United States v. Mitchell Stein (11th Cir. July 2020)

The Federal Docket

July 16, 2020

Sentencing Guidelines/Loss Amount – A district court may rely upon circumstantial evidence to calculate the loss amount if the evidence is specific and reasonably supports a conclusion that investors relied on the defendant’s fraudulent information. A lack of market efficiency does not necessarily undermine a finding of investor reliance.

Sentencing Guidelines/Intervening Events – A district court that recognizes the need to account for intervening causes and conducts a thorough hearing may properly reject an intervening cause theory.

Appeals/Law of the Case – A defendant may not raise claims on remand that are outside the scope of the appellate court’s mandate unless the evidence relating to a previously-waived claims is substantially different, there is new controlling authority, or there was clear error that is manifestly unjust.

Mitchell Stein was convicted of wire fraud, securities fraud, money laundering, and obstruction of justice. Stein was sentenced to 204 months’ imprisonment, restitution of $13,186,025.85, and forfeiture of $5,378,581.61. Stein appealed. The Eleventh Circuit affirmed Stein’s convictions but vacated his sentence based on the district court’s speculative loss amount. The Court remanded the case for resentencing and “for the limited purpose of considering evidence of investor reliance and intervening events that may have cause the stock price to decline.” The district court re-sentenced Stein to 150 months’ imprisonment and $1,029,570 in restitution.

Stein appealed again, arguing that the district erred by rejecting his arguments challenging his forfeiture order, which he had raised for the first time on remand. Stein also argued that the Court should not have rejected “the claim that the government knowingly used or relied on false evidence in violation of the Due Process Clause, Brady, and Giglio” in Stein’s first appeal three years ago.

The Court disagreed, first holding that the district court properly calculated the amount of loss because it “relied on ‘specific circumstantial evidence’ to reasonably conclude” that Stein’s fraudulent conduct induced investors and caused the losses. The Court noted that the district court may estimate a loss amount if it is based on a reasonable methodology and more than mere speculation and that specific, circumstantial evidence of investor reliance is sufficient to prove causation.  The Court further held that a drop in stock price and lack in market efficiency does not necessarily undermine a finding of investor reliance.

The Court also held that there was no clear error in the district court’s decision to credit one witness’s testimony over the other regarding causation. The Court held that a district court that reasonably relies on evidence and analysis of a qualified expert does not err by failing to address the possible existence of intervening events. The Court also noted that, in this case, the district court did in fact “recognize[] that it had to take intervening events into account” and held a discussion about one such intervening event, the 2008 financial downturn.

The Court also held that the district court properly rejected Stein’s due process and forfeiture claims because they fell outside the scope of the limited remand of Stein’s case. The Court held that a district court cannot “‘alter, amend, or examine the mandate, or give any further relief or review, but must enter an order in strict compliance with” the appellate court’s mandate to remand.

The Court noted that, although there are three exceptions to the general prohibition against revisiting issues decided on previous appeals, none applied. First, the Court held that the new evidence at Stein’s subsequent trial was both untimely and immaterial since it was already stipulated. Second, the Court held that Stein provided no new authority contrary to the Court’s first decision. Third, the Court held that the decision was not clearly erroneous because there was not “sufficient evidence that the government knowingly relied on false testimony” and that “Stein failed to show how the government either suppressed or capitalized on allegedly false testimony.”

The Court also held that there is no intervening law affecting the forfeiture statutes, 18 U.S.C. §§ 981(a)(1)(C) and 982(a)(1), so Stein could not challenge his forfeiture order on remand. The Court held that Honeycutt v. United States, which affected joint and several liability in drug crimes, is limited to the specific language of 21 U.S.C. § 853.

Appeal from the Southern District of Florida 

Opinion by Marcus, joined by E. Carnes and Luck

Click here to read the opinion.

Tom Church - Tom is a trial and appellate lawyer focusing on criminal defense and civil trials. Tom is the author of "The Federal Docket" and is a contributor to Mercer Law Review's Annual Survey in the areas of federal sentencing guidelines and criminal law. Tom graduated with honors from the University of Georgia Law School where he served as a research assistant to the faculty in the areas of constitutional law and civil rights litigation. Read Tom's reviews on AVVO. Follow Tom on Linkedin.

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