United States v. Chen

998 F.3d 1

• Court: Court of Appeals for the First Circuit
• Decided: May 17, 2021
• Docket: 19-1962P
• Status: Published

Opinion

United States Court of Appeals For the First Circuit No. 19-1962 UNITED STATES OF AMERICA,

Appellee,

v.

CHARLIE JINAN CHEN, a/k/a Charlie Chen,

Defendant, Appellant.

APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS

[Hon. Denise J. Casper, U.S. District Judge]

Before

Lynch and Kayatta, Circuit Judges, and McElroy, District Judge. _____________________

Valerie S. Carter, with whom Dennis C. Carter and Carter & Doyle LLP were on brief, for appellant. Donald C. Lockhart, Assistant United States Attorney, with whom Andrew E. Lelling, United States Attorney, was on brief, for appellee.

May 17, 2021

 Of the District of Rhode Island, sitting by designation. MCELROY, District Judge. Charlie Jinan Chen was charged

in a four-count indictment with three counts of insider trading,

in violation of 15 U.S.C. §§ 78j(b) and 78ff(a) (counts 1-3), and

with one count of making a materially false statement to the

Federal Bureau of Investigation (FBI), in violation of 18 U.S.C.

§ 1001(a)(2) (count 4). The government alleged Mr. Chen made the

false statement during an interview the FBI conducted of him while

investigating insider trading. At trial, he was acquitted of all

three insider trading counts but convicted of making a false

statement. He was sentenced to two years of probation plus a

$4,000 fine.

The crux of the appeal involves the content of the

allegedly false statement and related claims of prosecutorial

misconduct and judicial mishandling of count 4. Also material to

the appeal is the content of a second statement which, while

alleged by the government to have been false, was not charged.

The two statements – one referred to as the Recall Allegation and

the other as the Friends Allegation - are elucidated below.

We affirm.

Background.

The insider trading charges pertained to Mr. Chen's

stock trading in Vistaprint, an international printing company

with offices in Lexington, Massachusetts. The government

- 2 - contended that just prior to the release of eight consecutive

quarterly earnings statements, Mr. Chen exercised options to

purchase Vistaprint stock. In each of these quarters, Mr. Chen

correctly predicted the rise in share prices that would follow the

announcements. After the bump in the stock value, he sold shares,

realizing a profit of more than $800,000. The government alleged

that this pattern of purchasing and selling Vistaprint stock was

facilitated by insider information obtained from a Vistaprint

executive, Zhen (Jenny) Ye, or her husband, Kun (Kevin) Xu, or

both. According to the prosecution, the Ye-Xu family and the Chen

family were close friends, living near each other, sending their

children to the same language school, and socializing and

vacationing together.

During the FBI interview, Mr. Chen made two statements

that are relevant here. He told the FBI that he could not recall

options trading in Vistaprint. It was that answer, which we refer

to as the "Recall Allegation", that count 4 of the indictment

alleged was untrue. Mr. Chen made a second statement to the FBI

which the government also challenged as false, albeit not in a

formal charge. In the FBI interview, Mr. Chen denied that he and

the executive's husband, Kun or Kevin Xu, were "close friends."

He said they were mere acquaintances who did not speak often and

had never spoken about Vistaprint. He claimed not to know what

- 3 - Jenny did for a living. The accusation that this denial was untrue

is referred to here as the "Friends Allegation." The untruth of

the Friends Allegation was highly relevant to the prosecution. The

relationship between Mr. Chen and the Xu couple would make more

plausible his having received an insider "tip" from one or both of

them that could be used in insider trading. Further, it would

also make more probable that his trading in Vistaprint options

would be memorable.

This appeal sends our attention in two directions.

First, in a series of arguments all complaining in various ways of

the same thing, Mr. Chen contends that even though only the Recall

Allegation was charged as materially false, the jury might have

convicted him instead based on the uncharged Friends Allegation.

Second, in an argument not raised during trial but preserved in

his motion for new trial, Mr. Chen contends that the evidence was

insufficient to prove the materiality of the false statement, an

element of count 4. As discussed below, all of his arguments lack

merit.

The Preservation Requirement.

"It is a bedrock principle of our adversarial system

that ostensible errors arising before and during trial must be

properly raised and preserved in order to be reviewable on appeal."

United States v. Holmquist, 36 F.3d 154, 163 (1st Cir. 1994).

- 4 - Subject to the very limited "plain error" exception discussed

below, a party dissatisfied with something occurring at trial must

request some remedy from the trial judge to ensure that he or she

can carry that complaint to an appeals court if necessary. It is

from such rulings that appellate claims may arise.

The preservation requirement embodies the policy that

trial judges be given an opportunity to take corrective action if

some inappropriate or impermissible activity has occurred at the

trial. "In our adversarial system of justice, litigants must

alert trial courts to [an] 'error-in-the-making.'" United States

v. Kinsella, 622 F.3d 75, 83 (1st Cir. 2010) (quoting United States

v. Griffin, 818 F.2d 97, 100 (1st Cir. 1987)). Only if the trial

judge has had that opportunity and has, in the appellant's opinion,

failed to take appropriate action, may the appellant in the

ordinary course press the issue to the appeals court. "A timely

objection lets the trial judge correct any errors to avoid needless

reversals and remands." Id.

Framing of the Issues.

Mr. Chen's trial counsel seemed to understand the

problem that might arise from the fact that only one of the

accusations of false statements underlay count 4 of the indictment.

At various points in the trial, she pointed out that the government

seemed to be stressing the Friends Allegation at the expense of

- 5 - the Recall Allegation and that she was afraid the jury would either

be confused or tempted to convict on count 4 based on the knowing

falsity of the former instead of the latter. At no time, however,

as will be seen in the following discussion, did she make any

request of the trial judge to do or not do something because of

this concern, to preserve any claim of error.

In this Court, Mr. Chen frames his arguments in a

somewhat curious way. Rather than claim discrete errors committed

by the trial judge, he describes various incidents of prosecution

and judicial conduct or inaction. We discern from his narrative

seven discrete points of challenge:

1. That an improper variance occurred between the indictment and the proof at trial and that this variance violated Mr. Chen's right under Amendment VI of the United States Constitution "to be informed of the nature and cause of the accusation."

2. That the government "changed up" its theory between indictment and trial and, although the indictment stemmed from the Recall Allegation, the prosecution conducted itself as if the indictment charged the Friends Allegation. Br. of Defendant-Appellant at 9.

3. That the government committed prosecutorial misconduct by referring only to the Friends Allegation in its opening statement, and not to the Recall Allegation.

4. That the government "usurp[ed] Count Four" by arguing the Friends Allegation in its closing statement. Br. of Defendant-Appellant at 16.

5. That neither the trial judge's preliminary instruction nor her final instruction clearly informed the

- 6 - jury that it must find proof of the Recall Allegation – and not the Friends Allegation – to convict on count 4.

6. That the indictment – which charged the Recall Allegation as the allegedly false statement – was not sent to the jury room.

7. That the verdict form did not clearly inform the jury that to convict it must find the Recall Allegation – and not the Friends Allegation – to have been proven.

These several claims amount to the same complaint: that

the prosecution and judge contributed, in different ways, to the

possibility that the jury convicted on proof of the uncharged

Friends Allegation instead of on proof of the charged Recall

Allegation. No matter how many different ways he finds to frame

this assertion, however, Mr. Chen's problem is that none of these

arguments was preserved in the trial court by an objection, a

motion, or any other unsuccessful request or protest to the trial

judge.1 Mr. Chen's attempt to find satisfaction in this Court is

therefore contingent on his carrying the burden of demonstrating

that the events at trial he complains of were "plain error []

affect[ing] substantial rights." Fed. R. Crim. P. 52(b).

1 The only possible exception to this failure was a colloquy concerning the prosecution's opening statement. As will be discussed below, however, Mr. Chen's protest was quickly withdrawn, and he pronounced himself satisfied with the government's opening statement. See infra p. 13. - 7 - Waiver and Plain Error.

We discuss waiver and plain error at the outset to avoid

repetition as we proceed through Mr. Chen's arguments because all

but one of his arguments was either waived at trial or forfeited

below. An issue may be waived when a party purposefully abandons

it, either expressly or by taking a contrary position at trial.

United States v. Olano, 507 U.S. 725, 733 (1993) (defining waiver

as "the 'intentional relinquishment or abandonment of a known

right'" (quoting Johnson v. Zerbst, 304 U.S. 458, 464 (1938)). An

issue may also be waived if counsel's own conduct invited the trial

judge's ruling. E.g., United States v. Kakley, 741 F.2d 1, 3 (1st

Cir. 1984) (explaining that counsel "invited" whatever error may

have occurred by requesting the challenged instruction). A party

who waives an issue at trial cannot later complain on appeal by

pressing a position that was not taken at trial.

"Plain error," on the other hand, is a doctrine that

enables appellate review of forfeited issues that, while not

deliberately abandoned at trial, were not pressed by way of an

objection or request for ruling. See, United States v. McPhail,

831 F.3d 1, 8-9 (1st Cir. 2016) (distinguishing between waived and

forfeited issues). Reversal may occur in the absence of

preservation at trial when "(1) . . . an error occurred (2) which

was clear or obvious and which not only (3) affected the

- 8 - defendant's substantial rights, but also (4) seriously impaired

the fairness, integrity, or public reputation of judicial

proceedings." United States v. Salley, 651 F.3d 159, 164 (1st

Cir. 2011) (quoting United States v. Landry, 631 F.3d 597, 606

(1st Cir. 2011)). "Plain error reversals are limited to

blockbuster errors and not ordinary backfires." Id. Not only

must the error be a blockbuster, but the prejudice must also be so

substantial that it creates a "reasonable probability" that the

outcome of the trial would have been different had it not occurred.

United States v. Padilla, 415 F.3d 211, 221 (1st Cir. 2005)

(quoting United States v. Dominguez Benitez, 542 U.S. 74, 82

(2004)).

In this case, except for the materiality argument raised

at his motion for new trial, all of Mr. Chen's arguments on appeal

were either waived or forfeited. We discuss each below.

1. Variance between the indictment and the proof, and the Sixth Amendment violation.

At its heart, Mr. Chen's argument is that multiple

circumstances may have caused the jury to convict him of the

Friends Allegation instead of the Recall Allegation, essentially

causing a mismatch – or variance – between the indictment and the

proof. He contends that both the trial judge and the prosecutor

furthered this alleged error. As a result, he argues, he did not

receive adequate notice that the charge he had to defend against - 9 - concerned the Friends Allegation. At trial, however, he raised

neither the argument of variance nor of a Sixth Amendment "notice"

violation, so plain error review is required.2 See United States

v. Rodríguez-Milián, 820 F.3d 26, 32 (1st Cir. 2016) (reviewing

for plain error where appellant did not raise variance issue in

the district court).

As to his Sixth Amendment claim, Mr. Chen received

adequate notice of the conduct charged as criminal and so there

was no error, plain or otherwise. The indictment specifically

alleged the knowing falsity of his statement that he "could not

recall his options trading in [Vistaprint], when in fact CHEN then

and there knew he had bought and sold options in [Vistaprint] as

part of the insider trading scheme alleged herein." Mr. Chen

acknowledges in his brief that at various points the government

stressed it was relying on that allegation to convict. See, e.g.,

Br. of Defendant-Appellant at 5-6, 11-12, 15, 17-19. Indeed, the

record reflects that. That the government also introduced

evidence of a second false statement does not detract from the

notice Mr. Chen was indisputably given as to the Recall Allegation.

2 We note that Mr. Chen's presentation to this Court is spare. He cites but one case in support of his eight-and-one-half page argument, United States v. Dowdell, 595 F.3d 50 (1st Cir. 2010), a case which dealt with neither a variance nor a Sixth Amendment claim. Dowdell involved a "ministerial correction to a clerical error" in the indictment. Id. at 66. - 10 - "Convictions may be reversed based on variance only upon

a showing of prejudice to the defendant's substantial rights,"

such as "when lack of notice regarding the charges deprives the

defendant of his ability to prepare an effective defense and to

avoid surprise at trial." United States v. Soto-Beníquez, 356

F.3d 1, 27 (1st Cir. 2003); see also United States v. Tavares, 705

F.3d 4, 16–17 (1st Cir. 2013) (finding no plain error where there

was no prejudicial variance). As discussed above, Mr. Chen had

ample notice that the government intended to introduce evidence of

the Friends Allegation in addition to the Recall Allegation, and

ample opportunity to request a jury instruction clarifying that

count 4 was based on the Recall Allegation alone.

Mr. Chen suggests that he has established prejudice

because there was "evidentiary spillover" that could have led the

jury to convict him of count 4 based on the Friends Allegation,

even if it believed that he was telling the truth when he stated

that he could not recall his options trading with Vistaprint. But

we have only recognized such spillover prejudice in cases involving

multiple conspiracies and/or multiple defendants, see United

States v. Flaherty, 668 F.2d 566, 582 (1st Cir. 2017), "so that in

cases with multiple defendants proof that one defendant was

involved in one conspiracy does not lead the jury to believe that

another defendant was involved in a separate conspiracy." United

- 11 - States v. Tormos-Vega, 959 F.2d 1103, 1115 (1st Cir. 1992). Mr.

Chen points to no case in which we have applied this doctrine to

find a prejudicial variance with respect to a false statement

charge against a single defendant. In short, we see no plain

error.

2. Alleged prosecutorial misconduct in the opening and closing statements.

Mr. Chen complains that the government's opening

statement recounted the evidence only of the falsity of the Friends

Allegation, and that its failure to discuss the Recall Allegation

was misconduct. The judge had set a twenty-minute time limit for

opening statements. At the eighteen-minute point, she warned the

prosecutor of the elapsed time. At the point when the trial judge

called "time," the prosecutor had just progressed in his chronology

to the FBI’s going to Mr. Chen’s restaurant to talk to him. Told

to "wrap up," the prosecutor mentioned Mr. Chen’s "not close

friends" answer, "[a]mong other things," made one concluding

remark, and then sat down. Id.

The next day, Mr. Chen's counsel pointed out to the trial

judge that the prosecutor failed to discuss the Recall Allegation

in the opening statement and indicated her concern that the

government was planning to rely on the Friends Allegation to prove

count 4. The prosecutor confirmed that the government would rely

on the Recall Allegation alone and explained that he did not - 12 - mention the Recall Allegation during his opening statement because

he had run out of time. Defense counsel replied, "with that

clarification, we're fine." We need not decide whether Mr. Chen's

prosecutorial-misconduct objection was waived or forfeited through

this colloquy with the trial judge. Even assuming plain error

review is available, Mr. Chen points to no case holding that a

prosecutor committed misconduct by failing to mention certain

evidence in an opening statement. As such, Mr. Chen has not shown

that the prosecutor committed "clear or obvious" misconduct and so

cannot satisfy the second prong of the plain error standard.

The specific complaint about the closing statement is

hard to discern, but it seems to involve the government's statement

that "[Chen] lied about many things," without reminding the jury

that count 4 charged only falsity in the Recall Allegation. 3

Nestled in this section of Mr. Chen's brief is an additional claim

that faults the trial court for not sua sponte giving a

"cautionary/clarifying" instruction. Br. of Defendant-Appellant

at 21. We cannot find anything wrong with the prosecution's

closing argument, much less misconduct. The defense conceded at

trial that the evidence was relevant to the insider trading counts

and does so again in its Brief. Br. of Defendant-Appellant at 17,

Mr. Chen describes this as "[m]erging the one material 3

statement alleged in the Indictment with the other so-called uncharged lies." Br. of Defendant-Appellant at 20. - 13 - 35-37. Finding no clear prosecutorial misconduct, we can hardly

fault the trial judge, as Mr. Chen does, for failing to sua sponte

give a "clarifying" instruction.4

3. The indictment not going to the jury and the verdict form.

We combine these two claims of error because our analysis

of them is the same. Both claims were waived at trial. Whether

an indictment is given to the jury is within the sound discretion

of the trial judge. United States v. Medina, 761 F.2d 12, 21-22

(1st Cir. 1985). The failure to do so can hardly be termed error.

Even more fatal to Mr. Chen's contention is yet again the fact

that he not only did not object: he affirmatively agreed. The

trial judge made clear her intention not to provide the indictment

to the jurors, and on at least two occasions, Mr. Chen indicated

4 We note that "the plain error hurdle, high in all events, nowhere looms larger than in the context of alleged instructional errors." United States v. Rivera-Carrasquillo, 933 F.2d 33, 49 (1st Cir. 2019)(quoting United States v. Paniagua-Ramos, 251 F.3d 242, 246 (1st Cir. 2001)). Plain error will be found only for "glaring" mistakes, such as the failure to charge on the burden of proof. United States v. Paniagua-Ramos, 251 F.3d at 246 (1st Cir. 2001). At several points in the trial, the defense specifically approved the instructions given by the trial court. Mr. Chen does not appear to make a frontal assault on the trial court’s instructions to the jury on count 4. If he had, we would respond that the instruction given was one he and the government both proposed, he pointed out no problem with the instructions the trial judge proposed, and he made no objection at the close of the instructions. - 14 - his preference for precisely that decision. Having agreed to

withhold the indictment from the jury, any challenge to that course

of conduct was waived. United States v. Morehead, 676 F. App'x

695, 696 (9th Cir. 2017) (finding that the defendant waived his

right to have the indictment provided to the jury where he declined

the judge's offer to read the indictment to the jury or provide

them with a copy).

In the same way, we reject Mr. Chen's challenge to the

verdict form. Not only did he not object to it, when asked if the

verdict form was acceptable to the defense, counsel replied

specifically, "We're fine with it." He cannot change direction

in this Court. He has waived this issue. United States v.

Souffrant, 517 F. App'x 803, 718 (11th Cir. 2013) (finding that

the defendant waived any objection to the verdict form by agreeing

to it).

4. Motion for a new trial.

Mr. Chen's appellate claim under Fed. R. Crim. P. 33 is

unclear. The government interprets it as challenging the

sufficiency of the evidence on count 4. Br. for United States at

35. While Mr. Chen does specifically challenge proof of

materiality with respect to the Recall Allegation, he mounts a

broader challenge that he terms the trial court's "inexplicabl[e]

acquiescenc[ence] to the government's unilateral transformation of

- 15 - Count Four." Br. of Defendant-Appellant at 37. This is yet

another way to repackage the complaints discussed above. However,

bringing these claims in a motion for a new trial does not relieve

Mr. Chen of meeting the burden of plain error, as all but the

materiality issue discussed below remain unpreserved. See

Kinsella, 622 F.3d at 83. We do not agree that the district court

or the government "unilateral[ly] transform[ed]" count 4.

With respect to materiality, while Mr. Chen maintains

the statement had to be one that in fact affected the

investigation, we agree with the government's assertion that it

merely had to be of a type which would have a "natural tendency"

to influence an investigation in the "abstract." United States

v. Phillipos, 849 F.3d 464, 473 (1st Cir. 2017) (quoting United

States v. Mehanna, 735 F.3d 32, 55 (1st Cir. 2013); accord Mehanna

at 55 ("[W]here a defendant's statements are intended to misdirect

government investigators, they may satisfy the materiality

requirement of section 1001 even if they stand no chance of

accomplishing their objective."). Pretending to not recall the

trades can be as material as admitting or denying having made them,

as a jury could find that a feigned lack of memory was intended as

a thinly veiled deception. See, e.g., United States v. Sampson,

898 F.3d 287, 307 (2d Cir. 2018)(holding that the evidence was

sufficient to support the conclusion that the defendant's

- 16 - statement that he did not recall having seen a check register page

was intended to deceive FBI agents).

Finally, in his argument for a new trial, Mr. Chen

included a claim that the indictment was "unclear." 5 Br. of

Defendant-Appellant at 40. He argued it is ambiguous as to whether

it charges a false statement or merely a failure of memory. He

maintains this argument only by omitting language from the

indictment in a way that is misleading. He quotes the indictment

as charging "that Chen ‘could not recall his options trading in

VPRT, when in fact CHEN then and there knew he had bought and sold

options in [Vistaprint] as part of the insider trading scheme

alleged herein.'" Id. Read that way, of course, it charges him

with having a failure of memory. But that is not what the

5 Nestled in this argument in his brief, Mr. Chen appears to question, though obliquely, the sufficiency of the evidence that his claim not to remember options trading in Vistaprint was false. Br. of Defendant-Appellant at pp. 42-43. We dispose of this argument, to the extent it is made, quickly. In reviewing the sufficiency of the evidence, we draw all inferences in favor of the verdict. United States v. Morel, 885 F.3d 17, 22 (1st Cir. 2018) (preserved sufficiency challenges are reviewed "taking the evidence in the light most favorable to the verdict."). Here, Chen engaged in options trading over the course of two years no less than eight times, his profit was approximately $830,000, and the percentage of the Chen family retirement accounts that were invested in Vistaprint was considerable, particularly in comparison to Mr. Chen's other investments. Mr. Chen's interpretation of this evidence is not the only one, and the jury could well have drawn a reasonable inference that his professed failure of memory was not true. - 17 - indictment recited. Instead, with the language that Mr. Chen

omitted placed in italics by us, the indictment charged that Mr.

Chen

did knowingly and willfully make a materially false, fictitious, and fraudulent statement and representation . . . by stating to Special Agents of the Federal Bureau of Investigation that he could not recall his options trading in [Vistaprint], when in fact CHEN then and there knew he had bought and sold options in [Vistaprint] as part of the insider trading scheme alleged herein.

The full language of the indictment leaves no doubt that Mr. Chen

was charged with making a false statement about whether he

remembered options trading, not with having a faulty memory.

There was nothing ambiguous about it, no error, and certainly no

plain error.

Although Mr. Chen has made known to us his

dissatisfaction with several events at his trial, he did not make

it clear to the district judge. Indeed, he explicitly agreed to

at least two of her decisions that he now claims as error and he

failed to preserve all but one of the rest. Subject to both waiver

and the difficult standard of plain error, he has failed to make

his appellate case. Finding that Mr. Chen's arguments lack merit,

- 18 -