amounts sufficient to

indemnify CoBank against such Increased Cost. A certificate as to the amount of such Increased Cost,

submitted to Borrower by CoBank, shall be conclusive and binding for all purposes.

2.4

Taxes. All payments made by Borrower pursuant to Repayment Obligations under

the Credit Extension will be without any deduction or withholding for or on account of any taxes in the

country of Borrower or any political jurisdiction thereof, whether presently existing or hereafter arising. If

any such withholding should be required by applicable law, Borrower will pay COBANK such additional

amounts as may be necessary to ensure that the net amount received by COBANK under any given letter of

credit reimbursement agreement will equal the full amount CoBank would have received had no

withholding or deduction on account of taxes been required by law, and Borrower will promptly provide to

CoBank a copy of the related tax receipt.

Section 3. Events of Default

3.1

Events and Rights. If any of the following “events of default” shall occur and be

continuing for any reason: (i) default shall be made in the payment when due of the principal of or Merest

on any Loan or any other amount payable by Borrower hereunder; or (ii) Borrower shall default in the due

LGjw/G/agreement/(Reviscd 6/99)

App.62

GSM-102 Terms and Procedures for Letter of Credit Refinancing

Page -3-

performance of or compliance with any other agreement herein or between CoBank and Borrower or any

letter of credit, or any representation or warranty by Borrower herein or therein shall prove to have been

incorrect, or shall be breached, in any material respect; or (iii) Borrower shall become insolvent or unable to

pay its debts as they become due or proceedings shall be instituted by or against Borrower in respect of

bankruptcy or other relief for debtors or creditors generally, or any government or other supervisory

authority shall, or shall take steps to, assume control or supervision over Borrower’s assets with a view to

conservation or liquidation thereof; or (iv) any license (including, without limitation, foreign exchange

licenses from appropriate authorities in Russia) consent, authorization, registration or approval now or

hereafter necessary to enable Borrower to comply with its obligations incurred herein, or under any letter of

credit, shall be modified, revoked, withdrawn or withheld; THEREUPON, in any such case, by notice to

Borrower, CoBANK may declare the principal of and all accrued interest on the Loans to be forthwith due

and payable, without demand, presentment, protest or other notice, all of which are hereby waived by

Borrower. Borrower shall indemnify CoBank and hold CoBank harmless against any loss or expense

incurred by it (including any funding costs relating to collection) as a consequence of any payment default

(whether upon stated maturity, acceleration or otherwise) in respect of this Agreement, the Loans, the letters

of credit or any other document submitted in connection herewith.

Section 4. Jurisdiction

4.1

U.S. Jurisdiction. In case COBANK shall bring any judicial proceeding in relation to

any matter arising hereunder or under any letter of credit or document submitted in connection herewith

including any judgment in relation thereto, Borrower hereby irrevocably submits generally and

unconditionally to the nonexclusive jurisdiction of the courts of the State of Colorado and the U.S. District

Court for the District of Colorado. In the event Borrower does not maintain an agent for service of process

in the State of Colorado or said agent cannot, with reasonable diligence, be located, Borrower agrees that

service of process maybe made by registered or certified mail (or equivalent) addressed to Borrower at: 23,

Bldb. 1, Bolshaya Dmitrovka Street, Moscow 125009, Russia, Attention: Mr. Alexander Akhverdyan.

In any such proceeding, Borrower irrevocably waives, to the fullest extent permitted by law, any objection

which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or

relating hereto, or to any letters of credit or documents submitted in connection herewith, brought in any of

the aforementioned courts, and hereby further irrevocably waives any claim that any such suit, action or

proceeding brought in any such court has been brought in an inconvenient forum. To the extent that

Borrower may be entitled, in any jurisdiction in which judicial proceedings may at any time be commenced

with respect hereto or to any letter of credit or other document submitted in connection herewith to claim for

itself or its revenues, assets or properties immunity (whether by reason or sovereignty or otherwise) from

suit, from the jurisdiction of any court (including but not limited to any court of the United States of

America or the State of Colorado) Borrower hereby irrevocably agrees not to claim and hereby irrevocably

waives such immunity.

Section 5. Miscellaneous

5.1

Currency. Credit granted hereunder or under any related letter of credit or other

document constitutes a credit arrangement in which the specification of U.S. dollars or lawful currency of

the United States of America, and the payment in immediately available funds as above prescribed are of the

essence, and U.S. dollars shall be the currency of account in all events.

LGjw/G/agreemcnt/(Revised 6/99)

App.63

GSM-102 Terms and Procedures for Letter of Credit Refinancing

Page -4-

5.2

Costs and Expenses. Borrower will reimburse CoBank or the CCC for its

out-of-pocket expenses (including legal fees and disbursements of counsel) incurred in connection with the

enforcement of or preservation of rights hereunder or under any letter of credit or other document submitted

in connection herewith.

5.3

Assignment and Participation. COBANK may at any time sell, assign, transfer or

grant participations in all or any portion of its right, title and interest in and to any Loans made pursuant

hereto to the CCC, the exporter or any other financial institution.

Nature of Agreement. Notwithstanding any provision contained herein the line of

5.4

credit to which it refers is revocable by CoBANK at any time for any reason.

5.5

Borrower’s Authority. By accepting these Terms, Borrower represents and

warrants that Borrower’s execution and performance under the letter of credit repayment obligations set

forth in the Credit Extension have been duly authorized, that such governmental approvals (including,

without limitation, foreign exchange approvals) as may be required have been obtained and are in effect,

and that Borrower has been approved by the CCC for participation in the Export Credit Guarantee Program.

CoBank, acb

By:

rQmberly S. prison

Title:

Vice President

June 28,2010

ACCEPTED AND AGREED TO:

INTERNATIONAL INDUSTRIAL BANK

By:

Title:

Date:

LGjw/G/agrccineat/(Revised 6/99)

App.64

Case 17-1956, Document 232, 07/30/2018, 2355069, Pagel of 38

17-1956-cr(L)

17-1969-cr, 17-2844-cr, 17-2866-cr

3n tijr United States Court of Appralo

for ttjr j^rcoofo Circuit

UNITED STATES OF AMERICA,

Plaintiff- Appellee - Cross-Appellant,

v.

SARAH ZIRBES,

Defendant,

PABLO CALDERON, BRETT C. LILLEMOE,

Defendants - Appellants - Cross-Appellees.

ON APPEALS FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF CONNECTICUT NO. 3:15-CR-25

(THE HONORABLE JANET C. HALL, CJ.)

FINAL FORM REPLY BRIEF

OF DEFENDANT-APPELLANT PABLO CALDERON

Pablo Calderon

ProSe

7 Old Parish Road

Darien, CT 06820

(203) 613-6748

App.65

Case 17-1956, Document 232, 07/30/2018, 2355069, Page2 of 38

TABLE OF CONTENTS

TABLE OF AUTHORITIES

li

INTRODUCTION

1

ARGUMENT

3

I.

n.

THE RIGHTS AND OBLIGATIONS OF LETTER OF

CREDIT CONFIRMERS.............................................

3

THE INDICTMENT MUST BE DISMISSED BECAUSE

LILLEMOE’S OR CALDERON’S ACTIONS NEVER

PUT THE U.S. BANKS’ PROPERTY RIGHTS AT RISK.

10

a.

b.

c.

The U.S. Banks’ Right to Reimbursement by the LC

Issuers Was Never at Risk........................................

11

The U.S. Banks’ Property Rights in the Loans and

Guarantees Were Never at Risk............................

15

Contemplated Harm is Lacking as a Matter of Law

18

III. LILLEMOE’S AND CALDERON’S STATEMENTS

WERE NOT FALSE..................................................

22

IV. CONFIRMERS COULD NOT HAVE DISHONORED

LILLEMOE’S OR CALDERON’S DOCUMENTS EVEN

WITH KNOWLEDGE OF ALLEGED

MISREPRESENTATIONS...............................................

24

THE ALLEN CHARGE WAS UNDULY COERCIVE

29

V.

VI. CALDERON RESTS ON HIS OTHER ARGUMENTS

REQUIRING A NEW TRIAL......................................

App.66

30

Case 17-1956, Document 232, 07/30/2018, 2355069, Page3 of 38

31

CONCLUSION

TABLE OF AUTHORITIES

CASES

3Com Corp. v. Banco do Brasil, S.A.,

171 F.3d 739 (2d Cir. 1999)...........

7

3Com Corp. v. Banco do Brasil, S.A.,

2 F.Supp.2d 452 (S.D.N.Y.1998), affd 171 F.3d 739 (2d Cir.

1999).........................................................................................

8

ACE Am. Ins. Co. v. Bank of the Ozarks,

2014 WL 4953566 (S.D.N.Y. Sept. 30, 2014)

27

Airline Reporting Corp. v. First Nat'l Bank ofHolly Hill,

832 F.2d 823 (4th Cir. 1987)...........................................

8

Alaska Textile Co. v. Chase Manhattan Bank, N.A.,

982 F.2d 813 (2d Cir. 1992).................................

6

Banco Nacional De Mexico, S.A. v. Societe Generate,

34 A.D.3d 124, 820 N.Y.S.2d 588 (2006)...............

10

BasicNet S.p.A. v. CFPServs. Ltd.,

127 A.D.3d 157, 4 N.Y.S.3d 27 (N.Y. App. Div. 2015)

8

Centrifugal Casting Mach. Co. v. Am. Bank & Tr. Co.,

966 F.2d 1348 (10th Cir. 1992)................................

7

First Commercial Bank v. Gotham Originals, Inc.,

64 N.Y.2d 287,475 N.E.2d 1255 (1985)............

9

App.67

Case 17-1956, Document 232, 07/30/2018, 2355069, Page4 of 38

Ground Air Transfer v. Westate's Airlines,

899 F.2d 1269 (1st Cir.1990)................

8

Intraworld Indus., Inc. v. Girard Tr. Bank,

461 Pa. 343 A.2d 316 (1975)................

7,8

Itek Corp. v. First Nat. Bank ofBoston,

730 F.2d 19 (1st Cir. 1984)...............

7,8

Maurice O'Meara Co. v. Nat'l Park Bank ofNew York,

239 N.Y. 386, 146 N.E. 636 (1925)...........................

9

Nederv. United States,

527 U.S. 1 (1999) ...

25

Record Optical, Inc. v. Government ofIsrael,

816 F.2d 854 (2d Cir.1987)........................

8

Roman Ceramics Corp. v. Peoples National Bank,

714 F.2d 1207 (3d Cir.1983)...............................

7

Sztejn v. J. Henry Schroder Banking Corp.,

Ill Misc. 719, 31 N.Y.S.2d 631 (Sup. Ct. 1941)

7, 9, 12

United Bank Ltd. v. Cambridge Sporting Goods Corp.,

41 N.Y.2d 254, 360 N.E.2d 943 (1976).....................

9

United States v. Finazzo,

850 F.3d 94 (2d Cir. 2017)

19

United States v. Regent Office Supply Co.,

421 F.2d 1174 (2d Cir. 1970)................

22

STATUTES

10, 17

18U.S.C. § 1343

App.68

Case 17-1956, Document 232, 07/30/2018, 2355069, Page5 of 38

3, 10, 17, 30

18U.S.C. § 1344

Colo. Rev. Stat. Ann. §§ 4-5-102, 103,107, 108, 109 (West)

3

NYUCC §§ 5-102, 103, 107, 108, 109 (McKinney)

3

Uniform Commercial Code § 5-102

4

Uniform Commercial Code § 5-103

5,6

Uniform Commercial Code § 5-107

4

Uniform Commercial Code § 5-108

4, 6, 12

Uniform Commercial Code § 5-109

passim

REGULATIONS

14, 17

7 C.F.R. § 1493

OTHER MATERIALS

James G. Barnes, Defining Good Faith Letter of Credit

Practices,

28 Loy. L. A. L. Rev. 101 (1994).............................

App.69

28

Case 17-1956, Document 232, 07/30/2018, 2355069, Page6 of 38

INTRODUCTION

The government’s brief and the lower court completely ignore Uniform

Commercial Code Article 5 (“UCC”) of the States of New York and Colorado

that govern the letters of credit (“LCs”) in this case. See the lower court’s ruling

on the motions for judgement of acquittal. DN420 (SA1-28). Instead of basing

their legal theories on the law, the government and the lower court create

fictional rights and obligations and attempt to prove that Lillemoe’s and

Calderon’s actions put at risk Deutsche Bank’s and CoBank’s (“U.S. banks”,

“confirmers”) property rights in the letters of credit and in the guaranteed loans

that financed the obligations of the issuing banks. Instead of instructing the

jury on the controlling law - the UCC - the lower court looked to government

witnesses at trial to dictate the law or left the jury to divine it.

An understanding of the well-established rights and obligations of the

parties to an LC requires reading the UCC and the case law. In light of the

actual law, the government and lower court’s theories make no sense. Two

basic assumptions underlying the indictment and the theories of the government

and the lower court alike, are that the U.S. banks honored in good faith and that

Lillemoe’s and Calderon’s presentations were complying on their face. DN1

(JA86-117). Based on these two facts alone, the U.S. banks’ property rights

App.70

Case 17-1956, Document 232, 07/30/2018, 2355069, Page7 of 38

were never at risk and the indictment must be dismissed as a matter of law.

Neither the government nor the lower court alleges fraud on the parties

of the underlying GSM transactions, the shippers who sold to Lillemoe the

rights to use their exports in the GSM-102 Program (“Program”) and the

Commodity Credit Corporation (“CCC”) that issued the guarantees, except for

three shipments (out of several thousand shipments Lillemoe and Calderon

submitted in the Program during the indictment period) where the government

alleges that the onboard dates disqualified them for use under the guarantees

CCC issued. However, under a reasonable interpretation of the Program

regulations, those three shipments do satisfy the requirements of the guarantees.

The undisputed facts show no fraud in the underlying transactions, which is

another ground for reversing the convictions as a matter of law.

Under the proper standard of examination, with or without the alleged

alterations, copies of bills of lading (“BLs”) were truthful and strictly complied

with the terms of the LCs. As Lillemoe’s and Calderon’s documents did not

misrepresent the underlying shipments, the falsity element of the fraud charges

fails.

Despite testimony by two bank witnesses at trial, no confirmer could

have dishonored Lillemoe’s and Calderon’s presentations because there was no

App.71

Case 17-1956, Document 232, 07/30/2018, 2355069, Page8 of 38

fraud in the underlying transaction — even if the confirmers knew of the

alleged alterations. The materiality element of the charges also fails.

The lower court also erred by giving an unduly coercive Allen charge.

Finally, Calderon rests on the arguments in his principal brief requiring a new

trial for the error of giving a no-ultimate-harm instruction or for an erroneous

instruction under 18 U.S.C. § 1344 (2).

ARGUMENT

I.

THE RIGHTS AND OBLIGATIONS OF LETTER OF

CREDIT CONFIRMERS

Under UCC law, the confirmer of an LC has two basic rights.1 First, the

confirmer has the right to dishonor a presentation of the documents required

for payment under the LC (“presentation”) that is not facially complying or

when there is fraud in the underlying transaction. In other words, the confirmer

has the obligation to honor a facially complying presentation lacking fraud in

the transaction. Second, the confirmer who has honored a facially complying

i The references in this reply brief to the model UCC correspond verbatim to

the text of Chapter 38 of the Consolidated Laws of New York Annotated,

Uniform Commercial Code, the law applicable to LCs confirmed by Deutsche

Bank, and Title 4 of the Colorado Revised Statutes Annotated, Uniform

Commercial Code, the law applicable to LCs confirmed by CoBank. The texts

are contained in sections NYUCC §§ 5-102, 103, 107, 108, 109 (McKinney)

and Colo. Rev. Stat. Ann. §§ 4-5-102, 103,107, 108, 109 (West).

App.72

Case 17-1956, Document 232, 07/30/2018, 2355069, Page9 of 38

presentation without knowledge of fraud has the right to reimbursement by the

LC issuer.

The issuer of a LC has the obligation to honor a presentation that

“appears on its face strictly to comply with the terms and conditions of the

letter of credit” (emphasis added). UCC § 5-108(a) (SA162). A confirmer “has

the rights and obligations of an issuer”, including the obligation to honor a

facially complying presentation. UCC § 5-107(a) (SA160).2 The obligation to

honor a facially complying presentation is not absolute, however. UCC §5108(a) (SA162) provides for the exception codified in UCC § 5-109 (SA168).

If a presentation that “appears on its face to strictly comply [...] but a required

document is forged or materially fraudulent, or honor of the presentation would

facilitate a material fraud by the beneficiary on the issuer or applicant [...] the

issuer, acting in good faith may honor or dishonor the presentation”. UCC § 5109 (a)(2) (SA168).3

2 The term confirmer is defined in UCC § 5-102(4) (SA152).

3 Official Comment 1 to UCC § 5-109 (SA168-169) emphasizes that fraud

must be “material” and suggests a standard for courts to decide “materiality”

but admonishes that “only by examining [the underlying] transaction can one

determine whether a document is fraudulent or the beneficiary has committed

fraud”. “Material fraud by the beneficiary occurs only when the beneficiary

has no colorable right to expect honor and where there is no basis in fact to

support such a right to honor.” Id.

App.73

Case 17-1956, Document 232, 07/30/2018, 2355069, PagelO of 38

The “fraud exception” applies to both the issuer’s and the confirmer’s

obligation to honor a facially complying presentation by the beneficiary, but

not to the reimbursement by the issuer to a confirmer who has honored in good

faith the beneficiary’s presentation. “[T]he issuer shall honor the presentation,

if honor is demanded by [...] a confirmer who has honored its confirmation in

good faith [or] a holder in due course of a draft drawn under the letter of credit”.

UCC § 5-109 (a)(1) (SA168). In other words, the confirmer’s right to

reimbursement for honoring a facially complying presentation in good faith is

immune to fraud in the transaction.4

The key feature in LCs that the obligation to honor stops short of fraud

only, is called the “independence principle”. “Rights and obligations of an

issuer to a beneficiary or a nominated person under a letter of credit are

independent of the existence, performance, or nonperformance of a contract or

arrangement out of which the letter of credit arises”.

UCC § 5-103(d)

4 Official Comment 6 to UCC § 5-109 (SA170) explains: “Section 5109(a)(1) also protects specified third parties against the risk of fraud. By

issuing a letter of credit that nominates a person to negotiate or pay, the issuer

(ultimately the applicant) induces that nominated person to give value and

thereby assumes the risk that a draft drawn under the letter of credit will be

transferred to one with a status like that of a holder in due course who

deserves to be protected against a fraud defense.”

App.74

Case 17-1956, Document 232, 07/30/2018, 2355069, Pagell of 38

(SA157). 5

“An issuer is not responsible for the performance or

nonperformance of the underlying contract, arrangement, or transaction”. UCC

§ 5-108 (f)(1) (SA162). This court has explained the independence principle

as follows:

The fundamental principle governing documentary letters of credit

and the characteristic which gives them their international

commercial utility and efficacy is that the obligation of the issuing

bank to [honor] a draft on a credit when it is accompanied by

documents which appear on their face to be in accordance with the

terms and conditions of the credit is independent of the

performance of the underlying contract for which the credit was

issued. [...] This independence principle infuses the credit

transaction with the simplicity and certainty that are its hallmarks.

The letter of credit takes on a life of its own as manifested by the

fact that in credit operations all parties concerned deal in

documents, not in goods, services, and/or other performances to

which the documents may relate.

Alaska Textile Co. v. Chase Manhattan Bank, N.A., 982 F.2d 813, 815-17 (2d

Cir. 1992). “[T]he issuer must honor a proper demand even though the

beneficiary has breached the underlying contract[....]

This principle of

independence is universally viewed as essential to the proper functioning of a

letter of credit and to its particular value, i.e., its certainty of payment.”

5 Official Comment 1 of UCC § 5-103 (SA157) explains that “[o]nly staunch

recognition of this principle by the issuers and the courts will give letters of

credit the continuing vitality that arises from the certainty and speed of

payment under letters of credit.”

App.75

Case 17-1956, Document 232, 07/30/2018, 2355069, Pagel2 of 38

Centrifugal Casting Mach. Co. v. Am. Bank & Tr. Co., 966 F.2d 1348, 1352

(10th Cir. 1992).

Despite the importance of insulating the LC from the underlying

transaction to achieve the LC’s commercial purpose, courts have long

recognized situations of fraud in which the wrongdoing of the beneficiary has

“so vitiated the entire transaction that the legitimate purposes of the

independence of the issuer's obligation would no longer be served”. Itek Corp.

v. First Nat. Bank of Boston, 730 F.2d 19, 25 (1st Cir. 1984), quoting Roman

Ceramics Corp. v. Peoples National Bank, 714 F.2d 1207, 1217 (3d Cir.1983),

quoting Intraworld Indus., Inc. v. Girard Tr. Bank, 461 Pa. 343, 359, 336 A.2d

316, 324-325 (1975). The seminal, pre-code case of the fraud exception to the

independence principle is Sztejn v. J. Henry Schroder Banking Corp., Ill Misc.

719, 31 N.Y.S.2d 631 (Sup. Ct. 1941). Sztejn was sold bristle as specified in

the shipping documents and the LC. In fact, “worthless rubbish” shipped and

the court ordered a permanent injunction against honor of the LC by the issuer.

This Court has explained that the fraud defense “authorizes dishonor only

where ‘a drawdown would amount to an outright fraudulent practice by the

beneficiary.’” 3Com Corp. v. Banco do Brasil, S.A., 171 F.3d 739, 747 (2d Cir.

1999) quoting Recon/Optical, Inc. v. Government of Israel, 816 F.2d 854, 858

App.76

Case 17-1956, Document 232, 07/30/2018, 2355069, Pagel3 of 38

n. 4 (2d Cir. 1987) explaining the “fraud in the transaction” doctrine.

The [fraud] exception, as we also explained in Itek, 730 F.2d at

24-25, concerns ‘fraud’ so serious as to make it obviously

pointless and unjust to permit the beneficiary to obtain the money.

Where the circumstances ‘plainly’ show that the underlying

contract forbids the beneficiary to call a letter of credit, Itek, 730

F.2d at 24; where they show that the contract deprives the

beneficiary of even a ‘colorable’ right to do so, id. at 25; where the

contract and circumstances reveal that the beneficiary's demand

for payment has ‘absolutely no basis in fact,’ id.

Ground Air Transfer v. Westate's Airlines, 899 F.2d 1269, 1272—73 (1st Cir.

1990).

To defend dishonor the LC issuer carries the burden of proving fraud. In

Intraworld, an injunction against honor was refused because the plaintiff was

unable to prove that the beneficiary “had no bona fide claim for payment [in

the underlying contract] and that her documented demand had absolutely no

basis in fact.” Intraworld, 461 Pa. at 363. “The issuer bears the burden of

proving the fraud if it alleges fraud as a defense to an action for wrongful

dishonor.” Airline Reporting Corp. v. First Nat'l Bank of Holly Hill, 832 F.2d

823, 827 (4th Cir.1987); see 3Com Corp., 2 F.Supp.2d 452, 461

(S.D.N.Y.1998), affdsub nom. 3Com Corp., 171 F.3d 739 (2d Cir. 1999) .6

6 A recent case explaining the independence principle and the fraud exception

is BasicNet S.p.A. v. CFP Servs. Ltd., 127 A.D.3d 157,4 N.Y.S.3d 27 (N.Y.

App. Div. 2015), 86 UCC Rep.Serv.2d 113,2015 N.Y. Slip Op. 02080.

App.77

Case 17-1956, Document 232, 07/30/2018, 2355069, Pagel4 of 38

While the fraud exception to the independence principle has a long

history, concurrently, courts have recognized the need to protect certain classes

from the fraud defense. Judge Cardozo, in dissent, distinguished a holder of a

draft that is aware of fraud from the innocent holder. Maurice O'Meara Co. v.

Nat'l Park Bank ofNew York, 239 N.Y. 386,401,146 N.E. 636,641 (1925). “If

[...] the bank presenting the draft for payment was a holder in due course, its

claim against the bank issuing the letter of credit would not be defeated even

though the primary transaction was tainted with fraud.” Sztejn at 635. In

United Bank Ltd. v. Cambridge Sporting Goods Corp., 41 N.Y.2d 254, 360

N.E.2d 943 (1976), the court upheld an injunction against payment of drafts in

a case where fraud-in-the-transaction was established because the confirmer

did not prove that it was holder in due course of the drafts. “Notwithstanding

[the fraud] exception, if the person presenting a draft drawn on a letter of credit

is a holder in due course (see, Uniform Commercial Code § 3-302), the issuer

must pay the draft, whether it has notice of forgery or fraud or not.” First

Commercial Bank v. Gotham Originals, Inc., 64 N.Y.2d 287, 295, 475 N.E.2d

1255, 1259 (1985). To defend dishonor, “an issuing bank must first establish

that a presentation is fraudulent and only then does the burden shift to the

confirming or negotiating bank to show that it paid in good faith.” Banco

App.78

Case 17-1956, Document 232, 07/30/2018, 2355069, Pagel5 of 38

Nacional De Mexico, S.A. v. Societe Generale, 34 A.D.3d 124, 132, 820

N.Y.S.2d 588 (2006), citing UCC § 5-109(a)(l)(ii) (SA168).

II.

THE INDICTMENT MUST BE DISMISSED BECAUSE

LILLEMOE’S OR CALDERON’S ACTIONS NEVER PUT

THE U.S. BANKS’ PROPERTY RIGHTS AT RISK

In each of Lillemoe’s and Calderon’s transactions, the U.S. banks were

parties to two related but distinct contracts. The banks were confirmers of the

LCs issued on Appellants’ behalf as LC applicants. The U.S. banks also

provided loans to the foreign banks, issuers of the LCs. The loans financed the

obligation to reimburse the U.S. banks for honoring Appellants’ presentations

as beneficiaries. The contemplated harm element of the fraud charges here, 18

U.S.C. §§ 1343, 1344, concern only the U.S. banks’ property rights in those

two contracts. The inquiry into the harm element starts by determining whether

Lillemoe’s and Calderon’s actions ever put the U.S. banks’ property rights at

risk.

As LC confirmers that honored Lillemoe’s and Calderon’s presentations,

the U.S. banks had only one property right in the LC contracts: reimbursement

by the issuing banks. As lenders to the LC issuing banks, the U.S. banks had

three property rights: (1) full and truthful disclosure of information relating to

the creditworthiness of the borrowers, (2) principal and interest payments of

App.79

Case 17-1956, Document 232, 07/30/2018, 2355069, Pagel6 of 38

the loans, and (3) the loan collateral, in this case, the GSM-102 guarantees

assigned to them.

a.

The U.S. Banks’ Right to Reimbursement by the

LC Issuers Was Never at Risk

There are three separate grounds to conclude as a matter of law that the

U.S. banks’ right to reimbursement was never at risk. First, it is plainly stated

in the indictment. “[T]he foreign banks were obligated to repay the funds to the

U.S. financial institutions by virtue of the letters of credit issued to the U.S.

financial institutions”. DN1146 (JA96).

Second, Lillemoe’s and Calderon’s presentations were on their face

complying and the U.S. banks honored them in good faith. The U.S. banks and

LC issuing banks both determined the presentations to be facially complying

because the U.S. banks paid, as the indictment charges, “large amounts of

capital” and the LC issuing banks accepted their obligation to reimburse the

U.S. banks. DN1

44, 46 (JA96). There is no dispute that in fact the

presentations were facially complying. Further, the indictment alleges that the

U.S. banks are the victims of fraud, not participants in fraud. “[T]he banks’

good faith — their absence of knowledge — was a fundamental premise of the

government’s case. See Tr.4747:18 (closing: arguing the banks would not have

paid ‘[i]f they had known’)”. Lillemoe Br. 48.

App.80

Case 17-1956, Document 232, 07/30/2018, 2355069, Pagel7 of 38

Based on these two facts explicitly alleged in the indictment, the U.S.

banks had the right to reimbursement as a matter of law by the letter of UCC §

5-109(a)(1)(h) (SA168).

No alleged misrepresentations by Lillemoe or

Calderon, and no claims of fraud could have affected the confirmers’ right to

reimbursement because they honored facially complying presentations in good

faith. A confirmer has more rights than a LC beneficiary, in that it is immune

to the fraud defense of the issuer’s dishonor. Holders in due course of drafts

drawn on LCs have been protected from fraud since Sztejn, when it became

widely accepted law that fraud can override the independence of the issuer’s

obligation.7 See supra, Sztejn at 635.

Third, there was no fraud in the transactions underlying the LCs.

Without fraud in the transaction, the issuing bank has no legal ground to

dishonor a facially complying presentation, whether the beneficiary or the

confirmer demands honor. The issuer must honor by UCC § 5-108(a) (SA162)

and has no ground to dishonor under UCC § 5-109(a)(2) (SA168). The same

conclusion ensues, that the U.S. banks’ right to reimbursement was never at

7 The U.S. banks were also holders of drafts in the Appellants’ transactions

including the transaction of the wire fraud counts of conviction under

guarantee 821940. See GX207 at 8227 (JA1864). As the U.S. banks honored

in good faith, they were holders in due course. See UCC § 5-109(a)(l)(iii)

(SA168).

App.81

Case 17-1956, Document 232, 07/30/2018, 2355069, Pagel8 of 38

risk as a matter of law.

The requirement to defeat the issuer’s obligation to honor is high and

examination of the transactions underlying Lillemoe’s and Calderon’s LCs

shows that they do not meet the “no colorable right”, “no basis in fact” standard

of fraud. See UCC § 5-109 Official Comment 1 (SA168-169). Lillemoe’s and

Calderon’s Program transactions are of the “third party” type described by the

lower court. See DN420 at 4-5 (SA4-5) and Calderon Br. 8-11. In a third party

transaction, the Program participant buys a third party’s right to use a shipment

in a guarantee application. In such a transaction, fraud can happen in one of

two ways, using a third party’s shipment without the right to do so, or using a

shipment that doesn’t qualify for the guarantee or that is outright fictitious. The

government does not allege that the Appellants did not have right to the

shipments or that the shipments did not exist. “[Lillemoe and Calderon] would

and did make arrangements to pay for the bills of lading [...] by paying [...] in

order to purchase copies of the shipping documents”. DN1 f 36 (JA94-95).

“The defendants purchased the bills of lading used in [the “Cool Express”

transaction of the wire fraud counts] from a third-party exporter”. U.S. Br. 20.

The government only alleges that three shipments (out of thousands) submitted

by Lillemoe and Calderon in Program guarantees do not qualify. “Without the

App.82

Case 17-1956, Document 232, 07/30/2018, 2355069, Pagel9 of 38

date changes, the shipments would not have been compliant with the date

restrictions in the program”. U.S. Br. 14. The changed onboard dates of the

three corresponding BLs are the only possible basis for fraud in Lillemoe’s and

Calderon’s transactions.

As explained in their briefs, there is colorable ground that the disputed

shipments do qualify. See Calderon Br. 34-38 and Lillemoe Br. 35-40. As the

definition of Date of Export is ambiguous, under a “reasonable” construction

of 7 C.F.R. § 1493.20(d) (SA67), the three disputed shipments do qualify for

the guarantees. Calderon Br. 37-38. Lillemoe reaches the same conclusion,

construing the regulatory text according to its “natural meaning”. Lillemoe Br.

35. Calderon’s and Lillemoe’s arguments are more than sufficient to defeat the

issuer’s right to dishonor and they also show that based on undisputed facts the

transactions are not fraudulent as a matter of law. In response the government

argues that it, too, has a plausible interpretation of the regulation and that the

jury was “entitled” to determine the sole legally valid definition. U.S. Br. 41.

Yet the government’s arguments prove no criminal liability, as its burden is not

to show there exists a reasonable interpretation of an ambiguous regulation

under which the shipments do not qualify, but rather it must show that the

shipments do not qualify under all reasonable interpretations. See Calderon Br.

App.83

Case 17-1956, Document 232, 07/30/2018, 2355069, Page20 of 38

34-35, referring to the well-established standard for criminal false statements.

Not having a basis in law, the government’s theory then transfers upon the illinstructed jury the court’s function of interpreting the regulatory text.

The government has shown that, at most, CCC may have ground to

dispute three shipments under two guarantees. There was no fraud on CCC as

a matter of law and that precludes any possibility of defending the issuers’

dishonor of the presentations. But it is not necessary to rely on the evidence at

trial to conclude that the U.S. banks’ right to reimbursement was never at risk

— the facts stated in the indictment suffice. The U.S. banks, as confirmers that

honored facially complying presentations in good faith, are immune to the fraud

defense to dishonor.

b.

The U.S. Banks’ Property Rights in the Loans

and Guarantees Were Never at Risk

Though Lillemoe and Calderon were not parties to the guaranteed loans

that the U.S. banks extended to the LC issuers, their LCs created the obligations

financed by the loans and they assigned the guarantees. Calderon Br. 5. As

lenders, the U.S. banks had a property right to truthful information on the ability

of the borrower to repay and on the value of the collateral, here the guarantees.

Neither the U.S. banks nor CCC as guarantor relied on Lillemoe or Calderon

to analyze the credit of the borrowers. Lillemoe and Calderon were only

App.84

Case 17-1956, Document 232, 07/30/2018, 2355069, Page21 of 38

required to provide the name of the borrower bank, which they did truthfully.

The U.S. banks were not deceived on the nature and characteristics of the loans

and associated guarantees. See GX207 at 8215,8244 (JA1852, JA1881). Thus,

the only possible question is the outright validity of the contracts.

The

borrowers could repudiate the obligation under the LC and as a result repudiate

the loan, or CCC could repudiate the guarantees after assignment to the U.S.

banks. As demonstrated above, the borrowers had no legal basis to dishonor

the reimbursement obligation and therefore had no legal basis to repudiate the

loan after acceptance of the obligation.

Likewise, CCC had no legal basis to repudiate guarantees based on

qualifying shipments. Only two guarantees, those based on the three shipments

where the Date of Export allegedly disqualifies them, might have caused an

unanticipated loss to the U.S. banks and consequently liability for Lillemoe.

But, as demonstrated in Lillemoe’s and Calderon’s briefs, Lillemoe did not

commit fraud in procuring the two guarantees.

Lillemoe Br. 35-40 and

Calderon Br. 34-38. No criminal liability can be attributed to Lillemoe or

Calderon based on a potential dispute over a guarantee contract and since the

U.S. bank did not claim under the two guarantees, there could be no contractual

dispute or liability under civil law either.

App.85

Case 17-1956, Document 232, 07/30/2018, 2355069, Page22 of 38

While CCC can repudiate a claim for loss by the beneficiary of a

Program guarantee based on a breach of contract, it cannot repudiate a claim of

an assignee that fulfilled the requirements of the assignment in good faith. The

protections of an assignee are codified in 7 C.F.R. § 1493.120(e) (Action

against the assignee) (SA77): “CCC will not hold the assignee responsible or

take any action or raise any defense against the assignee for any action,

omission, or statement by the exporter of which the assignee has no knowledge.”

The assignee’s right to claim for loss under a guarantee is immune to fraud

provided the assignee’s good faith, as is the right to reimbursement of the LC

confirmer who honored in good faith. Based solely on the indictment and its

assumption of good faith, the U.S. banks’ property right in the assigned

guarantees was never at risk as a matter of law.

The government’s theory purports that, to the contrary, the U.S. banks’

right to claim on the guarantees was at risk. “The defendants’ fraud placed the

banks at risk of losing the guarantee payments if the USDA determined that

they knew of the defendants’ misstatements.” U.S. Br. 48 n. 16. This make no

sense. Under the government’s theory, the named victim of fraud under 18

U.S.C. § 1343 or § 1344 can also aid and abet in the commission of the offense.

This Court should reject this theory.

App.86

Case 17-1956, Document 232, 07/30/2018, 2355069, Page23 of 38

c.

Contemplated Harm is Lacking as a Matter of

Law

In constructing a theory of harm, the lower court gets off on the right foot

despite ignoring LC law, but thereafter its logic deviates from the law making

its theory irreparably flawed. DN420 at 10-20 (SA10-20). The lower court

starts by correctly rejecting Lillemoe’s blanket averment that a LC confirmer

has no right to dishonor a facially complying presentation.8 As a consequence,

the lower court correctly reasons, the confirmer who knows of fraud has a

decision to make, to pay or not to pay, and that decision is “economic”. From

there on, the lower court and the law part ways.

“There was Sufficient Evidence to show that the Banks were Deprived

of Information Necessary to Make an Economic Decision”. DN420 at 10

(SA10). The title of the subsection in the lower court’s ruling suggests that a

beneficiary who commits fraud in the underlying transaction, necessarily

commits fraud on the confirmer by “depriving” it of the knowledge of fraud

8

The lower court does not understand the factual basis for the fraud exception

to the independence principle, which is fraud in the underlying transaction,

unless “unauthorized alteration of international trade documents” equates to

fraud in the lower court’s mind. DN420 at 13 (SA13). Throughout the

proceedings, the lower court systematically failed to distinguish mere

deception from fraud by ignoring or misconstruing the harm element.

App.87

Case 17-1956, Document 232, 07/30/2018, 2355069, Page24 of 38

because, presumably, the “non-disclosures can or do result in tangible

economic harm”, in this context, to the confirmer. U.S. Br. 45, quoting United

States v. Finazzo, 850 F.3d 94,111 (2d Cir. 2017) . The lower court’s theory of

harm is based on the faulty logic that if the confirmer is deceived into honoring,

it follows, without any basis in law, that the confirmer was harmed in the

transaction. The court maintains that “[Lillemoe’s theory] also fundamentally

misstates the risk he defrauded the banks into accepting”, thereby again

conflating deception with fraud.

DN420 at 15 (SA15).

To support its

conclusion the lower court relies on bank witness testimony suggesting the

alleged alterations jeopardized reimbursement and the ability to claim under

the guarantee. “[Womack] further testified that CoBank was concerned with

the bills of lading specifically because they were necessary to get repaid by the

foreign bank or, if the foreign bank failed to pay, under the GSM-120 program.”

DN420 at 13 (SA13). Instead of assuming its function as sole determiner of

rights and obligations under contract and law, the lower court assigns that role

to a government witness.

Later in its ruling, the lower court concedes Calderon’s argument that the

issuer’s obligation to reimburse was not affected, but immediately doubles

down on the conclusory theory that, when the confirmer is deceived, it is

App.88

Case 17-1956, Document 232, 07/30/2018, 2355069, Page25 of 38

defrauded. “Calderon's argument that the altered documents did not change the

obligation of IIB to repay the loan is beside the point of whether or not Lillemoe

and Calderon committed wire fraud. Wire fraud need not necessarily cause its

victim a loss: it is sufficient if the victim is deprived of its right to use its

property based on non-fraudulent information.” DN420 at 18 (SA18). On

similar arguments by Lillemoe and Calderon that CCC’s obligation to pay

claims under the guarantees could not be affected by the alleged alterations, the

lower court side-steps the correct conclusion of law and reverts to its

conclusory theory equating deception to fraud.

The lower court makes but one actual attempt to link deception to

potential harm. “[T]he doctoring of the underlying documents increased the

risk that the CCC would deny guarantee payments based on CCC's view that

CoBank was aware of the alterations. This dispute could potentially lead to

protracted and costly litigation over the issue of whether CoBank had

knowledge of the nature of the documents it had accepted.” DN420 at 16

(SA16). In that scenario and based on the assumption in the indictment that

CoBank acted in good faith, CoBank would certainly prevail in litigation for

breach of contract. The lower court’s theory of harm is therefore based on the

expected unfairness of the litigating court in awarding costs and damages, but

App.89

Case 17-1956, Document 232, 07/30/2018, 2355069, Page26 of 38

the litigating court deserves the same presumption of fairness that the lower

court expects from others.

The lower court errs in bypassing the required inquiry into the

transactions underlying the LC, here the question whether the shipments of

Lillemoe’s and Calderon’s transactions qualified for the guarantees. As shown

above, there was no fraud in the underlying transactions. The presumed fraud

in the court’s theory, based on alleged alterations of copy BLs, simply did not

exist. The multiple errors of law pervasive in the court’s theory translate

directly into erroneous jury instructions which invalidate the jury’s findings

that the court also relies on.

In its brief, the government recycles some of the lower court’s theory of

harm. One additional argument the government advances is to attribute to

Lillemoe and Calderon losses due to the borrower’s default on the loans. U.S.

Br. 47-49. As explained above, Lillemoe and Calderon cannot be held

accountable for a repudiation of the loans or the guarantees as there is no legal

basis and, likewise, they cannot be held accountable for the failure to perform

on the loans as neither the U.S. banks nor CCC relied in any way on Lillemoe

or Calderon in making the credit decisions to lend or issue guarantees. This

theory of harm has no merit.

App.90

Case 17-1956, Document 232, 07/30/2018, 2355069, Page27 of 38

Lillemoe’s and Calderon’s actions never put at risk the property rights

of the U.S. banks. They did not misrepresent the credit risk that the U.S. banks

and CCC deliberately assumed in the loans to the LC issuing banks. They did

not expose the U.S. banks to a legally viable cause for repudiation of loan or

guarantee. By well-established law in this Court, Lillemoe and Calderon did

not contemplate harm to the U.S. banks because there was no “discrepancy

between benefits reasonably anticipated” and “the actual benefits which the

defendant delivered, or intended to deliver”. See United States v. Regent Office

Supply Co., 421 F.2d 1174, 1182 (2d Cir. 1970). This conclusion of law can be

drawn from the fact implicit in the indictment that the U.S. banks honored

facially complying presentations in good faith.

For these reasons, the

indictment must be dismissed. In addition, there is a separate ground to reverse

the convictions, that Lillemoe and Calderon did not commit fraud on CCC.

ffl. LILLEMOE’S AND CALDERON’S STATEMENTS WERE

NOT FALSE

The government alleges that Lillemoe’s and Calderon’s documents

contain material misrepresentations in that copy-non-negotiable stamps were

replaced with “original” stamps and October 5 onboard dates with October 6

on copy BLs. U.S. Br. 13-18. The sole basis of the theory is witness testimony.

App.91

Case 17-1956, Document 232, 07/30/2018, 2355069, Page28 of 38

The testimony should be disregarded in its entirety and so should the theory.

The question here is whether Lillemoe’s and Calderon’s documents,

alleged alterations and all, satisfied the contractual requirements of the LC. It

is a question of interpretation of contractual language that, when “couched [...]

in language of common use and understanding, [is] purely a matter of law for

the court”. United States v. Race, 632 F.2d 1114,1120 (4th Cir. 1980). Further,

as to criminal liability, “one cannot be found guilty of a false statement under

a contract beyond a reasonable doubt when his statement is within a reasonable

construction of the contract.” Id. Here, whether other reasonable constructions

exist is irrelevant as is the construction of the government witnesses. If

Calderon’s construction of the contract is reasonable, as a matter of law

Lillemoe’s and Calderon statements must be interpreted according to his

construction when deciding whether Calderon is criminally liable of making or

being complicit of false statements.

Here the relevant requirements in the LCs are a “COPY OF ORIGINAL

ON BOARD OCEAN BILL(S) OF LADING” and “APPLICANT

AUTHORIZES PAYENT OF DOCUMENTS AGAINST DISCREPANCIES

BUT WITHOUT AFFECTING CCC REQUIREMENTS”. GX207 at 82148215 (JA1851-1852). The “discrepancies” clause means that the examination

App.92

Case 17-1956, Document 232, 07/30/2018, 2355069, Page29 of 38

rules of UCP do not apply to these documents. Calderon Br. 40. To comply,

the copy BLs must satisfy the requirements of the Program regulations, 7 C.F.R.

§ 1493.

As per the language of the regulations, and understood in context, a copy

BL is a document that faithfully reproduces the information in an actual

transportation document which is relevant in determining whether the shipment

qualifies for the guarantee. An “original” stamp is information about the

document, not about the shipment, therefore it is irrelevant to the validity or

“authenticity” of the copy BL. Except for three copy BLs with changed dates,

the government cannot dispute the truthfulness of statements under Calderon’s

construction of the term copy BL. Using Lillemoe and Calderon’s reasonable

construction of on board date, it cannot dispute that October 6 is a true on board

date for the three shipments and that the shipments do qualify for the guarantees.

Calderon Br. 34-38.

IV. CONFIRMERS COULD NOT HAVE DISHONORED

LILLEMOE’S OR CALDERON’S DOCUMENTS EVEN

WITH KNOWLEDGE OF ALLEGED

MISREPRESENTATIONS

To be material, Lillemoe’s and Calderon’s alleged misrepresentations

must be capable of influencing the confirmer’s decision to honor. See Neder v.

App.93

Case 17-1956, Document 232, 07/30/2018, 2355069, Page30 of 38

United States, 527 U.S. 1, 16 (1999). The banker witnesses, Womack and

Effing, both testified that they would not have paid had they known of

document changes. U.S. Br. 33-34. But Womack’s or Effing’s testimony is

irrelevant to materiality unless it reflects what a reasonable confirmer would

have decided. A reasonable jury, properly instructed in the applicable law,

would reject the testimony of the bankers and the government’s expert.

A confirmer presented with facially complying documents, as is the case

here, knows that there is only one defense to dishonor: fraud in the underlying

transaction. UCC § 5-109(a)(2) (SA168). Before dishonoring, a reasonable

confirmer who has learned of changes in documents needs evidence showing

that the beneficiary has “no colorable right to expect honor” and that his

demand for honor has “absolutely no basis in fact”. But here no such evidence

exists because, as explained above, there was no fraud in Lillemoe’s and

Calderon’s “third party” transactions when they had the right to use the

shipments in the Program and the shipments qualified for the guarantees. The

government concedes as much save two transactions with disputed on board

dates. If she became aware of the alleged misrepresentations, a reasonable

confirmer would not change her decision to honor Lillemoe’s and Calderon’s

presentations and a properly instructed jury cannot reasonably find materiality.

App.94

Case 17-1956, Document 232, 07/30/2018, 2355069, Page31 of 38

An unreasonable confirmer, like Womack and Effing, may say she

would dishonor but, ultimately, she would honor. The confirmer might

erroneously believe that Lillemoe’s or Calderon’s presentation is deceptive,

erroneously conflate deception with fraud — no differently than the

government or the lower court do — and refuse to pay. In that scenario

Lillemoe or Calderon would sue for wrongful dishonor and the litigating court

would order the confirmer to pay because, as demonstrated above, there is no

fraud in the underlying transaction, the only legal ground for dishonoring a

facially complying presentation.

Beyond the fact that the U.S. banks have no legal ground to dishonor, in

practice, if they have any remaining doubts after learning of changes in facially

complying documents, they would do the logical and easiest thing before

dishonoring, they would contact CCC, describe the relevant characteristics of

the shipment and, after confirmation that the shipments qualified, they would

honor, making this case moot. In general, banks are reluctant to dishonor

because, as explained above, an honest belief of fraud is not sufficient to defend

dishonor, only actual fraud. A confirmer or an issuer is much more likely to let

someone else enjoin payment, rather than dishonoring themselves, thereby

App.95

Case 17-1956, Document 232, 07/30/2018, 2355069, Page32 of 38

shifting the heavy burden of proving fraud.9

In Program transactions,

confirmers have but one possible economic motive to dishonor, an infirmity in

a guarantee. This is the actual “economic decision” that the lower court and

the government’s theories leave abstract and undefined. The theories collapse

under scrutiny based on the conceded fact that the shipments do qualify and, in

the case of the dates, the legal insufficiency to show that they do not qualify.

The government and the bankers’ testimony paint a false picture that

changed documents are an automatic cause for dishonor. The reality of the

marketplace is far from that:

Letter of credit beneficiaries prepare and procure the documents

that are required to perform their contractual obligations to the

applicant and to satisfy the conditions of the letter of credit

securing the applicant's payment obligations to the beneficiary. In

order to comply with the documentary requirements of the letter

of credit, beneficiaries frequently present documents containing

false statements. [...] This may occur because the parties did not

draft the letter of credit to match the terms of the underlying

9 The most common and unconfessed motive for the issuer to dishonor is that

the applicant is in default and she does not expect reimbursement. ACE Am.

Ins. Co. v. Bank of the Ozarks, 2014 WL 4953566 (S.D.N.Y. Sept. 30, 2014).

The issuer will typically nitpick the documents claiming they don’t comply,

and in addition claim fraud in the underlying transaction. Such defenses very

rarely succeed. In the case of Lillemoe’s and Calderon’s Program

transactions, the issuers were either fully collateralized before the transaction

or paid in full very shortly after honor. See Tr.3396:20-22 (JA950) and

GX1215 at 2124 (JA3607), showing same day $6,171,413.10 payment to the

issuer on the wire fraud counts transaction. The issuers had no economic

incentive to dishonor.

App.96

Case 17-1956, Document 232, 07/30/2018, 2355069, Page33 of 38

contract or the terms of the underlying contract are amended but

not the letter of credit. [...] In most cases the beneficiary is

apparently, if not actually, motivated to present the document

containing a false statement because deleting or qualifying the

false statement would make the document facially noncomplying

under the letter of credit. Suffice it to say that a surprising number

of presentations that are facially complying benefit from back

dating, unauthorized signing, misdescription of contractual

performance, and the like.

James G. Barnes, Defining Good Faith Letter of Credit Practices, 28 Loy. L.

A. L. Rev. 101, 105 (1994). Non-fraudulent facially complying documents

containing false statements commonly occur and dishonor is not supported by

practice or law, even when the unaltered documents are not complying.

Lillemoe’s and Calderon’s documents, however, did not contain false

statements and were complying without the alterations. Calderon Br. 40.

The fact that CoBank document checkers may reject a copy BL without

an “original” stamp, does not imply that such a copy BL is legally non­

complying or, equivalently for Program LCs, that it does not satisfy CCC

requirements. CoBank sets its own standard of examination that is more

stringent than required by law. It can reject a document that does not meet its

heightened standard, but it cannot expect a court to allow dishonor of legally

complying documents. For obvious business reasons Lillemoe and Calderon

strived to meet CoBank’s standard. GX208 at 78871 (JA1908). But there is

App.97

Case 17-1956, Document 232, 07/30/2018, 2355069, Page34 of 38

neither fraud nor intent to defraud in altering a document that is legally

complying so that it complies under both the legal standard and CoBank’s

standard. In the case of the October 6 dates, Lillemoe could have presented the

unchanged BLs with the port logs showing that the goods were onboard on

October 6. Lillemoe Br. 36. That might have led CoBank to reject the

documents but there is no legal certainty that CoBank could have ultimately

dishonored the presentation.

V. THE ALLEN CHARGE WAS UNDULY COERCIVE

While a lower court’s Allen charge must be viewed "in its context and

under all the circumstances,” the government’s brief focused on the judge's

instructions in isolation, failing to account for the potential for coercion arising

from the extraordinary combination of circumstances during the juiy’s

deliberation. See Jenkins v. United States, 380 U.S. 445, at 446. This Court

must ask whether, in light of all relevant circumstances, the Allen charge had

the effect of suggesting to the jury that it must reach unanimity even against the

jurors ’ conscientious judgment. Here, (1) the jury understood that the trial had

an absolute end date past which deliberations would not continue; (2) the lower

court instructed the jury to continue deliberations on three separate occasions

including when the jury finally stated that its deliberations were complete; (3)

App.98

Case 17-1956, Document 232, 07/30/2018, 2355069, Page35 of 38

the lower court refused to include a reasonable doubt reminder in its Allen

charge and; (4) the jury only required 93 minutes following receipt of the Allen

charge to reach a unanimous verdict, despite the fact that it had deliberated for

1,292 minutes over the course of 4 days and was unable to reach a unanimous

verdict. Calderon Br. 43-46. Even if, as the government suggests, no single

one of these factors would mandate a new trial, the combination led to an

impermissibly coercive Allen charge and, as a result, this Court should remand

this case for a new trial.

VI. CALDERON RESTS ON HIS OTHER ARGUMENTS

REQUIRING A NEW TRIAL

Calderon rests on the arguments in his principal brief requiring a new

trial for the error of giving a no-ultimate-harm instruction or for an erroneous

instruction under 18 U.S.C. § 1344 (2). Calderon Br. 51-59.

App.99

Case 17-1956, Document 232, 07/30/2018, 2355069, Page36 of 38

CONCLUSION

The indictment should be dismissed. In the alternative, because there was

neither deceit nor fraud on CCC, the judgement of the lower court should be

reversed. As a second alternative, the judgment should be vacated and the case

remanded for a new trial.

Respectfully submitted,

/s/ Pablo Calderon

Pablo Calderon

7 Old Parish Rd

Darien, CT 06820

(203) 613-6748

July 9,2018

App.100