2nd Circuit Vacates Fraud Conviction
July 1, 2010
SRZ litigation partners Richard J. Morvillo and Peter H. White, together with several colleagues at their former firm, served as counsel for Mark Kaiser in his successful appeal to the 2nd U.S. Circuit Court of Appeals that reversed his conviction for securities fraud. Mr. Kaiser, a former high level executive with US Foodservice ("USF"), a wholly owned subsidiary of Dutch supermarket conglomerate Royal Ahold NA, was convicted in 2006 of making fraudulent misrepresentations about the financial condition of USF, which Royal Ahold had acquired in 2000. Messrs. Morvillo and White were lead trial counsel in the 2006 jury trial.
On July 1, the 2nd U.S. Circuit Court of Appeals in United States v. Kaiser said the trial judge erred in a jury instruction on the law of “conscious avoidance” and improperly admitted a hearsay statement by USF's general counsel. These errors substantially prejudiced Mr. Kaiser and necessitated the reversal of his conviction for securities fraud, conspiracy, and three counts of making, or causing to be made, false filings to the SEC on behalf of Royal Ahold. The case has been remanded to the district court for a new trial. The Court of Appeals, in ruling on the jury instructions, found that the trial court omitted important language previously adopted in the Circuit. In particular, the Court of Appeals focused on the absence in the conscious avoidance charge of language indicating that the jury could infer knowledge of a fact (1) “where there is a high probability that the defendant knew of its existence” and (2) “unless the defendant did not believe it existed.” The Court of Appeals also found that the trial court erred in admitting through a third witness a prejudicial statement USF’s GC made to a senior official at USF where neither of the two appeared as witnesses at trial.
In commenting about the case, Richard Morvillo stated, “All of us who worked on Mark’s appeal are overjoyed with the result. There was scant evidence at trial of his actual knowledge of the conspiracy the Government charged, and the Court of Appeals’ ruling makes it clear that “conscious avoidance” can only fill that evidentiary hole in circumstances that were not established at trial.”