Monday, April 6, 2015
Panel Upholds Lawyer’s Conviction for Obstructing SEC Probe
By KENNETH OFGANG, Staff Writer
The Ninth U.S. Circuit Court of Appeals Friday affirmed the conviction and seven-year prison sentence handed to a former partner in a major law firm for obstructing the Securities and Exchange Commission’s investigation into a client’s multimillion dollar investment fraud.
The panel rejected former Nixon Peabody LLP partner David Tamman’s claim that U.S. District Judge Philip Gutierrez of the Central District of California should not have accepted his waiver of jury trial.
Tamman, a State Bar member since 1995, argued on appeal that once he told the judge he was using medications, the judge should have asked specific questions about what drugs those were and what dosages he was taking.
Tamman says he was taking large dosages of Prozac, Wellbutrin, and similar medications and that they were affecting his judgment.
But Judge David A. Ezra of the U.S. District Court for the District of Hawaii, sitting by designation, said Tamman, a graduate of Dartmouth College and USC Law School, was sophisticated and understood the significance of what he was doing when he and his attorney agreed to the waiver.
Gutierrez tried Tamman without a jury in 2012 and found him guilty of one count of conspiring to obstruct justice, five counts of altering documents, one count of being an accessory after the fact to his client’s mail and securities fraud crimes, and three counts of aiding and abetting the client’s false testimony before the SEC.
The client, John Farahi, had earlier pled guilty to running a Ponzi scheme, selling unregistered securities, bank fraud, and conspiring with Tamman to obstruct justice. Farahi, an Iranian-American who gave investment advice on a Farsi-language radio talk show in Los Angeles, was sentenced to 10 years in prison.
Prosecutors said that when the SEC made a surprise inspection of Farahi’s business, Tamman began altering and backdating documents to create the illusion that Farahi had been disclosing to investors that Farahi was himself taking the majority of investors’ funds. They also said that Tamman created and backdated phony promissory notes.
Tamman, a partner at Nixon Peabody from 2007 to 2009, is currently under interim suspension from the State Bar. He is also embroiled in litigation with his former firm, saying he lost a huge portion of his clientele when the firm terminated him after the SEC started serving subpoenas as part of the Farahi investigation, and that Nixon Peabody acted out of greed, wanting his book of business.
In rejecting the jury-waiver claim, Ezra explained that under United States v. Cochran, 770 F.2d 850 (9th Cir. 1985), the district judge must ascertain that the defendant understands the nature of the jury right that he is giving up. While the Cochran court suggested four specific advisements—“twelve members of the community compose a jury,” that “the defendant may take part in jury selection,” that “jury verdicts must be unanimous,” and that “the court alone decides guilt or innocence if the defendant waives a jury trial—less specificity is required if the defendant is well-educated and legally sophisticated, the judge explained.
“Here, as a practicing attorney and partner at a major law firm, Tamman was well aware of the rights that a jury trial would entail. The district court reasonably concluded that Tamman’s competence, background, and experience ensured that he understood the mechanics of a jury trial and the rights he was waiving, even without an in-depth colloquy or a recitation of the four facts mentioned in Cochran,” the judge said.
The district judge who accepted the waiver, and the defense attorney who advised the judge that the defendant was competent to give it, were in the best position to judge whether it was knowing and voluntary, Ezra said.
Ezra also rejected the defendant’s attacks on the length of the sentence. The judge noted that the sentence was shorter than the guidelines range of 151 to 188 months, which Ezra said was calculated correctly.
The defense argued that Tamman should not have received both an enhancement based on Farahi having been a broker-dealer, which extended to the defendant as Farahi’s accessory, and a second enhancement based on having used “special skills” as an attorney to commit securities crimes.
Sentencing Commission commentary suggesting that both enhancements should not apply to the same defendant does not apply where the special sills are those of the defendant, and the broker-dealer is the accessory and not the defendant.
It was also proper to impose enhancements based on the total amount of money involved in the scheme—more than $20 million—and the number of victims—more than 50—by imputing Farahi’s actions and knowledge to Tamman, Ezra said.
“The district court considered that Tamman, as an accessory after the fact to Farahi, had knowledge of Farahi’s mail fraud and Ponzi scheme,” the judge wrote. “The mere fact that his actual knowledge may have been limited to 43 victims does not preclude a finding that all of the victims were reasonably foreseeable to him.”
The appeal was argued by Harvard Law School Prof. Alan Dershowitz for the defendant and Assistant U.S. Attorney Paul G. Stern for the government.
The case is United States v. Tamman, 13-50463.
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