United States v. Aldo Tarallo

OPINION

Defendant Aldo Tarallo appeals his convictions on six counts of securities fraud, in violation of 15 U.S.C. §§ 78j(b) and 78ff and 17 C.F.R. § 240.10b-5; and four counts of mail fraud, in violation of 18 U.S.C. § 1341. We reverse his convictions with respect to three vicarious liability counts for lack of evidence. In affirming the remaining seven counts, we hold that a defendant may commit securities fraud “willfully” in violation of 15 U.S.C. § 78ff and 17 C.F.R. § 240.10b-5 even if the defendant did not know at the time of the acts that the conduct violated the law. We further hold that a defendant may commit securities fraud “willfully” by intentionally acting with reckless disregard for the truth of material misleading statements. Finally, we hold that 15 U.S.C. § 78ff is not facially unconstitutional as a violation of Apprendi v. New Jersey, 530 U.S. 466, 120 S.Ct. 2348, 147 L.Ed.2d 435 (2000).

FACTUAL AND PROCEDURAL BACKGROUND

Defendant and two co-defendants, David Colvin and John Larson, together participated in a fraudulent telemarketing scheme. Colvin owned several companies used in the scheme, including Intellinet, Inc., and Larson was Intellinet’s sales manager. Defendant was hired by Intelli-net as a telemarketer, and he participated in the fraud from April 1997 until February 20, 1998. Defendant and others solicited those called to invest in various businesses whose value and operations were fictitious. These purported businesses included Medical Advantage, Inc. (“Medical Advantage”), Lamelli Medical Technology, Inc. (“Lamelli”), and R.A.C. International, Inc. (“R.A.C.”).

Defendant and his co-defendants falsely represented to potential investors that Medical Advantage operated independent weight loss clinics around the country and had a projected 1997 revenue of $8.2 million, and that C. Everett Koop and Tom Brokaw supported or were affiliated with the company. Defendant and his co-defendants falsely represented to potential investors that Lamelli had developed a detoxification system that could detoxify a person of all alcohol or drugs in 15 minutes, that the system had won FDA approval, and that $187 million in revenue was expected to be generated by this alleged invention in 1998. Defendant and his co-defendants falsely represented to potential investors that R.A.C. had generated $2.3 million in revenue in 1997 from sales of motor oil, car batteries, and tools, and that the company projected for 1998 revenues of approximately $3.5 million.

Defendant and his co-defendants told potential investors that they would be investing by means of promissory notes, which would be held in a “trust” for a fixed term of between 90 and 180 days. In return, the investors would receive 12 percent interest per annum and shares of “restricted stock” in the company. Defendant told investors that the company’s Initial Public Offering (“IPO”) would occur on or before the date on which the promissory note was to mature, at which point investors could (at their option) either receive back their invested principal or use it to purchase shares offered in the IPO. In *1181 stead of holding the invested funds in trust as promised, however, Colvin and others used those funds for the benefit of Colvin, Larson, Defendant, and their associates, and the investors never saw their money again.

After a nine-day trial, a jury convicted Defendant on six counts of securities fraud and four counts of mail fraud. The district court sentenced him to 37 months’ imprisonment on each count, with the sentences to run concurrently. Defendant timely appealed.

DISCUSSION

Defendant presents four arguments on appeal: (A) there was insufficient evidence to support the fraud convictions; (B) there was insufficient evidence to support the convictions on counts arising from acts committed by other telemarketers; (C) the district court erred in instructing the jury; and (D) the prosecution engaged in misconduct that prejudiced Defendant. We will address each of these arguments in turn, but agree with Defendant only as to the second argument.

A. Evidence Supporting the Fraud Convictions

1. Standard of Review.

We review de novo the question whether sufficient evidence was adduced at trial to support a conviction. United States v. Diaz-Cardenas, 351 F.3d 404, 407 (9th Cir.2003). We view the evidence in the light most favorable to the government, and it is sufficient if any rational trier of fact could have found the essential elements of the crime beyond a reasonable doubt. United States v. Plache, 913 F.2d 1375, 1381 (9th Cir.1990).

2. Defendant knowingly made false statements.

A defendant may be convicted of committing mail fraud in violation of 18 U.S.C. § 1341 only if the government proves beyond a reasonable doubt that the defendant had the specific intent to defraud. United States v. Sayakhom, 186 F.3d 928, 941 (9th Cir.), amended by 197 F.3d 959 (9th Cir.1999). Likewise, a defendant may be convicted of committing securities fraud only if the government proves specific intent to defraud, mislead, or deceive. United States v. Brown, 578 F.2d 1280, 1284 (9th Cir.1978).

Defendant argues that there was insufficient evidence that he knew that the statements he made to potential investors were false. If he did not even know that the statements were false, of course, he could not have had the specific intent to defraud. He points out that Colvin and Larson distributed typewritten scripts for salespeople to use during sales calls, and he asserts that the investment materials they provided to Defendant (and passed along to investors) were sophisticated and were not recognizably false. In essence, Defendant claims that no evidence at trial established that he was anything other than an innocent who was duped right along with the investors.

The record does not support Defendant’s claim. A reasonable factfinder could have found beyond a reasonable doubt that Defendant knew of the fraudulent nature of the scheme in which he was participating.

For example, the jury was presented with evidence that Defendant knew that it was a lie to assure investors that their money was guaranteed and risk-free because it was held in a “trust” until the IPO occurred. For example, Crew testified that Defendant told him that his investment would be held in a trust and that, after the IPO, he could receive his principal back with interest, or else receive shares in the company. However, Defendant received paychecks from Sierra Ridge *1182 Management Trust, which was one of the trusts for which Defendant solicited investors. Agent Goldman testified that, after being arrested and Mirandized, Defendant admitted that he knew he was being paid out of the same “trust” companies that investors’ money was being deposited. Paul Coynes, who worked with Defendant as a telemarketer, also testified for the prosecution. Coynes explained that he realized after a time that it was impossible for the money he was soliciting to be held safely in a trust:

[W]e told people that all the money went into the trust company. And at some point it became clear to me how ridiculous that was because we were getting paid a commission, the sales manager was getting paid a commission, and the owner of the company was obviously living a decent life-style and that money had to come from somewhere.

A juror could reasonably conclude from this evidence that Defendant knew that the “trusts” were not actually safe, but were being raided for payroll.

The jury also heard evidence that Defendant lied to potential investors about where he was located, telling them during telephone conversations that he was in a different office from Colvin, an office that did not exist. Investor-victim John Wied-mer testified that Defendant told him that he was in a Washington, D.C., office, while Colvin was in California. Wiedmer testified that this statement influenced his decision to invest because it made the publishing company Defendant was pitching sound like “a pretty big operation,” and that representation added some credence to the legitimacy of the enterprise. Likewise, investor-victim Keith Crew testified that Defendant sometimes claimed to be in Washington, D.C., when they spoke on the telephone and that Defendant provided him with a business card from Al Tarall (Defendant’s alias) in Washington, D.C. However, Agent Steven Goldman of the FBI testified that, in the course of his investigation into the telemarketing scheme, he learned that the “Washington office” was only a “virtual office” that consisted simply of a service that answered the telephones and forwarded mail.

The foregoing evidence supported the jury’s finding beyond a reasonable doubt that Defendant knew of the fraudulent nature of the telemarketing scheme and that he acted with the intent to defraud.

3. The false statements were material.

A misrepresentation must be material to form the basis of a conviction for mail or securities fraud. Neder v. United States, 527 U.S. 1, 25, 119 S.Ct. 1827, 144 L.Ed.2d 35 (1999) (mail fraud); United States v. Smith, 155 F.3d 1051, 1064 (9th Cir.1998) (securities fraud under 17 C.F.R. § 240.10b-5). For mail fraud, the test is whether the statement has a natural tendency to influence, or is capable of influencing, the addressee’s decision. United States v. LeVeque, 283 F.3d 1098, 1103-04 (9th Cir.2002). For securities fraud, a statement is material if there is a substantial likelihood that a reasonable investor would consider it important in making a decision. No. 84 Employer-Teamster Joint Council Pension Trust Fund v. Am. W. Holding Corp., 320 F.3d 920, 934 (9th Cir.), cert. denied , — U.S. -, 124 S.Ct. 433, 157 L.Ed.2d 311 (2003).

Defendant’s false statement that the invested funds would be placed in a trust and would be safe there was material under both the mail fraud and securities fraud standards. Such a statement has a natural tendency to influence a potential investor’s decision to invest, and a reasonable investor would find the level of risk to be important in deciding whether to invest.

The materiality of Defendant’s false statements that he was in an office in *1183 Washington, D.C., is a closer question, but we conclude that these statements also were material. By making the business appear to be a “pretty big operation,” these statements had a natural tendency to influence a potential investor’s decision. Similarly, a potential investor might consider multiple office locations, and travel to them, to be indices of sophistication, prosperity, or business savvy, which would be important in making a decision whether to invest.

Defendant cites LeVeque, 283 F.3d at 1104, in support of his argument that his lies regarding his location were not material. In LeVeque, we distinguished the Second Circuit’s decision in United States v. Regent Office Supply Co., 421 F.2d 1174, 1178 (2d Cir.1970). We explained that a fraud conviction could be maintained in LeVeque because the “defendants materially misrepresented the advantages of their offer.” 283 F.3d at 1104. This had not been true in Regent, where the false statements were made only in order to gain access to make their sales pitch, and did not misrepresent “the price or quality of the product being sold.” LeVeque, 283 F.3d at 1104. The Second Circuit therefore determined in Regent that the statements were not material. Id. Defendant relies on LeVeque to argue that only direct misrepresentations of the price, quality, or advantages of the transaction are material. We disagree. The standards we cite above clearly allow for a broader class of conduct to be considered material. Here, Defendant’s misrepresentations were designed to give a false impression as to the size and nature of his own company as well as the businesses in which victims were being asked to invest. LeVeque was merely distinguishing the facts of that case with a case in which the only misrepresentations were related to gaining access to customers in order to pitch an otherwise honest product.

In short, Defendant’s misrepresentations were material, and there was sufficient evidence of them presented to the jury. We therefore affirm the jury’s convictions on the “direct liability” counts.

B. The “Vicarious Liability” Convictions

Defendant was convicted on counts 7, 23, and 24 of the indictment, all of which charged him with mail fraud and securities fraud arising out of sales made by other employees of the telemarketing firm. The district court instructed the jury- on two theories for these counts: an aiding-and-abetting theory, and a eausing-another-to-commit-a-crime theory. The court did not instruct the jury on a “coschemer liability” theory.

With respect to aiding and abetting, the court instructed that whoever “aids, abets, counsels, commands, induces or procures the commission of a crime against the United States is as guilty as a principal.” The court explained that, to prove a defendant guilty under 18 U.S.C. § 2(a), the government must prove beyond a reasonable doubt: (1) that a crime was committed by someone; (2) that the defendant knowingly and intentionally aided, counseled, commanded, induced, or procured that person to commit the crime; and (3) that the defendant acted before completion of the crime. The defendant must have acted with the knowledge and intention of helping the actor commit the crime.

The court also provided an instruction for causing another to commit a crime under 18 U.S.C. § 2(b). This instruction explained that whoever “willfully causes an act to be done which if directly performed by him ... would be an offense against the United States is guilty as a principal.”

Defendant argues that insufficient evidence was adduced to prove beyond a reasonable doubt that the telemarketers who were involved in the charged transactions *1184 committed any crimes, or to prove that Defendant either aided or abetted any crimes or caused the other telemarketers to commit any crimes. The government responds primarily that sufficient evidence existed for the jury to convict Defendant on the vicarious liability charges under a “coschemer liability” theory.

Under “coschemer liability,” a defendant who commits mail fraud is vicariously liable for all the acts of his coschemers in furtherance of the scheme, if the acts were reasonably foreseeable to the defendant. United States v. Stapleton, 293 F.3d 1111, 1116-17 (9th Cir.2002). The government concedes that it did not request, and that the district court did not give, a jury instruction on coschemer liability. Nevertheless, the government argues, the jury was entitled to convict Defendant on the vicarious liability counts under a coschemer theory because it was instructed that the government can prove that a defendant is guilty of securities fraud if the evidence proved that he took part in a “scheme ... to defraud” or “engaged in a course of business which operated as a deceit,” and that the jury could convict Defendant for mail fraud if the government proved that he “knowingly participated in a scheme or plan to defraud.”

The government correctly notes that the victim investors in the transactions at issue in counts 7, 23, and 24 testified to experiencing the same type of fraud as did the witnesses with whom Defendant had dealt directly. Therefore, the government posits, there was sufficient evidence before the jury that these transactions were criminal and that Defendant reasonably could have foreseen the solicitation of these victims.

The problem with this argument is that, in order to convict Defendant under a “coschemer” theory, the jury would have had to find beyond a reasonable doubt that Defendant’s fellow telemarketers were, in fact, coschemers acting in furtherance of the scheme. See Stapleton, 293 F.3d at 1118 (explaining that jury instructions were adequate because they “required the jury to find that the co-schemers’ acts were in furtherance of the unlawful scheme”). However, the jury was never instructed on coschemer liability, and so it was not informed that this fact was a necessary predicate to a conviction. Neither of the vicarious liability theories on which the jury was instructed required it to find beyond a reasonable doubt that Defendant’s fellow telemarketers were cos-chemers. Because the jury was not instructed that it had to find beyond a reasonable doubt all elements of coschemer vicarious liability, on appeal the government may not rely on this new theory. See McCormick v. United States, 500 U.S. 257, 270 n. 8, 111 S.Ct. 1807, 114 L.Ed.2d 307 (1991) (“[T]he Court of Appeals af-firmedfdefendant’s] conviction on legal and factual theories never tried before the jury .... [F]or that reason alone ... the judgment must be reversed.”).

The government argues, in the alternative, that there was sufficient evidence to convict Defendant on the aiding and abetting theory, because he aided the transactions at issue by taking a 20 percent commission on his sales, while the balance of the “invested” money was available (and in part used) for paying expenses of the telemarketing operations. The government reasons that, merely by bringing money into the shop, Defendant aided the actions of his fellow telemarketers.

We disagree. There was no evidence that Defendant, when generating revenues, intentionally aided any of his coworkers in committing their own frauds, as distinct from making money for himself. Nor did the government present evidence that the money brought in by Defendant was used specifically to support the frauds *1185 charged in counts 7, 23, and 24. In the circumstances, there was insufficient evidence for the jury to convict Defendant on these counts based on an aiding and abetting theory.

The government no longer argues that the convictions can be sustained under 18 U.S.C. § 2(b).

Because there was insufficient evidence to support the jury’s convictions for vicarious liability under the theories on which the district court instructed the jury, we reverse Defendant’s convictions on counts 7, 23, and 24.

C. Jury Instructions

Defendant claims several errors in the jury instructions relating to the fraud counts as to which there was sufficient evidence.

1. Standards of Review.

We review de novo the question whether a trial court’s jury instruction accurately states the law. United States v. Hopper, 177 F.3d 824, 831 (9th Cir.1999). By contrast, we review for abuse of discretion a district court’s formulation of jury instructions. United States v. Franklin, 321 F.3d 1231, 1240-41 (9th Cir.), cert. denied, — U.S. -, 124 S.Ct. 161, 157 L.Ed.2d 106 (2003). Finally, we review for plain error challenges to jury instructions that were not objected to before the district court. United States v. Delgado, 357 F.3d 1061, 1065 (9th Cir.2004).

2. Instructions equating “willfully” and “knowingly.”

Defendant was charged with, and convicted of, securities fraud under 15 U.S.C. § 78ff and under 17 C.F.R. § 240.10b-5, which was promulgated under the authority of 15 U.S.C. § 78j. Section 78ff(a) states:

(a) Willful violations; false and misleading statements

Any person who willfully violates any provision of this chapter (other than section 78dd-l of this title), or any rule or regulation thereunder the violation of which is made unlawful or the observance of which is required under the terms of this chapter, or any person who willfully and knowingly makes, or causes to be made, any statement in any application, report, or document required to be filed under this chapter or any rule or regulation thereunder or any undertaking contained in a registration statement as provided in subsection (d) of section 78o of this title, or by any self-regulatory organization in connection with an application for membership or participation therein or to become associated with a member thereof, which statement was false or misleading with respect to any material fact, shall upon conviction be fined not more than $5,000,000, or imprisoned not more than 20 years, or both, except that when such person is a person other than a natural person, a fine not exceeding $25,000,000 may be imposed; but no person shall be subject to imprisonment under this section for the violation of any rule or regulation if he proves that he had no knowledge of such rule or regulation.

15 U.S.C. § 78ff(a) (2003) (emphases added).

The district court instructed the jury on “knowingly” and “willfully” as follows:

Each of the crimes charged in the indictment requires proof beyond a reasonable doubt that the defendant acted knowingly. An act is done knowingly if the defendant is aware of the act and does not act or fail to act through ignorance, mistake, or accident.

The government is not required to prove that the defendant knew that his acts or omissions were unlawful. Thus, for example, to prove a defendant guilty of securities fraud or mail fraud based *1186 on making a false or misleading representation, the government must prove beyond a reasonable doubt that the defendant knew the representation was false or was made with reckless indifference to its truth or falsity, but it need not prove that in making the representation the defendant knew he was committing securities fraud, mail fraud, or any other criminal offense.

In these statutes, willfully has the same meaning as knowingly.

Defendant argues that the court erred by instructing that “willfully” and “knowingly” mean the same thing, and by instructing that the government did not have to prove that defendant knew that his conduct was unlawful. He argues that the “willful” instruction runs afoul of Bryan v. United States, 524 U.S. 184, 191-92, 118 S.Ct. 1939, 141 L.Ed.2d 197 (1998), in which the Supreme Court stated:

As a general matter, when used in the criminal context, a “willful” act is one undertaken with a “bad purpose.” In other words, in order to establish a “willful” violation of a statute, “the Government must prove that the defendant acted with knowledge that his conduct was unlawful.” Ratzlaf v. United States, 510 U.S. 135, 137, 114 S.Ct. 655, 126 L.Ed.2d 615 (1994).

(Footnote omitted.) Because 15 U.S.C. § 78ff requires a showing of “willfulness,” Defendant argues, it was error to instruct the jury that Defendant could be convicted even if the jury found that he did not know that his conduct was unlawful.

As an initial matter, we note that the district court did err in this instruction, although not in the way that Defendant claims. 1 As quoted above, the district court instructed that “[e]ach of the crimes charged in the indictment requires proof beyond a reasonable doubt that the defendant acted knowingly.” (Emphasis added.) However, § 78ff(a) states that a person who “willfully” violates any provision of the chapter or any rule or regulation promulgated thereunder is subject to criminal penalty. 15 U.S.C. § 78ff. “Knowingly” is not a required element. Id. “Knowingly” is an element for the conviction of any individual who “makes, or causes to be made, any statement in any application, report, or document required to be filed under this chapter or any rule or regulation thereunder or any undertaking contained in a registration statement as provided in subsection (d) of section 78o of this title.” Id. As § 78ff makes clear, such a person must be found to have engaged in the proscribed conduct “willfully and knowingly.”

The conduct for which Defendant was indicted, tried, and convicted did not involve the filing of an application, report, or document required by the securities laws. Instead, his conduct was covered by 17 C.F.R. § 240.10b-5. 2 That conduct *1187 clearly falls under the first provision of § 78ff, which requires only that the act be done “willfully,” but does not require that the act be done “knowingly.” Therefore, the district court’s instruction that “[e]ach of the crimes charged in the indictment requires proof beyond a reasonable doubt that the defendant acted knowingly” was erroneous.

However, the district court then went on to equate “willfully” with “knowingly.” The district court’s error in including “knowingly” in the instructions is therefore harmless so long as the definition the court provided for knowingly and willfully satisfies the statutory definition of “willfully.” We turn now to that question.

The Supreme Court has taken pains to observe that the word “willful” “is a word of many meanings” and that “its construction is often influenced by its context.” Ratzlaf, 510 U.S. at 141, 114 S.Ct. 655 (alterations omitted) (internal quotation marks omitted); see also Bryan, 524 U.S. at 191, 118 S.Ct. 1939 (internal quotation marks omitted). We must consider, then, the context in which “willfully” is found in the securities fraud statutes. The question is whether the securities fraud statutes’ use of the term “willfully” means that a defendant can be convicted of securities fraud only if he or she knows that the charged conduct is unlaivjul, or whether “willfully” simply means what the district court instructed it means: “knowingly” in the sense that the defendant intends those actions and that they are not the product of accident or mistake.

Defendant’s argument — that willfulness requires that he knew that he was breaking the law at the time he made his false statements — has been previously rejected by this and other courts. In United States v. Chamay, 537 F.2d 341, 351-52 (9th Cir.1976), we cited with approval the Second Circuit’s interpretation of § 78ff in United States v. Peltz, 433 F.2d 48, 54 (2d Cir.1-970). The Second Circuit explained there that “[t]he language makes one point entirely clear. A person can willfully violate an SEC rule even if he does not know of its existence. This conclusion follows from the difference between the standard for violation of the statute or a rule or regulation, to wit, ‘willfully,’ and that for false or misleading statements, namely ‘willfully and knowingly.’ ” Id. at 54. We quoted a law review article cited in Peltz, 433 F.2d at 55, which “concluded it was necessary only that the prosecution establishes a realization on the defendant’s part that he was doing a wrongful act.” Charnay, 537 F.2d at 352 (quoting William B. Herlands, Criminal Law Aspects of the Securities Exchange Act of 1934, 21 Va.L.Rev. 139, 149 (1934)) (internal quotation marks omitted). Adopting the reasoning of the Second Circuit, we “accepted] this with the qualifications, doubtless intended by the author, that the act be wrongful under the securities laws and that the knowingly wrongful act involve a significant risk of effecting the violation that has occurred.” Id. (internal quotation marks omitted). 3

We also addressed an argument very similar to Defendant’s in United States v. English, 92 F.3d 909 (9th Cir.1996). In English, the defendant was convicted of securities fraud under 15 U.S.C. §§ 77q(a) and 77x. “Section 77q(a) makes it illegal to use instruments of interstate commerce to defraud or deceive purchasers of securities. Section 77x, a general penalty provi *1188 sion covering § 77q(a) and other 15 U.S.C. § 77 offenses, provides that ‘[a]ny person who willfully violates’ § 77q(a) is subject to fines and incarceration. 15 U.S.C. § 77x (emphasis added).” Id. at 914. Section 77x is therefore substantively similar to the willfullness provision of § 78ff(a). In English, we rejected the defendant’s argument that § 77x’s willfullness requirement required that the government prove that the defendant knew that his conduct was illegal. We distinguished Ratzlaf and explained that “our cases ... support the conclusion that §§ 77q(a) and ... 77x do not require proof of knowledge of illegality.” Id. at 915.

Even were we not bound by our existing precedent, we would reach the same result. The final clause of § 78ff(a) provides that “no person shall be subject to imprisonment under this section for the violation of any rule or regulation if he proves that he had no knowledge of such rule or regulation.” 15 U.S.C. § 78ff(a). The opening-sentence of subsection (a) explains that “[a]ny person who mllfully violates any provision of this chapter ... or any rule or regulation thereunder the violation of which is made unlawful or the observance of which is required under the terms of this chapter” commits a crime. Id. (emphasis added). If “willfully” meant “with knowledge that one’s conduct violates a rule or regulation,” the last clause proscribing imprisonment — but not a fine — in cases where a defendant did not know of the rule or regulation would be nonsensical: If willfully meant “with knowledge that one is breaking the law,” there would be no need to proscribe imprisonment (but permit imposition of a fine) for someone who acted without knowing that he or she was violating a rule or regulation. Such a person could not have been convicted in the first place.

Under our jurisprudence, then, “willfully” as it is used in § 78ff(a) means intentionally undertaking an act that one knows to be wrongful; “willfully” in this context does not require that the actor know specifically that the conduct was unlawful. The district court’s instructions correctly informed the jury that it had to find that defendant intentionally undertook such an act:

[T]o prove a defendant guilty of securities fraud or mail fraud based on making a false or misleading representation, the government must prove beyond a reasonable doubt that the defendant knew the representation was false or was made with reckless indifference to its truth or falsity, but it need not prove that in making the representation the defendant knew he was committing securities fraud, mail fraud, or any other criminal offense.

The district court’s instructions thus required the jury to find that Defendant had made statements that he knew at the time were false, or else made them with a reckless disregard for whether they were false. 4 The district court therefore required the jury to find that Defendant undertook acts that he knew at the time to be wrongful, meeting the standard for defining “willfully” in this circuit. The district court’s importation of the term “knowingly” into the jury instructions was harmless beyond a reasonable doubt, because the court equated “knowingly” with “willfully,” and the court’s definition properly explained “willfully.”

3. Recklessness standard for securities fraud.

As discussed above, the district court instructed the jury that it could convict Defendant of both mail fraud and securities fraud if it found that he had made *1189 a false statement, which was a representation that either “(a) was then known to be untrue by the person making or causing it to be made or (b) was made or caused to be made with reckless indifference as to its truth or falsity.” Defendant argues that the recklessness portion of the instruction was error as to the securities fraud counts.

The comment to Ninth Circuit Model Jury Instruction 9.7 (2000) states that reckless disregard for truth or falsity is sufficient to sustain a conviction for securities fraud. The comment cites United States v. Farris, 614 F.2d 634, 638 (9th Cir.1979), for this proposition. Defendant argues that the comment incorrectly describes the law to be applied in this case, because Farris was not a 15 U.S.C. §§ 78j(b) or a 78ff prosecution, because Farris relied on a civil securities fraud case, and because the Supreme Court’s decision in United States v. O’Hagan, 521 U.S. 642, 117 S.Ct. 2199, 138 L.Ed.2d 724 (1997), stands for the proposition that recklessness is insufficient to sustain a criminal conviction for securities fraud. In O’Hagan, the Supreme Court said that, in order to convict a defendant of securities fraud, the government must prove that the defendant “willfully” violated Rule 10b-5. 521 U.S. at 665-66, 117 S.Ct. 2199 (citing 15 U.S.C. § 78ff(a)). 5 Defendant again cites Bryan, 524 U.S. at 191-93, 118 S.Ct. 1939, for the proposition that willfullness requires actual knowledge and argues that recklessness cannot satisfy this requirement.

Defendant’s argument fails.