BRIEF OF DEFENDANT-APPELLANT

Transcription

1 Case: Document: 79 Page: 1 04/04/ cr To be argued by: Ynited States Court of Appeals FOR THE SECOND CIRCUIT -v- Appellee, Defendant-Appellant, Defendant. ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF NEW YORK BRIEF OF DEFENDANT-APPELLANT and SPECIAL APPENDIX Attorneys for Defendant-Appellant

2 Case: Document: 79 Page: 2 04/04/ TABLE OF CONTENTS Page PRELIMINARY STATEMENT JURISDICTIONAL STATEMENT....1 QUESTIONS PRESENTED STATEMENT OF THE CASE STATEMENT OF FACTS A. The Indictment B. Pretrial Motions C. Motz's Guilty Plea....8 D. The PSR and Motz's Objections E. Fatico Hearing and Post-Hearing Submissions The Government Expert The Defense Experts F. Sentencing G. Restitution SUMMARY OF ARGUMENT ARGUMENT Introduction i-

3 Case: Document: 79 Page: 3 04/04/ Page POINT I: MOTZ'S TRADE ALLOCATION SCHEME NEITHER CAUSED NOR CONTEMPLATED "LOSS" TO HIS CUSTOMERS AND, EVEN IF IT DID, THE LOSS WAS MUCH LESS THAN $2.4 MILLION A. No Loss B. Much Less Loss Ex Post Facto Intolerable Ambiguity POINT II: THE NUMBER OF "VICTIMS" WAS LESS THAN POINT III: THE RESTITUTION ORDER MUST BE VACATED BECAUSE IT DID NOT AND COULD NOT IDENTIFY EITHER THE "VICTIMS" OR THEIR PURPORTED "LOSSES" POINT IV: MOTZ'S EIGHT- YEAR PRISON TERM IS UNREASONABLE...46 CONCLUSION ii-

4 Case: Document: 79 Page: 4 04/04/ TABLE OF AUTHORITIES Page CASES United States v. Allen, 529 F.3d 390 (7th Cir. 2008) United States v. Arnaout, 431 F.3d 994 (7th Cir. 2005)...41 United States v. Booker, 543 U.S. 220 (2005) United States v. Catoggio, 326 F.3d 323 (2d Cir. 2003) United States v. Ebbers, 458 F.3d 110 (2d Cir. 2006) United States v. Fagans, 406 F.3d 138 (2d Cir.2005) United States v. Flowers, 55 F.3d 218 (6th Cir. 1995)...29 United States v. Frydenlund, 990 F.2d 822 (5th Cir. 1993) United States v. Giovanelli, 464 F.3d 346 (2d Cir. 2006) United States v. Guang, 511 F.3d 110 (2d Cir. 2007) United States v. Harris, 79 F.3d 223 (2d Cir. 1996) United States v. Jones, 460 F.3d 191 (2d Cir. 2006) United States v. Marcus, 538 F.3d 97 (2d Cir. 2008) United States v. Marcus, 628 F.3d 36 (2d Cir. 2010) United States v. Orton, 73 F.3d 331 (11th Cir. 1996) United States v. Parris, 573 F. Supp. 2d 744 (E.D.N.Y. 2008) , 49 -iii-

5 Case: Document: 79 Page: 5 04/04/ United States v. Pescatore, F.3d, 2011 WL (2d Cir. Feb. 23, 2011) , 45 United States v. Preasley, 628 F.3d 72 (2d Cir. 2010) United States v. Rutkoske, 506 F.3d 170 (2d Cir. 2007)...37 United States v. Silkowski, 32 F.3d 682 (2d Cir. 1994) United States v. Scheele, 231 F.3d 492 (9th Cir. 2000) United States v. Van Alstyne, 584 F.3d 803 (9th Cir. 2009) , 30 STATUTES AND GUIDELINES 18 U.S.C U.S.C U.S.C. 3663A USSG 2B , 28, 29, 39, 41 OTHER AUTHORITIES In re Gerson Asset Management, 2005 WL (SEC Admin. Proceeding Dec. 2, 2005) SEC v. Lyons, SEC LR (Aug. 12, 1998) SEC v. Bond, SEC LR (Aug. 10, 2001) iv-

6 Case: Document: 79 Page: 6 04/04/ PRELIMINARY STATEMENT Appellant George M. Motz appeals from A) a judgment of the United States District Court for the Eastern District of New York, entered on May 13, 2010, convicting Motz upon his plea of guilty to one count of securities fraud (18 U.S.C. 1348(1)), and sentencing him to, inter alia, an eight-year prison term and a 1 $20,000 fine ("the Judgment"), and B) an order of the same court, entered August 5, 2010, directing Motz to pay restitution in the approximate amount of $865,000 ("the Order") (Spatt, J, on the Judgment and Order). Motz is confined pursuant to the Judgment, and has been since June 30, JURISDICTIONAL STATEMENT Subject matter jurisdiction in the district court over this federal criminal prosecution was based on 18 U.S.C. 3231, and this Court has jurisdiction over the appeals from the Judgment and the Order pursuant to 28 U.S.C This is an appeal from A) the Judgment, entered May 13, 2010, following Motz's sentencing on April 28, 2010, and B) the Order, entered August 5, Motz 1. A "corrected" judgment was filed on June 18, 2010 (A582), which differed from the May 2010 judgment (A576) only to the extent of representing that Motz had pleaded guilty to the second superseding indictment, not the first. 1

7 Case: Document: 79 Page: 7 04/04/ filed timely notices of appeal from the Judgment (on May 5, 2010) and from the Order (on August 17, 2010). QUESTIONS PRESENTED 1. Did Motz's trade allocation scheme cause or contemplate any "loss" to his customers and, even if it did, wasn't the loss much less than $2.4 million? 2. Wasn't the number of "victims" less than 50? 3. Must the restitution order be vacated because it did not and could not identify either the "victims" or their purported losses? 4. Wasn't Motz's eight-year prison term unreasonable? 2

8 Case: Document: 79 Page: 8 04/04/ STATEMENT OF THE CASE George Motz, the 69-year-old long-serving and respected mayor of Quogue, Long Island, and a decorated death-notification officer during the Vietnam war, was indicted in the Eastern District of New York in August 2008 on one count of securities fraud (18 U.S.C. 1348(1)) and one count of document alteration (18 2 U.S.C. 1519). Doc.##1-3. The indictment alleged that Motz, who owned under 10% of a Manhattan securities broker-dealer, Melhado Flynn & Associates ("MFA"), conducted a trade allocation or "cherry picking" scheme by which profitable day trades, i.e., blocks of stock purchased in the morning that rose in value during the day and were sold at a profit, were often allocated late in the trading day to MFA's proprietary account and subsequently to the accounts of two favored hedge fund clients, thereby locking in the profits for the favored accounts, while losing day trades, i.e., blocks of stock purchased in the morning that declined in value during the day, were allocated late in the trading day to, and maintained in, client accounts over which Motz had trading discretion ("discretionary accounts"). In November 2008, a nearly identical superseding indictment was returned, this time adding MFA as a codefendant. A "Doc. # " refers to the documents listed in the district court's docket entries reproduced at A1-14 in the parties' joint appendix; "A" refers to pagination in the parties' joint appendix. 3

9 Case: Document: 79 Page: 9 04/04/ The district court dismissed most of the indictment on pretrial motion (A109-22), but Motz nonetheless pleaded guilty without a plea agreement in October 2009, entering his plea soon after the court ruled that, pursuant to F.R.Ev. 404(b), the government would be permitted to introduce at trial all of the trades and other conduct dismissed on pretrial motion. Doc.##55, 60. Following a Fatico hearing in April 2010 principally devoted to the issue of "loss" under the United States Sentencing Guidelines ("USSG") (A ), the court sentenced Motz on April 28, 2010, to, inter alia, an eight-year prison term (A548-49), and later ordered Motz to pay restitution in the approximate amount of $865,000. A In June 2010, Motz surrendered to a BOP facility where he remains confined pursuant to the Judgment. STATEMENT OF FACTS A. The Indictment. The first superseding indictment ("the indictment") charged Motz and MFA with the unlawful trade allocation scheme committed during the period November 2000 and June 2005, in violation of a securities fraud statute that only became effective on July 30, 2002, and alteration of documents 3 committed in September The second superseding indictment (A123) charged only the securities (continued...) 4

10 Case: Document: 79 Page: 10 04/04/ According to the indictment, Motz, a registered representative and investment advisor, managed approximately 183 discretionary accounts, and had exclusive authority to trade for MFA's proprietary or house account. A Motz also shared trading authority for two investment funds, i.e., the Third Millennium Fund and Investment Fund #1 (later identified by the government by the name of its principal investor, Damon Mezzacappa). A The indictment effectively divided the charged scheme into two time periods: the earlier period (November 2000 to September 2003) charged Motz with allocating the profitable trades to MFA's proprietary account, and the later period (June June 2005) charged Motz with allocating profitable trades to the two hedge fund accounts. The indictment alleged that, for the period November 2000 to September 2003, Motz allocated "losing" day trades near the 3. (...continued) fraud offense, but added 56 additional trades made between June 2003 and June 2005, and added a count of criminal forfeiture against Motz alone. In a May 28, 2010 addendum (Doc.#119), well after Motz was sentenced, the Probation Department informed the court that it had made an error in the PSR which warranted "correction." According to the Probation Office, Motz had actually pleaded guilty to the second, not the first, superseding indictment. Motz was never arraigned on the second superseding indictment, however, and nothing in his plea allocution indicates that he was pleading guilty to the second superseding indictment. Accordingly, Motz did not and could not plead guilty to that indictment nor could he have been convicted under it. See Rules 10 and 11(g), F.R.Cr.P. 5

11 Case: Document: 79 Page: 11 04/04/ end of the trading day to the accounts of the two hedge funds or the discretionary accounts or all three. The indictment acknowledged that Motz did not close out those "losing" trades on the day of purchase, i.e., by selling the securities, but continued to hold the securities in the discretionary accounts to which they had been allocated for longer periods. As a result, even the indictment acknowledged that those so-called "losing" day trades "may have become profitable by the time they were closed." A19. According to the indictment, since Motz closed out winning or profitable trades the same day, and allocated most of those trades to the MFA proprietary account, those profits were realized virtually risk free. Thus, the indictment alleged that of the 204 trades Motz allocated to the house account during the period November 9, 2000 to September 30, 2003, 202 were profitable, realizing a net profit for that account of approximately $1.4 million. A19. During the fall of 2003, MFA was investigated by the NASD and the SEC. According to the indictment, in order to cover up the trade allocation scheme using MFA's proprietary account, Motz and others at MFA altered trade tickets to make it appear that those trades had been allocated earlier in the day than they actually had been. A As the government would later acknowledge, the alleged "alteration" conduct (the indictment does not allege "destruction" of 6

12 Case: Document: 79 Page: 12 04/04/ documents) was committed only at MFA's Manhattan office. Count Two, charging document alteration in September 2003 in the Eastern District of New York, was based on those allegations, but the court dismissed that count on venue grounds. A122. According to the indictment, in September 2003 Motz ceased allocating profitable day trades to the house account, and began assigning some of them only to the accounts of the two hedge funds (Third Millennium and the Mezzacappa Fund) in order to keep those two funds as satisfied investors. A The indictment alleges that, during the period June 2003 and June 2005, Motz assigned 50 "winning" day trades to these two funds. A23. The government later produced to the defense a list of 1216 trades occurring between January 2001 and June 2005 which the government identified as the suspect trades it intended to introduce and prove at trial. A That list, which identified both the "winning" trades allocated to the house account (and later to the hedge funds) and the "losing" trades allocated to the discretionary accounts over the period covered by the indictment, was the basis for the USSG "loss" calculation advanced by the government. B. Pretrial Motions. Motz moved in July 2009 to dismiss the indictment on grounds of the statute of limitations, lack of venue, unconstitutional 7

13 Case: Document: 79 Page: 13 04/04/ vagueness, and the Ex Post Facto Clause. Docs.## In a reported decision dated August 14, 2009, the district court granted Motz substantial relief. A For example, the district court held that 18 U.S.C was not a continuing offense, so that the trade allocations occurring more than five years before the return of the indictment, i.e., before August 27, 2003, were time-barred. As a result, 638 of 1216 trades were outside the limitations period (before August 27, 2003) and could not be prosecuted. Doc. #48 at 21; A120. Moreover, upon the government's concession that all of the "alteration" conduct occurred at MFA's Manhattan office, the court also dismissed Count Two on venue grounds. As a result, what began as a two-count indictment charging a securities fraud scheme committed over a five-year period and involving more than 1200 questioned trades became, after pretrial motions, a one-count indictment charging a two-year scheme involving less than half the original number of suspect trades. C. Motz's Guilty Plea. On October 13, 2009, within a month of the court's Rule 404(b) decision permitting the government to introduce at Motz's trial on the remaining transactions all of the otherwise time-barred transactions (Doc. #60), Motz entered a guilty plea, without a plea agreement, to the trade allocation scheme charged in Count One. His plea allocution, interrupted several times to permit him to confer with counsel (A160, 167), did not go smoothly. The 8

14 Case: Document: 79 Page: 14 04/04/ experienced district judge would later describe Motz's plea as "one of the longest pleas I had." A515. For example, at the beginning of the proceedings the government agreed that Motz was entitled to a three-level reduction for acceptance of responsibility; by the end of the proceedings the government had "revise[d] its opinion on three points for acceptance of responsibility" (A159, 186), and at sentencing urged the court, unsuccessfully, to deny Motz any USSG reduction for acceptance of responsibility. A449-51, During his allocution, Motz readily admitted that his scheme was designed to benefit MFA's proprietary account (A178), and that he "put the preponderance of profitable day trades into the proprietary trading account [of MFA]." A181. As Motz put it, "I'm accepting full responsibility for [allocating] the high percentage of profitable day trades into the firm trading account" (A183), but Motz denied that he did or intended to hurt any of his clients. Motz insisted several times during the plea proceedings that the day trades were "not appropriate for the client [accounts]" (A181), and that unprofitable trades allocated to client accounts were held for substantial periods until sold (almost always at a profit), "because [these] clients were not day traders. They were investors." A183. Indeed, even though the government repeatedly notified them that they were victims of Motz's scheme and therefore entitled under the Crime Victims Act to 9

15 Case: Document: 79 Page: 15 04/04/ attend all proceedings, to be heard at sentencing, and possibly even to receive restitution (Doc. #89 Exhibit Z), some of Motz's supposedly victimized clients 4 actually wrote letters of support for him at sentencing, and only one customer 5 bothered to complain. None appeared at sentencing. A464, 534. Nevertheless, by the end of the lengthy plea proceedings, and upon government agreement that Motz had admitted an offense under 18 U.S.C (A186), the district court accepted Motz's guilty plea to securities fraud in satisfaction of the only remaining count of the indictment. A187. D. The PSR and Motz's Objections. In its Pre-Sentence Report ("PSR"), the Probation Office revealed that, while the government presented a list of 240 "victims," the government "is unable to identify the losses suffered by each victim." PSR 11. Nevertheless, the PSR calculated Motz's total offense level at 35 in Category I ( months), driven largely by the PSR's adoption of the government calculation that Motz had caused his discretionary clients, who totaled 4. At least five persons on the government's "victim" list wrote letters of support for Motz, including Charles Mott, Ben Carter, David Genser, Tobe Intrieri and Susan Sayer. Compare A with Doc. #89 Exhibit C. 5. The complaining letter-writer (Kennedy) wrote on behalf of his elderly mother, but failed to acknowledge that his mother's account, managed by Motz over many years, made profits of some $11 million, an analysis performed by a defense expert (Sikowitz) which the government did not dispute. A529-30,

16 Case: Document: 79 Page: 16 04/04/ more than 50 (4-levels), a combined "loss" of about $2 million (16 levels). The PSR also reflected the government view that Motz should receive no reduction for acceptance of responsibility. In his sentencing memorandum (Doc. #89), Motz objected to, inter alia, the PSR's "loss" and "number of victims" calculations; he contended there was no "loss" and no victims within the meaning of the USSG. Motz's own USSG calculation produced a total offense level of 11 (including a two-level reduction for acceptance of responsibility), with a USSG range of 8-14 months before considering Motz's arguments for downward departure on grounds of, inter alia, age and military and public service. E. Fatico Hearing and Post-Hearing Submissions. With no plea agreement because the parties were advancing dramatically different "loss" calculations, the district court held a Fatico hearing before sentencing. Both sides introduced expert reports and testimony, and made post-hearing submissions. 1. The Government Expert. The government's expert, Lawrence Harris, a professor of finance at the University of Southern California and for two years the chief economist for the SEC (A211-12), acknowledged on crossexamination that he was not and never had been a registered representative or investment advisor; had never supervised retail accounts like MFA's discretionary 11

17 Case: Document: 79 Page: 17 04/04/ accounts; had not reviewed the new account opening statements for the discretionary accounts at issue in this case; did not review the investment objectives of the customers reflected in their new account opening statements; did not review the risk profile of the discretionary account customers; and therefore had "no idea" whether any of the purported victimized customers had authorized Motz to engage in day trading in their accounts; did not know if any of the discretionary accounts were margin accounts; did not know the amount of the commissions that MFA charged its customers for executing trades; had not attempted to satisfy the obligation of a broker or trader to "know the client"; in conducting his analysis in this case, had not put himself in the shoes of an investment advisor for MFA's customers; did not analyze how the subject stocks performed two weeks or more after the day of trade; did not know whether the 1200 or so subject trades were discretionary or directed trades; and conceded that some of those trades may not have been discretionary trades at all, "in which case my evidence would have been less conclusive for the government." A332-38, 343, ). Finally, Harris claimed that he had not attempted to address or answer the defense expert's report or conclusions. A343. Over the three years Harris had worked on the issue of loss in this case, first for the SEC in 2007 and then for the government (A344-45), culminating in an 12

18 Case: Document: 79 Page: 18 04/04/ "Addendum" submitted two days before the Fatico hearing, Harris repeatedly modified his theory of loss. Initially, Harris theorized that "loss" in this case could be measured by the profits realized by MFA's proprietary account and later the accounts of the two hedge funds. While Harris never abandoned that theory, the district court rejected it at sentencing. A488. The newer and alternative "loss" theory advanced by Harris, reflected in his Addendum admitted at the Fatico hearing over defense objection because its tardy production did not give the defense a sufficient opportunity to analyze it (A271-73), was based on the notion that the "disfavored" accounts realized a first-day loss amounting to $2.4 million resulting from the difference between the higher price at which Motz purchased the stock in the morning and the lower price of the stock when he allocated it to the discretionary accounts. A310-17, In other words, two days before the Fatico hearing, Harris finally discovered that the "loss" from a "cherry picking" scheme comes about because A284. [i]n effect, the purchase is actually taking place at the time of assignment, not at the original time [of purchase] in the morning, and so they [the discretionary accounts] are paying a higher price than they should for the securities that they're receiving. 13

19 Case: Document: 79 Page: 19 04/04/ Whatever the theory, Harris always insisted that the discretionary accounts suffered a loss, a conclusion he adhered to despite the fact that 1) a highly respected and knowledgeable defense expert refuted Harris's theories; 2) most of Motz's discretionary accounts made money over time on the questioned trades; 3) some of the accounts were not discretionary accounts at all, and therefore could not be part of the charged scheme; and 4) under any fair and proper system of allocating trades, some of the "losing" trades would have been allocated to the discretionary accounts in any event, assuming those accounts were amenable to day trades in the first place (and they weren't). A260. Moreover, in his last-minute Addendum, Harris acknowledged that his original reports were based on an erroneous "simplifying assumption when computing the damages" (A255), which Harris claimed to have cured in the Addendum by exercising "more discipline in the production of the addendum than previously." A348. According to Harris, his Addendum contained his most accurate "loss" figure, $2,409,311. A255, Harris's Addendum also increased the amount of loss by approximately $1.2 million, to a total of $3.6 million, on the assumption that the discretionary accounts were charged $.10 a share per transaction for investment advisory services they did not receive from Motz, when the $.10 figure was actually the normal execution cost per share for any MFA trade. A264, The court rejected Harris's additional $1.2 million loss figure. A

20 Case: Document: 79 Page: 20 04/04/ The Defense Expert. Charles Porten, a defense expert, was the president of his own investment advisory firm, a Harvard Business School graduate, and a chartered financial analyst with 31 years of experience in the investment management industry, including as chief investment officer of Citibank's Global Private Bank. In his expert report dated January 7, 2010 (A ), Porten concluded that Harris's initial loss calculation of $2,164,869 million, based on Harris's theory that loss could be measured by the profits earned by the "favored" accounts on the first day, was "grossly overstated" because it failed to take into account transaction costs, taxes, the cost of liquidity to make the purchase, e.g., sale of stock or borrowing, and the fact that day trading was inappropriate for the discretionary accounts. Porten concluded that "a more realistic number for the 'profit' [if allocated to the discretionary accounts] would be a loss of $131,236." A197 (emphasis added). Of course Porten had no opportunity to address in his report Harris's new theory of loss, i.e., the same-day difference between purchase price and allocation price, because Harris only offered his new theory on the eve of the Fatico hearing while Porten's report had been submitted months earlier and in response to Harris's original and outdated report. It was not until the Fatico hearing that Porten had the opportunity, albeit a limited one, to comment not only on Harris's testimony at 15

21 Case: Document: 79 Page: 21 04/04/ the hearing, but Harris's new theory which in the end was the theory of loss the court adopted. For example, Porten testified uncontradicted that most of Motz's clients made money on the questioned trades because Motz bought "blue chip" stocks that inevitably appreciated in value after the first day. A381. According to Porten's analysis, during the sample year of 2004, 83% of the questioned trades became profitable within one week, and 88% became profitable within two weeks. Id. In other words, Porten insisted that the first day's loss is irrelevant... [since] the trades that showed a loss after day one were not closed out after day one. There was no realized loss to the client. Those transactions stayed in the account. A381. Porten concluded that most of the questioned trades allocated to the discretionary accounts "worked out well [for the customers] in a reasonably tough economic environment and paid dividends along the way." A382. In short, Porten insisted that, while he was "not disputing that cherry picking was a fraud," it was a fraud in which "there is no loss to the clients, just a gain to the favored accounts." A In reaching his conclusion, Porten rejected Harris's assertion that Motz's trading scheme was a "zero sum game" in which profits improperly allocated to favored accounts came from or resulted in 16

22 Case: Document: 79 Page: 22 04/04/ losses in the disfavored accounts. A According to Porten, "The gains [to the favored accounts] were from different transactions... The private clients weren't on the other side of those trades. The zero sum game doesn't apply." A After the Fatico hearing and two days before sentencing, both sides made simultaneous submissions addressing the testimony at the hearing and the issue of loss (and the related issue of the number of victims). A (government); A (Motz). Counsel for Motz contrasted Harris's shifting positions with Porten's consistent position that the discretionary accounts suffered no loss from Motz's trade allocation scheme. F. Sentencing. At Motz's sentencing on April 28, 2010, and over government objection, the court gave Motz a two-level reduction for acceptance of responsibility. The court also rejected the government's eleventh-hour argument that the loss caused by Motz should include an additional $1.3 million based on the advisory fees the discretionary accounts had paid, a loss the court found 7. Motz also introduced the expert report of Jonathan Macey, the Sam Harris Professor of Corporate Law, Corporate Finance and Securities Law at the Yale Law School, and a professor in the Yale School of Management, who was prepared to testify, inter alia, that the day trades allocated to the proprietary and hedge fund accounts "would have been wholly inappropriate for the Retail Accounts" (Doc.#89 Exhibit U), but Macey did not testify at the Fatico hearing. 17

23 Case: Document: 79 Page: 23 04/04/ unsupported. Finally, the court rejected Harris's original theory that the loss caused by Motz was equivalent to and could be measured by the profits earned by the "favored" accounts. A488-89, 519. At the same time, the court rejected Motz's argument that the charged victims suffered no loss. Instead, the court adopted Harris's loss figure of approximately $2.4 million based on Harris's newer theory that the discretionary accounts had lost the amount by which the subject stocks had declined in value on the day of trade from the time they were bought in the morning until allocated to the discretionary accounts near the end of the trading day. A488. The court also rejected the defense's related objection to the government's list of 240 discretionary account "victims" to whom "losing" day trades had been allocated, thereby increasing Motz's total offense level by 4-levels for more than 50 victims. A496. Finally, the court enhanced Motz's sentence by 2-levels for obstruction based on Motz's "destruction" of trading records, although Motz had only been charged with altering records, and there was no evidence he had destroyed any records. A Based on its findings, the court calculated Motz's total offense level at 33 ( months), imposed a prison sentence of 96 months and a $20,000 fine, left the amount of restitution for later determination and, over government 18

24 Case: Document: 79 Page: 24 04/04/ objection, permitted Motz to self-surrender to a designated BOP facility. A548-49, G. Restitution. By decision and order dated August 5, 2010 (A651-53), the district ordered Motz to pay restitution in the amount of $864,806, a figure calculated by Harris based on the timely trades allocated to the discretionary accounts, i.e., trades occurring after August 27, In so holding, the court "decline[d] Motz's invitation to revisit victim loss issues that were decided during the Fatico hearing." A652. In particular, the court rejected Motz's argument that restitution to customers who ultimately profited from the trades allocated to their accounts would amount to a "windfall." A624. The court did agree to stay Motz's obligation to pay restitution pending this appeal. A SUMMARY OF ARGUMENT I. The court erred in determining a USSG "loss" figure of $2.4 million because it failed to offset the loss by profits Motz made for the charged "victims" after the first day paper losses from his "cherry picking" scheme. In any event, the loss was far less than $2.4 million because the court failed to consider or resolve, inter alia, the ex post facto implications of basing "loss" on the violation 8. MFA, which was moribund, also pleaded guilty and was sentenced to a term of probation. 19

25 Case: Document: 79 Page: 25 04/04/ of a statute that did not take effect until two a half years after the scheme allegedly began, and the government expert's concession that his estimate, which the court adopted, had a 40% margin of error, which is not a "reasonable estimate" for purposes of determining "loss." II. For much the same reasons, the court erred in concluding that Motz's scheme victimized 240 persons. In fact, the government failed to prove the existence of any victims. Certainly the number of "victims" found by the court is intolerably unreliable because the court did not consider or resolve such factors as 1) the victim list included non-discretionary accounts which were not part of the charged scheme; 2) the victim list double counted the victims who had several accounts; 3) the victim list did not take into account the ex post facto implications of calling someone a victim based on conduct occurring before the effective date of the statute; and 4) the list included accounts that received no allocation of block trades and therefore could not have been part of the scheme. III. The court's restitution order is invalid because it fails to identify any victim or the amount of restitution to which any victim was entitled, in plain violation of the restitution statute. The fundamental defects in the order should come as no surprise not only because many, if not all, of the 240 names on the government's list were not victims at all, but because the government conceded it 20

26 Case: Document: 79 Page: 26 04/04/ could not identify "the losses suffered by each victim," as the statute requires in order to avoid a windfall to "victims" who suffered no loss. IV. An eight-year prison term for a 69-year-old man with an unblemished record and a history of honorable military and public service is unreasonable where the "victims" of his trade allocation or "cherry picking" scheme actually profited from the trades allocated to their accounts. 21

27 Case: Document: 79 Page: 27 04/04/ ARGUMENT Introduction. Without appellate review and relief, this case presents a cautionary tale of the bizarrely onerous results the USSG regime, which largely drove Motz's harsh sentence, is capable of producing when confronted with securities schemes like this one raising new issues or garden-variety issues in unusual contexts. We start with the proposition that George Motz, the married father of five, was the long-serving and respected mayor of Quogue until he resigned after he pleaded guilty, and was decorated for his service to his country during the Vietnam war. By some lights, these facts alone could make his eightyear sentence seem at least puzzling. But there's more. Motz's two-count indictment was largely eviscerated on pretrial motion, although he nonetheless pleaded guilty soon after the government won its Rule 404(b) motion. Even during his guilty plea and after, Motz continued to deny that he had caused or intended to cause any loss to the charged victims, i.e., the discretionary accounts to which he allocated same-day losing trades. There was good reason for Motz's resistence. It was undisputed that the overwhelming majority of the questioned same-day trades allocated to client accounts ultimately made a profit. Indeed, despite being told repeatedly by the government that they were "victims" of Motz's scheme, there is no indication in the record that any significant number 22

28 Case: Document: 79 Page: 28 04/04/ of customers considered themselves "victims." Some even wrote to the court to urge leniency for Motz at sentencing. Motz's plea amounted to an admission that he used his clients' accounts without their knowledge as a vehicle to carry out a trade allocation scheme by which MFA's house account (and later two favored hedge funds) were assured of making money by the allocation to those accounts of only profitable day trades. Implicit in Motz's allocution was the admission that he caused his discretionary accounts to pay for trades that were not intended for their benefit, but were allocated to them, and paid for by them, only because the stocks had declined in value on the day of purchase, and Motz did not want to assign losing trades to the house account. Certainly Motz has never attempted to deny his guilt of the charged fraud. But an admitted securities fraud scheme does not necessarily mean that the discretionary accounts suffered financial "loss" within the meaning of the USSG. On the contrary, the USSG recognizes that actual or intended loss, e.g., in a check kiting or Ponzi scheme, can be mitigated or reduced by credits, gains or repayment. USSG 2B1.1, comment. (n. 3(E)). Here, whatever the "same day" loss, the stocks allocated to the discretionary accounts indisputably and usually became profitable, generally within a relatively 23

29 Case: Document: 79 Page: 29 04/04/ short time after purchase. And that is what differentiates this case from every other reported "cherry picking" case. If the government had identified discretionary accounts that lost money when the stocks Motz allocated to them were sold, perhaps that "loss" would have been a real "loss" for purposes of the USSG. But neither the government nor its expert ever identified such accounts or trades, no doubt because the government wanted to ignore or obscure the critical fact that the supposed victims actually made money overall from the charged trades. In short, the government did not carry its burden of proving the $2.4 million loss figure adopted by the district court. And if there was any USSG "loss" and Motz argues on this appeal, as he did below, that the government proved no loss it was certainly much less than the $2.4 million accepted by the district court. The case should be remanded for resentencing. 24

30 Case: Document: 79 Page: 30 04/04/ POINT I: MOTZ'S TRADE ALLOCATION SCHEME NEITHER CAUSED NOR CONTEMPLATED "LOSS" TO HIS CUSTOMERS AND, EVEN IF IT DID, THE LOSS WAS MUCH LESS THAN $2.4 MILLION A. No Loss. This case raises a new and important question of law about how to calculate "loss" under the USSG in a trade allocation scheme. What makes the issue new, and what causes the government serious conceptual and practical problems, is the fact that, unlike all other reported cherry picking cases, Motz's scheme indisputably made money for most of his allegedly victimized 9 customers, just not on the day of the trade. Thus, the government concocted a "loss" that was purely theoretical and artificial, providing only a misleading freeze-frame that did not reflect the kind of actual or intended "loss" the USSG requires before enhancing the offense level as dramatically (16 levels) as the court did in this case. 9. Compare, e.g., In re Gerson Asset Management, 2005 WL (SEC Admin. Proceeding Dec. 2, 2005) (personal gain of over $200,000; loss to clients of at least $150,000); SEC v. Bond, SEC LR (Aug. 10, 2001) (personal gain of $6.6 million; loss to clients of $57 million); SEC v. Lyons, SEC LR (Aug. 12, 1998) (personal gain of $929,000; loss to clients of $416,000). In none of the cited cases, nor in any other reported decision involving a cherry picking scheme, was the loss measured by the first day trading losses. Moreover, there was no question in the cited case that the offending investment advisors or fund managers profited at the expense of their customers. In short, Motz's case is sui generis. 25

31 Case: Document: 79 Page: 31 04/04/ In the face of undisputed actual profit or gain in this case, the government understandably had a hard time articulating a theory of "loss." The best it could do, over months and months of effort, change and refinement of its position, was the assertion that, no matter how much the discretionary accounts ultimately profited from Motz's scheme, they would never recover the first-day price differential between the supposedly higher opening price the discretionary accounts paid for stock and the lower price at the time the stock was allocated to them later in the day. A In other words, according to the government, "the question now before the Court [after the Fatico hearing] is how to measure 10 the first day losses." A442 (emphasis added). No court has ever before accepted or adopted the government's theory, i.e., that same-day paper losses are the equivalent of actual loss under the USSG, and for good reason. The law is clear that USSG "loss" is not to be determined on 10. In something of an understatement, the government offered what it conceded was an "extreme" hypothetical example that, in the government's view, "best makes the point." A443. The example involved 100,000 shares of bank stock purchased at $10/share in the morning, but as a result of news during the day that the bank's officers had been indicted, the share price tumbled to $1/share by the end of the day when the stock was assigned to a discretionary account, creating a paper loss of $900,000 for the day. According to the government, no matter how much the stock rebounded in the days and weeks afterwards, the discretionary account would never make up the $900,000 first-day paper loss. 26

32 Case: Document: 79 Page: 32 04/04/ such an artificial basis, one that fails to take into account developments after the first day. First, by limiting the scheme to "first day losses," the government impliedly acknowledges that Motz's purchases made profits for the discretionary accounts exceeding first day losses. Indeed, the indictment says so (the "losing" trades "may have become profitable by the time they were closed"). And Motz's expert, a highly reputable and experienced market professional, concluded, without contradiction or question by the government or its expert, that the overwhelming number of questioned trades were ultimately profitable: the questioned trades had "worked out well [for the customers] in a reasonably tough economic environment and paid dividends along the way." Had the trades lost money after the first day, this Court can be sure that the government would have sought to hold Motz accountable and punish him for those losses. Equally important, despite the defense's uncontradicted argument that the discretionary accounts were unsuitable for day trades, the government's "loss" theory was predicated on the baseless and erroneous proposition that the same day allocations were suitable in light of the investment objectives and risk profiles of the discretionary accounts, factors that the government expert conceded he had not looked into, and that the loss lay merely in charging those accounts a higher price 27

33 Case: Document: 79 Page: 33 04/04/ than they should have paid, i.e., the higher purchase price as opposed to the lower price when the stock was allocated to the discretionary accounts. In other words, the owners of Motz's discretionary accounts would not likely have authorized his use of their money to purchase stock for their own accounts to facilitate a trade allocation scheme designed to benefit the house account or a few favored customers. It was the purchase price of the stock paid for by the discretionary accounts for a purpose they presumably had not authorized that constituted the "loss" caused by the scheme to which Motz pleaded guilty. The government conspicuously ignores this more natural and rational theory of loss because, if the scheme and its consequences are not hermetically sealed on the first day, as the government theorizes, the USSG would recognize the fair market value of any off-setting gains or credits. USSG 2B1.1, comment. (n. 11 3(E)(i) & (ii) and 3(F)(iv)). 11. USSG 2B1.1, comment. (n. 3(E)(i) & (ii)) provides in relevant part that loss "shall be reduced" by "the money returned and the fair market value of the property returned and the services rendered, by the defendant or other persons acting jointly with the defendant, before the offense was detected" or by "the amount the victim has recovered by the time of sentencing from disposition of the collateral [pledged or otherwise provided by the defendant]." Commentary note 3(F)(iv) provides that, "in a Ponzi or otherwise fraudulent investment scheme, gain to an individual investor in the scheme shall not be used to offset the loss to another individual in the scheme," but gain to the individual investor offsets his own losses. United States v. Van Alstyne, 584 F.3d 803, (9th Cir. 2009). 28

34 Case: Document: 79 Page: 34 04/04/ For example, in a check kiting scheme, while the USSG could have calculated the loss as the face amount of any kited check, in fact the "loss" in such a scheme is based on the actual loss the lender suffers by or after the time of detection, less any funds available to the lender to offset the loss. See, e.g., United States v. Flowers, 55 F.3d 218, 222 (6th Cir. 1995). No additional "loss" is attributed to the defendant for borrowing the lender's funds or putting those funds at risk during the kite, where the defendant ultimately makes good on the kited check before the kite falls and the scheme unravels. USSG 2B1.1, comment (n. 3(D)(i)("Loss shall not include... interest of any kind); United States v. Frydenlund, 990 F.2d 822, 826 & n.5 (5th Cir. 1993) (rejecting government argument that check kiting loss is sum total of kited checks; instead, loss is net loss when scheme unravels). Similarly, in a Ponzi scheme, "loss" is measured by a victimized investor's actual loss at the time the scheme unravels, not the theoretical or risk of loss when he first invests in the fraudulent scheme. If the investor receives the promised return on his investment, even from later victims of the scheme, he has not suffered a loss within the meaning of the USSG: [I]ndividuals who receive a 'return' or break even on their 'investments' are not victims for purposes of 2F1.1. At most, they are unwilling pawns in the Ponzi scheme. 29

35 Case: Document: 79 Page: 35 04/04/ These individuals may be exposed to a risk of harm by the Ponzi scheme, but the risk of harm should not be considered in estimating the loss under 2F1.1. United States v. Orton, 73 F.3d 331, 334 (11th Cir. 1996), adopted by the USSG in App. C, Amend See also Van Alstyne, 584 F.3d at ("The notes accompanying [Amendment 617]... make clear that the implication of the new standard is that returns to investors up to the amount invested do not count as losses"). Like check kiting or Ponzi schemes, the "loss" in a trade allocation scheme is the amount paid by the customer for the fraudulently allocated stocks, less the amount ultimately returned to the customer's account, which in this case was more than the amount the customer accounts were charged for the purchase, let alone the amount of the first-day's price differential between purchase and allocation. A slight variation in the government's hypothetical example demonstrates the conceptual and practical flaws in the government "same day loss" theory. Suppose that the bank stock purchased in the morning at $10/share was allocated at the end of the day when the stock was down only $.25 and was trading at $9.75/share. The next day, however, when the market had fully absorbed the news of the indictments of the bank's officers, the stock declined precipitously to the government's hypothesized $1/share. Under the government's theory, the 30

36 Case: Document: 79 Page: 36 04/04/ "loss" caused by Motz's scheme would be measured only by the $.25/share first day differential, not the more dramatic second day loss resulting from the original fraudulent allocation. But just as Motz might be responsible for all loss caused by or resulting from his trade allocation scheme, whether the loss occurred on the first day or two weeks later, he should also be credited with the substantial gains he realized for his clients after the first day. Here, the government has never disputed the defense expert's analysis that nearly all of the subject trades allocated to the discretionary accounts produced a profit over the period that Motz held the stock. For example, the defense expert determined that in the sample year of 2004, 83% of the allocated block trades became profitable in one week and 88% became profitable after two week, in part because Motz purchased blue chip stocks. Like all other fraudulent investment schemes, loss in a trade allocation scheme should be based on actual net loss, not theoretical paper losses. Where, as here, the client accounts actually profited from the trades, Motz is entitled to have those gains credited against any losses resulting from his allocation scheme. For this reason Motz correctly argued below that the government did not carry its burden of proving "loss," and that his offense level should not have been enhanced by 16-levels for "loss." No doubt for this reason, too, none of the

37 Case: Document: 79 Page: 37 04/04/ "victims" turned up at sentencing. On the contrary, at least five of those "victims" wrote letters to the court supporting Motz. Accepting Motz's argument concerning "loss" does not mean that he would go unpunished. Motz never qualified or withdrew his admission of guilt to the trade allocation scheme, which starts with a base offense level of 7. Nor could there be any quarrel with a 4-level enhancement because Motz was an investment advisor ( 2B1.1(b)(17)(B)(iii)), a 2-level enhancement for obstruction ( 3C1.1), and a 2-level role enhancement ( 3B1.1(c)), resulting in a total offense level of 13 (after deducting 2-levels for acceptance of responsibility), producing a USSG range in Zone C of months. In short, the district court erred as a matter of law in adopting the government's artificial and novel theory that produced an illusory $2.4 million loss, while rejecting Motz's more consistent and persuasive argument that his scheme caused no actual USSG "loss," nor was it intended to, because his discretionary clients profited over all from the allocations. B. Much Less Loss. Even if this Court accepts the government's "day of trade" theory of "loss," the court's $2.4 million loss calculation was grossly overstated and erroneous, principally because, as far as the record shows, the court, like the government and its expert, ignored or failed to consider a number of 32

38 Case: Document: 79 Page: 38 04/04/ undisputed or indisputable defense arguments that substantially reduced the "loss" calculation. 1. Ex Post Facto. The government's loss calculation, submitted on the eve of the Fatico hearing and adopted by the court at sentencing, was based on Motz's 765 block trades between January 4, 2001, and June 28, 2005, broken up and allocated to discretionary accounts on the day of purchase. A29-45, 215. The government's expert (Harris) concluded that the loss figure under this new "day of trade" theory was approximately $2.4 million, the figure the court accepted and on which it based its 16-level USSG "loss" enhancement. The district court correctly held on pretrial motion that 18 U.S.C. 1348, the statute under which Motz pleaded guilty, was not a continuing offense; that each of Motz's trades in furtherance of the trade allocation scheme was a separate 1348 offense; and therefore prosecution for trades occurring before August 27, 2003, was barred by the statute of limitations. The court held, however, that otherwise time-barred trades could be used to determine "loss" under a relevant conduct theory. As a result, the statute of limitations had no affect in determining "loss," although it did significantly affect the issue of restitution since restitution cannot be imposed for a crime for which Motz was not convicted. 33

39 Case: Document: 79 Page: 39 04/04/ What the court failed to take into account, however, was the fact that 1348 did not take effect until July 30, 2002, and that Motz could not be punished for his trades before the effective date without violating the Ex Post Facto Clause. United States v. Marcus, 538 F.3d 97 (2d Cir. 2008) (plain error reversal of two counts of conviction based on Ex Post Facto Clause violation) (Marcus I), vacated United States v. Marcus, 130 S. Ct (2010), on remand United States v. Marcus, 628 F.3d 36 (2d Cir. 2010) (reversing conviction on one count on ex post facto grounds) (Marcus II); United States v. Harris, 79 F.3d 223, 228 (2d Cir. 1996) (defining scope of Ex Post Facto Clause). Of the 765 block trades relied on by the government, and therefore the court, 225 occurred before the effective date of the statute (A29-33), and were therefore barred as a basis for punishing Motz. The loss from these 225 trades, according to the government's chart, totaled approximately $930,000, the amount by which the $2.4 million loss figure must be reduced on Ex Post Facto grounds. In fact, based on Harris's acknowledgments in his Addendum, i.e., that approximately 314 out of the 765 block trades "may not have been subject to the fraud" (A260) (see Point I-B-2, infra), the nearly $1 million reduction based on Ex Post Facto principles could well have reduced the "loss" to a lower category than the "more than $1 million" category upon which the court settled. 2B1.1(b)(1)(I). 34

40 Case: Document: 79 Page: 40 04/04/ Even if removing nearly $1 million, by itself, would not have reduced Motz's offense level, it surely would have favorably affected the court's view of Motz and his offense, and would likely have resulted in a lower sentence. 2. Intolerable Ambiguity. In his Addendum, the government's expert, Professor Harris, made a startling admission: [S]ome of the trades that I identified as assignable [to the scheme] in fact may not have been subject to fraudulent trade assignments.... Had [Motz] assigned all profitable trades to the favored accounts, and all other trades to the disfavored accounts, approximately equal numbers of trades would have been assigned to both sets of accounts. Instead, 765 trades of the 1216 trades that I identified as assignable were assigned to the disfavored accounts while only 451 were assigned to the favored accounts. Thus, approximately 314 (765 minus 451) trades assigned to the disfavored accounts may not have been subject to the fraud. A260 (emphasis added). Thus, by his own admission, the government's expert, whose loss figure was adopted by the court, recognized that about 40% of the 765 trades he allocated to Motz's scheme may not have been part of the fraud at all. In other words, Harris acknowledged the possibility that, even without Motz's trade allocation scheme, 40% or more of the "losing" trades would have been allocated to the discretionary accounts in any event. Losses to accounts not attributable to the scheme cannot be laid at Motz's doorstep for purposes of 35

41 Case: Document: 79 Page: 41 04/04/ sentencing under the USSG. United States v. Ebbers, 458 F.3d 110, 128 (2d Cir. 2006) ("[l]osses from causes other than the fraud must be excluded from the loss calculation"). The high percentage of trades that Professor Harris may have improperly or erroneously assigned to the scheme is not chimerical or illusory. As reflected on the government's chart of all questioned trades, by at least the beginning of April 2004 the government was able to track the time of Motz's block purchases. A39-44, Even a cursory review of the government's chart reveals that many of those block purchases were made in the afternoon of the trading day in fact, approximately 47% of the listed trades whose time of purchase was identified on the government's chart were not made in the morning but in the afternoon and therefore closer to the time of allocation a pattern which is inconsistent with the scheme charged in the indictment and Motz's guilty plea allocution. 12 Similarly, Harris acknowledged that he never bothered to determine whether the client accounts which he included as part of the scheme were actually non- 12. In his plea allocution, Motz admitted that "there were times when I would purchase block trades in the morning, and then monitor the performance of these trades during the day. There were occasions when I saw these trades were making a profit. I took the profits from those trades to benefit the firm's proprietary trading account." A Similarly, the indictment alleges that "[a]s part of the scheme, Motz frequently submitted orders to purchase securities to the MFA trading desk in the morning." A18. 36

42 Case: Document: 79 Page: 42 04/04/ discretionary accounts. Harris passed off this gaping hole in his analysis by breezily conceding that, if some of Motz's questioned trades were not discretionary trades at all, "my evidence would have been less conclusive for the government." A332-38, 343, True, the USSG recognizes that determining loss is often a complicated matter, and therefore courts are permitted to estimate loss rather than determine it with an accountant's precision. USSG 2B1.1, Comment. (n. 3(C)); United States v. Guang, 511 F.3d 110, 123 (2d Cir. 2007) ("A district court need not establish the loss with precision but rather need only make reasonable estimate of the loss, given the available information"); United States v. Rutkoske, 506 F.3d 170, 179 (2d Cir. 2007). Nevertheless, a margin of error of 40% or more is not a "reasonable estimate," but a stab in the dark, and an arbitrary, unsatisfactory and ultimately unlawful basis on which to deprive a defendant of his freedom. Cf. United States v. Scheele, 231 F.3d 492, 499 (9th Cir. 2000) (like "loss," the USSG permits drug quantity to be estimated; but where court estimates, it must consider the margin of error in its methodology before determining quantity, and approximated quantity should then be compared to USSG "break points": "If taking the margin of error into account and erring on the side of caution would 37

43 Case: Document: 79 Page: 43 04/04/ reduce the defendant's base offense level to the next lowest level, the court must do so"). 13 Accordingly, the case should be remanded for resentencing without a "loss" enhancement or at least for recalculation of the "loss" enhancement, taking into account, inter alia, the effective date of 18 U.S.C and the high percentage of trades that had nothing to do with the scheme. POINT II: THE NUMBER OF "VICTIMS" WAS LESS THAN 50 Over Motz's objection (Doc. #89 at 30-31; A467, 490), Motz received a 4- level enhancement under USSG 2B1.1(b)(2)(B) for causing loss to more than 50 "victims." A496. The court found the government had established that the 13. While Harris tried to pass of this intolerable ambiguity as merely meaningless background "noise" which did not bias his conclusions since "gainers are approximately equally likely as losers, so that the gainers will offset the losers" (A261), his reasoning is illogical and unpersuasive. Based on Harris's logic, there should have been an equal number of "losers" as "winners" among allocations to Motz's discretionary accounts. But a review of those trades shows that there are far more same-day losers than winners (A29-45), suggesting that a high percentage of those losers had nothing to do with the scheme. Equally plausible, the supposedly off-setting "winners" were never reflected on the chart since Harris admitted that he "undoubtedly" did not identify all client trades that were assignable to the scheme. A260. Thus, Harris's attempt to soft pedal a 40% margin of error by calling it merely background "noise" is unconvincing. His theory that "gainers" will offset the "losers" is at odds with the facts. 38

44 Case: Document: 79 Page: 44 04/04/ offense "involved the 240 victims set forth in the Pre-Sentence Report, and the offense level was properly increased by four levels." Id. Of course, the defense had argued before and at sentencing that Motz's scheme caused no loss, and therefore no "victims," or at least that the government had not carried its burden of proving otherwise. See Point I-A, supra. If the defense argument is accepted by this Court, Motz's offense level would have to be reduced by 4-levels, i.e., less than 10 victims. USSG 2B1.1(b)(2)(A). Even assuming, however, that this Court upholds the government's "day of trade" theory of loss, the number of "victims" found by the district court is still intolerably unreliable because of the many important factors the court appeared not to consider and certainly did not resolve. Counsel for Motz pointed out to the court that the government's list of 240 victims 1) included non-discretionary accounts which, according to the government's expert, were not part of the charged scheme although such non-discretionary accounts were figured into his analysis; 2) included multiple accounts for the same client, sometimes based on nothing more than variations in the spelling of the client's name, which would not 14 constitute multiple victims but only one victim; 3) the "victim" list did not reflect 14. For example, the "victim" list reflects two accounts, one in the name "Renee Karas Crames" and the other in the name of "Renee Karas Crames, 12 (continued...) 39

45 Case: Document: 79 Page: 45 04/04/ the date or dates on which block trades were improperly allocated to the discretionary accounts, and therefore whether criminal prosecution of the questioned trade would be barred by the effective date of 18 U.S.C (July 30, 2002) and the Ex Post Facto Clause; 4) a number of persons identified by the government as "victims" actually wrote letters of support for Motz at sentencing, suggesting that they did not view themselves to be victims, and neither should the government (Doc. #89 Exhibit C); and 5) the list of "victims" included accounts that received no allocation of any portion of block trade purchases. These were serious flaws in the government's list of "victims," and should have called into question the list's reliability. Having adopted the government's questionable loss theory, however, the court did not appear inclined to make nice distinctions as to who was or was not an actual victim. The two concepts (loss and victim) are not synonymous, however, because the court is entitled to estimate loss, while identifying victims, whether for the USSG or for restitution, requires precision since the USSG contains a precise definition of "victim," i.e., "any person who sustained any part of the actual loss... as a result of the offense." USSG 2B1.1, comment. (n.1). 14. (...continued) Westfield Road," undoubtedly the same person. A

46 Case: Document: 79 Page: 46 04/04/ This case is no different from United States v. Arnaout, 431 F.3d 994, 999 (7th Cir. 2005), where the Seventh Circuit "could not find proof by a preponderance of the evidence in the record that at least 50 donors contributed the amount attributable to [the defendant]." While there were 17,000 potential victims of the defendant's scheme in Arnaout, and "it is entirely conceivable that of the over 17,000 potential victims, more than 50 contributed to the $300,000" loss attributable to the defendant (id.), the Arnaout court was persuaded by the defendant's argument that the district court had "failed to account for each dollar diverted and did not trace each diverted dollar back to a specific donor." Arnaout demonstrates the rigor with which the court is required to determine the identity or number of victims, and highlights how inadequate and unsatisfying the record and the court's efforts were in this case. In short, it is virtually certain that there were fewer than 240 victims of Motz's trade allocation scheme. Indeed, the indictment alleges that Motz supervised or managed only 186 discretionary accounts, so it is hard to understand how there could ever be 240 victims. And it is probable that there were less than 50 victims. If so, Motz's 4-level enhancement for more than 50 victims would have to be reduced by at least two levels. If this Court accepts Motz's argument that no loss occurred, there would be no victims at all within the meaning of the 41

47 Case: Document: 79 Page: 47 04/04/ USSG. At the very least, the record demonstrates that the government failed to carry its burden of establishing the requisite number of victims for the 4-level enhancement imposed on Motz. POINT III: THE RESTITUTION ORDER MUST BE VACATED BECAUSE IT DID NOT AND COULD NOT IDENTIFY EITHER THE "VICTIMS" OR THEIR PURPORTED "LOSSES" Over government objection, the district court wisely granted a stay of Motz's restitution obligation on the ground that "the loss issue was vigorously litigated and... Motz should be given an opportunity to test [the court's] finding on appeal before he is required to make this [$864,806] restitution payment." A657. In fact, even apart from the "vigorously litigated" loss issue, the court's restitution order must be vacated because it contains none of the precision the statute demands. We start with the fact that the restitution order nowhere identifies the victims to whom restitution is owed and the amount of restitution each victim is to receive. A The Mandatory Victims Restitution Act ("MVRA"), 18 U.S.C. 3663A, expressly requires the court to identify in the judgment or restitution order the identities of the "victims" to whom restitution is to be paid 42

48 Case: Document: 79 Page: 48 04/04/ and in what amount. As this Court has held: "Identification of victims is a statutory prerequisite to the application of the MVRA... The court erred in not identifying them before ordering restitution." United States v. Catoggio, 326 F.3d 323, 328 (2d Cir. 2003). See also United States v. Pescatore, F.3d, 2011 WL , at *12 (2d Cir. Feb. 23, 2011) (" 3664(f)(1)(A) required that the amount of each victim's loss be determined by the district court and included in the restitution order") (emphasis added). For these reasons alone, the restitution order must be vacated. These fatal omissions the identities of the victims and the amount of restitution to which they are entitled are not surprising, and reflect a more fundamental problem than simply a technical defect in the order. The PSR disclosed the government's admission that "it is unable to identify the losses suffered by each victim." PSR 11. The government's inability to determine or identify how much each victim lost and the amount of restitution to which he was therefore entitled makes any "victim" list meaningless since there is no way to know whether any particular name on the list actually suffered a loss. 15. The MVRA provides in relevant part that it applies to "any offense... in which an identifiable victim... has suffered a... pecuniary loss." 3663A(c)(1)(B). Moreover, 18 U.S.C. 3664(f)(1)(A) requires that "[i]n each order of restitution, the court shall order restitution to each victim in the full amount of each victim's losses as determined by the court...." 43

49 Case: Document: 79 Page: 49 04/04/ Here, the government produced to the Probation Office, and the Probation Office provided to the defense, a list of 240 named "victims," but the record fails to reflect that the district court incorporated, or even saw, that list of names. Certainly the court's restitution order makes no reference to the list. Moreover, even the government acknowledge below, albeit grudgingly, based on this Court's decision in United States v. Silkowski, 32 F.3d 682, 690 (2d Cir. 1994), that restitution was inappropriate and unauthorized for conduct that was not the basis of a criminal conviction. A616 ("the defendant is not properly assessed restitution for victim losses incurred prior to August 27, 2003 the relevant date for statute of limitations purposes"). In this case, the "victim" list included persons or accounts who were not victims for purposes of restitution, including accounts to which no timely trades were allocated, non-discretionary accounts, or accounts to which no portion of a block trade was allocated. Motz argued below, and argues on this appeal, that the trades Motz allocated to his client accounts overwhelmingly became profitable, generally within days or weeks of their purchase, and therefore those account holders cannot be victims for any purpose, including restitution. See Point I-A, supra. Even assuming, however, this Court finds the government's loss theory to be valid, the 44

50 Case: Document: 79 Page: 50 04/04/ government's theory cannot serve as a basis for determining restitution because, unlike "loss" under the USSG which does not require identification of particular victims and permits reasonable estimates of loss, restitution requires precision in the identification of victims and the amount of loss. Pescatore, supra, 2011 WL , at *10 (" 3663A does not authorize the court to order restitution to victims in excess of their losses"). Professor Harris admitted in his first Addendum that his calculation of victim loss had as much as a 40% margin of error. While he may have considered such an extraordinary possibility of mistake as simply background "noise" when it came to the issue of "loss" since "the gainers would offset the losers," his analysis could only apply in gross terms to the group of discretionary accounts as a whole. It was completely inapplicable and inappropriate for determining restitution where each "victim" and that victim's loss must be identified. The government has no idea who the victims are and how much restitution they are entitled to receive. In fact, for most, if not all, of the "victims," any restitution would amount to an extraordinary windfall. Furthermore, where, as here, the "victims" and the amount of restitution to which they are entitled are not specifically determined and identified, there is no way for the defendant to argue for and receive the benefit of set offs or credits against restitution to which the 45

51 Case: Document: 79 Page: 51 04/04/ statute entitles him. United States v. Allen, 529 F.3d 390, 397 (7th Cir. 2008) (court committed plain error when it refused to deduct from restitution the value that fraud victims may have obtained from defendant). In short, the district court's restitution order was invalid because it failed to identify the victims or their particular, individualized losses, critical omissions for restitution purposes which the government concededly has no way of determining. The restitution order should be vacated. POINT IV: MOTZ'S EIGHT-YEAR PRISON TERM IS UNREASONABLE After United States v. Booker, 543 U.S. 220 (2005), this Court reviews sentences for substantive and procedural "reasonableness." United States v. Giovanelli, 464 F.3d 346, (2d Cir. 2006). This Court has also recognized that "reasonableness" in sentencing is "inherently a concept of flexible meaning, generally lacking precise boundaries," and so this Court has declined to "fashion any per se rules as to the reasonableness of every sentence within an applicable guideline." United States v. Jones, 460 F.3d 191, (2d Cir. 2006). See also United States v. Preasley, 628 F.3d 72, 79 (2d Cir. 2010) ("We do not presume that a Guidelines range sentence is reasonable. Instead, we take into account the totality of the circumstances, giving due deference to the sentencing judge s 46

52 Case: Document: 79 Page: 52 04/04/ exercise of discretion, and bearing in mind the institutional advantages of district courts") (internal quotation marks and citations omitted). Motz's sentence was substantively and procedurally unreasonable. No point would be served in repeating here Motz's arguments on "loss" and "number of victims." See Points I and II, supra. Suffice it to say that if this Court accepts or upholds any of those arguments, Motz's sentence would be procedurally unreasonable, requiring vacatur and resentencing. United States v. Fagans, 406 F.3d 138, 141 (2d Cir. 2005) ( [A]n incorrect calculation of the applicable Guidelines range will taint not only a Guidelines sentence, if one is imposed, but also a non-guidelines sentence, which may have been explicitly selected with what was thought to be the applicable Guidelines range as a frame of reference ). Thus, for present purposes, we focus instead on substantive reasonableness. Even accepting the government's arguments on "loss" ($2.4 million) and number of victims (240), Motz's eight-year sentence, based on his guilty plea to a securities scheme that, even if it resulted in a technical loss, indisputably "worked out well" for most of the "victims" and did so "in a reasonably tough economic environment," is substantively unreasonable, particularly in view of Motz's age 47

53 Case: Document: 79 Page: 53 04/04/ (69 years old), prior unblemished record and long history of honorable public service. 16 Because of the inherently ad hoc nature of the reasonableness determination, no point would be served by extended citation to sentencing jurisprudence. For present purposes, the data and analysis reflected in United States v. Parris, 573 F. Supp. 2d 744 (E.D.N.Y. 2008), provides ample authority to conclude that Motz's sentence was unreasonable. In Parris, the defendant was 17 convicted of securities fraud and obstruction. Unlike this case, however, the loss (about $4.9 million) and number of victims (over 500) in Parris were double the loss and number of victims the district court found here. Id. at 748. Unlike Motz, who owned only a small ownership interest in MFA, the Parris defendants owned and ran the company and personally pocketed more that $2.6 million of the scheme's proceeds. Id. Unlike Motz, the Parris defendants put the government to its proof at trial, and received no reduction for acceptance of responsibility. Finally, unlike Motz, who has a distinguished military record and a long history of 16. Even if the district court considered most of these factors when imposing sentence, the court came to an unreasonable conclusion when it imposed an eight-year prison term. 17. Motz was not convicted of obstruction, but his sentence was enhanced for obstruction-related conduct, i.e., altering documents. 48

54 Case: Document: 79 Page: 54 04/04/ public service, the Parris defendants "presented 'no characteristics or circumstances that distinguished this case as sufficiently atypical to warrant a sentence different from that called for under the guidelines." Id. at 750. After canvassing, with government assistance, the type of sentences imposed throughout the country in comparable securities fraud cases, the court in Parris concluded that a five-year term of confinement was "sufficient, but not greater than necessary, to satisfy the purposes of sentencing." Id. at 755. In light of the sentence in Parris, as well as the sentences in securities fraud cases around the country, all reflected in a comprehensive chart prepared with government assistance and incorporated in the Parris decision, Motz's eight-year prison sentence is simply unfathomable and profoundly unreasonable. 49

55 Case: Document: 79 Page: 55 04/04/ CONCLUSION For the above-stated reasons, Motz's j udgment of conviction and restitution order should be vacated, and hi s case should be remanded to the di strict courl for resentencing. New York, New York April 4, Respectfull y submined, 950 Thi rd Avenue New Yo rk, New York (212) G. ROBERT GAGE, JR. LAURA-MICHELLE HORGAN GAGE SPENCE R & FLEM ING LLP 410 Park Avenue ew York, New York (2 12) Allomeysfor Appellalll GeOlge Motz 50

56 Case: Document: 79 Page: 56 04/04/ Certification of Compliance with FRA!' 32(a)(7) PursuaI1l to Rul e 32(a)(7)(C), F.R.A.P., I hereby certify based on the wordcounting function or my word processing system (WordPerfect X3) that this brief complies with the Rule's type and vo lume limitations. This briercoi1lains words. Dated: New York, New York April 4, 20 I I Steven Y.

57 Case: Document: 79 Page: 57 04/04/

58 Case: Document: 79 Page: 58 04/04/ Table of Contents United States v. Motz,

59 Case: Document: 79 SPA1 Page: 59 04/04/ Westlaw 652 F.5upp.2d 284 (Cite as: 652 F.Supp.2d 284) Page I United States District Court, E.O. New York. UN ITED STATES of America, v. George M. MOTZ, and Melhado, Flynn & Associates, Inc., Defendants. No. 08-CR-598 (ADS). Aug. 14, Background : Defendants were indicted for onc count of securities fraud and onc count of document al teration, in connection with fraudulent "cherry-picking" scheme, as officer and minority owner of corporate registered broker-dealer and investment advisor that executed trades without immediate assignment to particular accounts, waiting until later in day to determine profitability of trarle, then allocating profitable securities to broker-dealer defendant's proprietary account but allocating unprofitable trade to funds and discretionary cli cnt accounts. Owner defendant moved to dismiss indictment or, alternatively, to transfer venue. Uoldings ; The District Court, Spatt, 1., held that: (I) indictment's allegations of securities fraud were sufficient to withstand pre-trial challenge to vcnue; (2) transfer of venue was not warranted; (3) securi ty fraud claims with respect to certain trades were not time-barred; (4) securities fraud statute was not unconstitutionally vague; {5) securities fraud charge was not unconstitutionally vague; (6) indictment's allegations were sufficiently detailed for cognizable securities fraud claim; and (7) indictmcnt's allegations of document al teration were not sufficient to withstand pre-trial challenge to venue. Motion granted in part and denied in part. West Headnotes (II C riminal Law Criminal Law 110lX Venue IIOIX{A) Place of Bringing Prosecution 1l Okl13 k. Offenses against United Statcs. Most Cited Cases Both the Sixth Amendment and Federal Rules of Criminal Procedure require that defendants be tried in the district where thei r crime was committed. U.S.C.A. Const.Amend. 6; Fed.Rules Cr. Proc.Rulc 18, 18 U.S.CA. 121 C riminal Law 110 :=564(2) 110 Criminal Law IIOXVII Evidence 110XVl1 (V) Weight and Sufficicncy II Ok564 Place of Commission of Offense and Vcnue II Ok564(2) k. Degree of proof. Most Cited Cases Indictment and In fo rmation 210 :=86(2) 210 Indictment and Information 21 OV Requisites and Sufficiency o f Accusation 2JOk86 Place of Offense 210k86(2) k. Sufficiency in general. Most Cited Cascs At a criminal trial, the government carries the burden to demonstrate the propriety of thc chosen venue by a preponderance of the evidence; however, when faced with a pre-trial venue challenge, the government need only show that the superseding indictment alleges fac ts sufficient to support venue. Fed.Ru les CL Proc.Rule 18, 18 U.S.C.A 131 1ndictmcnt and Information 210 ;:;:::>86(2) 210 Indictment and Infonnalion 21 OV Requisites and Sufficiency of Accusation :! 1 Ok86 Place of Offense 21Ok86(2) k. Sufficiency in general. Most Thomson Reuters. No Claim to Orig. US Gov. Works.

60 Case: Document: 79 SPA2 Page: 60 04/04/ F.Supp.2d 284 (Cite as: 652 F.Supp.2d 284) Page 2 Cited Cases Govcrnmenl's superseding indictmenl, charging defendants with securities fraud in conncction with "cherry-picking" scheme, sufficiently alleged facts to withstand defendant's pre-trial challenge to venue in forum district, including allegations that scheme occurred within forum district and elsewhere, and that defendant directed fraudulent account allocations by sending faxes from his residencc and another location in forum district 10 codefendant corporate broker-dealer. 18 U.S.C.A. 1348(1 ), 1519; Fed.R ules Cr. Proc.Rulc 18, 18 U.S.C.A. 14] C riminal Law 110 = > Criminal Law lloix Venue IIO IX(B) Change of Venue I 10k 123 Grounds for Change 110k124 k. In general. Most Cited Cases In dcc iding a motion to transfer venue, district court strikes a balance between ten Pfaff fac tors, none of which is dispositive, and detennines which fac tors are of greatest impotlance: ( I) location of the defendant, (2) location of possible witnesses, (3) location ofcvents likely to be in issue, (4) location of documents and records likely to be involved, (5) possible disruption of the defendant's business if thc case is not transferred, (6) expense 10 the parties, (7) location of counsel, (8) relative accessibility of the place of trial, (9) docht conditions of each district involved, and ( 10) any other special elements which might affect the transfer. Fed.Ru les Cr. Proc.Rule21(b). 18 U.S.C.A. 151 C riminal Law 110 = > II S 110 Criminal Law 1i0lX Venue II OIX(B) Change of Venue II Ok J J 5 k. Power and duty of court in general. Most Cited Cases Generally, a criminal prosccution should be retained in the original district court in which the case was filed. Fed.Rules Cr.Proc.Rule 21 (b), 18 U.S.C.A. [61 Crimina l Law 110 = > 134(1 ) 110 Criminal Law I J OIX Venue I I OIX(B) Change of Venue II Ok 129 Application IIOk 134 Affidavits and Other Proofs I JOk134(1) k. In general. Most Cited Cases Thc burden of justifying a transfer of venue for a criminal prosecution rests with the defendant. Cr. Proc. Rulc 21(b), 18 U.S.C.A. [7[ Crimina l Law 1I0 ;::::::> Criminal Law I IOIX Venuc I IOIX(B) Change ofvenuc IIOk 121 k. Discretion of court. Most Cited Cases The dctermination of a motion to transfer venue of a criminal prosecution is committcd to the sound discretion of thc district court. Fcd.Rules Cr. Proc. Rulc 21(b), 18 U.S.C.A. [8] C riminal Law 110 ;::::::> Criminal Law I JOIX Venue II00X(B) Change of Venue! IOkl23 Grounds for Change I J Ok 124 k. In general. Most Citcd Cases Criminal Law 110 = : > 127 J 10 Criminal Law 110 lx Venue lioi X{B) Change of Venue 11 Ok 123 Grounds for Change IlOk l27 k. Conven ience of witnesses. Most Citcd Cases Balance of Phm fac tors weighed against transfer of criminal prosecution of charges against de I I Thomson Reutcrs. No Claim to Orig. US Gov. Works.

61 Case: Document: 79 SPA3 Page: 61 04/04/ F.Supp.2d 284 (C ite as: 652 F.Supp.2d 284) Page 3 fendan ts for securities fraud "cherry-pick ing" scheme; only two of ten PI(ll( factors favo red transfer, namely location of events of scheme and location of defense counsel, but corporate broker-dealer defendant was no longer in busi ness and owner defendan t was elected official of and resided in forum district, along with most witnesses, recruitment of investors and some account allocations for scheme took place in forum district, discovery was completed fo r bulk of documents obtained from proposed transferee district, defendant's business was defunct so would not be disrupted, litigation wou ld not be more costly in forum, defense attorneys were in close proximity to forum, docket condit ion of each district was neutral factor, and no special elements were identified. 18 U.S.C.A. I ); Fed. Rules Cr.Proc.Rule 21 (b), 1 S U.S.C.A. 191 Criminal Law 110 ;::;;:> Crim inal Law IIOX Limi tat ion of Prosceut ions IIOkl48 Commencement of Period of Limitation IIOkl49 k. Commission of offense in general. Most Ci ted Cases Criminal law 110 ;::::>150! 10 Crim inal Law Ii0X l imitation of Prosecutions II Ok 148 Commencement of Period of Limitalion 11 0kl50 k. Continuing offenses. Mosl Cited Cases Generally, a crimi nal offense is "committed," wi thin meaning of statute of limitations for securities fraud, when the offense has been completed; however, thc lime at which a crime is "completed" depends largely on the nature of the crime, as some crimes are instantaneous and others arc continuing. IS U.S.C.A C riminal law 110 : = Criminal Law! lox Lim itation of Prosecutions IIOk 148 Commencement of Period of Limi t- ation 110kl50 k. Continuing offcnses. Most Cited Cases Where the crime charged constitutes a continuing offense, the crime is not "completed," under statute of li mi tations for securities fraud rcquiring prosecution of defendant within five years aftcr offense has been "committed," until the conduct has run its course. 18 U.S.C.A I1 Criminal Law 110 ;::::> Criminal Law IIOX Limitation of Prosecutions 1 JOkl48 Commencement of Period of Limitat ion 11 Ok 150 k. Cont inuing offenses. Most Cited Cases An offense is deemed to be a "con tinuing offense," fo r statute of limi tations purposes, only where the explicit language of the substantive criminal statute compels such a conclusion, or the nature of the crime involved is such that Congress must assuredly have intended that the cri me be treated as a continuing one. [121 Criminal Law Criminal Law Jl0X Limitation of Prose cui ions 1 )Ok143 Commencement of Period of Limitalion 11 Okl50 k. Continuing offenses. Most Cited Cases The continuing offense doctrine should be applied for statute of limitations purposes only in limited circumstances, and continuing offenses arc not to be (00 readily found, since criminal limitations statutes are to be liberally interpreted in favo r of repose. [131 Criminal Law 11 0 = > Criminal Law Thomson Reuters. No Claim to Orig. US Gov. Works.

62 Case: Document: 79 SPA4 Page: 62 04/04/ F.Supp.2d 284 (Ci te as: 652 F.S upp.2d 284) Page 4 IIOX Limitation of Proseeulions IIOk l48 Commencement of Period of Limitalion 110k 150 k. Continuing offenses. Most Ci ted Cases There is a dist inction 10 be drawn between conduct that is deemed a continuing offense and conduct that constitutes a continuing course of criminal activity, but which is not deemed continuing for statute of limitations purposes. [141 C riminal Law lid 110 Criminal Law II OX Limitation of Prosecutions II0k 148 Commencement o f Period of Limitation [IOkISO k. Continuing offenses. Most Cited CllSCS To establish whethcr Congress intended to treat an offense as continuing, for stlltute of limitlltions purposes, district court considcrs whether thc statute of offense itself clearly contemplates a prolonged course of conduct. [1 5[ C riminal Law lid 110 Criminal Law I lox Limitation of Prosecutions IIOk 148 Commencement of Period of Limitation I 10k 150 k. Conti nuing offcnses. Most Cited C[lses A continuing offense is not simply an offense that continues in a factual sense, as where a defendant cngaged in a course of conduct comprised of rcpeated criminal violations, but instclld refers to a substantive crime that Congress estllblished as continuing. [161 C riminal Law Criminal Law 110X Limitation of Prosecutions II Okl48 Commencement of Period of Limitat ion I J Ok 150 k. Continuing offenses. Most Cited Cases Continuing offenses, for statute of limitations purposes, include conspiracy, escape from fede ral custody, kidnapping, and crimes of possession; each of these crimes, by thei r nature, continue after the offense is initially committed. [171 C riminal Law Criminal Law I IOX Limitation of Prosecutions IIOk l48 Commencement of Period of Limilation 11 Ok 149 k. Commission of offense in general. Most Citcd Cases C riminal Law 110! 10 Criminal Law IIOX Limitalion of Prosecutions 110kl48 Commencement of Period of Limitation IIOk150 k. Continuing offenses. Most Cited Cases Defendant's charge fo r repeatedly violating securi ties fraud statute over period of time, pursuant to same "cherry-picking" scheme, did not transform securities fraud statute into "conlinuing offense," for purposes of five-year statute of limitations for securilies fraud, and thus, each lime defendant executed allegedly fraudulent trade, elemcnts of securities fraud were satisfied, and claim accrued with respect to that violation. 18 U.S.C.A. 1348(1),3282. IISI Constitutiona l Law Constitutional Law 92X First Amendment in General 92X(A) In General 92k I! 59 Vagueness in General 92k 1160 k. In general. Mosl Cited Cases Generally, the "void-for-vagueness doctrine," under the First Amendment, requires that a penal Thomson Reuters. No Claim to Orig. US Gov. Works.

63 Case: Document: 79 SPA5 Page: 63 04/04/ F.Supp.2d 284 (Cite as: 652 P.5upp.2d 284) Page 5 statute define the criminal offense with sufficient definiteness that ordinary people can understand what conduct is prohibited and in a manner that does not encourage arbitrary and discriminatory enfo rcement. U.S.C.A. Const.Amcnd. I. [191 Criminal Law Criminal Law 1101 Nature and Elements of Crime II Ok 12 Statutory Provisions 110k13.1 k. Certainty and definiteness. Most Cited Cases When the interpretation of a criminal statute does not implicate First Amendment rights, under the void-for-vagueness doctrine, the statute is assessed fo r vagueness only as applied, that is, in light of the specific facts of the case at hand and not with regard to the statute's facial validity. U.S.c.A. Const.Amend. I. 120[ Constitutional Law 92 ;:;;;> Constitutional Law 92X First Amendment in General 92X(8) Particular Issues and Applications 92k [ 170 k. In general. Most Cited Cases Securities Regulation B Securities Regulation 349BI Federal Regulat ion 349D I(G) Offenses and Prosecutions 349Bkl93 k. Fraudulent transactions. Most Cited Cases Criminal securities fraud statute docs not implicate a defendant's rights under the First Amendment. U.s.C.A. Const.A mend. [; 18 U.S.C.A Constitutional Law 92 (;::::::> Constitutional Law 92X First Amendment in General 92X(A) In General 92 kl 159 Vagueness in General 92k1160 k. In general. Most Cited Cases When faced with an "as applied" First Amendment vagueness ehallcnge to a criminal statute, district court engages in a two-part inqui ry to determine: (I) whether the statute gives the person of ordinary intelligence a reasonable opportunity to know what is prohibited, and then considers (2) whether the statute provides explicit standards for those who apply the statute. U. S.C.A. Const.Amend. I. 122[ Con stitutional Law 92 (;::::::> Constitutional Law 92V lii Vagueness in General 92kl132 Particular Issucs and Applications 92 kl 133 k. In general. Most Ci ted Cases Securities Regulation 3498 = > B Securities Regulation 349B I Federal Regulation 349BI(G) Offenses and Prosecutions 349Bk 193 k. Fraudulent transactions. Most Cited Cases Crimi nal securities fraud statute, prohibiting knowing execution, or attempt to execute, scheme or artifice to defraud any person in connect ion with securities of publicly traded companies, was not unconstitutionally vague as applied, since statute gave person of ordinary intell igence reasonable opportunity to know what conduct was prohibited, rather than creating trap for unwary defendant or permitting arbitrary enfo rcement, and statute provided explicit standards to be applied by government in showing fraudu lent intent, scheme to defraud, and nexus with securities. 18 U.S.C.A Securities Regu lation B Securities Regulation Federal Regulation 349B I(G) Offenses and Prosecutions 3498k 19J k. Fraudulent transactions. Most Cited Cases [n order to prove a violation of the criminal securities fraud statute, the government must show: IC 2011 Thomson Reuters. No Claim to Orig. US Gov. Works.

64 Case: Document: 79 SPA6 Page: 64 04/04/ F.5upp.2d 284 (Cite as: 652 F.S upp.2d 284) Page 6 (I) fraudulen t intent, (2) a scheme or artifice to defraud, and (3) a nexus with a security. 18 U.S.C.A [24[ Sec urities Regulation 349B =::> Securities Regulation Federal Regulation 3498 [(0) Offenses and Prosecutions 349Bk l95 k. Indictment and information. Most Cited Cases In a securit ies fraud scheme, the government necd not specify in the indictment which client accounts were victimized by each allcgedly fraudulent trade. 18 U.S.C.A [25[ Constitutional l aw 92 =::> Constitutional Law nviji Vagueness in General 92k [ [32 Particular Issues and Applications n kl133 k. In general. Most Cited Cases Securities Regulation 3498 C;:;:;;> Securities Regu[ation 349B! Federal Regu lation 349B I(G) Offenses and Prosecutions 349Bkl95 k. Indictment and information. Most Citcd Cases Superseding indictment's charge against defendants for securities fraud was not unconstitut ionally vague, on grounds that indictmcnt failed to describc specific victims of alleged fraudu lent schcme, since government was not required to comb through investmcnt profiles and cash Icvels of each client account to describe specific victims of each allegedly fraudulent "cherry-picked" trade. 18 V.S.C.A [261 lndictmenl a nd Information 210 (>=86(1) 210 Indictment and Information 11 OV Requisites and Sufficiency of Accusation 11Ok86 Place of Offense 210k86(1) k. Necessity of statement of place ofvellue. Most Ci ted Cases Indictment and In fo rmation 210 = > 87(1) 210 Indictment and Information 210V Requisites and Sufficiency of Accusation 210k87 Time of Offense 210k87(1) k. Necessity of averments as to time in general. Most Cited Clses Indictment and Information 2 10 =:> 110(3) 210 Indictment and Information 2 I OV Requisites and Sufficiency of Accusation 2 [Ok107 Statutory Offenses 2!Ok! 10 Language of Statute 21 Ok [ 10(3) k. Sufficicncy of indictment in language of statute in general. Most Cited Cases Indictments arc required to do little more than to track the language of the statute charged and state the timc and place in approximatc terms of the alleged crime. Fed.Rules Cr.Proc.Rule 7(c), 18 U.S.C.A. [271 Indictment and Information 210 : = : ' 71.2(2) 210 Indictment and Information 210V Requisites and Sufficiency of Accusation 210k71 Certainty and Particularity 11 Ok71.2 Purpose of Requirement and Test of Compliance 210k7 1.2(2) k. Informing accused of nature of charge. Most Cited Cases Indictment and Information 21 0 = > 7 J.2(4) 210 Indictment and Information 2 I OV Requisites and Sufficiency of Accusation 21 Ok7l Certainty and Particularity 2l0k7 J.2 Purpose of Requirement and Test ofcompjiance 2 10k7 1.1(4) k. Protection against subsequent prosecution. Most Cited Cases To be legally sufficient, the indictment must specify the clements of the offense in enough detail to give a defendant not ice of the charges against him and to permit him to plead double jeopardy in a futu re prosecution based on the same events Thomson Reuters. No Claim to Orig. US Gov. Works.

65 Case: Document: 79 SPA7 Page: 65 04/04/ F.Supp.2d 284 (Cite as: 652 FoSupp.2d 284) Pagc 7 u.s.c.a. ConSI.Amend. 5; Fed.Rules Cr.Proc.Rule 7(c), 18 U.S.C.A. 128] Securilies Regulation 349B C;;:;;> Securities Regulation 349B! Federal Regulation 3490[(G) Offenses and Prosecutions 349Bk 195 k. Indictment and information. Most Cited Cases Superseding indictment allegcd willi sufficient detail for cognizable claim that defendants intentionally schemed to defraud in conncction with publ icly traded securities, including allegations of "cherry-picking" scheme from which fraudulent intent could bc inferred due to necessary result of disadvantaging clients with discretionary accounts by shifting risk of unprofitable trades entirely to those accounts while creating vinually risk-free profits for defendants and two hedge fund clients. 18 U.s.C.A. 1348; Fed.Rules Cr.Proe.Rule 7(c), 18 U.S.c.A. 129 ] Securities Regulation 3498 C;;:;;> B Securities Regulation 349BI Federal Regulation 349BI{G) Offenses and Prosecutions 3498kJ93 k. Fraudulent transactions. Most Cited Cases Because the text and legislative history of the securities fraud criminal statute clearly establish that the statute was modeled on the mail and wire fraud statutes, district court's analysis of the securities fraud statute is guided by the caselaw construing the mail and wire fraud statutes. 18 U.S.C.A. 1341,1343, Securities Regulation 349B : = > B Securities Regulation 349B! Federal Regulation 34981(G) Offenses and Prosecutions 349Bk193 k. Fraudulent transactions. Most Cited Cases Where the necessary result of the defendant's securities fraud scheme is to injure others, fraudulent intent may be inferred from the scheme itself. 18 U.S.C.A.!348. IJll lndietment and Information 210 C;;:;;>86(2) 210 Indictment and Information 210V Requisites and Sufficiency of Accusation 21 OkS6 Place of Offense 21 OkS6(2) k. Sufficiency in general. Most Cited Cases Supcrseding indictment, charging defendants with document alteration, lacked sufficient allegations of facts to withstand defendant's pre-trial challenge to venue in forum district, since there were no facts identifying that charged acts took place in forum district. 18 U.S.C.A. 1519; Fed.Rules Cr.Proc.Rule 18, 18 U.S.C.A. *288 Bcnton 1. Campbell, United States Attorney, Eastern District of New York, by James G. McGovern, Assistant United States Attorney, Daniel A. Spcctor, Assistant United States Attorney, Roger Anson Burlingame, Assistant United States Attorney, William E. Schaeffer, Assistant United Statcs Attorney, Central Islip, NY, for United States of Amcrica. Gage Spencer & Fleming LLP, by G. Robert Gage, Esq., Laura-Michelle Rizzo, Esq., of Counsel, New York, N.Y. for Defendant George M. Motz. Ellenoff Grossman & Schole LLP, by Ted Poretz, Esq., of Counsel, New York, *289 NY, for Defendant Melhado, Flynn & Associates, Inc. MEMORANDUM OF DECISION AND ORDER SPATT, District Judge. On November 19,2008, a superseding indictment issued charging Defendants George Motz ("Motz" or "the Defendant") and Mclhado, Flynn & Associates, Inc. (,OM FA ") with one count of securities fraud, in violation of 18 U.S.c.!348( J) ("Count One"), and one count of document alteration, in violation of 18 U.S.c ("Count Two"), in connection with a fraudulent "cherry-picking" scheme Thomson Reuters. No Claim to Orig. US Gov. Works.

66 Case: Document: 79 SPA8 Page: 66 04/04/ F.Supp.2d 284 (C ite as; 652 F.Supp.2d 284) Page 8 Presently before the Court is a motion by Motz to dismiss the indictment or, in the alternative, to transfer venue to the Southern District of New York. I. BACKGROUND Motz is an officer and minority owner of MFA, a registered broker dealer and investment advisor located in Manhattan. Motz was a registered repres entative and investment advisor for 183 discretion ary trading accounts at MFA. According to the su pcrseding indictment, Motz also had the exclusive authority to trade on behalf of MFA's proprietary trading account. The superseding indictment alleges that Motz engagcd in "cherry-picking," a practice whereby a trader executes trades without immediately assigning them to a particular account. In this regard, the superseding indicunent alleges that Motz purchased securities in the early part of the trading day and waited until later in the day-when he saw whether the securities purchased had appreciated in value-to allocate the securit ies to MFA's proprietary account. According to the superseding indictment, if a tradc proved unprofitable, Motz would allocate the securities to the Thi rd Mi llennium Fund, Investment Fund # I, the discretionary client accounts or al! th ree. The superseding indictment alleges that of the 204 trades that Motz executed on behalf of the MFA proprictary account between November of 2000 and Scptember of 2003, 202 were profitable. The superseding indictment also allcges that Motz used the remarkable success of the MFA proprietary account to market MFA to potential investors, including two hedge funds: Mezzacappa Partncrs, L.P. and The Third Millennium Fund. According to the Government, from June of 2003 unti l May of 2005, Motz cmploycd the same "cherry-picking" scheme to benefit both of these funds. According to the superseding indictment, Motz and other MFA representatives, in the ordinary course of business, prepared trade tickcts that reo necled the security to be traded; the number of shares to be traded; and the account to which the trade should be allocated. In general, upon receipt of these tickets, MFA's trading desk would place a time stamp on the ticket indicating when the ticket WIIS received and when the trade was executed. The Government alleges that, in order to effectuate his scheme, Motz would send trade tickets to the MFA trading desk in the morning without specifying the accounts to which the trades should be allocated. Motz would thcn instruct the trading desk where to allocate securities much later in the day usually just before the market closed. If the securitics appreciated in value, he would instruct the trading desk to allocate the securities to the favored accounts. If the securities depreciated in value he would instruct the trading desk to allocate the securities to one of his discretionary trading accounts. The Government alleges thai, to conceal the scheme, Motz altered *290 the MFA trading tickets to create the false im pression that he allocated trades to favo red ac counts at the time the securities were purchased. I/. DISCUSSION A. Count One Securities Fra ud Motz raises a number of different challenges to Count One. The Court will address each in turn. I. Whether Venue is Lacking in the EDNY [1][2] Motz contends that venue is Jacking in the Eastern District of New York because the "chcrry-pieking" scheme all eged in the superseding indictment was carried out in Manhattan. It is well established that "[b]oth the Sixth Amendment and Fedcrn l Rule of Criminal Procedure 18 require that defendants be tried in the district where their crime was 'committed.' " U"ited States v. Ramire:, 420 F.3d 134, 138 (2d Cir.2005) (citing U.S. Canst. amend. IV, and Fcd. R.Crim.P. 18). Accordingly, at trial, the Government carries the burden to demon strate the propriety of the chosen venue by a preponderance of the evidence. Id. at 139 (citing Uni ted Stales II. Smith. 198 F.3d (2d Cir.1999 )). However, when faced with a pre-trial venue challenge, the Government need only show Thomson Reuters. No Claim to Orig. US Gov. Works.

67 Case: Document: 79 SPA9 Page: 67 04/04/ F.5upp.2d 284 (Cite li S: 652 F.Supp.2d 284) Page 9 that the superseding indictment alleges facts sufficient to support venue. United States v. Bronson. No. 05-CR-714, 2007 WI at *4 (E.D.N.Y. Aug. 23, 2007). [3J Herc, Count One allegcs generally that the charged securities fraud scheme occurred "within the Eastern District of New York and elsewhere." In particular, the Government alleges that Motz directed certain of the fraudulent account allocations by sending faxcs to MFA from his residence in Quogue and the Quogue Mayor's Office on the East End of Long Island. At the motion to dismiss stage, these allegations suffice to allegc venue in the Eastern District of New York. See Unired Stales v. Sleit!, 429 F.Supp.2d 633, 643 (S.D.N.Y.2006) (holding that "as long as thc indictment alleges vellue, a pretrial motion to dismiss based on contrary allegations by the defendant must be denicd."); Ullited Slares I'. Bellomo. 263 F.Supp.2d 561, 579 (E.D.N.Y.2003) (same). Thus, the Defendant's motion to dismiss Count One for lack of venue is denied without prejudice and with leave to renew at the trial. See United Srales v. Elcock, No. 07-CR WL , at "4 (S.D.N. Y. Jun. 10, 2008) (denying a defendant's pre-trial venue challenge without prejudice and with leave to renew subject \0 Fed.R.Crim.P. 29); Unilcd Srares 1'. Valencia Rugefes, No. 04-CR WL , at "2 (S.D.N. Y. May ) (same). 2. Whether th e Court Should Transfer Venu e to the SONY [4) Fed.R.Crim.P. 21(b) provides that, "[ujpon the defendant's motion, the court may transfer the proceeding, or one or more counts, against that defendant to anothcr district for the convenience of the parties and witnesses and in the interest of justice." In deciding a motion to transfer venue, courts are guided by ten factors: (1) location of the defendant; (2) location of possible witnesses; (3) location of evenls likely to be in issue; (4) location of documents and records likely to be invo lved; (5) possible disruption of the defendant's business if the case is not transferred; (6) expense to the parties; (7) location of counsel; (8) relative accessibility of the place of trial; (9) docket conditions of each district involved; and (10) any other special elements which might affect the transfer. *29lPlafl I'. Minnesota Mining & Mfg. Co., ]76 U.S , 84 S.Ct. 769, II L.Ed.2d 674 ( 1964); Ullited Srares v. Kelly/iall. 602 F.2d 10]], 1038 (2d Cir.1979); Unired Srates v. Brooks, No. 08-CR-35, 2008 WL , al "1 (S.D.N. Y. Ju l. 3 1, 2008). ''No one of these considerations is dispositive, and 'it remains for the court to try to strike a balance and determine which factors are of greatest importance.' " United Slates v. Maldunado-Rivera, 922 F.2d 934, 966 (2d Cir. 1990) (quoting United States v. Stephenson. 895 F.2d 867, 875 (2d Cir. I 990)). [5][6][7] "As a general ru le, a criminal prosecution should be retained in the original district" in which it was fi led. Unired Stmes v. Ullited Stales Steel Corp., 233 F.supp (S. D.N.Y.1964). Accordingly, the burden of justifying a transfer under Fed. R.Crim. P. 2 1 rests with the defendant. United Siaies 1'. Guw;teffa. 90 F.Supp.2d (S.D.N.Y.2000) (citing Unired Stlltes II. Spy Factory. Inc., 951 F.Supp. 450, 464 (S.D.N.Y.1997) and United SImes 1'. Persico, 621 F.Supp. 842, 858 (S.D.N.Y. 1985)). Ultimately, the determination of a Fed. R.Crim. P. 21 (b) motion is committed to the sound discretion of the Court. Maldonado-Rivera, 922 F.2d at 966 (citations omitted). 3. The Location of the Defendants [8] This factor cuts decidedly agai nst transferring the case. Al though Motz formerly worked four days per week in MFA's Manhattan office, MFA is no longer in business and Mo!z currently lives on Long Island in Quogue. The Court also notes that Motis venue challenge is significantly less compelling given that he is an elected official within th is district. b. The Location of Possible Witnesses This factor is somewhat difficult \0 analyze because the Government has not yet produced a list of the witnesses that will be called to testify at the trial. However, the Governmcnt represents that while Thomson Reuters. No Claim to Orig. US Gov. Works.

68 Case: Document: 79 SPA10 Page: 68 04/04/ FSupp.2d 284 (Cite as: 652 F.S upp.2d 284) Page 10 many of the potential witnesses may work in Manhattan, many of them happen to live on Long Island. Without more information about the location of prospectivc witnesses, the Court finds that this fac tor does not favor cither party's position. c. Location of the Events at Issue This facto r appears to favor Motz. Although the Government has suggested (hat certain parts of the alleged scheme were carried out on Long Island-namely the recruitment of investors and some of the account allocations-most of the conduct committed in furtherance of the alleged scheme seems to have takcn place in Manhattan. d. Location of Documents and Records This factor carries no weight in the Court's analysis. Although the bulk of the documents and records at issue were produced out of MFA's fo rmer office in Manhattan, discovery has already been completed. It makes little scnse to have venue turn on the original location of documents and records that have already been produced to the respective parties. c. Possible Disruption of th e Defendants' Businesses MOlz's papers make no mention of how a trial might disrupt his business affairs. The Court is not eonccrncd that the trial will disrupt business at MFA because the company is now defunct. Contrary to Motz's suggestion, the fact that a trial in Central Islip might interfere with the new business endeavors of former MFA employees who are not defendants in this case is irrelevant to the Court's analysis. *292 r. Expense 10 th e Parties Motz makes no effort to explain why litigating this case in Central Islip would prove more costly. Accordingly, this facto r weighs against transferring the case g. Loc ation of Counsel This factor elearly favo rs a transfer as counsel for both Defendants have their offices in Manhat- tan. However, in light of Central Islip's proximity to Manhattan, this is not a major facto r. h. Relative Aeeessibility of Central Islip As noted above, counsel fo r both Defendants have their offices in Manhattan and most of the prospective witnesses in this case apparently live in the New York mctropolitan area. The courthouse is roughly 50 miles from Motz's counsel's office in Manhattan and Central Islip is accessible on the Long Island Railroad. Under the ci rcumstances, the Court finds that this factor weighs somewhat against a venue transfer. i. Docket Conditions in th e EDNY and SONY Th is factor carries no weight in the Court's analysis because it is difficult to discern, with any degree of precision, whether the respective dockets favor or disfavor a transfer of venue. The Court declines to speculate-simply by looking at docket statistics-about whether the trial would be delayed in the event of a transfer to the Southern District of New York. j. SIJ ecial Elements The parties have not identified and the Court is not aware of-any special circumstances in this case that either favor or disfavor a transfer of venue. After a rcvicw of the Plan facto rs, the Court finds that Motz has failed to meet his burden to show that this case should be transferred to the Southern District of New York. See United Steel C(JI'l).. 2]] F.Supp. m 157 (observing that "[\]0 warrant a transfer... it should appear that a trial there would be so unduly burdensome that fairness requires the transfer to another district of proper venue where a trial would be less burdensome" and that the Court's inquiry "must take into account any countervailing considerations which may militate against removal."). Although two of the ten factors-the location of the events in qucst ion and the location of counsel-favor Motz's position, neither consideration is of such importance that a transfer of venue is appropriate. In fact, if anything, the Court's balancing of these ten facto rs tips Thomson Reuters. No Claim to Orig. US Gov. Works.

69 Case: Document: 79 SPA11 Page: 69 04/04/ F.Supp.2d 284 (Cite as: 652 F.Supp.2d 284) Page I I against transferring this case to the Southern District of New York. Accordingly, the Defendant's motion to transfer venue is denied. 3. Whether Certain Trades are Ba rred by the Statut e of Limitations The applicable statute of limitations governing Count One provides that a. defendant must be prosecuted "within five years after such offense shall have been committed." 18 U.S.C Here, Ihe original indictment issued on August 27, Motz contends that all of the securities transactions alleged in Count One which occurred before August 27, 2003 arc beyond the five year statute of limitations. [9J[10] Generally, a criminal offense is committed when the offense has been completed. Toussie v. Ulliled Slales, 397 U.S. 112, lis, 90 S.Ct. 858, (1970). However, "[tjhe time at which a crime is 'complete' depends largely on the nature of the crime. Some crimes are 'instantaneous'; others are 'continuing.' " *293 United Slates v. Eppolito, 543 F.3d 25, 46 (2d Cir.2008) (citations omitted). Where the crime charged constitutes a "continuing offense," the crime is not completed-and therefore the statute of limitations docs not begin to run-until "the conduct has run its course." fd. Therefore, the question for the Court is whether the alleged scheme is a "continuing offense" such that the Government may prosecute Motz for trades that were made more than five years prior to the indictment. [I [][12] The Supreme Court has explained that an offense is decmed "continuing" for statute of limitations purposes only where "the explicit language of the substantive criminal statute compels such a conclusion, or thc nature of the crime involved is such that Congress must assuredly have intended that it be treated as a continuing one." TOl/ssie. 397 U.S. at S.C! In analyzing whether either of these conditions are met, "[t]he Supreme Court has cautioned... that the continu ing offense doctrine 'should be applied only in limited circumstances,' and continuing offenses ' are not to be too readily found,' since ' criminal limitations statutes arc to be liberally interpreted in favor of repose.' " See United Slaies II. Rivlin, No. 07-CR-524, 2007 WL , lit *2 (S. D.N. Y. Dec. 5, 2007) (quoting TOlIssie, 397 U.S. at S.Ct. 858) (internal citation omitted). [13] The explicit language of 18 U.S.c does not compel the conclusion that [8 U.S.c should be construed as a continuing offense. Thus, following the Supreme Court's guidance in TOllssie, the Court's task is to determine whether the nature of the crime itself-securities fraud-is such that Congress "must assuredly" have intended to treat it as a continuing offense. Although Motz did allegedly engage in a course of repeated criminal conduct in violation of 18 U.S.C. 1348, it does not necessarily follow that 18 V.S.c. [348 is a continuing offense. See Rill/in, 2007 WL , *3 (quoting Ullited Stales v. 166 F.3d 873, 877 (7th Cir.1999), and Unired Slates v. Jaynes, 75 F.3d 1493,1506 n. 12 (10th Ci r. 1(96» (observing that" 'separate offenses may be part of a common scheme without being 'continuing' for limitation purposes.' "). As District Judge Sidncy Stein has aptly cxplained, there is a distinction to be drawn "between conduct that is deemed a 'continuing offense' under TOlissie and conduct that constitutes a continuing course of criminal activity, but which is not deemed 'continuing' for limitations purposes." Rh'{in, 2007 WL , ill *2. [14][15J[16] "To estilblish whether Congress intended to treat an offense as 'continuing,' courts consider whether the [statute itself] 'clearly contemplate[s] a prolonged course of conduct.' " Riv/ifl, 2007 WL , at *3 (quoting Toussie, 397 U. S. at 120,90 S. C!. 858), A continuing offense is not simply "an offense that continues in a factual sense, as where a defendant engaged in a course of conduct comprised of repeated criminal violations," but instead refers to a substantive crime that Congress established as continuing. Id. at *2. Traditional examples of "continuing offenses" include conspiracy, escape from federal custody, kid- <C 2011 Thomson Reuters. No Claim to Orig. US Gov. Works.

70 Case: Document: 79 SPA12 Page: 70 04/04/ F.Supp.2d 284 (Cite as: 652 F.Supp.2d 284) Page [2 napping, and crimes of possess ion. Id. (citing Ulliled Slales v. Rodrigue=-Moreno. 526 U.S. 275, , 119 S.C!. 1239, 143 L.Ed.2d 388 (1999) (kidnapping); United States v. Baile)'. 444 U.S S.Ct. 624, 62 L.Erl.2d 575 (1980) (escape from federal custody); United States v. Waters. 23 F.3d 29, 36 (2d Cir.1994) (unlawful possession ofa firearm); Uniled Sral(tS v. McGoff, 831 F.2d 1071, 1078 (D.C.CiL I 987)). Each of these crimes, by thcir nature, continue aftcr the offense is initially committed. For example, a dcfcndant*294 who escapes from federal custody continues to violate 18 U.S.c. 751(a) until he is apprehended. (I 7] A!though it is truc that securities fraud schemes arc frequently carried out over a period of time, 18 V.S.c itself does no! contemplate a prolonged course of conduct. Based upon the rcqui rements of 18 U.S.c. IJ48(1), each time Motz executed an allegedly fraudulent trade, the requisite clements of securities fraud were satisfied and the applicable statute of limitations began to run with respect to that violation. See Uniled Slates v. Ma - hajjv. No. 05-CR WL , at *'2 (E.D.N. Y. Aug. 2, 2006) (noting that a violation of 18 U.S.C requires proof of three elements: "(I) fraudulent intent (2) a scheme or artifice to defraud and (3) a nexus with a security."). Thc fact that Motz is charged with repeatedly violati ng the statute over a period of time pursuant to the same scheme docs not transform 18 V.S.c. IJ48 into a "continuing offense" for statute of limitations purposes. See RiFlill WL at *3 (quoting Y(Jshar. 166 F.3d at 877) (observing that "[i]t is not the active or passive nature of a defendant's act ions that matters, but rather whether the statute describes an offense that by its nature continues after the elements have been met."). Accordingly, Motz's motion for partial dismissal of Count One is granted. The Government may on ly prosecute Motz for allegedly fraudulent tradcs that occurred within the five years preceding the August 27, 2008 indictment. 4. Whether 18 V.S.c is Unconstitutionally Vague Motz contends that 18 U.S.c. 1348(1 ) is itself unconstitutionally vague because the statute's breadth creates no limitation on the scope of ils plication. The statute makes it a crime to "knowingly execute{ ], or attempt ( 1 to execute, a scheme or artifice... to dcfraud any person in connection," with the securities of publicly traded companies. 18 V.S.c. 1348( 1). According to the legislative history, the overarching purpose of the statute was to broaden the range of conduct proscribed by existing federal securities laws. See 148 Congo Rec. S (daily cd. July 26, 2002) (statement of Sen. Leahy), available at 2002 WL (noting that 18 U.S.C. was "intended to provide needed enforcement flexibility in the context of publicly traded companies to protect shareholders and prospective shareholders against all the types of schemes and frauds which inventive criminals may devise in the future."). fl8j(19](201 "As genera lly stated, the voidfor-vagueness doctrine requires that a penal statute define the criminal offense with sufficient definiteness that ordinary people can understand what conduct is prohibited and in a manner that docs not encourage arbitrary and discriminatory enforcement." United States v. Rybicki, 354 F.3d 124, 129 (2d Ci( 2003) (quoting Kolendel" v. Lawson, 461 U. S. 352,357,103 S.CI L. Ed.2d 903 (1983 )). The Second Circuit has found that when "the interpretation of a statute docs not implicate First Amendment rights, it is assessed for vagueness only 'as applied,' i.e., 'in light of the specific facts of the case at hand and not with regard to the statute's facial validity.' " Id. (quoting United SlateS V. Nadi, 996 F.2d (2d Cir. I 993 )). Here, it is clear that 18 V.S.c docs not implicate Motis rights under the First Amendment. The Court's task, then, is to detcrmine whether the statute is unconstitutionally vague as applied. [21] When faced with an "as applied" vagueness chai!enge, courts engage in a two-part inquiry. Nodi, 996 F.2d at 550. *295 "[A] court must first C 2011 Thomson Reuters. No Claim to Orig. US Gov. Works.

71 Case: Document: 79 SPA13 Page: 71 04/04/ F.Supp.2d 284 (Cite as; 652 F.Supp.2d 284) Page 13 determine whether the statute 'givers] the person of ordinary intelligence a reasonable opportunity to know what is prohibited' and then consider whether the law 'providers] explicit standards for those who apply [it]. ' " Id. (quoting GrC/)'l/cd v. CiTY of Rockford, 408 U.S S.Ct. 2294, 2299, 33 L Ed.2d ), and Unired Slaies v. Schmddermal!. 968 F.2d 1564, 1568 (2d Cir. 1992). [22] Motz does not articulate why a person of ordinary intelligence would be unable to understand the conduci prohibited by 18 U.S.c [n other words, Motz has failed to show thai the language of 18 U.S.c is so vague as to "create[ J a trap for the unwary and permit[ J arbitrary enforce ment." Nadi, 996 F.2d at 550. The statute's [anguage is intentionally broad because Congress sought to create a mechanism by which prosecutors could combat the myriad of ever-evolving securities fraud schemes. [23] With regard to the second prong of the analysis-whether the law provides explicit standards to be applied-the Court notes that the requisite clements of the statute are straightforward. In order to prove a violation of the [8 U.S.c. 1348, the Government must show: "( I) fraudulent intent (2) a scheme or artifice to defraud; and (3) a nexus with a security." Mahaffy, 2006 WL , at 12. The Court finds that this standard is sufficiently clear to prevent the arbitrary or discriminatory application of 18 U.S.C Accordingly, Motz's "as applied" challenge is denied. 5. Wheth er Count One is Uncon stitutionally Vague [24][25] Motz contends that Count One is unconsti tutionally vague and must therefore be dismissed because the superseding indictment fails to describe the specific victims of the alleged scheme. However, as the Court has already observed, in a securities fraud scheme such as the one alleged, the Government need not specify which MFA client accounts were victimized by each allegedly fraudulent trade. Here, because the Defendant "cherry-picked" the profitable trades for the benefit of MFA, Mezzacappa Partners, L.P., and the Thi rd Millennium Fund, each client with a discretionary trading account with MFA could conceivably be considered a victim because these clients could have benefitted from the profitable trades. The Government need not comb through the investment profiles and cash levels of each discretionary account to determine what accounts could have benefitted from each profitable trade. This level of detai l is well-beyond the scope of an indictment. 6. Whether Count One AlIegcs a Cognizable Claim Undcr 18 U.S.c [26J[27J Motz argues that Count One fails to allege a cognizable claim under 18 U.S.C Rule 7(c) of the Federal Rules of Crimi nil! Procedure requires that an indictment contain a "plain, concise and definite written statement of the essential facts constituting the offense charged." Fcd.R,Cr. f>. 7(c). This requirement is not particularly onerous and the Second Circuit has repeatedly upheld "indictments that 'do little more than to track the language of the statute charged and state the time and place (in approximate terms) of the alleged crime.',. UJl ill!d SWte$ II. Walsh, 194 F.3d 37, 44 (2d Cir.1999) (quoting Uni/ed STales II. Tramunti, 513 F.2d 1087, 1113 (2d Ci L), cert. denied, 423 U.S S.Ct , 46 L.Ed.2d 50 (1 975 )). To be legally sufficient, the indictment must specify the clements of the offense in enough detail to give a defendant notice of the charges against him and to permit him to plead doub le jeop ardy in a future prosecution based on the same events. Id. *296 (quoting Unilcd Stales \'. S!al'foulokis, 952 F.2d Pd Cir.), cerro denied, 504 U.S. 926, 11 2 S.Ct. 1982, 118 L. Ed.2d 580 ( 1992)). [28] Here, it is beyond serious dispute that the superseding indictment alleges, in considerable detail, a scheme to defraud in connection with publicly traded securities. However, Molz contends that the superseding indictment fails to adequately allege the required element of fraudulent intent. The Court disagrees. [29][30] The parties agree that because "the «) 2011 Thomson Reuters. No Claim to Orig. US Gov. Works.

72 Case: Document: 79 SPA14 Page: 72 04/04/ F.Supp.2d 284 (Ci te as: 652 F.Supp.2d 284) Page 14 text and legislative history of 18 U.S.c clearly establ ish that it was modeled on the mail and wire fraud statutes," the Court's analysis should be guided by the caselaw construing those statutes. Mahaffy, 2006 WL , at *11; see 18 u.s.c (mail fraud);! 8 U.S.C (wire fraud). To show that a defendant possessed fraudulent intent within the meaning of the mail and wire fraud statutes, the Government must show that the defendant "contemplated some actual harm or injury to [his] vict ims." UniTed STUtes v. Starr. 816 F.2d (2e1 Cir.1987). The Second Circuit has held (hat "where the 'necessary result' of the [defendant's] scheme is to injure others, fraudulent intent may be inferred from the scheme itself. " United Slales II. D'Ammo, 39 F.3d 1249, 1257 (2d Ci r. 1994) (citations omitted). Here, the cherry-picking scheme described in the superseding indictment contemplated harm to the allegedly disfavored accounts. The alleged scheme, by its very nature, allowed Motz and MFA to sh ift the risk of unprofitable trades entirely to disfavored client accounts. By selectively allocating the profitable trades, Motz generated virtually riskfrce profits for MFA and two hedge fund clients at the expense of clients with discretionary accounts. Under the circumstances, fraudulent intent can be inferred because the necessary result of the alleged scheme was to disadvantage clients with discretionary accounts. The Government has adequately alleged all of the requisite clements of 18 U.s.C Accordingly, Motz's motion to dismiss Count One is den ied. present the document alteration count to a grand jury in the Southern District of New York or attcmpt to replead the count in the Eastern District of New York. In any event, having dismissed Count Two on venue grounds, the Court will not address Motz's additional challenges to the document alteration charge. III. CONCL USION With respect to Count One, the Court finds that the Government has, at the pre-trial stage, offered allegations sufficient to show that venue is propcr in the Eastern District of New York. The Court finds that the statute is constitutional as applied in this case; the superseding indictment is not unconstitutionally vague; and that the Governmcnt has alleged a cognizable claim under 18 V.S.c However, the Government may only prosecute Motz for allegcdly fraudu lent trades that occurred within the five years preceding the August 27, 2008 indictment. The Court also finds that Count Two should be dismissed without prejudice because*297 venue is lacking in the Eastern District of New York. SDORDERED. E.D.N.Y.,2009. V.S. v. Motz 652 F.Sllpp.2d 284 END OF DOCUMENT B. COllllt Two-Documellt AlteratiOll [31] Motz argues that Count Two should be dismissed because venue is lacking in the Eastern District of New York. In particular, Motz points out-and the Government concedes-that the evidence dcveloped thus far is insufficient to prove Ihat the charged acts of document alteration took place in this district. Accordingly, Count Two is dismissed without prejudice. The Government may choose to (> 2011 Thomson Reuters. No Claim to Orig. US Gov. Works.

73 Case: Document: 79 SPA15 Page: 73 04/04/ ,..., '- 'A024SB Case Document 103 (Rev. 06lOJ)Jlldpncnlln.Cri,llin. t c- Filed 05113/10 Page 1 of 6 EASTERN UNITED STATES OF AMERICA V. THE DEFENDANT: X pjeaded guilty to ccunt(s) GEORGE M. MOTZ UNITED STATES DISTRICT COURT District of NIN NEW YORK JUDGME Case Number: USMNumbcr: ONE (TWO COUNT FIRST SUPERSBDpm INDICTMENT). o pje.ded nolo contcndercto co\d\t(s) IN r!,t,." " which was accepled by the court. U.S. DJS [;/CT COUItr c.d.n.y o was found guilty on count(s) after a plea ofnot guilty. The defendlu'lt is adjudicated auilty of these of'fellsc9: Title 4: ScstiOD 18:1348(1) AUU, I. CI.", 8 Fclony '. A CRIMINAL CASE CR-08-0S98(S-2}01 (ADS) G. Robert G'. Esq. (RED!Roger Burlingame. AUSA Dcl"mdanl'. AtIonIIg'!. f.j.j 201D * LONG ISLAND OFFICE DUcOR EadC1l l:olml I The defendant is sentenced 05 provided in paps 2 through the Selltencin& Refonn Act of 1984, o The defendant has been round nol: guilty on couot(s) _-,6,--_ x eount(s) and Second Superseding Indictment 0 Is X are dismissed on die motion orthe United States. The sentence is imposed punu8ii1io It Is ordered that the defendant must notity the UDited Stata anomcy for this!let within 30 days of any cbame of name, residence, orrnailillgaddreu until all fines, JatiMion, costs, and spocial usessmcntl imposed 'judgment arc fully pakt. Ifomcrcd to payrestimioll, the defendallt must notify the court IUld United states altomey ofmatenal chanpt bi nomlc circwnstajlces. Sign.rureof JwIF. HONORABLE D. SPAlT, U.5.D.J. Mil)' Il, 2.010

74 Case: Document: 79 SPA16 Page: 74 04/04/ '. Case 2:0S-cr AOS Document 103 Filed 05/13/10 Page 2 of6 AO 2f58 (Re.. 06lO')Jlldplfllt in Criminl\Casc SIIOCIIl Imprisonment DEFENDANT, CASE NUMBER: GEORGE M. MOTZ CR-08-OS98(S 2)-OI (ADS) IMPRISONMENT., The defendant is hereby committed to the custody of the United States Bureau If Prisons to be imprisoned for. total term of:. NINETY SIX (96) MONTHS_ 11ffi DEFENDANT SHALL BE GIVEN crebrr FOR TIME ALREADY SERVED, IF ANY. XThc coun makclil the following recommenditiollj to the Bureau of Prisons: THAT THE DEFENDANT SERVE HIS SENTENCE AT THE MINIMUM SECURJTY F ACIUTY AT THE FEDERAL PRISON CAMP IN PENSACOLA, FLORIDA. THE DEFENDANT SHALL BE GfVEN MENTAL HEAL1H TREATMENT. - [)The defendant is remanded to the custody ofthc United States Marshal. XThc defendant shall SWTencier to the United States Marshal for this district: x " O a.m. X p.m. on 61301W or the Institution designated o as notirjcd by llie United Stales Marsha]. [JThe defendant shall surrender for servjee of sentence at the institution desipitc by the Bureau ofprisoos: o before 2 p.m. on o o IS notified by the United State5 Marshal. as notified by the Problltion or Pretrial ServtcU Office. I hive executed this judgment as follows: RETURN.. Deferl(iant delivered Of! withacertifiedc:opyoflbisjudgmeet. to UNITED STATES MAASHAL By DEPUTY UNITED STATES MARSHAL ----._..._

75 Case: Document: 79 SPA17 Page: 75 04/04/ SB (Rev..Crimlnal C&se Shed 3 Suporv;,e.! Release DEFENDANT: CASE NUMBER: Case 2:0B-cr ADS Document 103 For d 05/ Ie 13/10 Page30f6 GEORGE Mo MOTZ CR-O'-0598(S-2)-Ot (ADS) SUPERVISED Upon rcle&3e from imprisorunent, the defendant shall be on supervised release for. tdm of: Judsmmt-Pwae _ Q( THREE (3) YEARS. The defendant must repanto the probation office in me district to which the de*r!dant is rlljused within 72 hours ohl/lease from the custody of the Buteau of Pnsons. The del'endant shall not commit another federal, srate or local crime. The defendant &ban not unlawfully pcl:ssess a conuolled substance. The defendant qu refrain from any' unlawful use ofa controlled substlu1ce. The defendatrt shall subinlt 10 one drug test within 1.5 days of release &oat anc:\ al least twtl periodic drug tescs thereafter, as by the court. o The above drub testing condition Is suspended, based on the coun's detennlnldoa that the defendant poses a low risk of future subslance abuse. (Check, if applicable.) X The defendant shall not possess a ftreann, ammwlitioo. destructive device, or.., other dangcrous weapon. (Check, if.ppllcable.) o The defmdant shall In the collection of ON A as directed by ttlc prot.fdon officcr. (Check, ifapplicable.) o The dcfendant Jhail register with the stale sex offendcr registration agency in.it&te whcre the defendant residcs, works. OJ is a student, as directed by the probation officer. (Check, ifappllcable.) o Thc defendant shall participate in an approved propm for domestic violence. (Cbcck, ifapplicabk.) Ifthis/'udgment imposes a nne or rejtituclon, It is a condition of supttyised re" that the dcfendant pay In accordance with Ihe Schedule 0 Payments sboct of this judgment. The defendant musl comply with the standard condkions that have beco by this court as well as with luly additional conditions on the attached page.,. STANDARD CONDITIONS OF sppervision 1) the defendant shall not leavc the judicial dutria without the permission otdit court or probation officer; 2) the defendant shall repol1lo tbe probation officer and shall submit. tnrthm'.d COf1Ipletc written report within the fint five days of each month; 3) thc defendant shall answer truthfully all inquiries by the probation officer and follow thc instructions of the probation officer; 4) the defendant shall support his or her dependents and meet other family 5) the defendlult sban work regularly at a lawful occupation, unless excused the probation officer for schoo1ina. training, or oliler acceptable reasons; 6) the derendant shall notity lbe probation officer at least len days prior to IllI)' :Clbangc in residence or employment; 1) the defendant shall retrain from excessive use ofelcoholaod shall not pun:itr.e, posse.ss, use. distnbute, or administer any controlled substance or any paraphemlllie related to any controlled except as prescribed by. physician; 8) tbc defendlflt shall not hquent places where controlled substancc$ arc iu.1y aold, used, distributed. or administered; 9) the defendant shall not associate with any p'cnons edpaed In criminal actiyfly and shall not associate with any penon convicted ofa felony. unless gnulted pcnnisslon to do 10 by the probafion officer; 10) the defendant shall pennil a probation officer to visit him or hcr at any time.home or clsewhere and shall pennit coofiscat!on of any contraband obsentcd in plain view orthe probation officer; I I) the defendant shall notify the probation officer withirl!evcnly,fwo hours arrested or questioned by a law enforcement officer; 12) the shall not enter into any 1gecment 10 ICt as an Infonner or "lpcciai agcnt of a law enforcement agency without the pennlsslon of the court; and IJ) as directed by the probation officer, the defeodadl shall notity third parties _ritb that may be occasioned by thc defendant's criminal record or history or characteristics IIl'I.d shall permit the officer to makc such notification and to confinn the defendant s compliance with such notificadon requirement.,

76 Case: Document: 79 SPA18 Page: 76 04/04/ Case 2:08-cr ADS Document 103 Filed 05/13/10 Page A02U8 DEFENDANT: CASE NUMBER: (R". O6IOS) Judplent in I Cticn;nll Case Shoel 3" - Supmlsed Release GEORGE M. MOTZ CR (S-2}Ot (ADS) ADDITIONAL SUPERVISED RELJ4ISE TERMS I. RESTITUTION TO BE DECIDED AT A LATER DATE. 2. TIlE DEFENDANT SHALL PAY A FINE IN TIlE SUM OF TWENTY TllVUSAND DOLLARS ($20,000.00) TO THE U.S. A TIORNEY'S OFFICE, 225 CADMAN PLAZA EAST, BROOKLYN J!Y.

77 Case: Document: 79 SPA19 Page: 77 04/04/ " AOlASB Case 2:08-cr ADS Document 103 (Rey. OI!JOS) ill. Criminal c.. Shoel S CIimir* Maocwy p.,aitier DEFENDANT: CASE NUMBER; GEORGE M. MOTZ CR (S-2)-Ot (ADS) CRIMINAL MONETARY Filed 05/13/10 Page 50f6,1 The defendant mlbc pay the total criminal montlaly penalties under the schedu&c Cllf.paymenu on Sheet 6. TOTALS Aacwplltt S flu $ 20,000,00 RnUtullOD S TO BE DETERMINED o The detcnninauon of restitution i. deferrod UIllil sfter $UCh determination.. An JudgMiltrt in a Criminal Case (AO 24.SC) will be entered o The defendant must make restitution (Including community restitution) to the folkrwing payees in the amount listed below. lethe defendant makes a partiel payment, payee shall receive an approximiaity othefwise in the priorit): payment column below. However, pui'suadt to tlu.s.c. 3()64(1). all nontbiml victims must be paid before the United States 15 patd. ' Nlmso(P Tot.! Lpg- Rgtltyt.. Qrdered Priority or PuCSnlne TOTALS S -' L S -' L o Restitution amount ordered punuaot to plea agreement S o The deferniant must pay interest on restitution and. fine of more than unless the restitution or ftoe is paid in full before the fifteenth day after the date ofche j udgment, pursuant to 18 U.S.C. 3612(f). AII of the payment options on Sheet 6 may be subject 10 penaltih for delinquency and default, punuant to 18 U.S.C. 3611(g), o The court dt1ermined that the defendant does not have the ability to pay o the Interest requirement is waived for the 0 fine 0 restitution.. o the interest requirement for the 0 fine 0 restitution is modiftlld u follows: and Ills ordered that filldinp for tho: totll amount ofloues are September 13, 1994, but before April underchaptel'$ I09A, 110, I loa, and J 13A of Tille 18 foroffmsescommitted on orafter

78 Case: Document: 79 SPA20 Page: 78 04/04/ " A024SB Document 103 Filed 05113/10 Page 6 or6 Shoel 6 - Schedule or DEFENDANT: CASE NUMBER, GEORGE M. MOTZ CR (S-2)-O I (ADS) SCHEDULE OF PAYMEN1'S JlldplX'l'll P.&e --!- of' 6 Hlylng assessed the dcfendant's ability to pay, payment of the total criminal monetary P,lNlties Ire du.c as follows: A X Lump swn payment ofs due immediatel)', balance m. o notlatertllan,01'.\ _ D inaccordance 0 C, 0 0, 0 E,or 0 F below; or ' 8 0 Payment to begin immediately (may be combined with 0 C, DO. til 0 F bclow); or c 0 Payment in equal (c.,., weekly. monthly, quarterly) of S oyer a period of (e.8., months or yean), to commence (c.8., 30 orj() days) after Ole date oftbis judgment; or D 0 Plyment in equal (e.g., weekly, monthly, quarterly) installilcdts of S oyer a period of -:::::c:<::= (e,g., months or yean), to commence (c.g '10 days) after release: from imprisonment to a term of supervision; or E 0 Payment during thc term ofsupcnoised release will commence within (e.g., 30 or 60 days) after rclouc from imprisonment. The coun will set the payment plan based on an assessment of'thc defendant's ability to pay at that lime; or p 0 Special instructions regarding the payment of criminal monetary penalties: Unless tbe court hu express'r ordered otherwise, ifthisjudgment imposes of criminal penalric5 is due during!mprisonment. All crunina monetary penalties, except those payments made the Fcdcnd Bureau of PriSOQJ' Inmate Financill ReSpomibilify Program, arc made to the of the court. The defendant shall receivc endlt for all payments previously made toward any crintidai monetary penalties imposed. X Joint and Several Defendant and and payee, if appropriate. Names and Caso Numbers (including defendant mubber), Total Amount, Joint and Seven) Amount, MELHADO, FLYNN & ASSOClA TES CR 08-! (ADS). o The defendant shall pay the cost ofprosecudoo. o Thc defendant shall pay the following court cost(s): o The defendant shall forfeit the defendant's ioterest in thc following property to Ita, United States: Pa}'!!lents shall bclapplic.d in the following order: (I) USC$Sment, (2) restitution Princtal. (3) restitution interest, (4) fine principal. (!5) fine interest, (6) community restitution, (7) penalties, and (8) Including COlt and court costs.

79 Case: Document: 79 SPA21 Page: 79 04/04/ "AO 2458 (Rev ) Judgment in a Climinal Case UNITED STATES DrSTRlCT COURT EASTERN District of NEW YORK UNITED STATES OF AMERICA THE DEFENDANT: X pleaded guilty 10 count{s) v. GEORGE M. MOTZ o pleaded nolo contendere to count(s) which was accepted by the court. o was found guilty on counl(s) after a pica of not guilty. The defendant is adjudicated guilty ofthese offcnses: (1""-,,..,,) JUDGMENT IN A CRIMINAL CASE Case Number: USM Number: CR OS 0598(S 2) O I (ADS) G. Robert Gage, Esq. (RET) froger Burlingame, AUSA Dcrendant"s AUorne)' ONE (SINGLE COUNT SECOND SUPERSEDrNG INDICTMENT). T itle & Section 18:1348(1) Nature o(offcnse SECURITIES FRAUD, a Class B Felony Offense Ended C ount I The dcfcndanl is sentenced as provided in pages 2 through the Sentencing Reform Act of _... 6 of lhis judgment. The sentence is imposed pursuant 10 o The defendant has been found not guilty on count(s) X Counl(s) and Second Superseding Indictment 0 is X are dismissed on the motion of the United States. It is ordered that the defendant must notify the United States attorney for this district within 30 days of any change of name, residence, or mailing address until all fines, restitution, costs, and special assessments imposed by this judgment are fully paid. If ordered to pay restitution, the defenoani must notify the court and Un ited States attorney of material changes in econom ic circumstances. April Signature of Judge ROBERT c. HElNEMANl'I l ' (J \>,V _! r... <y :...:.., -.'. HONORABLE ARTHUR D. SPAlT, U.S.D.J. Name and Title of Judge June Date

80 Case: Document: 79 SPA22 Page: 80 04/04/ AO 245B (Rey, 06/()S) Judgmtllt in Cri minal Case Shee! 2 - Imprisonment DEFENDANT: CASE NUMBER: GEORGE M. MOTZ CR (S-2)-01 (ADS) Judgment Page, of 6 IMPRISONMENT The defendant is hereby committed 10 the custody of the United States Bureau of Prisons to be imprisoned for a total teon of: NfNETY SIX (96) MONTHS. THE DEFENDANT SHALL BE GIVEN CREDIT FOR TIME ALREADY SERVED, IF ANY. X The court makes the following recommendations to the Bureau of Prisons: THATTHE DEFENDANT SERVE HIS SENTENCE ATTHE MINIMUM SECURITY FACILITY AT THE FEDERAL PRISON CAMP fn PENSACOLA, FLORIDA. THE DEFENDANT SHALL BE GIVEN MENTAL HEALTH TREATMENT. OThe defendant is remanded to the custody of the United States Marshal. X The defendant shall surrender to the United States Marshal for this district x o " "12", :0,,,0 0 a.m. as notified by the United States Marshal. X p.m. o. 6/30110 or the Institution designated OThe defenda nt shall surrender for service of sentence at the institution designated by the Bureau of Prisons: o before 2 p.m. on o as notified by the United States Marshal. o as notified by the Probation or Pretrial Services Office. f have executed thisjudgmenl as foll ows: RETURN " Defendant delivered on, with a certified copy of this judgment. to UNITED STArES MARSHAL DEPUTY UNITED STATES MARSHAL

81 Case: Document: 79 SPA23 Page: 81 04/04/ AO 2459 DEFENDANT, CASE NUMBER, (Rev ) Judgment in a Criminal Case SlIcel J - Release GEORGE M. MOTZ CR-OS-059S(S-2)-OI (ADS) SUPERVISED RELEASE Judgmcll! Page of Upon release from imprisonment, the defendant shall be on supervised release for II term of: THREE (3) YEARS. The defendanl must repon 10 the probation office in the district to which the defendant is released with in 72 hours of release from the custody of the Bureau ofpnsans. The defendant shall not commit another federal, state or local crime. The defendant shall not unlawfully possess a controlled substance. The defendant shall refrain from any unlawfu l use of a controlled substance. The defendant shall submit to one drug test within IS days of release from imprisonment and at least two periodic drug tests thereafter, as determined by the court. o The above drug testing condition is suspended, based on Ihe court's detennination that the defendant poses a low risk of fulure substance abuse. (Check. if applicable.) X TIle defendant shall not possess a fireann, ammunition, destructive device, or any other dangerous weapon. (Check, if applicable.) o The defendant shall cooperate in the collection of ON A as directed by the probation officer. (Check, ifapplicable.) o The defendant shall register with the state sex offender registration agency in the state whcre the defendant residcs. works, or is a student. as directed by the probation officer. (Check. ifapplicable.) o The defendant shall participate in an approved program for domestic violence. (Chcck, if applicable.) If this/'udgment imposes a fine or restitution, il is a condition of supervised release thai the defendant pay in accordance with the Schedulc 0 Payments sllcet of this judgment. The defendant must comply with the standard conditions that have becn adopted by this court as well as with any additional conditions on the attached page. I) 2) 3) 4) 5) 6) 7) 8) 9) 10) II) 12) 13) STANDARD CONDITIONS OF SUPERVISION the defendant shall not leave Ihe judicial district without the permission of the court or probation officer; the defendant shall report to the probation officer and shall submit a truthful and complete written repon within Ihe first five days of cach month; the defendant shall answer truthfully all inquiries hy the probation officer and follow the instructions of the probation officer; the defendant shall support his or her dependents and meet other family responsibilities; the defendant shall work regularly al a lawful occupation, unless cxcused by the probation officer for schooling, training, or other acceptable reasons; the defendant shall notify Ihc probation officer at least ten days prior to any change in residence or employment; the defendant shall refrain from excessive use of alcohol and shall not purchase, possess, use, distribute, or administer any controlled substance or any paraphernalia related to any controlled substances, except as prescribed by a physician; the defendant shall not frequent places where controlled substances are illegally sold, used, distributed, or adm inistered; the dcfendant shall not associate with any I?crsons enga!led in criminal activity and shall not associate with any person convicted of a felony, unlcss granted pennission to do so by the proballon officer; the defendant shall permit a probation officer 10 visit him or her at any time at home or elsewhere and shall pennit confiscation of any contraband obscrved in plain view oflhe probation officer; the defendant shal l notify the probation officer within sevcnty-two hours ofbcing arrested or questioned by a law enforcemenl officer; the shall not enler into any agreement 10 act as an informer or a special agent of a law enforccment agcncy without the permission of the cour1; and as directed by the probation officer, the defendanl shajj notify third parties of risks that may be occasioned by the defendant's criminal record or personal history or characteristics and shall pcnnit the probation officcr to make such notifications and to confirm thc defendant's compliance with such notification requirement.