# Appendix — Reich v. United States, 128 S. Ct. 115 (2007) (No. 06-1591)

> Briefs, arguments, decisions, and more.

URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386008_0545%3A2

## Record

- **Collection:** Supreme Court brief
- **Document type:** Appendix
- **Published:** January 1, 2007

## Text

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APPENDIX A

UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT

August Term 2006
(Argued: January 26, 2007 Decided: March 2, 2007)
Docket No. 06-1445-cr

UNITED STATES OF AMERICA,

Appellee,
vV.

PERRY REICH,
Defendant-Appellant.

Before:

KEARSE and SOTOMAY OR, Circuit Judges,
and KOELTL, District Judge. '

Defendant-appellant Perry Reich appeals from a judg-
ment of conviction on one count of corruptly obstructing a
judicial proceeding, in violation of 18 U.S.C. § 1512(c)(2),
one count of forging a judge’s signature, in violation of 18
U.S.C. § 505, and one count of making a false statement to
a federal officer, in violation of 18 U.S.C. § 1001(a)(2), in
connection with his fabrication of a court order. We hold
principally that (1) 18 U.S.C. § 1512(c) requires a nexus

' The Honorable John G. Koeltl, United States District Judge for

the Southern District of New York, sitting by designation.

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between a defendant’s conduct and the effect on the judi-
cial proceeding, as described in United States v. Aguilar,
515 U.S. 593 (1995), and that the trial evidence in this case
was sufficient to establish such a nexus; and (2) 18 U.S.C.
§ 505 does not require an intent to defraud. We also reject
Reich’s other challenges. The judgment of conviction of
the United States District Court for the Eastern District of
New York (Garaufis, J.) is AFFIRMED.

AMY BUSA, Assistant United States Attorney
(Roslynn R. Mauskopf, United States Attorney,
Eastern District of New York, David C. James,
Assistant United States Attorney, on the brief),
Brooklyn, New York, for appellee.

MARK M. BAKER (Benjamin Brafman, Karen A.
Newirth, on the brief), Brafman & Associates, P.C.,
New York, New York, for defendant-appellant.

SOTOMAYOR, Circuit Judge:

Defendant-appellant Perry Reich appeals from the
March 31, 2006 and the May 1, 2006 amended judgment of
the United States District Court for the Eastern District of
New York (Garaufis, J.), convicting him, following a jury
trial, of one count of corruptly obstructing a judicial pro-
ceeding, in violation of 18 U.S.C. § 1512(c)(2), one count
of forging a judge’s signature, in violation of 18 U.S.C.
§ 505, and one count of making a false statement to a fed-
eral officer, in violation of 18 U.S.C. § 1001(a)(2), in con-
nection with his fabrication of a court order. Reich
challenges his conviction on all three counts, his sentence
to twenty-seven months imprisonment, and the district

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court’s March 10, 2006 denial of his motions for a judg-
ment of acquittal, for a new trial, and for bail pending
appeal, United States v. Reich, 420 F. Supp. 2d 75 (E.D.N.Y.
2006). Reich raises five issues on appeal: (1) that there was
insufficient evidence to establish that his conduct would
have the “natural and probable effect” of obstructing the law-
suit, such that a conviction for obstruction of justice under 18
U.S.C. §1512(c)(2) was inappropriate; (2) that the jury
should have been instructed to find, and evidence was
required to establish, an intent to defraud under 18 U.S.C.
§ 505; (3) that it was error to permit the government to
crossexamine Reich’s character witness by asking about an
allegedly “private” unauthorized change to his law part-
ner’s life insurance policy; (4) that there was insufficient
evidence to establish that he made a false statement to a
government agent; and (5) that the district court improperly
applied a “special skills enhancement” in calculating
Reich’s sentence under the United States Sentencing
Guidelines Manual (“U.S.S.G.” or “Guidelines”). We dis-
agree with all of Reich’s arguments on appeal and affirm
his conviction on all counts.

BACKGROUND

The following account is drawn from the evidence
adduced at trial before Judge Nicholas G. Garaufis.

The Ryan Beck Lawsuit

Sometime before the activity that gave rise to Reich’s
criminal conviction, Reich, who is a lawyer, commenced
through counsel an arbitration proceeding against a bro-
kerage firm he alleged had mishandled his account. This
firm was subsequently acquired by Ryan Beck & Co.
(“Ryan Beck”), another brokerage firm, and Reich

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amended his arbitration claim to include Ryan Beck as a
respondent. In July 2002, Ryan Beck filed a lawsuit in the
Eastern District of New York, seeking to enjoin Reich and
several other defendants, also former investors who had
filed arbitration claims (collectively, the “investor-defen-
dants”), from arbitrating against it. Ryan Beck & Co. vy.
Fakih, No. 02 Civ. 4052 (E.D.N.Y.) (“Ryan Beck v. Fakih”
or the “Ryan Beck lawsuit”).2 The case was assigned to
Chief Judge Edward R. Korman, who referred the prelim-
inary injunction motion to Magistrate Judge Roanne L.
Mann; eventually, the parties agreed to have Magistrate
Judge Mann preside over the entire case. See Order, Ryan
Beck v. Fakih, No. 02 Civ. 4052 (E.D.N.Y. Nov. 7, 2002)
(Docket Entry No. 49).°

In September 2002, Magistrate Judge Mann issued an
order denying Ryan Beck’s motion for a preliminary
injunction staying arbitration, and on June 4, 2003, she
issued another order denying Ryan Beck’s motion for
reconsideration of that decision. See Order, Rvan Beck v.
Fakih, No. 02 Civ. 4052 (E.D.N.Y. Sept. 23, 2002) (Docket
Entry No. 28); Order, Ryan Beck v. Fakih, No. 02 Civ.
4052 (E.D.N.Y. June 4, 2003) (Docket Entry No. 83) (the
“June 3 Order’”).4 Because the June 3 Order did not resolve
Ryan Beck’s outstanding summary judgment motion, how-
ever, Ryan Beck’s attorney, Joel Davidson (“Davidson’’),

> Though a lawyer. Reich was represented by counsel in the pro-
ceedings. Civil Docket, Beck & Co. v. Fakih, No. 02 Civ. 4052
(E.D.N.Y.).

* The Order was signed September 11, 2002, but was not dock-

eted until November 7, 2002.

Though this Order was docketed June 4, Magistrate Judge Mann
signed it on June 3. Because the district court and the parties have
referred to it as the “June 3 Order,” we now do so for consistency.

Sa

of the law firm Davidson & Grannum, filed an application
for a writ of mandamus in the United States Court of
Appeals for the Second Circuit to compel Magistrate Judge
Mann to issue a ruling.

The Forged Order

On June 17, 2003, at approximately 11:10 a.m., David-
son & Grannum’s law office received a four-page fax
transmission that purported to be, but was not, an order
issued by Magistrate Judge Mann (“the forged Order”),
which was dated June 17, 2003, and bore Magistrate Judge
Mann’s fax header and signature. The forged Order
directed that “[t]he orders denying the preliminary injunc-
tion are recalled and vacated, and defendant Fakih and its
counsel are enjoined from proceeding with the arbitration
hearing against Ryan Beck and the brokers.” It also
recused Magistrate Judge Mann from further proceedings
in the case, stating that she had discussed the suit with
Chief Judge Korman, “who recommended to me that
I recuse myself from the case and return the matter to him.
.. . Given the manner in which I have handled this case, a
reasonable person would believe that I was not impartial,
and recusal logically follows.” Finally, the order returned
the matter to Chief Judge Korman and stated:

The parties shall notify Chief Judge Korman by
letter whether they consent to further proceed-
ings before a different Magistrate Judge, whether
the matter can be decided on the basis of the cur-
rent submissions without the necessity for addi-
tional argument, and whether. . . sanctions may
be imposed against and [sic] of the defendants.

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The forged Order bore similarities to the June 3 Order:
It had the same caption, final page, and fax header, and
was faxed at the same time of day. The date of the forged
Order appeared to have been changed by hand, and one
part of the text alignment was skewed. The forged Order
also contained information that only someone familiar
with the Ryan Beck lawsuit would know; for example, it
included details of the June 3 Order and contained a
phrase—‘“mixing apples and oranges”—that Davidson
occasionally used during the litigation. Telephone records
produced at trial indicated that at 11:08 a.m. on June 17, a
call lasting several minutes was initiated to Davidson’s fax
machine from Reich’s home using a pre-paid calling card.

Davidson’s secretary found the forged Order in the fax
tray shortly after 11 a.m., and handed it to another lawyer
at Davidson’s firm; that attorney faxed the forged Order to
Davidson, who was at home. In response to the forged
Order, Davidson wrote a letter to the Second Circuit with-
drawing his application for a writ of mandamus, which he
understood the forged Order to render moot. Because the
forged Order purported to enjoin only one of the investor-
defendants from arbitrating, however, Davidson also con-
tacted Chief Judge Korman to inquire how he should
proceed regarding the remaining investor-defendants. In
addition, Davidson circulated the forged Order to various
arbitration panels and attorneys representing Ryan Beck in
other jurisdictions.

Magistrate Judge Mann learned of the forged Order
sometime in the afternoon of June 17 or June 18, when the
attorney for one of the investor-defendants called her
chambers to say he had heard that she had issued a deci-
sion. On June 18, she signed an order stating that the
forged Order was fraudulent, had not been issued by the

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court, and should not be relied on in any manner. See
Order, Rvan Beck v. Fakih, No. 02 Civ. 4052 (E.D.N-Y.
June 23, 2003) (Docket Entry No. 110). She also contacted
the Second Circuit so that it would not rely on the forged
Order for purposes of considering the mandamus applica-
tion, and notified the United States Attorney’s Office for
the Eastern District of New York of the forged Order. The
United States Attorney’s Office referred the matter to the
Federal Bureau of Investigation (“FBI”) for investigation.

Reich’s Pretrial and Trial Statements

After the FBI’s initial investigative efforts yielded phone
records linking Reich’s phone number to the fax transmis-
sion of the forged Order, FBI agents interviewed Reich at
the end of July 2003. Reich denied having any contact with
Davidson on June 17, and denied using prepaid telephone
cards. The agents again spoke to Reich in August, when
they searched his home pursuant to a warrant. Reich stated
that he may have contacted Davidson regarding a confi-
dentiality agreement. When an agent asked Reich why
telephone records would reflect a several-minute connec-
tion between his phone and the Davidson fax machine,
Reich stated that he may have dialed the fax line inadver-
tently and hung up. To explain why such an inadvertent
call would last over three minutes, he stated that his phone
did not always disconnect the line immediately upon hang-
ing up.

The following March, Reich and his attorney met with
the FBI agents for a proffer session. When asked whether
he had called Davidson, Reich reiterated that he had dialed
the Davidson fax by mistake, and again denied owning or
using calling cards, although he said he had purchased one

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for his girlfriend. The agents offered Reich the opportunity
to state that he had sent the forged Order as a “joke.”
According to Reich’s testimony at trial, he responded:
“No, I told them distinctly no matter what, no matter
[what] the consequences ... were to me | said I would
never, never say that. I didn’t do it. As I sit here today,
I will never say that I did something | didn’t do.”

At trial, Reich continued to deny creating the forged
Order. He stated that he had tried to call Davidson’s phone
line to discuss a discovery issue and engage in settlement
discussions, but dialed Davidson’s fax number by mistake
and subsequently hung up. He admitted using a calling
card to make the call, but said he had done so because he
was having trouble with his phone service.

Asked about his fax capabilities, Reich admitted he
owned a fax modem the government had seized during its
search. He was also questioned about whether he owned a
Canon Fax Phone 8, the manual to which had been found
in his home. He admitted he had once owned such a
machine but claimed that he had discarded it several years
earlier.

Fax Testimony at Trial

The government called a fax expert at trial, who testified
that the evidence was consistent with the forged Order
having been faxed from Reich’s home. For example, the
length of the call was consistent with the transmission of a
four-page document, and the fax log records could not
have been generated from an inadvertent phone call
because Davidson’s fax machine, which would have
received the phone call, was designed to terminate such
calls after forty-one seconds. The expert also stated that
because of the page numbering on the forged Order, he

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could tel] that the last three pages of the fax had been
transmitted as a single long sheet. Reich’s fax expert coun-
tered that Reich’s fax modem could not have transmitted
the final three pages as a single sheet, and so could not
have been used to transmit the forged Order found in
Davidson’s fax tray. He admitted, however, that he had not
tested a Canon Fax Phone 8. The government’s rebuttal
witness testified that a Canon Fax Phone 8 could have
transmitted the forged Order.

Character Testimony at Trial

Reich called James Pelzer, Clerk of the Court, New York
State Supreme Court, Appellate Division, Second Depart-
ment, as a character witness. Pelzer testified that he and
others believed Reich to be a person of honesty and
integrity. On cross-examination, the government sought to
ask Pelzer about an incident in which Reich, immediately
after learning that his law partner Steven Schapiro had ter-
minal cancer, allegedly changed the beneficiary of
Schapiro’s life insurance plan from Schapiro’s family to
the partnership without first notifying him as the partner-
ship agreement required. Following an objection by
defense counsel and a discussion outside the jury’s pres-
ence, Judge Garaufis permitted the government to ask the
following question: “[I]f 1 told you that Mr. Reich had
changed the beneficiary of an insurance policy away from
Mr. Schapiro’s family members, designating the law firm
the beneficiary in the event of Mr. Schapiro’s death, with-
out notice to Mr. Schapiro and in violation of the partner-
ship agreement that the two of them had, would that
change your opinion or the opinion of the community ...
with regard to the defendant’s honesty or good character?”
Trial Tr. 847. Pelzer responded that it might.

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When Reich testified ta its own defense, he explained’
that he had notified Schapiro before changing the policy
beneficiary, and that he had done it in order to protect the
firm with regard to money loaned by Schapiro’s mother to
Schapiro, for which the firm was responsible.

Conviction, Sentencing, and Post-Trial Motions

After deliberations on August 25, 2005, the jury returned
a verdict of guilty on all three counts. Reich moved for a
judgment of acquittal and for a new trial pursuant to Fed-
eral Rules of Criminal Procedure 29 and 33, alleging insuf-
ficient evidence to support convictions on any of the three
counts, improper impeachment of a character witness, and
improper rebuttal.” See Reich, 420 F. Supp. 2d at 81. He
also moved for bail pending appeal. Judge Garaufis denied
the motions for a judgment of acquittal and for a new trial,
holding principally that there was sufficient evidence that
Reich sent the forged Order, that he obstructed an official
proceeding within the meaning of § 1512(c)(2), and that he
made a false statement to the FBI. Reich, 420 F. Supp. 2d
at 82-85. Judge Garaufis also denied Reich’s motion for
bail pending appeal, finding that his rulings did not raise
any substantial questions for appeal. /d. at 90-91.

The presentence report prepared by the United States
Probation Department calculated Reich’s combined adjusted
offense level as 18. This included a “special skills enhance-
ment,” see U.S.S.G. § 3B1.3, on all three counts, based on
the Probation Department’s conclusion that Reich’s special
skills as an attorney facilitated his crimes. At sentencing,
Judge Garaufis found the enhancement warranted and

> He subsequently amended those motions, but did not change in

any way their significant underlying bases.

lla

applied it to all three counts. Ile found the Guidelines range
of 27 months to 33 months to be reasonable and sentenced
Reich to 27 months’ imprisonment. This appeal followed.

DISCUSSION

We address each of Reich’s challenges to his conviction
in turn.

I. Obstruction of Justice

Reich challenges as insufficient the evidence supporting
his conviction for obstruction of justice under 18 U.S.C.
§ 1512(c)(2), which subjects to criminal liability one who
“corruptly ... obstructs, influences, or impedes any offi-
cial proceeding, or attempts to do so.” In United States v.
Aguilar, 515 U.S. 593 (1995), the Supreme Court con-
strued the intent element of 18 U.S.C. § 1503, whose rele-
vant language is substantially similar to the relevant
language in 18 U.S.C. § 1512(c)(2),° to include a “nexus
requirement.” /d. at 600 (internal quotation marks omit-
ted); see also United States v. Schwarz, 283 F.3d 76, 108
(2d Cir. 2002). To satisfy this requirement, the defendant’s
conduct must “have a relationship in time, causation, or
logic with the judicial proceedings”; in other words, “the
endeavor must have the natural and probable effect of inter-
fering with the due administration of justice.” Aguilar, 515
U.S. at 599 (internal quotation marks omitted). Reich con-
cedes that the necessary nexus can exist when the discre-

* Section 1503, titled “Influencing or injuring officer or juror gen-

erally.” subjects to criminal liability one who corruptly “endeavors to
influence, intimidate, or impede” an officer or juror or “influences,
obstructs, or impedes, or endeavors to influence, obstruct, or impede,
the due administration of justice.” 18 U.S.C. § 1503(a).

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tionary actions of a third person are required to obstruct
the judicial proceeding, but he alleges that the evidence
adduced at trial failed to establish such a nexus because it
was not foreseeable to Reich that the third party, Davidson,
would act on the forged Order in such a way as to obstruct
the judicial proceeding.

This Circuit has not previously applied Aguilar’s nexus
requirement to § 1512(c)(2). We have, however, applied it
not only to § 1503, see Schwarz, 283 F.3d at 108-09, but
also to 18 U.S.C. § 1505, which subjects to criminal liabil-
ity one who “corruptly . . . influences, obstructs, or impedes
... the due and proper administration of the law under
which any pending proceeding is being had before any
department or agency of the United States,” see United
States v. Quattrone, 441 F.3d 153, 174 (2d Cir. 2006). The
language of § 1505 is even more similar to § 1512(c)(2)
than is § 1503, and given that the parties have not disputed
Aguilar’s application to § 1512(c)(2), there is no reason
not to apply it. See Quattrone, 441 F.3d at 170 n.18 (stat-
ing that the parties had treated §§ 1503 and 1505 “the same
for analytical purposes” and that the court saw “no reason
for taking a different tack” because “[t]he only relevant dis-
tinction between the two statutes—at least in the context of
this case—lies in the attendant circumstances of the obstruc-
tion”). Accordingly, we hold that § 1512(c)(2) incorporates
a “nexus requirement” as articulated in Aguilar.

Reich has failed to show that the evidence was insuffi-
cient to establish a nexus between his actions and obstruc-
tion of the proceeding. See United States v. Matthews, 20
F.3d 538, 548 (2d Cir. 1994) (describing the “heavy bur-
den” on defendants who challenge the sufficiency of evi-
dence). Because the forged Order appeared to render moot
Ryan Beck’s application to the Second Circuit for a writ of

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mandamus, it was foreseeable that upon receiving the
forged Order, Davidson would withdraw the application,
as he in fact did. In addition, because the forged Order
expressly invited the parties to contact Chief Judge Kor-
man regarding further proceedings, it was foreseeable that
Davidson would contact Chief Judge Korman, as he in fact
did. This evidence is clearly sufficient to establish a “rela-
tionship in time, causation, or logic” between Reich’s
transmission of the forged Order and effects on the judicial
proceeding, as Aguilar requires. 515 U.S. at 599. More-
over, that relationship is much closer than those found
insufficient in Aguilar or Schwarz, where the defendants
merely made false statements to agents who might or
might not later testify before a grand jury. See Aguilar, 515
U.S. at 600; Schwarz, 283 F.3d at 109. It is also closer in
time, causation, and logic than the relationship found suf-
ficient in Quattrone, where the defendant sent an email to
his staff endorsing a suggestion to destroy documents that
might eventually be subpoenaed by a grand jury. 441 F.3d
at 166, 172. Here, by contrast, Reich directly injected a
false order into ongoing litigation to which he was a party.
The forged Order purported to enjoin a party from acting
in an arbitration, directed the parties to contact Chief
Judge Korman, and mooted a party’s application before the
Second Circuit, thereby inducing that party to withdraw it.
The effects of the forged Order were more “natural and
probable” than those in Aguilar, Schwarz, or Quattrone.
Reich also claims that no “obstruction” occurred within
the meaning of § 1512(c)(2) because there was no evidence
that “the fairness or outcome of the Ryan Beck lawsuit was
affected in any way.” He observes that unlike the language
of § 1503, which contemplates action affecting the “due
administration of justice,” § 1512(c)(2) contemplates only

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actions affecting “any official proceeding.” This differ-
ence, Reich contends, indicates Congress’s intent not to
criminalize under § 1512(c)(2) actions that impact the
administration of justice but that do not “actually” affect
the outcome of the official proceedings. This interpreta-
tion, however, is inconsistent with the plain language of
the statute, which encompasses all actions that “corruptly
... influence[]” a proceeding—or even attempt to do so—
not merely those that affect its ultimate outcome. More-
over, the injection of the forged Order into the Ryan Beck
lawsuit at the very least “influence[d]” the proceedings, in
that it caused a litigant to withdraw a filing and contact a
judge, and caused Magistrate Judge Mann to issue an order
explaining the falsity of the forged Order and to convene a
status conference to discuss it.

Il. Forgery of a Judge’s Signature

Reich claims the district court erred in failing to instruct
the jury that the forgery count under 18 U.S.C. § 505
requires proof of intent to defraud. Acknowledging that
§ 505, which makes it a crime to “forge[] the signature of
any judge ... of any court of the United States ... or
forge[] or counterfeit[] the seal of any such court, or know-
ingly concur[] in using any such forged or counterfeit sig-
nature or seal, for the purpose of authenticating any
proceeding or document,” does not on its face require an
“intent to defraud,” Reich nonetheless argues that we
should find such a requirement because it is an element of
common-law forgery, and the common law should inform
our interpretation of federal criminal statutes.

Whether § 505 requires an intent to defraud is an issue
of first impression for this Court, but two other circuits
have addressed it. In 1931, the Sixth Circuit endorsed the

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view Reich now advances, holding that Congress intended
§ 505 to include the common-law element of intent to
defraud. Levinson v. United States, 47 F.2d 470, 471 (6th
Cir. 1931);’ see also United States v. Bertrand, 596 F.2d
150, 152 (6th Cir. 1979) (referring to Levinson and finding
that the appeal was governed by stare decisis). The Tenth
Circuit, however, drew the opposite conclusion.® United
States v. Cowan, 116 F.3d 1360, 1361 (10th Cir. 1997). We
now join the Tenth Circuit in holding that § 505 does not
require an intent to defraud.

In interpreting a statute, “[wJe start, as always, with the
language of the statute.” Williams v. Taylor, 529 U.S. 420,
431 (2000). The text of § 505 contains no intent-to-defraud
element; “{t]o the contrary, §505’s plain language only

requires that a defendant . . . knowingly forge the signature
of a federal judge ‘for the purpose of authenticating any
proceeding or document.’” Cowan, 116 F.3d at 1362 (quot-
ing 18 U.S.C. § 505).

7 The version of 18 U.S.C. § 505 analyzed in Levinson was part of
a predecessor statute to the current § 505, which was enacted in 1948,
see Pub. L. No. 80-772, 62 Stat. 683 (1948), but the relevant language

is identical.

S Reich claims that two additional Circuits have joined the Sixth

in holding that § 505 requires an intent to defraud, but neither of the
cases he cites actually reached that question. See United States v. Lon-
don, 714 F.2d 1558, 1563-64 (11th Cir. 1983) (looking to the scope of
common law forgery for the unrelated purpose of shedding hght on
whether passing off a photocopy of a judge’s signature as an original
fell within the ambit of § 505, but not addressing the question of intent
to defraud, which was not before the court); United States v. Dver, 546
F.2d 1313, 1316 (7th Cir. 1976) (expressly declining to reach the ques-
tion of whether § 505 required an intent to defraud because the court
below erred in failing to find an unrelated “essential element,” though
suggesting in dictum that “much could be said for” the view that § 505
did require an intent to defraud).

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It is true that courts frequently construe an undefined
statutory term in a federal criminal statute to carry its com-
mon-law meaning, see United States v. Turley, 352 U.S.
407, 411 (1957), and that the common-law crime of for-
gery required an intent to defraud, see generally Moskal v.
United States, 498 U.S. 103, 121-28 (1990) (Scalia, J., dis-
senting). But it is also well-established that courts should
not assign a common-law meaning to a statutory term
“when that meaning is ... inconsistent with the statute’s
purpose.” Zaylor v. United States, 495 U.S. 575, 594-95
(1990); see also Moskal, 498 U.S. at 117 (“Congress’ gen-
eral purpose in enacting a law may prevail over th[e] rule
of statutory construction” that terms be given their com-
mon-law meanings.). Here, we agree with the Tenth Cir-
cuit that to import the common-law element of intent to
defraud into § 505 would thwart Congress’s goal in enact-
ing the provision. See Cowan, 116 F.3d at 1363.

Historically, the term “to defraud” has “refer{red] to
“wronging one in his property rights by dishonest methods
or schemes,’ and ‘usually signif[ied] the deprivation of
something of value by trick, deceit, chicane or overreach-
ing.’” McNally v. United States, 483 U.S. 350, 358 (1987)
(quoting Hammerschmidt v. United States, 265 U.S. 182,
188 (1924)). By contrast, § 505 is concerned not with pro-
tecting private parties from financial loss, but with pro-
tecting the integrity of a government function—namely,
federal judicial proceedings. “In considering a statute
enacted for the protection of the government,” we need not
interpret a term “from the same standpoint from which the
question would be considered if the word . .. were used in
a State statute enacted for the protection of ordinary prop-
erty rights of individuals .. . [because] in the one instance
the statute in its ordinary acceptation has reference to

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property and property rights alone, while in the other it has
reference to a broader purpose, that of protecting the gov-
ernment in its administration under the law... .” Curley v.
United States, 130 F. 1, 8 (1st Cir. 1904) (finding that a
statute penalizing conspiracies to “defraud” the United
States encompassed conspiracies not aimed at property
interests); see also McNally, 483 U.S. at 359 & n.8 (citing
Curley with approval). When an individual forges a
judge’s signature in order to pass off a false document as
an authentic one issued by the courts of the United States,
such conduct implicates the interests protected by § 505
whether or not the actor intends to deprive another of
money or property. To construe § 505 to proscribe such
conduct is “true to both its text and purpose.” Cowan, 116
F.3d at 1363.9

A survey of the counterfeiting and forgery provisions of
Title 18, Chapter 25, in which § 505 appears, supports this
interpretation. The current §505 was enacted in 1948
along with the bulk of the other provisions appearing in
Chapter 25. See Pub. L. No. 80-772, 62 Stat. 683 (1948)
(the “1948 Act’). Of those provisions, some very clearly
require an intent to defraud, see, e.g., 18 U.S.C. § 471
(prohibiting forgery of federal obligations and sccurities
with “intent to defraud”); 18 U.S.C. § 478 (prohibiting for-
gery of foreign obligations and securities “with intent to
defraud”); 18 U.S.C. § 482 (prohibiting forgery of foreign
bank notes “with intent to defraud”), while others do not
contain such a requirement, see, e.g., 18 U.S.C. § 493 (pro-
hibiting forgery of writings issued by certain federal lend-
ing agencies); 18 U.S.C. § 496 (prohibiting forgery of

9 We note, as did the Tenth Circuit. that there is “[n]o elucidating

legislative history” of § 505, making us even more “hesitant to stray
from the plain language of the statute.” Cowan, 116 F.3d at 1363.

18a

documents pertaining to imports and customs duties), and
still others enumerate several crimes, only one or some of
which require an intent to defraud, see, e.g., 18 U.S.C.
§ 506 (prohibiting, without mention of intent to defraud, the
“false[] mak[ing], forge[ry], counterfeit[ing}], mutilat[ion],
or alter[ation]” of the seal of any U.S. department or agency,
but prohibiting the possession, sale, or other transfer of
such fraudulent seal only with “fraudulent intent”).!° This
variation strongly suggests that Congress deliberately
chose to require an intent to defraud for some forgery and
counterfeiting crimes, but not for others. Cf Whitfield v.
United States, 543 U.S. 209, 216 (2005) (stating that Con-
gress’s inclusion of an express overt-act requirement in
many conspiracy statutes, but not the one considered by
the Court, “clearly demonstrat{[ed] that it knows how to
impose such a requirement when it wishes to do so”).

We also note that of the provisions originally enacted in
the 1948 Act, those requiring an intent to defraud were
generally oriented toward a different purpose than those
not requiring such an element. Provisions in the first cate-
gory frequently criminalized forgeries and counterfeits
likely to be used to defraud private citizens out of their
money or property—for example, the forgery of U.S. and
foreign obligations and securities, 18 U.S.C. §§ 471, 478.
Those in the second category, meanwhile—like § 505—
criminalized activities likely to impugn the reputation or
integrity of the federal government regardless of whether

10

Stull other provisions contain other intent requirements. See,
e.g., 18 U.S.C. § 473 (prohibiting dealing in counterfeit obligations or
securities when the actor has “the intent that the same be passed, pub-
lished, or used as true and genuine”); 18 U.S.C. § 474 (prohibiting pos-
session of plates or stones used for printing U.S. securities with “intent
to use such plate, stone, or other thing . . . in forging or counterfeit-
ing”).

19a

the perpetrator intended to defraud private citizens. See,
e.g., 18 U.S.C. § 497 (prohibiting forgery of letters patent);
18 U.S.C. § 498 (prohibiting forgery of military discharge
papers); 18 U.S.C. § 506 (prohibiting forgery of the seal of
any U.S. department or agency). In those provisions enu-
merating separate but related crimes and assigning differ-
ent intent requirements to each, those crimes most likely to
defraud private citizens were the ones containing an intent-
to-defraud element. See, e.g., 18 U.S.C. § 485 (requiring
an “intent to defraud” to “pass//, utter[], publish[{], [or]
sell[]” counterfeit coins or bars, but not to “falsely make[/,
forge[], or counterfeit{]” such coins or bars (emphasis
added)); 18 U.S.C. § 507 (prohibiting the forgery of ship’s
papers without an intent to defraud, but prohibiting the
“utter[ing], publish[ing], or pass[ing]” of such papers only
with “intent to defraud”). Section 505’s prohibition on forg-
ing a judge’s signature, which is concerned with preserving
the integrity of the courts, falls logically into the category of
crimes Congress intended to penalize even when the actor did
not intend to deprive others of money or property. In light of
this meaningful variation, we decline to read into § 505 an
intent-to-defraud element Congress chose to omit.

In sum, like the Tenth Circuit, we hold that engrafting an
intent-to-defraud element onto § 505 would not effectuate
Congress’s intent, and we find no crror in the district
court’s jury instruction on the §505 count omitting an
intent-to-defraud requirement.

As an additional matter, Reich claims that there was
insufficient evidence to demonstrate that he personally
forged Magistrate Judge Mann’s signature. Now conceding
that there was evidence that the forged Order was faxed
from his home, Reich argues that this could at most show
that he “knowingly concur[red]” in the forgery, which,

20a

though also prohibited under § 505, is not the crime with
which the government charged him. There was ample evi-
dence presented at trial, however, that Reich himself
forged the Order. For example, the government presented
evidence that the author of the forged Order was intimately
familiar with the Ryan Beck lawsuit and that the forged
Order was faxed from Reich’s residence. It is well-estab-
lished that in considering a defendant’s challenge to his
conviction based on insufficiency of the evidence, “the
evidence [must] be viewed in the light most favorable to
the government and all permissible inferences drawn in its
favor,” and that so long as “the evidence, thus construed,
suffices to convince any rational trier of fact of the defen-
dant’s guilt beyond a reasonable doubt,” the conviction
must stand even if the government’s case has not
“exclude[d] every possible hypothesis of innocence.”
United States v. Martinez, 54 F.3d 1040, 1042-43 (2d Cir.
1995) (internal citations and quotation marks omitted).

I11. Other Claims
A. Impeachment of Character Witness

Reich claims that the district court erred in permitting
the government to cross-examine his character witness,
James Pelzer, regarding Reich’s having changed the bene-
ficiary of his law partner’s life insurance policy in viola-
tion of the partnership agreement.'! In particular, Reich

'! The Federal Rules of Evidence state that “[{e]vidence of a perti-

nent trait of character offered by an accused, or by the prosecution to
rebut the same” is admissible, Fed. R. Evid. 404(a)(1), and may be
made by “testimony as to reputation or . . . in the form of an opinion,”
Fed. R. Evid. 405(a). On cross-examination regarding reputation or
opinion, “inquiry is allowable into relevant specific instances of con-
duct.” /d.

2la

cites United States v. Monteleone, 77 F.3d 1086, 1089-90
(8th Cir. 1996), for the proposition that the life insurance
incident was “private in nature and not likely to have been
known in the community at large,” and thus was imper-
missible “‘specific act’ cross-examination.” We review the
district court’s decision to allow the question for abuse of
discretion, United States v. Damblu, 134 F.3d 490, 494 (2d
Cir. 1998), bearing in mind that “[o]nce a defendant offers
character testimony, the prosecution is afforded substantial
latitude to rebut such evidence,” United States v. Russo,
110 F.3d 948, 952 (2d Cir. 1997).

At the outset, we note that Monteleone, an Eighth Cir-
cuit case, is not binding in this Circuit. Even if it were,
however, we would find that it does not render the district
court’s decision to permit the cross-examination an abuse
of discretion. First, in Monteleone, the conduct in ques-
tion—perjury before a grand jury—was “not likely to have
been known in the community at large” only because it
was “protected by an obligation of secrecy,” and so “the
only legitimate source of any rumors pertaining to Mon-
teleone’s [conduct] would have been Monteleone himself.”
Monteleone, 77 F.3d at 1090. In contrast, Reich’s conduct
with respect to the life insurance policy was not legally
protected as a secret and was in fact known to a number of
others besides Reich himself, including his partner’s fam-
ily and attorneys involved in dissolving the partnership.
Second, the Eighth Circuit has clarified that Monteleone
applies to reputation witnesses but not to opinion wit-
nesses, because “[a] specific instance of misconduct, even
if not of the kind generally known in the community,
would be relevant to the witness’s own opinion.” United
States v. Bruguier, 161 F.3d 1145, 1150 (8th Cir. 1998); see
also United States v. Birney, 686 F.2d 102, 108 (2d Cir.

22a

1982) (upholding trial court’s admission of cross-examina-
tion question as to whether certain nondisclosures by the
defendant in loan applications would affect the witness’s
opinion of the defendant’s character). Pelzer, who testified
both about his own impressions of Reich and those of the
community, served as both a reputation and an opinion
witness. Accordingly, because the question to which Reich
objects was directed at least in part to his opinion testi-
mony, it was proper regardless of whether it was generally
known in the community. See Trial Tr. 847 (“[I]f I told you
that Mr. Reich had changed the beneficiary of an insurance
policy ... would that change your opinion or the opinion
of the community ... with regard to the defendant’s hon-
esty or good character?” (emphasis added)). We also reject
Reich’s challenge that the cross-examination was uncon-
stitutional because it “forced” or “compelled” him to tes-
tify. The questioning may have affected his trial strategy,
but it certainly did not force him to testify.'?

B. False Statement Charge

Reich argues that the evidence adduced at trial was
insufficient to prove “the precise allegation in the indict-
ment” with respect to the false statement charge, which
alleged specifically that on March 4, 2004, Reich told the
FBI agents that the forged Order had not been faxed from
his home. Reich contends that the agents testified at trial
only that Reich had not admitted faxing the Order, not that
he denied faxing it. The former is not “an express denial,”
he claims; rather, it ts merely a “lack of forthrightness.”
Because the indictment charged him with an express

'2 On appeal, Reich did not challenge the form of the question

posed to his character witness, which took the form of a hypothetical.

23a

denial, Reich argues, finding him guilty based on a lack of
forthrightness would constitute a constructive amendment
of the indictment.

As the district court found, however, Reich’s argument
is “contrary to the facts.” Reich, 420 F. Supp. 2d at 85. One
of the agents testified that when confronted with the phone
records, Reich stated that he had called the Davidson fax
machine by mistake when trying to reach Davidson about
a deposition. Moreover, Reich himself testified that, when
asked if he would admit sending the forged Order in order
to avoid prosecution, he said: “No, I told them distinctly
no matter what, no matter [what] the consequences ...
were to me I said I would never, never say that. I didn’t do
it. As [I] sit here today, I will never say that I did some-
thing I didn’t do.” Trial Tr. 896. This testimony would
have permitted a rational juror to find that Reich denied
having sent the forged Order. Thus, unlike the defendant in
Bronston v. United States, 409 U.S. 352 (1973), a perjury
case Reich cites as analogous, Reich was not convicted
based on a response that was “literally true” but “arguably
misleading.” /d. at 353, 362 (finding that the perjury
statute did not criminalize the making of such statements).

C. Special Skills Enhancement

Finally, Reich argues that the district court improperly
applied a two-level special skills sentence enhancement,
see U.S.S.G. §3B1.3, to his convictions on the counts of
obstruction of justice (“Count One”) and making a false
statement to a federal officer (“Count Three’’). The special
skills enhancement provides for a two-level increase in the
Guidelines range whenever a defendant used a special skill
“in a manner that significantly facilitated the commission
or concealment of the offense.” /d.; see also id. cmt. n.4

24a

(naming “lawyers” as an example of individuals possess-
ing special skills). Reich does not challenge the enhance-
ment’s application to the count of forgery (“Count Two”).
He contends, however, that his special skills did not “sig-
nificantly facilitate[]” either of the other counts.

First, Reich claims that the “sole basis” for the obstruc-
tion of justice charge was faxing the forged Order, and that
his legal skills and training did not facilitate his use of the
fax machine. The district court’s “determination of
whether a defendant utilized a . . . special skill in a manner
that significantly facilitated the commission ... of the
offense is a question of fact reviewed for clear error.”
United States v. Thorn, 446 F.3d 378, 388 (2d Cir. 2006).
Count One of the indictment charged Reich broadly with
“knowingly, intentionally and corruptly obstruct[ing],
influenc[ing] and imped[ing] an official proceeding.” This
necessarily included the creation of the forged Order, with-
out which the obstruction, influencing, or impeding of the
judicial proceeding would have been impossible. Because
Reich used his special skills as a lawyer to create the
forged Order, it was not clear error for the district court to
apply the enhancement to Count One.

Because we affirm the district court’s application of the
enhancement to Count One, we need not resolve Reich’s
challenge to the application to Count Three because the
three counts of conviction were grouped pursuant to sec-
tion 3D1.2(c) of the Guidelines. The offense level for the
grouped counts was determined by reference to “the high-
est offense level of the counts tn the Group,” U.S.S.G
§ 3D1.3(a), which was level 18 for Count One. Thus'‘the
decision to apply the enhancement to Count Three had no
effect on Reich’s sentencing. See United States v. Richards,
302 F.3d 58, 72 (2d Cir. 2002) (finding “no persuasive

25a

grounds for a sentencing remand” when a defendant’s chal-
lenge to one aspect of his sentence, even if successful,
“would have no effect” on his term of imprisonment).

CONCLUSION

For the foregoing reasons, we find that (1) 18 U.S.C.
§ 1512(c) requires a nexus between a defendant’s conduct
and the effect on the judicial proceeding, as described in
United States v. Aguilar, 515 U.S. 593 (1995), and that the
trial evidence in this case was sufficient to establish such
a nexus; (2) 18 U.S.C. § 505, criminalizing the forgery of
a judge’s signature, does not require an intent to defraud,
and the evidence was sufficient to support Reich’s convic-
tion under the statute; (3) the district court did not abuse
its discretion in permitting the government to cross-exam-
ine Reich’s character witness regarding Reich’s change to
his law partner’s life insurance policy because character
witness was an opinion witness as well as a reputation wit-
ness; (4) the evidence was sufficient to establish that Reich
personally created the forged Order; and (5) the district
court’s application of a special skills enhancement to
Reich’s conviction under 18 U.S.C. § 1512(c), after con-
cluding that his skills as a lawyer facilitated the underlying
conduct, was not clearly erroneous, and the enhancement
was therefore proper. The judgment of conviction is
AFFIRMED.

26a

APPENDIX B

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK

04-Cr.-587(NGG)

UNITED STATES OF AMERICA

—against—

PERRY REICH,
Defendant.

MEMORANDUM AND ORDER

GARAUFIS, United States District Judge

A jury found the Defendant Perry Reich (“Reich” or
“Defendant”) guilty of forgery of a judge’s signature, of
corruptly obstructing a judicial proceeding, and of making
willfully false statements to Federal Bureau of
Investigation (“FBI”) agents. The Defendant now moves
for a judgment of acquittal or, in the alternative, a new
trial, pursuant to Rules 29(c) and 33 of the Federal Rules
of Criminal Procedure, respectively, for bail pending
appeal, and to modify the trial transcript. For the reasons
stated below, the Defendants’ motions are DENIED,
except for the application to modify the transcript, which
is GRANTED in part and DENIED in part.

27a
I. FACTUAL BACKGROUND

Because the questions raised by Defendant in his post-
trial motions require this court to look at the entire trial
record, what follows is a detailed examination of the evi-
dence presented at trial. Reich’s convictions arise from a
forged judicial order in Ryan, Beck & Co. v. Fakih, No. 02
Civ. 4052 (E.D.N.Y.) (Mann, J.) (“the Ryan Beck law-
suit”). Prior to the lawsuit, Reich, who held an account
with Gruntal & Co. (“Gruntal”), a brokerage firm, filed an
arbitration claim against Gruntal claiming a mishandling
of his account, and then amended his claim to include
Ryan Beck & Co. (“Ryan Beck”), another brokerage firm,
after Ryan Beck purchased the assets of Gruntal. (Trial
Transcript (“Tr.”) 328-32.) In the Ryan Beck lawsuit,

plaintiff Ryan Beck sought to enjoin investors, including
Reich, from arbitrating these claims against it. (/d.)

A. Evidence Adduced at Trial

On June 17, 2003, at approximately 11:10 a.m., the law
offices of Joel Davidson (“the Davidson firm”), the repre-
sentative of Ryan Beck in the lawsuit, received by facsimile
transmission a document that purported to be an order (“the
forged Order”), dated June 17, 2003, issued by Magistrate
Judge Roanne L. Mann, who was assigned to the Ryan Beck
lawsuit. (Tr. 532-33; Gov. Ex. 1.) The forged Order recalled
and vacated a previous order, dated June 3, 2003, denied a
preiiminary injunction, enjoined the parties from proceed-
ing with an arbitration hearing and recused Judge Mann
from further proceedings in the case. (Gov. Ex. 1.)

The forged Order was transmitted as a four page docu-
ment, including a cover letter and three page Memorandum
and Order. (Gov. Ex. 1.) The forged Order has Judge

28a

Mann’s fax header and her signature, and the cover page
appears to be from the Eastern District of New York, with
Judge Mann’s address and telephone number. (/d.) How-
ever, the forged Order appears to have been fashioned
from the June 3, 2003 Order, which has the same caption
and same third page. (Tr. 532-33; Gov. Ex. 24; compare
Gov. Ex. | with Ex. 31.) The date of the cover page, the fax
header, and the forged Order appear to have been changed
by hand, and the text of the forged Order is skewed. (Tr.
533; Gov. Ex. 1.) As explained in the expert testimony pre-
sented at trial, on the first page of the document “P 01” is
printed upside-down at the bottom of the page, on the sec-
ond page of the document “P 02” appears upside-down at
the bottom of the page, the third page of the document
states above the header “Extended Page 2.1,” and on the
last page of the document is printed upside-down at the
bottom of the page, “Extended Page 2.2.” (Gov. Ex. 1, 4.)

Phone records of Reich’s home and the Davidson firm
fax machine indicate that at 11:08 a.m., a call was initiated
to the Davidson firm fax machine from a pre-paid AT&T
calling card purchased by Reich. (Gov. Exs. 2, 35, 37.)
Maureen Vollers, the secretary of Joel Davidson, who is
counsel to Ryan Beck, testified that she found the forged
Order on the Davidson firm fax machine tray shortly after
11:00 a.m. (Tr. 102-03, 129, 170.) Vollers and Naomi
Weinberg, an associate at the Davidson firm, testified that
Vollers handed Weinberg the forged Order between 11:15
and 11:20 a.m. (Tr. 104-105, 187.) Ms. Weinberg testified
that she maintained control of the forged Order until she
had it faxed to Joel Davidson at his home at approximately
12:30 p.m. (Tr. 183-90.) Joel Davidson testified that Reich
was the only person with any relationship to the Ryan

29a

Beck lawsuit who sent a facsimile transmission to that
machine that day. (Tr. 358-60.)

In response to the forged Order, the Davidson firm with-
drew its June 9, 2003 application for a writ of mandamus
from the Second Circuit that it filed in response to Judge
Mann’s previous (and still controlling) June 3, 2003 Order.
(Tr. 363-64.) Mr. Davidson contacted Judge Korman, the
district court judge assigned to the case, to request that an
order be entered applying the rulings in the forged Order to
all other former investors in the Ryan Beck lawsuit. (Tr.
361.) Judge Mann then communicated in an order that the
forged Order was not issued by her. She held a status con-
ference in which she discussed the forged Order, and con-
tacted the Second Circuit to inform it that the forged Order
should not be relied on in deciding the writ of mandamus.
(Tr. 536-38, 547-48; Gov. Ex. 24.) Judge Mann’s law
clerk, John Marco, testified that the forged Order substan-
tially complicated the proceedings. (Tr. 547-48.)

B. Reich Pretrial Statements and Trial Testimony

Reich made four separate statements denying his
involvement in the creation and transmission of the forged
Order. Federal Bureau of Investigations (FBI) Special
Agent Richard Wilfling testified that he and agent Robert
Katzman interviewed Reich on July 31, 2003 (“July 31
interview’), in which Reich denied using pre-paid tele-
phone cards, and could not recall having any interaction
with Joel Davidson. (Tr. 576-77, 581.) He testified that he
interviewed Reich again on August I1, 2003 (“August 11
interview’), during an FBI search of Reich’s home, in
which Reich admitted to contacting Joel Davidson regard-
ing a confidentiality agreement that Reich may have faxed.

30a

(Tr. 590-91.) Confronted with telephone records showing a
connection for over three minutes on July 11, 2003 between
his residence and the Davidson fax machine, agent Wil-
fling testified that Reich explained that he may have inad-
vertently called the Davidson firm fax machine and
disconnected, and that the call lasted over three minutes
because his telephone does not always disconnect after
hanging up. (Tr. 591.)

Agent Wilfling further testified that on March 3, 2004,
he, agent Katzman, a government prosecutor, and Reich
and his counsel met in the United States Attorney’s Office
for a proffer session (“March 3 proffer session”). At that
session, agent Wilfling testified that Reich denied owning
or using an AT&T calling card, but said that he purchased
a prepaid calling card for his girlfriend in 2002. (Tr. 599.)
According to agent Wilfling, Reich reiterated that he had
been trying to reach Joel Davidson, but that he acciden-
tally dialed the Davidson firm fax machine, and that his
telephone sometimes did not disconnect after a call ends.
(Tr. 600-01.)

At trial, Reich denied that he created or sent the forged
Order, but admitted that he called the Davidson firm fax
machine number on June 17, 2003, at the time in question.
(Tr. 886-87, 894, 896.) However, Reich testified that he
did not intend to send a facsimile transmission, but rather
had wanted to speak with Joel Davidson to resolve a dis-
covery issue and engage in settlement discussions with the
Davidson firm. (Tr. 885.) Reich explained that he dialed
the fax number because he confused the Davidson fax and
phone numbers from the Davidson firm letter head. (Tr.
887). He also testified that he used an AT&T calling card
to make the call because he was having trouble connecting
telephone calls with his Verizon account. (Tr. 886.) Lastly,

31a

Reich testified that he did not actually connect with the
Davidson firm, and he suggested that the telephone records
showed a long communication because his computer fax
modem sometimes engages his telephone line and causes
the line to remain connected after the call has ended. (Tr.
887-88.)

Regarding his capability of sending the forged Order, at
trial Reich admitted that he owned a fax modem that was
seized by the government, and testified that at one time he
owned a Canon Fax Phone 8, but he explained that he dis-
carded the machine in 2000. (Tr. 892-93, 949.)

C. Expert Testimony Regarding Facsimile Transmission
of Forged Order

Cameron Smith, an expert on the Hewlett Packard (“HP”)
LaserJet 3100 and fax machines generally, testified for the
government regarding the facsimile transmission of the
forged Order. Smith testified that the Davidson firm fax
machine is an HP LaserJet 3100, and that its transmission
log for June 17, 2003 indicates that at 11:10 a.m., the
machine received a three minute, eighteen second, facsim-
ile transmission from a fax machine that had no identifica-
tion field to identify the sender at 9600 bits per second
(“bps”) that completed successfully. (Gov. Ex. 2; Tr. 424-
25.) Smith also testified that the length of this transmission
is consistent with a facsimile transmission of a four page
document, such as the forged Order, sent at 9600 bps. (Tr.
456, 472.)

Smith testified that the call from Reich’s home must
have sent a fax transmission, because the Davidson firm
fax machine automatically terminates calls without a fax
signal within 41 seconds. (Tr. 406, 410, 413, 454-55.) He
explained that the HP LaserJet 3100 changes the scale of

32a

the images sent to fit on the page. When the HP LaserJet
3100 cannot fit an image on a single page, it prints
“Extended Page” on each additional page that the image
requires. Thus, if a page is sent to the HP LaserJet 3100
that is 33 inches in length, the HP LaserJet 3100 prints on
the first page the page number, “X,” on second page
“Extended Page X.1,” and on third page “Extended Page
X.2.” (Tr. 457-59.)

Smith testified that at the government’s request, he
tested the “Extended Page” function by sending facsimile
transmissions to the HP LaserJet 3100 of one regular page
followed by one 44-inch long page.! Based on this testing,
Smith determined that if the last three pages of a four page
transmission to the HP LaserJet 3100 were attached together
(thereby constituting one extra-long page), the HP LaserJet
3100 would print the image in four pages, printing “Page
2” on the second page, “Extended Page 2.1,” on the third
page and “Extended Page 2.2,” on the fourth page, and
indicate a two page fax in the transmission log. (Tr. 460-
68, Gov. Exs. 75, 76.) Smith testified that the “Extended
Page” prints in the forged Order were generated by the HP
LaserJet 3100, and that the “P01” on the cover page was
not generated by the HP LaserJet 3100. (Tr. 470-71.)

The defense produced Mark Alcock, a forensics expert
witness. (Tr. 983-86.) Alcock testified that his examination
of the computers seized by the FBI showed that they did
not create the forged Order, and that Reich’s computer fax

l

Smith’s tests used two different types of elongated paper: three
pages of “tractor feed paper,” paper with perforated edges and holes on the
sides to accommodate the sprockets on a tractor feed printer, with the per-
forated edges torn off. and one specially made page 44 inches in length.
(Tr. 463.) However, Smith testified that three partially overlapped regular
sheets of paper would have had the same result. (/d.)

33a

modem could not have sent it. (Tr. 997-99.) He disputed
the reliability of Smith’s tests of the “Extended Page”
function on the HP LaserJet 3100, explaining that after try-
ing twice to send multiple pages that were taped together,
he jammed his machine. (Tr. 1000-01.) Alcock also testi-
fied that the “Extended Page” function could not have been
triggered by a facsimile transmission sent by a fax modem
and a flatbed scanner, as Reich alleged to have used in his
home to fax. (Tr. 1002-03.) Alcock challenged the authen-
ticity of the Government’s exhibits. He asserted that the
degraded quality of the header in the forged Order demon-
strated that it was never originally sent as a facsimile
transmission (Tr. 1023-27), and that ‘the Davidson firm fax
machine transmission log could have been replicated on
Microsoft Word. (Tr. 1029-31.) Alcock also found plausi-
ble Reich’s testimony that his fax modem could have
“jatched” onto the Davidson firm fax machine and pro-
longed the call after Reich had hung up. (Tr. 1038-39.)

Alcock admitted that he has never used a Canon Fax
Phone 8, and that he did not test whether a Canon Fax
Phone 8 could have transmitted the forged Order. He con-
firmed that the service manual states that one model of the
Canon Fax Phone 8 faxes at 9600 bps. (Tr. 1001-02, 1039,
1114.) On cross examination, Alcock admitted that he is
not an expert in the extended page feature of the HP Laser-
Jet 3100. (Tr. 1069-78.) Alcock further admitted that his
conclusion that the forged Order did not originate as a fax
was based on assumptions about the magnification and res-
olution of the copy and the fax header of the copy. (Tr.
1143-49.)

As a rebuttal witness to Alcock, the government pro-
duced Yogeshwar Burchell. an expert in the operation of
the Canon Fax Phone 8. Burchell testified that the Canon

34a

service manual seized in Reich’s home was most likely of
the 9600 bps model (Tr. 1214), and that the Canon Fax
Phone 8 does not transmit a header. (Tr. 1215-16.)

C. Relevant Pre- and Post-Trial Motions

Before the trial, the Defendant moved in limine to pre-
vent the government from introducing the forged Order,
arguing that the government had failed to established its
authenticity. (United States v. Reich, slip op., dated June
10, 2005, at 4.) I ruled that a reasonable juror could find
the forged Order to be authentic based on the testimony of
Davidson firm employees Weinberg and Vollers, despite
the testimony of expert witness Alcock, and denied the
Defendant’s motion in limine to exclude the document pur-
suant to Federal Rule of Evidence 901(a). (/d. at 7.) At
trial, the Defendant sought a dismissal of the charges on
the basis that Alcock established that the forged Order was
not sent as a facsimile transmission from Reich’s home to
the Davidson firm fax machine. (Tr. 1226-35.) I denied
that motion from the bench. (Tr. 1235.)

After deliberations on August 25, 2005, the jury con-
victed Reich of (1) forgery of a judge’s signature in the
forged Order; (2) obstruction of justice for his role in inter-
fering with the Ryan Beck lawsuit; and (3) making false
representations to FBI agents at the March 3 proffer ses-
sion.

On September 17, 2005, Defendant moved for a judg-
ment of acquittal or for a new trial pursuant to Federal
Rules of Criminal Procedure 29 and 33, based on insuffi-
cient evidence, improper impeachment of a character wit-
ness, and improper rebuttal. Reich also moved for a
post-trial Franks hearing. (See Def’s Mem. Supp. Pre-Trial
Mot.) Defendant supplanted this motion on November 30,

35a

2005, withdrawing his Rule 29 bases of improper charac-
ter impeachment and improper rebuttal, and his application
for a post-trial Franks hearing, and adding as new grounds
for his Rule 33 motion that the uncontradicted portions of
Alcock’s testimony warrant a new trial. (Def’s Ltr. Br.,
dated Nov. 30, 2005, at 1-7.) Defendant also applied for
several changes to the transcript, and for bail pending
appeal. (Def’s Ltr. Br., dated Nov. 30, 2005, at 7.)

Il. STANDARD OF REVIEW
A. Rule 29

The defendant “bears a heavy burden” on a Rule 29
claim as the court “must credit every inference that the
jury may have drawn in favor of the government.” United
States v. Finley, 245 F.3d 199, 202-3 (2d Cir. 2001) (inter-
nal quotation and citation omitted). “The jury’s verdict
must be sustained, if any rational trier of fact could have
found the essential elements of the crime beyond a reason-
able doubt.” /d. (emphasis in original). In reviewing the
sufficiency of evidence underlying a conviction, the court
is reminded that it is the jury’s duty alone to make infer-
ences from the evidence. See e.g., United States v. Jackson,
335 F.3d 170, 180 (2d Cir. 2003). Where “either of the two
results, a reasonable doubt or no reasonable doubt, is fairly
possible, the court must let the jury decide the matter.”
United States v. Autuori, 212 F.3d 105, 114 (2d Cir. 2000).
In short, as the Second Circuit has put it: “the court may
enter a judgment of acquittal only if the evidence that the
defendant committed the crime alleged is nonexistent or so
meager that no reasonable jury could find guilt beyond a
reasonable doubt.” United States v. Guadagna, 183 F.3d
122, 130 (2d Cir. 1999) (internal quotation and citation
omitted).

36a
B. Rule 33

Federal Rule of Criminal Procedure 33 provides that,
“({ujpon the defendant’s motion the court may vacate any
judgment and grant a new trial if the interest of justice so
requires.” Fed. R. Crim. P. 33. “The ultimate test on a Rule
33 motion is whether letting a guilty verdict stand would
be a manifest injustice.” United States v. Ferguson, 246
F.3d 129, 134 (2d Cir. 1997). The Second Circuit has
stated that a district court should exercise such authority
only “in the most extraordinary circumstances.” United
States v. Locascio, 6 F.3d 924, 949 (2d Cir.1993). “Although
a trial court has broader discretion to grant a new trial pur-
suant to Rule 33 than to grant a motion for a judgment of
acquittal pursuant to Fed. R. Crim. P. 29, where the truth
of the prosecution’s evidence must be assumed, that dis-
cretion should be exercised sparingly.” United States v.
Sanchez, 969 F.2d 1409, 1414 (2d Cir. 1992) (internal cita-
tion omitted).

Ili. DISCUSSION

In this post-trial motion, Defendant argues that a Rule
29 judgment of acquittal is warranted because the evidence
adduced at trial was insufficient to convict him on any of
the three counts, and that in the alternative this court
should grant a new trial pursuant to Rule 33 because the
government failed to rebut Alcock’s expert opinion that the
forged Order was never sent by facsimile transmission to
the Davidson firm fax machine, and the verdict ts therefore
against the weight of the evidence. Both these arguments
lack merit.

37a

A. Defendant’s Rule 29 Motion for Judgment of
Acquittal

Defendant contends that a judgment of acquittal is war-
ranted because there was insufficient evidence to support
his convictions. I will proceed to examine all three counts
under a Rule 29 sufficiency of the evidence standard.

1. Sending of The Forged Order

Defendant was convicted of having knowingly forged
the signature of Magistrate Judge Mann for the purpose of
authenticating the forged Order. (Indictment 4f 11-12.)
Title 18 of the United States Code makes criminal the
“forg[ing of] the signature of any judge .. . of any court of
the United States ... for the purpose of authenticating any
proceeding or document... .” 18 U.S.C. § 505.

Defendant argues that there was insufficient evidence to
support the jury’s verdict that Reich sent the forged Order
from his home as a facsimile transmission to the Davidson
firm fax machine. (Def’s Mem. Supp. Post-Trial Mot., at
5-9.) Defendant points to two facts brought out in the trial,
viz: (1) that Vollers, the secretary of Joel Davidson and the
only witness who testified that the forged Order was in the
tray of the machine shortly after 11:00 a.m., could not pin-
point when it arrived and did not actually witness the
Davidson firm fax machine generate the forged Order (id.
at 7); and (2) that Alcock, a forensics expect, concluded
that the forged Order was never originally a faxed docu-
ment. (/d. at 8.)

The Government provided strong evidence that Reich
created and sent the forged Order as a facsimile transmis-
sion to the Davidson firm fax machine. The jury heard
competent and uncontested evidence that Vollers received

38a

the forged Order from the Davidson firm fax machine tray,
and that Reich had placed a phone call from his home to
that machine around the time that Vollers discovered the
document. Davidson firm staff testified that Reich was the
only person who called the Davidson firm fax machine
who had sufficient knowledge of the case to be able to cre-
ate the forged Order.

Ajithough Reich initially denied having called the David-
son firm fax machine and possessing a phone card, Reich
later recanted this statement in the face of mounting evi-
dence and admitted that he did place the call using the
phone card listed in the Davidson firm fax machine trans-
mission log. At trial, he stated that he had meant to call
Joel Davidson’s telephone line, and hung up immediately
after he realized that he dialed the incorrect number. How-
ever, Reich’s phone records and the Davidson firm fax
machine log showed a several minute communication
between Reich and the fax machine, and expert testimony
established that the length of this communication was con-
sistent with Reich having sent the forged Order via fac-
simile transmission. Under the circumstances, a rational
juror would have been justified in concluding from Reich’s
conflicting statements that he was not a credible witness,
and could have resolved the conflicting expert opinions
against Reich. To the extent that the Defendant seeks to
show that he was more credible than Vollers, and that
Alcock was more credible than Smith, I must “defer to the
jury’s assessment of witness credibility and the jury’s res-
olution of conflicting testimony.” United States v. Bala,
236 F.3d 87, 93-94 (2d Cir. 2000).

Second, the Defendant urges that no rational trier of fact
after hearing Alcock’s opinion that the forged Order that
did not originate as a facsimile could find beyond a rea-

39a

sonable doubt that Reich had sent the forged Order from
his home. At trial, Alcock presented to the jury this opin-
ion based on a forensics examination of the forged Order.
Alcock concluded that the fax header had degraded in such
a way as to indicate that it was never sent by fax, and that
the “Extended Page” signals did not appear on the earliest
generation of the forged Order received into evidence.’

It is axiomatic that a jury is free to accept or reject the
opinion of an expert. This is especially true “in forensic
document examination, where... conclusions are drawn, in
large part, on subjective criteria.” United States v. Starzec-
pyzel, 880 F. Supp. 1027, 1048 (S.D.N.Y. 1995). On cross
examination, Alcock admitted that his conclusion relied on
assumptions regarding the magnification and resolution of
the copy of the forged Order represented by Government’s
Exhibit |. The jury could reasonably have rejected Alcock’s
opinion that the forged Order was not originally a fax
based on these assumptions. Furthermore, the jury was
fully justified in rejecting Alcock’s opinion that a Canon
Fax Phone 8 could not have sent the forged Order in the
manner described by Smith, as Alcock admitted that he
never operated a Canon Fax Phone 8.

In conclusion, | find that a rational juror could have
inferred from the evidence that Reich forged Judge Mann’s
signature to authenticate the forged Order and faxed it to
the Davidson law firm. See United States v. Canady, 126
F.3d 352, 356 (2d Cir. 1997) (directing that a court “must
affirm the conviction so long as, from the inferences rea-

Insofar as Reich questions the authenticity of the Government's
Exhibit | in an attempt to re-litigate its admissibility, I adhere to the ruling
in my June 10, 200S Memorandum and Order. (See United States v. Reich,
slip op., dated June 10, 2008, at 5-7.)

40a

sonably drawn, the fact finder might fairly have found
guilt beyond a reasonable doubt’).

2. Obstruction of Justice

Reich argues that no rational juror could have found that
Reich sent the forged Order to the Davidson firm to
“knowingly, intentionally and corruptly obstruct, influence
and impede,” the Ryan Beck lawsuit, in violation of 18
U.S.C. § 1512(c)(2). (Indictment 9 10.) Section 1512(c)(2)
states that a person who “corruptly ... obstructs . .. any
official proceeding, or attempts to do so,” violates this
criminal provision. 18 U.S.C. § 1512(c)(2).

As a predicate matter, the defense argues that it is the
Government’s burden to show that the Defendant intended
to deceive the court in sending the forged Order to the
Davidson firm. (See Def.’s Mem. Supp. Post-Trial Mot., at
9-11.) Defendant urges that because there was no proof
offered that the forged Order deceived any court, that
I must overturn the jury’s verdict on this obstruction of
justice charge.

As a relatively new provision, the few cases that discuss
Section 1512(c)(2) do not specifically address the question
of whether deception of a litigant in order to interfere with
a judicial proceeding constitutes obstruction of justice pur-
suant to Section 1512(c)(2). See, e.g., United States v.
Alvarez, 352 F. Supp. 2d 356, 358 (E.D.N.Y. 2005) (find-
ing that an allegation that defendant provided a false dec-
laration to a grand jury to defeat an indictment states a
violation of Section 1512(c)(2)); United States v. Hey, No.
03-80863, 2005 U.S. Dist. LEXIS 38550, *13-*14 (E.D.
Mich. 2005) (denying motions for new trial or acquittal of
Section 1512(c)(2) count for offering perjured testimony
to a grand jury). However, the Defendant’s proposed con-

4la

struction of Section 1512(c)(2) does not comport with the
plain meaning of the statute, which is not limited to actions
directed at a court. Whether Reich faxed the forged Order
directly to the court, or faxed it to opposing counsel, it
may still constitute a violation of the statute if sending the
forged Order could reasonably be expected to influence a
court proceeding.’ I therefore find that a violation of this
statute occurs where, as here, a person acts with the intent
to deceive an adverse party with the reasonable expecta-
tion that the deception will interfere with a judicial pro-
ceeding.

Here, the unrefuted evidence shows that Reich sent the
forged Order with the reasonable expectation that it would,
and that it did, obstruct the Ryan Beck litigation. Joel
Davidson testified that the Davidson firm wasted time and
legal expenses in withdrawing and then resubmitting its
application for a writ of mandamus, and in discussing the
forged Order with Judge Korman and Judge Mann. Judge
Mann’s law clerk testified that the forged Order wasted
judicial resources in requiring Judge Mann to issue an
Order and to communicate to Judge Korman and the Sec-
ond Circuit that the forged Order did not come from her,
and to discuss the forged Order at a status conference with
the parties. A rational juror could conclude from this evi-
dence that the forged Order obstructed the Ryan Beck law-
suit.

> If Section 1512(c\(2) required an intent to deceive the court,

! would find that there was sufficient evidence for a rational juror to con-
clude that Reich intended in sending the forged Order to deceive the Sec-
ond Circuit into believing that the writ of mandamus was moot, and that
Reich drafted the Davidson law firm as an unwitting agent in the decep-
tion.

42a

It can be inferred from the impact of the forged Order on
the Ryan Beck lawsuit that Reich intended to obstruct the
proceedings. See United States v. MacPherson, 424 F.3d
183, 189 (2d Cir. 1997) (“The law . . . recognizes that the
mens rea elements of knowledge anu intent can often be
proved through circumstantial evidence and the reasonable
inferences drawn therefrom... .”) Defendant’s contention
that the “contrived” and “crude construction” of the forged
Order belies the Government’s contention that it was
intended to deceive is without merit. (Def.’s Mem. Supp.
Pre-Trial Mot., at 12.) Testimony from employees of the
Davidson firm established that the forged Order was not so
facially flawed as to be dismissed as a fake instrument. On
the contrary, the Davidson firm accepted the document as
a true Order, and as a result withdrew its application for a
writ of mandamus and contacted the District Judge to
expand the reach of the Order to all defendants in the law-
suit.

Defendant’s argument that sending the forged Order was
not a “corrupt” act because no dishonest purpose can be
inferred from the creation and facsimile transmission of
the forged Order is also without merit. (Def.’s Mem. Supp.
Pre-Trial Mot., at 13.) The question is whether Reich sent
the forged Order knowing that the natural outcome of
sending it to the Davidson firm would be to obstruct the
Ryan Beck litigation. See United States v. Neiswender, 590
F.2d 1269, 1274 (4th Cir. 1979) (interpreting similar pro-
vision in 18 U.S.C. § 1503 and holding that “[t]he defen-
dant’s design is irrelevant: if the natural result of his plan
is to interfere with judicial processes, justice will be
obstructed whether he hopes it is or not... .”) The Gov-
ernment put forward sufficient evidence for a jury to con-
clude that the natural result of sending the forged Order

43a

was to obstruct the Ryan Beck lawsuit. Accordingly, the
Government is not required to prove beyond a reasonable
doubt the motivation for Reich’s deception, whether it was
to have Judge Mann recuse herself, to deceive or embar-
rass a hated adversary, or for future blackmailing purposes.
In conclusion, I find that a rational juror could reasonably
conclude that the Defendant violated 18 U.S.C.
§ 1512(c)(2) in sending the forged Order to the Davidson
firm with the intent to obstruct the Ryan Beck lawsuit.

3. False Statement to FBI

Lastly, Reich urges this court to find that no rational
juror could have concluded from the evidence that he made
a willfully false statement to government agents in the
March 3 proffer session. (Def.’s Mem. Supp. Pre-Trial Mot.,
at 13-14.) This obstruction of justice count is grounded in 18
U.S.C. § 1001(a)(2), which states that it is a criminal act
for “whoever, in any matter within the jurisdiction of the
Government of the United States, knowingly and willfully
... [to] make[] any materially false, fictitious, or fraudu-
lent statement or representation.” /d.

Defendant contends that there is a “failure of proof” to
show that Reich made a materially false statement at the
March 3 proffer session, because agent Katzman’s testi-
mony that Reich never admitted to having sent the forged
Order suggests that he made no statement at all regarding
his culpability. This argument is contrary to the facts.
Agent Wilfling testified that at the March 3 proffer ses-
sion, when Reich was confronted with the allegation that
he sent the forged Order during his 11:10 a.m. phone call
to the Davidson firm fax machine, Reich stated that he had
been trying to reach Joel Davidson but he accidentally
dialed the Davidson firm fax machine, and that his tele-

44a

phone sometimes does not disconnect after a call ended.
(Tr. 600-01.) At trial, when Reich was asked on direct how
he responded in the March 3 proffer session to Agent Katz-
man’s offer not to prosecute in exchange for admitting that
he sent the forged Order, Reich testified “No, I told them
distinctly no matter what ... | would never, never say that.
I didn’t do it. As [I]} sit here today, I will never say that I
did something I didn’t do.” (Tr. 896.) A rational juror could
have concluded from this testimony that Reich at the
March 3 proffer session denied having sent the forged
Order to the Davidson firm. Accordingly, Defendant’s
motion for a judgment of acquittal for this obstruction of
justice charge is denied.

For the reasons stated above, Defendant’s Rule 29
motion for a judgment of acquittal on the grounds of insuf-
ficient evidence is denied.

B. Defendant’s Rule 33 Motion for A New Trial

Defendant submits that a new trial is warranted on all
counts because Reich’s expert witness, Mark Alcock, cor-
roborated Reich’s testimony that he “inadvertently” made
the phone call to the Davidson law firm, and the Govern-
ment did not adequately rebut this expert testimony.
(Def.’s Ltr. Br., dated Nov. 30, 2005, at 5.) Reich’s Rule 33
motion is based on Alcock’s purportedly “uncontradicted
testimony” that (1) the forged Order was not created on the
seized computers; (2) Reich’s fax modem did not send the
forged Order; (3) Defendant could not have created the
subject fax by taping pages together or using tractor paper;
(4) Government’s Exhibit | never was a fax: and (5) “when
Defendant connected to the Davidson firm fax machine,
his computer modem ‘latched’ onto the Davidson machine
after Defendant hung up, until it timed out.” (/d.)

45a

As stated supra, Alcock’s testimony that Government
Exhibit 1 was never a fax and could not have been sent via
facsimile transmission was indeed contradicted by expert
testimony and by other evidence adduced at trial. The
Government’s expert witness, Cameron Smith provided
lengthy testimony that the forged Order and transmission
log are consistent with the use of a fax machine, such as
the Canon Fax Phone 8, to send a fax at 9600 bps to the HP
LaserJet 3100 in which the second page was three pages
long. Furthermore, Defendant’s contention that it was
“uncontradicted” that Reich could not have taped the last
three pages together or used tractor paper to fax the forged
Order is contrary to the facts. By Alcock’s own admis-
sions, he only made two attempts to send a fax with the last
three pages taped together, he never attempted to send a
fax with tractor paper, and he did not test the capability of
the Canon Fax Phone 8 to fax attached pages. (Tr. 1000-
02.) In contrast, Smith’s uncontested testimony was that
the forged Order could have been sent as a three page
attached document using tractor paper. (Tr. 463.)

Alcock’s opinion that Defendant’s fax modem ‘latched’
onto the Davidson machine after he disconnected the call
is contradicted by Smith’s uncontested testimony that the
Davidson firm fax machine times out after 41 seconds.
Alcock’s ‘latching’ theory does not on its face explain why
the fax log records would reflect a call lasting several min-
utes if the Davidson firm fax machine is designed to ter-
minate calls after 41 seconds. Although Alcock at trial
dismissed this contradiction by positing, essentially, that
anything is possible when a fax modem malfunctions, he
also admitted that it was possible that there was no mal-
function and that Reich sent a fax. (Tr. at 1178-1180.)
Under the circumstances, the jury was justified in crediting

46a

Smith’s opinien that the fax modem could not have
‘latched’ onto the call because the HP LaserJet 3100 would
have terminated the call after 41 seconds.

With respect to the remainder of Alcock’s testimony,
specifically that the forged Order was not created on the
seized computers and that Reich’s fax modem did not send
the forged Order, the Government was not required to
prove these facts. Inasmuch as Defendant argues that a
new trial is necessary because Defendant offered expert
testimony tending to disprove two subsidiary facts of a
possible means by which Reich sent the forged Order, this
argument lacks merit because “[t]he burden does not oper-
ate upon each of the many subsidiary facts upon which the
prosecution may collectively rely to persuade the jury that
a particular element has been established beyond a reason-
able doubt.” United States v. Viafara-Rodriguez, 729 F.2d
912, 913 (2d Cir. 1984). Therefore, the question before this
court is whether the weight of the evidence supports
beyond a reasonable doubt the allegation that Reich faxed
the forged Order to the Davidson firm.

Assuming, arguendo, that Alcock’s testimony showed
that the forged Order was not created on Reich’s seized
computers or sent using Reich’s seized fax modem, the
weight of the evidence supports the inference that Reich
was otherwise capable of creating and faxing the forged
Order from his home. Reich could have converted the June
3, 2003 Order into the forged Order on a typewriter using
manual instruments, or on a different computer not seized
by the Government. Defendant could have sent the forged
Order with the Canon Fax Phone 8 that he admitted to
owning at one time, or some other fax machine that the
Government did not seize. The testimony of the Davidson
firm employees that they received the forged Order at the

47a

same time that Reich called the fax machine and that Reich
was the only person to have called that day who could have
created the forged Order was credible. Alcock did not in
his testimony create a reasonable doubt as to Reich’s abil-
ity to send the forged Order. Accordingly, the weight of the
evidence supports the jury’s conclusion that the Defendant
sent the forged Order via fax to the Davidson firm fax
machine.

The decisional law relied on by Reich in support of his
motion supports this conclusion. In Sanchez, the Second
Circuit reversed a district court that granted a Rule 33
motion because the trial judge erroneously rejected the tes-
timony of three police officers because of “insignificant”
discrepancies in their testimony. United States v. Sanchez,
969 F.2d 1409, 1414 (2d Cir. 1992). In Ferguson, the Sec-
ond Circuit upheld a new trial order by the district court in
a trial for conspiracy to commit murder in aid of racket-
eering, on the basis that the prosecution failed to provide
any evidence showing the necessary motive element that
the act was for pecuniary gain or for gang membership or
status. United States v. Ferguson, 246 F.3d 129, 135-136
(2d Cir. 2001). See also United States v. Morales, 902 F.2d
604, (7th Cir. 1990) (Posner, J.) (granting a new trial
because of the discrepancies in the only witness’s testi-
mony and aspects of the physical evidence, and the harsh
minimum sentence for conviction).

As in Sanchez, this is not a case in which “testimony ts
patently incredible or defies physical realities ... .” Sanchez,
969 F.2d at 1414. The Government presented competent
and admissible evidence demonstrating that Reich had the
capacity to fax the forged Order from his home. Uniike
Ferguson, in which there was no proof to support an ele-
ment of the charged offense, whether Reich created and

48a

sent the forged Order via his scanner and fax modem are
subsidiary facts that are unnecessary for the jury to find
that Reich created and sent the forged Order beyond a rea-
sonable doubt.

In conclusion, this court finds that the weight of the evi-
dence supports the conclusion that Reich faxed the forged
Order to the Davidson firm fax machine, and Reich’s
motion is therefore denied.

C. Continuation of Bail Pending Appeal

The defense moves for bail pending appeal pursuant to
18 U.S.C. § 3143(b)(1), which provides that:

a judicial officer shall order that a person who
has been found guilty of an offense and sen-
tenced to a term of imprisonment, and who has
filed an appeal or a petition for a writ of certio-
rari, be detained, unless the judicial officer finds
... by clear and convincing evidence that the per-
son is not likely to flee or pose a danger to the
safety of any other person or the community if
released ... and ... that the appeal is not for the
purpose of delay and raises a substantial question
of law or fact likely to result in....

reversal, a new trial, or a sentence that does not include
imprisonment on all counts. /d. Therefore, in order to grant
Defendant’s motion for bail pending appeal, I must find
that (1) Reich is not likely to flee or pose a danger to the
safety or any other person or the community; (2) his appeal
is not for the purposes of delay; (3) the appeal raises a sub-
stantial question of law or fact; and (4) that if the Second
Circuit decides the appeal in a manner favorable to Reich,
whether that decision is likely to result in a reversal or a

49a

new trial on all counts. See United States v. Randell, 761
F.2d 122, 125 (2d Cir. 1985)

With respect to the first element, Reich is unlikely to
flee or pose a danger to any person or the community. The
Government does not dispute this. I did not find Reich to
be a flight risk or a danger to the community before trial,
and | decline to do so now. See United States v. DiSomma,
951 F.2d 494, 497 (2d Cir. 1991) (“trial judge’s close
familiarity with the evidence presented in the case” affords
discretion to trial judge in determining whether the defen-
dant poses a danger to the community).

The second and the third elements of this analysis are
interrelated, because whether or not an appeal is made to
delay the sentence depends in large part on whether any
substantial appeal questions are presented. The Second
Circuit defines a “substantial” question as “one of more
substance than would be necessary to a finding that it was
not frivolous. It is a ‘close’ question or one that very well
could be decided the other way.” United States v. Randell,
761 F.2d 122, 124 (2d Cir. 1985) (internal quotation omit-
ted) (finding this articulation of a “substantial” question to
be the most appropriate).

In viewing the totality of the evidence, Defendant in his
post-trial motions has not raised any close questions for
appeal.* The Government provided strong evidence on all
three counts for which Reich was convicted, and any con-

4 The only potentially open question, whether 18 U.S.C. § 1512(c)(2)

requires a showing of deception of the court, does not present a substantial
question on appeal because there was sufficient evidence for the jury to
conclude that Reich in sending the forged Order intended to deceive the
Second Circuit. Moreover, as this question implicates only one of the three
counts of which Reich was convicted, it does not provide a basis for bail
pending appeal.

50a

clusions of guilt that required an inference are well within
the boundaries of permissible inferences set forth by the
Second Circuit. Further, while the standard for a Rule 33
motion for a new trial is lower, a trial court is given dis-
cretion in deciding whether to grant a Rule 33 motion. See
United States v. Ferguson, 246 F.3d 129, 133 (2d Cir.
1997) (reviewing a district court’s ruling on a Rule 33
motion for abuse of discretion, and finding that “the dis-
trict court’s holding is not an abuse of discretion even
though we may have decided differently if we were the
trial judge”). As a result, I find that the Rule 29 and Rule
33 motions presented to me do not pose close questions for
appeal purposes.

Defendant in his response to the Government’s opposi-
tion to bail pending appeal submits that his withdrawn
motions should be considered in deciding whether his
appeal raises any substantial questions of law or fact.
(Def’s Ltr. Br., dated Jan. 10, 2006, at 2-3.) In particular,
Defendant contends that his withdrawn Rule 29 motion
based on the Government’s impeachment of Reich’s char-
acter during the cross-examination of a character witness
presents a substantial question of law. (/d.) As Defendant
has previously raised this objection, and Defendant sub-
mitted briefing on the issue before withdrawing it, I shall
now consider this ruling strictly for the purposes of
whether it raises a substantial question of law or fact.°

Defendant’s Rule 29 motion based on improper impeach-
ment of Reich’s character argues that the Government

* | shall not, however, delve into unarticulated “numerous other

issues which had been litigated prior to, and during the course of the trial,”
(Def’s Ltr. Br., dated Jan. 10, 2006, at 3) as it is Defendant's burden to
overcome the presumption of post-trial detention pending appeal. See Ran-
dell, 76) F.2d at 124-25.

S5la

improperly cross-examined James Pelzer, a character wit-
ness for Reich. Pelzer testified on direct examination that
Reich is “a person of high honesty and integrity, a person
that you can trust... and... others share that same opinion.
(Tr. 813.) On cross-examination, the Government sought to
attack Reich’s character by asking about an unauthorized
change in his law partner’s life insurance policy in viola-
tion of the partnership agreement. (Tr. 817.) At a hearing,
I examined a partnership agreement between the partner
and Reich, in which each had life insurance paid by Reich,
the proceeds of which went to their own families in the
event of their death. (Tr. 822.) The agreement stated that if
Reich sought to change the terms of the agreement, that he
would have to notify his partner. (Tr. 823.) Lastly, | exam-
ined correspondence that established that Reich changed
the terms of the agreement after the partner was diagnosed
with cancer without consulting the partner. (Tr. 823-25.)
Based on that proffer, I allowed the following question
over defense counsel’s objection:

Mr. Pelzer, if | told you that Mr. Reich had
changed the beneficiary of an insurance policy
away from Mr. Schapiro’s family members, des-
ignating the law firm the beneficiary in the event
of Mr. Schapiro’s death, without notice to
Mr. Schapiro and in violation of the partnership
agreement that the two of them had, would that
change your opinion or the opinion of the com-
munity ... with regard to the defendant’s honesty
or good character?

(Tr. 847.)

“Once a defendant offers character testimony, the prose-
cution is afforded substantial latitude to rebut such evi-

52a

dence.” United States v. Russo, 110 F.3d 948, 952 (2d Cir.
1997). Federal Rule of Evidence 405 provides that if the
defense puts forward a character witness to testify to the
defendant’s good reputation, that “[o]n cross-examination,
inquiry is allowable into relevant instances of conduct.”
F.R.E. 405(a). The cross-examination is permitted to eval-
uate the character witness’s credibility and knowledge of
the defendant. United States v. Birney, 686 F.2d 102, 108
(2d Cir. 1982). Before allowing the prosecution to attack a
defendant’s credibility by asking character witnesses on
cross-examination about a specific instance of conduct, the
trial court should ascertain that the prosecution has a good
faith belief that the act occurred, and that the incident is
relevant to the character trait at issue. Michelson v. United
States, 335 U.S. 469, 481 n.18 (1948). The Second Circuit
reviews “a trial court’s ruling on the admissibility of char-
acter evidence for an abuse of discretion.” United States v.
Damblu, 134 F.3d 490, 494 (2d Cir. 1998); see also
Michelson v. United States, 335 U.S. 469, 480 (1948).

With these principles in mind, there is no substantial
question presented as to whether this question was permis-
sible under Federal Rule of Evidence 405. The defense
counsel offered a character witness who testified to
Reich’s reputation for honesty and integrity in the New
York legal community. On cross-examination, the prosecu-
tion is entitled to ask the witness about an act, based upon
a good faith basis to believe that the act occurred, that
tended to show Reich’s character for dishonesty. Further,
Reich’s propensity for integrity and honesty was relevant
to the charges that he would seek to deceive an adversary’s
counsel and obstruct a judicial proceeding through the use
of a forged Order.

53a

Defendant argues that the insurance agreement was a
“private” issue that was not intended to test the witness’s
knowledge of Reich, but simply to prejudice him in the
eyes of the jury. (Def. Mem. Supp. Pre-Trial Mot., at 16-
22.) Defendant relies on United States v. Monteleone, 77
F.3d 1086, 1089 (8th Cir. 1996), in which the Eighth Cir-
cuit held that the prosecutor must have a good faith belief
that the incident is “likely to have become a matter of gen-
eral knowledge, currency or reputation in the community.”
Id. (quoting United States v. Duke, 492 F.2d 693, 696 (Sth
Cir. 1974)). The Eighth Circuit reversed a conviction for
improper character impeachment because the prosecution
asked a character witness about the defendant’s alleged
perjury as a witness in a grand jury proceeding. Jd. at
1090. Because of the judicially mandated secrecy sur-
rounding grand jury proceedings, the court found that it
was “patently unlikely” that the public would be aware of
the alleged perjury. /Jd.; see also Duke, 492 F.2d at 696
(private nature of alleged bad act demonstrated by the fact
that the prosecutor learned of the incident through grand
jury testimony).

The private nature of the grand jury proceeding in Mon-
teleone is distinguishable from the instant violation of the
partnership agreement. The prosecution offered a letter
from Reich’s partner’s family regarding the violation of
the partnership agreement, which, unlike the grand jury in
Monteleone, was not legally bound to secrecy. Further-
more, the question by the prosecution to test Mr. Pelzer’s
knowledge of Reich’s reputation for honesty and integrity
in the New York legal community involved a violated
agreement between partners in a New York law firm, the
precise community that was likely to know about this inci-
dent. Defendant’s characterization of the private nature of

54a

the law partnership is belied by Pelzer’s own testimony, in
which he admitted having known that Reich practiced with
the law partner and that the partner had recently died. (Tr.
at 817.) Furthermore, in contrast to Monteleone where the
grand jury statement at issue was never shown to be perju-
rious, Monteleone, 77 F.3d at 1090, there is no dispute that
Reich changed the policy without his law partner’s consent
in violation of the partnership documents. (See Tr. at 825-
26.) In short, the substance of the Government’s Rule 405
question does not approach the type of conduct considered
private by the Eighth Circuit in Monteleone.®

Whether the Prosecution was entitled to question Pelzer
about Reich’s change to his law partner’s life insurance
policy under Federal Rule of Evidence 405, after this court
determined that there was a good faith basis for the ques-
tion and that it was relevant to the charged offenses, does
not present a close question. Moreover, even if this ruling
were incorrect, it would be harmless error, as there was
strong evidence as to Reich’s guilt. Accordingly, there is
no substantial question raised for appeal purposes by this
court’s decision to permit the Prosecution to question
Pelzer about Reich’s violation of the partnership agree-
ment.

® Defendant further argues that this question should not have been

permitted because of its prejudicial nature. (Def.°s Mem. Supp. Pre-Trial
Mot., at 22.) Balancing relevancy against prejudice is governed by Federal
Rule of Evidence 403, which states that the trial court may exclude evi-
dence if it “is substantially outweighed by the danger of unfair prejudice.”
F.R.E. 403. I find that the question did not cause unfair prejudice, but
rather legitimately probed the character witness's knowledge of Reich. As
Rule 403 provides discretion to the trial judge, and | found that its proba-
tive value outweighed the likelihood of unfair prejudice, this does not pres-
ent a substantial question on appeal.

55a

I will briefly address the remaining arguments that
Defendant has raised for appeal. Reich’s argument that the
search warrant of his home was issued based on false
information does not raise a substantial question because
even if true, the warrant was supported by probable cause
after excising the allegedly false information. See United
States v. Canfield, 212 F.3d 713, 718 (2d Cir. 2000) (find -
ing that remaining portions of an affidavit with false infor-
mation supported probable cause). Furthermore, Reich’s
argument that the Government’s summation was improper
in light of my rulings limiting his cross-examination fails
because “[t]he scope and extent of cross-examination are
generally within the sound discretion of the trial dourt.”
United States v. Weiss, 930 F.2d 185, 197 (2d Cir. 1991).
Assuming, erguendo, that any of these rulings were
improper, they were harmless error, as the purported
improper comments did not substantially influence the
jury in light of the strong evidence presented by the Gov-
ernment showing Reich’s culpability for the charges of
which he was convicted. See United States v. Pedroza, 750
F.2d 187, 197 (2d Cir. 1984) (citing Kotteakos v. United
States, 328 U.S. 750, 764-65 (1946)).

In conclusion, as Defendant raises no substantial ques-
tions of law or fact, I find that Reich’s appeal would sim-
ply be for the purposes of delay. As a result, I need not
reach the question of whether these questions, if success-
ful, would have the effect of overturning or ordering a new
trial of all charges. Therefore, Reich’s motion for bail
pending appeal is denied.

56a

D. Changes To The Transcript

Lastly, Reich moves for a number of changes to the trial
transcript. Reich’s motion is governed by Federal Rule of
Appellate Procedure 10(e), which provides that this court
“has the power to resolve a dispute over the record in the
first instance.” United States v. Zichettello, 208 F.3d 72, 93
(2d Cir. 2000) (interpreting Fed. R. App. P. 10(e)). The dis-
trict court reconstructs the record at its discretion unless
the record “‘was intentionally falsified or plainly unrea-
sonable.’” Jd. (quoting United States v. Keskey, 863 F.2d
474, 478 (7th Cir. 1988)).

On page 817, lines 17 - 20, the Government asks Pelzer:
“Would it change your opinion of Mr. Reich or would it
change, in your opinion, would it change the community’s
view of Mr. Reich if you learned about Mr. Reich’s chang-
ing the beneficiaries of an insurance policy of Mr.
Schapiro?” (Tr. 817.) Mr. Mahler, Reich’s former defense
counsel who was present when the question was asked,
posits that the reporter failed to capture the following words
at the end of that sentence: “from Mr. Schapiro’s children to
himself, in violation of a partnership agreement, the day
after he learned that Mr. Schapiro had terminal cancer.”
(Decl. of Stephen Mahler 4] 19.) The Government states that
it did not reference “terminal cancer in front of the jury nor
did the government at that time refer to Mr. Schapiro’s
children or that they were young ... .” (Gov’t Mem. Opp.
Post-Trial Mot., at 31 n.13.)

My review of the transcript shows that the Government
in its cross-examination of Pelzer never mentioned that
Schapiro had terminal cancer or that he had children. This
is supported by events subsequent to the initial question.
During this cross-examination, there was a lengthy discus-
sion outside the presence of the jury about whether this

S7a

question was permissible, and if so, in what form, and
I took the precaution of instructing the prosecutor that
“you are not to discuss cancer in asking the question ... .”
(Tr. 839). The prosecutor’s ultimately permitted question
did not mention cancer, Schapiro’s death, or his children.
(Tr. 847.) The record appearing correct as stated, | deny
Defendant’s motion to change this portion of the tran-
script.

Regarding this court’s statement on page 831, my recol-
lection is, and | direct that the transcript be modified to
reflect from line 2 on page 831 the following: “Katz. The
person who knows best what happened with the insurance
policy is sitting in the courtroom.”

As there is no objection to any of the other modifica-
tions to the transcript, I direct that the transcript be modi-
fied in the following manner: “Vuscone V-U-S-C-O-N-E”
changed to “Biscone B-I-S-C-O-N-E” on page 823, line
19; “DeBono” changed to “Bodenmiller” on page 824, line
5; and “firearms” changed to “telephones” on page 986,
line 14.

IV. Conclusion

Having considered thoroughly the entire case and
Defendant’s specific arguments, the court concludes that
the guilty verdict rendered by the jury was amply sup-
ported by competent, satisfactory and sufficient evidence
properly admitted in the course of a fair trial, and that
Defendant raises no substantial questions on appeal.
Accordingly, the Defendant’s motions for a judgment of
acquittal pursuant to Rule 29 of the Fed. R. Crim. Pro. and
for a new trial pursuant to Rule 33 of the Fed. R. Crim.
Pro., and his application for bail pending appeal are hereby
DENIED. Defendant’s motion to modify the transcript pur-

58a

suant to Rule 10(e) of the Federal Rules of Appellate Pro-
cedure is GRANTED in part and DENIED in part.

SO ORDERED.

Dated: March 10, 2006
Brooklyn, NY

/s/ Nicholas G. Garaufis

Nicholas G. Garaufis
United States District Judge

59a
APPENDIX C

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK

02-CV-4052 (RLM)
Filed: June 23, 2003

RYAN, BECK & CO., LLC,
Plaintiff,
—against—

YOUSSEF FAKIH, et al.,
Defendants.

MEMORANDUM AND ORDER

ROANNE L. MANN, UNITED STATES MAGISTRATE
JUDGE:

Plaintiff Ryan, Beck & Co., LLC (“plaintiff’ or “Ryan
Beck”) filed this action against defendants Perry S. Reich
(“Reich”), Franka Jones, as trustee of the Franka Jones
Trust (“Jones”), and Youssef and Ali Fakih (“the Fakihs”)
(collectively referred to herein as “the investors” or
“defendants”), seeking the following relief: a declaratory
judgment that Ryan Beck has no obligation to arbitrate cer-
tain disputes with the investors; a stay of three pending
arbitrations brought by the investors against Ryan Beck;
and a declaratory judgment absolving Ryan Beck of liabil-
ity for the acts that are the subject of those arbitrations. See
generally Complaint (“Compl.”) at 998, 10-20 and ad
damnum clause.

60a

Currently before this Court, following the parties’ con-
sent to have a magistrate judge handle the case for all pur-
poses (see 28 U.S.C. § 636(c)(1)), are various dispositive
motions and cross-motions filed by Ryan Beck, Jones and
the Fakihs.' Specifically, Ryan Beck has moved for sum-
mary judgment on its second claim for declaratory relief
{i.e., adjudging the parties’ disputes non-arbitrable) and
demands a permanent stay of each of the arbitrations pend-
ing against it. All three groups of investors* have filed
papers opposing Ryan Beck’s motions,’ and Jones and the
Fakihs have cross-moved to compel arbitration.*

' Ryan Beck’s motion for sanctions against Reich, and Reich’s

cross-motion for sanctions against Ryan Beck, were denied from the
bench during oral argument on January 21, 2003. See Transcript of Pro-
ceedings on January 21, 2003 (“1/21/03 Tr.”) at 15. (All transcripts of
court proceedings are cited herein as “[date] Tr.”’)

2 For ease of reference. the Fakihs hereinafter will be referred to

as one investor.

> Because the parties have filed numerous briefs and affidavits,

references to the parties” submissions will, in order to avoid confusion,
include the document number [“# ”] as reflected on the docket sheet.

4 Although all three investors have signed onto the Defendants”

Joint Memorandum of Law in Support of Their Cross-Motion to Com-
pel Plaintiff to Submit to Arbitration and in Opposition to Plaintiff's
Motion (“Def. Joint Mem.” [#99]), Reich has not filed any notice of
cross-motion. For the reasons detailed in this opinion, Reich’s situation
is materially distinguishable from that of his co-defendants and, had he
cross-moved for declaratory relief and/or to compel arbitration, this
Court would have denied the motion.

The Fakihs* Notice of Cross-Motion (#94) seeks “an order declaring
that the plaintiff must arbitrate” its dispute with them. No party has
addressed the distinction between an order declaring a duty to arbitrate
versus an order compelling arbitration and thus, for purposes of this
opinion, the Court will treat those concepts interchangeably.

-

61a

For the reasons that follow, the Court denies Ryan
Beck’s motions in all respects and grants in part the cross-
motions of the Fakihs and Jones, directing Ryan Beck to
arbitrate the issue of arbitrability with respect to those
investors. Reich’s arbitration proceeding is hereby stayed
pending the outcome of this lawsuit.

FACTUAL BACKGROUND?

Several years ago, each of the investors opened an
account with Gruntal & Co., L.L.C. (“Gruntal’”’),® which
was then registered with the Securities and Exchange
Commission as a broker-dealer and was a member of the
New York Stock Exchange (“NYSE”) and the National
Association of Securities Dealers (“NASD”). Upon
becoming a client of Gruntal, each investor entered into a
form contract entitled “Client Agreement & Margin Agree-
ment” (hereinafter “Client Agreement”). See, e.g., Court
Exhibit (“CX”) 2; CX 3; 9/5/02 Tr. at 5-6.’ Each such

>

Unless otherwise indicated, the facts recounted are not in dis-
pute.

© The Fakihs opened a joint account. Reich transferred his funds

from another brokerage firm. See Deposition of Perry S. Reich, on
October 30, 2002 (“Reich Dep.”), attached as Exhibit (“Ex.”) A to
Plaintiff's Supplemental Brief in Support of Its Motion for Summary
Judgment Against Defendant Perry Reich (“P1. Supp. Br.” [#90}) at 6,
15-16. (Reich also opened a second account with his mother, but that
account is not at issue in this action or in Reich’s pending arbitration.
See Reich Dep. at 24-25.)

The Jones and Fakih Client Agreements were marked as court
exhibits at oral argument on Ryan Beck’s motion for a preliminary
injunction. (Aithough the proceeding was held on September 4, 2002,
the transcript is incorrectly dated September 5, 2002, and is therefore
cited as “9/5/02 Tr.”) Copies of the Jones and Fakih Client Agreements
are also appended to the submissions of their respective counsel. See

ee
ri 5

62a

Client Agreement included a broadly worded arbitration
provision, see, e.g., CX 2 and 3 at 916,° and provided
that the Client Agreement would “inure to the benefit of
and be binding upon” the parties to the Client Agreement
and, among others, their respective successors and
assigns. See id. at 417; PX 2A (#90 [Ex.A]), Client
Agreement at 41.”

Exhibit B to Affidavit [of Edward H. Glenn, Jr.] in Support of Cross-
Motion to Submit to Arbitration (“Glenn Aff.” [#89]); Exhibit A to
Defendant Fakih’s [sic] Response to Local 56.1 Statement (“Fakih 56.1
Stmt.” [#94]).

The Reich Client Agreement was included among the documents
marked as Plaintiff’s Exhibit 2A (“PX 2A”) at Reich’s deposition
(appended to Pl. Supp. Br. {[#90]). Although the new account form
attached to the Client Agreement was signed by a Gruntal account
executive and approved by a Gruntal manager, the Court’s copies of the
form and Client Agreement do not appear to have been signed by
Reich. Inasmuch as no party has focused on the absence of Reich’s sig-
nature, the Court will assume that the Client Agreement reproduced
within PX 2A was the operative agreement between Gruntal and Reich.

8 The Jones and Fakih Client Agreements provide in pertinent

part that the parties thereto “agree that all disputes that may arise
between or among [those parties and certain specified other parties],
arising out of or relating to [that investor’s] Accounts (except for regu-
lated commodity accounts), orders, transactions or any construction,
performance or breach of this or any other agreement between or
among [the parties thereto] will be settled by arbitration.” CX 2 and 3
at 416.

° The language of the Client Agreement as to Reich differs from

that of the Fakihs and Jones in respects not material to the issues in this
case. The Reich Client Agreement provides, among other things, that
“[a]ny dispute | now or hereafter may have with Gruntal or any of its
current or former officers, directors, agents and/or employees, arising
out of or relating to any of my accounts with Gruntal or to transactions
heretofore or hereafter made therein or to any agreement between
myself and Gruntal, shall be settled by arbitration.” PX 2A (#90

63a

In March 2001, Reich notified Gruntal, in writing, that
he had “made arrangements to move [his] accounts to
another brokerage firm,” and he directed Gruntal “not to
make any further transactions with respect to this
account.” Letter from Perry S. Reich to Joseph Burgos,
dated March 16, 2001, included in PX 2A and PX 4 (#90
[Ex.A]). The next day, in a follow-up letter to a Gruntal
supervisor, Reich complained that his account manager
had not “follow[ed his] directions,” and he accused the
account manager of seeking “to increase his personal com-
missions at [Reich’s] continued expense.” Letter from
Perry S. Reich to Mark Serby, dated March 17, 2001,
included in PX 4 (#90 [Ex.A]). Reich transferred all of the
assets in his Gruntal accounts to Quick & Reilly on or
about April 9, 2001. See Reich Dep. (#90 [Ex.A]) at 31-32.
The accounts of the other defendants remained open in and
after the end of April 2002. See 9/5/02 Tr. at 11; 1/21/03
Tr. at 21; see also id. at 48.

In June 2001, Reich initiated an arbitration proceeding
before the NASD against Gruntal and its agent, Joseph
Burgos, charging that his account had been mishandled. In
April 2002, the Fakihs and Jones commenced similar
arbitration proceedings against Gruntal and its agents:
the Fakihs brought their claims before the NASD and
Jones brought hers before the NYSE.

Later that month, on or about April 20, 2002, Ryan
Beck, a broker-dealer headquartered in Livingston, New
Jersey, entered into a series of interrelated agreements,
-~acluding an ainended asset acquisition agreement

pex.Al). Chent Agreement at 914. Like the Jones and Fakih Client
Agreements, Reich's Agreement further provides that it “shall inure to
the benefit of and be binding upon you and me and our respective ...
successors and assigns.” /a. at 91.

64a

(“Acquisition Agreement”), with Gruntal, its parent com-
pany Gruntal Financial, L.L.C., and Gruntal Facilities
Management, L.L.C.'° Pursuant to the Acquisition Agree-
ment, Ryan Beck agreed to purchase most of the assets of —
Gruntal, including customer accounts and related books
and records. The nature and effect of the transaction—that
is, whether it constituted a de facto merger or rendered
Ryan Beck a successor-in-interest to Gruntal’s liabilities—
are the subject of much controversy among the parties, as
is the adequacy of the purchase price paid by Ryan Beck.
Part of the debate centers on a provision in the Acquisition
Agreement, pursuant to which the parties to that contract
agreed that, with certain exceptions not relevant here,
Ryan Beck would not assume any of Gruntal’s liabilities or
obligations other than those arising as of the closing date,
April 26, 2002 (“the Closing Date’). See Acquisition Agree-
ment § 1(B)(2) (stating, inter alia, that Ryan Beck “will
not assume ... liabilities for litigation, arbitrations or
other claims relating to operations prior to the Closing
Date [April 26, 2002], whether instituted before or after
the Closing Date ....”).

On the Closing Date, the defendants and other investors
were sent form letters on Gruntal letterhead, signed by the
chairmen and chief executive officers of Gruntal and Ryan
Beck, respectively. Following the salutation “Dear Valued
Client,” each letter advised that Ryan Beck had acquired
certain assets and liabilities of Gruntal; that the investor’s
account would be transferred to Ryan Beck, effective April
29, 2002, unless the investor immediately notified his or
her account executive otherwise and made arrangements

The Acquisition Agreement and related documents are attached
as Exhibit A to the Affidavit of Robert M. Berson In Support of Plain-
tiff Ryan, Beck’s Motion for Summary Judgment (“Berson Aff.” [#55]).

65a

for the account and/or securities to be transferred else-
where; and that the account would be serviced at Ryan
Beck by the same account executive as at Gruntal.!! It is
undisputed that none of the defendants signed a new client
agreement with Ryan Beck. See, e.g., 9/5/02 Tr. at 15.
However, plaintiff acknowledges that the Gruntal Client
Agreements with Jones and the Fakihs became the opera-
tive contracts with those customers. See 9/5/02 Tr. at 15-
16, 25, 71-73; 10/11/02 Tr. at 19, 44-45; 1/21/03 Tr. at
21-23, 33, 48.

Within several months of Ryan Beck’s acquisition of
Gruntal’s accounts and other assets, each of the investor-
defendants amended his or her statement of claim in arbi-
tration to add Ryan Beck as a respondent.'* On June 25,
2002, Ryan Beck filed its answer to the Fakihs’ arbitration
claims, requesting their dismissal. The underlying arbitra-
tion proceedings have continued, subject to a stipulation
by the defendants that they “will not assert or argue that
further participation of Ryan, Beck & Co., L.L.C. in the
[respective] arbitration proceeding[s] .. . constitutes a waiver
by Ryan, Beck & Co., L.L.C. of any rights it may have to
contest the propriety of its inclusion in such arbitration
proceeding[s]}.” Stipulation & Agreement of the Defen-

'' Asample of the form letter—hereinafter referred to as the “Dear

Client Letter”---is attached as Exhibit A to the Glenn Affidavit (#89).

'2 Ryan Beck is a member of the NASD but, unlike Gruntal, is not

a member of the NYSE. Plaintiff's complaint includes a cause of action
seeking to stay the Jones arbitration proceeding on the ground that the
NYSE “has no jurisdiction” over Ryan Beck. Compt. at 9.19. In order
t. simplify the issues before this Court, Jones agreed to and, in Octo-
ber 2002, did in fact refile her arbitration claims against Ryan Beck
(which had been pending before the NYSE) with the NASD. See Stup-
ulation of Defendant [Jones], dated September 18, 2002 (#51): 9/5/02
Tr. at 105-07; 10/11/02 Tr. at 30; 1/21/03 Tr. at 72.

66a

dants, dated September 18, 2002 (#51); see 9/5/02 Tr. at
100-05.'°

On July 17, 2002, Ryan Beck commenced this federal
action with the filing of its complaint for declaratory and
injunctive relief. On July 25, 2002, Ryan Beck sought a
temporary restraining order, which was denied by the Hon-
orable Edward R. Korman, who referred plaintiff’s motion
for a preliminary injunction to this magistrate judge.’*
After the motion: was fully briefed and argued, and after
the case was, with the parties’ consent, reassigned to a
magistrate judge for all purposes, this Court issued a Mem-
orandum and Order on September 20, 2002, denying the
motion for a preliminary injunction. See Memorandum &
Order, dated September 20, 2002 (“9/20/02 M&O”).'° On
October 11, 2002, the Court denied from the bench a cross-
motion filed by the Fakihs to dismiss the action on the
ground that Ryan Beck had waived its objection to arbitra-
bility. See 10/11/02 Tr. at 4-7. The Court then ordered
discovery limited to the issue of Reich’s status as a cus-
tomer of Ryan Beck (see id. at 54-57, 60-61) and estab-
lished a briefing schedule on the cross-motions for
summary judgment.

'3 The Jones arbitration hearing has been scheduled for January

2004; the Fakihs’ arbitration hearing is scheduled for February and
March 2004; the Reich hearing has not been set. See Letter to the Court
dated April 11, 2003, from Joel E. Davidson, Esq. (#75); Letter to the
Court dated June 12, 2003, from Stuart D. Meissner, Esq. (#109).

4 Plaintiff at the same time moved for summary judgment, but this

Court concluded that the motion was premature. See infra note 38.

1s

Plaintiff recently moved for reconsideration of the ruling as to
the Fakihs, and the Court adhered to its decision. See Memorandum and
Order dated June 3, 2003.

67a

Gruntal filed for bankruptcy protection on October 30,
2002, in Jn re GCO Services LLC, No. 02-15360 (S.D.N-Y.
Bankr.). See Berson Aff. (#55) at 42.

DISCUSSION

i rties’ Positions

The investors advance a series of arguments as to why
Ryan Beck is obligated to arbitrate the disputes at issue.
Looking first to traditional principles of contract and
agency, the investors assert that, as plaintiff’s customers,
their relationships with Ryan Beck were governed by the
Gruntal Client Agreements, each of which included an
arbitration provision; therefore, they argue, Ryan Beck
assumed the obligation to arbitrate the parties’ disputes
and, having derived the benefits of that contractual rela-
tionship, plaintiff is estopped from denying its duty to
arbitrate. See Def. Joint Mem. (#99) at 4-8. Secondly, the
investors contend that, apart from the aforesaid contractual
right to arbitration, NASD rules compel member firms to
arbitrate disputes with their customers. See id. at 8-13.
Moreover, they claim, the scope of the arbitration clause in
the Client Agreement is a matter for the arbitrators to
decide. See id. at 13-14.

Plaintiff resists arbitration on a number of grounds.
Relying principally on the disclaimer of liability contained
in the Acquisition Agreement, Ryan Beck maintains that it
did not agree to arbitrate “antecedent Gruntal disputes”!®

lo

Plaintiff's Reply Memorandum of Law in Support of Its Motion
For Summary Judgment/Declaratory Judgment (“Pi. Reply” [#103])
at 2.

68a

or “disputes relating to successor liability.”'’? According to
plaintiff, its arbitration agreement with former Gruntal
customers did not encompass “the subject matter of the
[pending] arbitrations.” Pl. Mem. (#87) at 3. Plaintiff also
disputes the investors’ claim that the arbitrators should
decide the scope of the arbitration provision; in plaintiff’s
view, the “plain meaning” of the Acquisition Agreement
“reflects [plaintiff’s] intent not to arbitrate ....” Pl. Reply
(#103) at 3.

Concerning the duty to arbitrate imposed by the NASD
Code, plaintiff takes the position that “customer” status
must be determined as of the time of the alleged wrongdo-
ing; in this case, the investors were Gruntal customers
when their claims arose. See Pl. Mem. (#87) at 4-6; PI.
Reply (#103) at 8.

As to Reich, plaintiff alleges that he never became a cus-
tomer of Ryan Beck, as he closed his Gruntal accounts and
transferred his assets one year prior to the acquisition, see
generally Pl. Supp. Br. (#90); consequently, Reich “totally
failed to prove that he has any agreement to arbitrate” with
Ryan Beck. /d. at 11.

Finally, Reich maintains that he “must be deemed to
have been a ‘customer’ of Ryan, Beck,” because he received
a “Dear Client Letter” advising him of the acquisition. See
Memorandum of Law Regarding Perry Reich’s Status as a
Ryan, Beck Customer (“Reich Mem.” [#105]) at 1. He also
invokes a series of theories for binding plaintiff, as a suc-
cessor-in-interest, to his Gruntal Client Agreement. See id.
at 6.

'7 Id. at 8; see id. at 2-3; Plaintiff's Memorandum of Law In Sup-

port of its Motion For Summary Judgment’Declaratory Judgment (“P1.
Mem.” [#87]) at 14.

69a
Il. Arbitration; General Legal Principles

As a preliminary matter, while counsels’ submissions
are silent on this issue, it appears that the parties’ disputes
are governed by the Federal Arbitration Act (“FAA”), 9
U.S.C. § 1 et seqg., inasmuch as (1) there are a series of
written arbitration agreements (albeit ones whose applica-
bility and scope are contested); (2) diversity provides an
independent basis for federal jurisdiction; and (3) the arbi-
tration provisions are contained in contracts affecting
interstate commerce. See Shaw Group Inc. v. Triplefine
Int'l Corp., 322 F.3d 115, 120 (2d Cir. 2003); ACEquip
Ltd. v. Am. Eng’g Corp., 315 F.3d 151, 154 (2d Cir. 2003).
Pursuant to section 4 of the FAA, the role of the Court 1s
“limited to determining two issues: i) whether a valid
agreement or obligation to arbitrate exists, and 11) whether
one party to the agreement has failed, neglected or refused
to arbitrate ....” PaineWebber Inc. v. Bybyk, 81 F.3d 1193,
1198 (2d Cir. 1996); accord Shaw, 322 F.3d at 120. The
latter issue is not disputed, as Ryan Beck is protesting the
arbitration proceedings.

As the Supreme Court has recently reiterated, the FAA
expresses a strong federal policy favoring arbitration
agreements. See Howsam v. Dean Witter Revnolds, Inc.,
123 S. Ct. 588, 591 (2002) (citing Moses H. Cone Mem'l
Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25 (1983));
see also PacifiCare Health Systems, Inc. v. Book, 123
S. Ct. 1531, 1536 n.2 (2003). The FAA creates “a body of
federal substantive law of arbitrability, applicable to any
arbitration agreement within the coverage of the Act.”
Moses H. Cone, 460 U.S. at 24 (quoted in National Union
Fire Ins. Co. v. Belco Petroleum Corp., 88 F.3d 129, 13

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386008_0545%3A2. Public record. Not legal advice.