United States v. Jesse Holovacko

• Court: Court of Appeals for the Third Circuit
• Decided: July 22, 2019
• Docket: 17-3395
• Status: Unpublished

Opinion

NOT PRECEDENTIAL

UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT ________________

No. 17-3395 ________________

UNITED STATES OF AMERICA

v.

JESSE HOLOVACKO, Appellant ________________

On Appeal from the United States District Court for the District of New Jersey (D.C. Criminal No. 3-16-cr-00349-001) District Judge: Honorable Michael A. Shipp ________________

Submitted Pursuant to Third Circuit L.A.R. 34.1(a) on February 6, 2019

Before: HARDIMAN, SCIRICA, and RENDELL, Circuit Judges

(Filed: July 22, 2019)

________________

OPINION* ________________

* This disposition is not an opinion of the full Court and pursuant to I.O.P. 5.7 does not constitute binding precedent. SCIRICA, Circuit Judge

Jesse Holovacko was a financial advisor at Merrill Lynch when he arranged to

transfer over $250,000 from the retirement account of a client of the firm into his own

personal account. Holovacko was convicted of investment advisor fraud and six counts of

wire fraud. He now challenges these convictions and requests a new trial on the basis of

two allegedly erroneous evidentiary rulings by the District Court. Neither ruling, though,

was an abuse of the trial court’s discretion. We will affirm Holovacko’s convictions.

I.

At Merrill Lynch, Holovacko handled the account of Stanley Klimek, a former

factory worker with about $600,000 in retirement savings invested with the firm.

Beginning in December 2013, Holovacko facilitated eighteen transfers from Klimek’s

account to his own. At Holovacko’s request, Klimek would move funds from his Merrill

Lynch account to his personal account at another bank, and would then send the funds to

Holovacko via cashier’s check. Within about eight months, Holovacko received

approximately $253,000 in total. Merrill Lynch detected irregularities in Klimek’s

account and began an internal investigation, in the course of which Holovacko admitted

he had received money from Klimek for personal use. Merrill Lynch fired Holovacko in

light of the investigation’s findings. Holovacko was charged with six counts of wire fraud

in violation of 18 U.S.C. § 1343 and one count of investment advisor fraud in violation of

15 U.S.C. §§ 80b-6, 80b-17.

At trial, Holovacko’s primary defense was that Klimek had known of the transfers

2 and had intended to give the money to Holovacko. Holovacko and Klimek maintained an

acquaintance relationship that included periodic lunches, and, Holovacko testified,

financial exigency exacerbated by a gambling problem led him to seek a loan from

Klimek, who was sympathetic to his plight. Had Klimek agreed to loan Holovacko the

money, this arrangement would have been against Merrill Lynch policy, but it would

seemingly lack elements necessary to secure a conviction under either of the two offenses

with which Holovacko had been charged. See 18 U.S.C. § 1343; 15 U.S.C. §§ 80b-6 &

80b-17. Klimek, though, testified he was not aware the money would go to Holovacko

and thought the deposits were part of Holovacko’s investment strategy on his behalf.

The jury found Holovacko guilty on all seven counts. Holovacko made a motion

for a new trial pursuant to Federal Rule of Criminal Procedure 33(a) and renewed an

earlier motion for judgment of acquittal pursuant to Federal Rule of Criminal Procedure

29(c) on two grounds: first, that the Government had elicited inadmissible lay opinion

testimony from one of Merrill Lynch’s internal investigators, Jeremy Hutson, and second,

that the verdict was not supported by the evidence. The District Court denied both

motions. Holovacko received a sentence of thirty-seven months on each count of the

indictment, with the sentences to run concurrently. Holovacko now appeals the verdict

and sentences.

II.

On appeal, Holovacko raises two alleged errors by the District Court which, he

contends, should lead us to set aside the jury verdict and order a new trial. In neither

3 instance did the District Court abuse its discretion.1

A.

First, Holovacko argues the District Court improperly allowed lay opinion

testimony from Merrill Lynch internal investigator Jeremy Hutson. Holovacko argues

that Hutson lacked personal knowledge supporting his stated opinion, instead relying on

documents produced by third parties, and that Hutson’s opinion amounted to telling the

jury what result to reach. Holovacko moved for a new trial on these grounds before the

District Court, and the Court found the testimony was admissible, or in the alternative,

constituted harmless error. We agree with the District Court’s evaluation of its own

previous ruling: The Court did not abuse its discretion in allowing Hutson’s testimony.2

The Government called witnesses including Stanley Klimek, a bank manager who

witnessed Holovacko withdrawing Klimek’s cashier’s checks; Holovacko’s supervisor at

Merrill Lynch; and Hutson, who conducted the investigation of Klimek’s account

irregularities and questioned Holovacko. During his testimony, Hutson described his

initial steps in examining the pattern of account irregularities and then said, “[i]t was

pretty obvious to me that there was a misappropriation of assets.” App. 367. Shortly after

this statement, Holovacko’s lawyer objected to the direction of the testimony, leading to a

1 The District Court had subject matter jurisdiction over this case under 18 U.S.C. § 3221. We have jurisdiction under 28 U.S.C. § 1291. We review evidentiary rulings at trial for abuse of discretion. United States v. Foster, 891 F.3d 93, 107 n.11 (3d Cir. 2018). 2 The Government argues Holovacko did not properly preserve the issue by making a specific objection during trial, which would mean we may only review the District Court’s ruling for plain error. United States v. Hodge, 870 F.3d 184, 203 n.14 (3d Cir. 2017). We need not address this issue because the District Court’s ruling, in any case, survives review for abuse of discretion.

4 discussion at sidebar. Holovacko’s lawyer explained that he feared “[Hutson]’s going to

render an opinion as to the ultimate issue of whether my client in fact misappropriated

assets.” Id. at 369. Holovacko’s lawyer further commented, “I feel that it really impinged

upon my client, a fair trial at this point, for him to render that kind of opinion, off the

cuff, to the jury.” Id. at 371. Taking Holovacko’s point, the judge commented, “[W]e are

approaching him being able to render some kind of opinion,” but “we are early enough in

your examination where we’ve not crossed that line.” Id. The judge directed the

Government to restructure its questioning to avoid the potential issue, and Holovacko’s

lawyer responded, “That would be fine.” Id. at 372.

Opinion testimony from a lay witness is allowed when it is: “(a) rationally based

on the witness’s perception; (b) helpful to clearly understanding the witness’s testimony

or to determining a fact in issue; and (c) not based on scientific, technical, or other

specialized knowledge . . . ” Fed. R. Evid. 701. Under the modern rules, “[a]n opinion is

not objectionable just because it embraces an ultimate issue.” Fed. R. Evid. 704(a). Still,

“[Rule 701] is carefully designed to exclude lay opinion testimony that ‘amounts to little

more than choosing sides, or that merely tells a jury what result to reach.’” United States

v. Fulton, 837 F.3d 281, 291 (3d Cir. 2016) (quoting United States v. Stadtmauer, 620

F.3d 238, 262 (3d Cir. 2010)).

Here, Hutson’s testimony concerned his own actions and perceptions. As the

District Court summarized the issue in addressing Holovacko’s Rule 29 motion,

“[Hutson] testified that (1) [the Internal Fraud Detection Unit]’s alert prompted

[Hutson’s] investigation; (2) [Hutson] personally reviewed the activity for himself; (3)

5 [Hutson] subsequently asked cyber forensics for assistance; and (4) [Hutson] personally

researched the accounts again before concluding that misappropriation of assets had

occurred.” United States v. Holovacko, No. 16-349 (MAS), 2017 WL 3184175, at *4

(D.N.J. July 26, 2017). Although some of Hutson’s perceptions involved his analysis of

records produced by others, that analytic process remains his own personal knowledge,

and Hutson confined his testimony to what he personally perceived and concluded. In

developing an opinion, “[i]t is logical that . . . [the witness] may incorporate documents

that were prepared by others, while still possessing the requisite personal knowledge or

foundation to render his lay opinion admissible under Fed. R. Evid. 701.” Lightning

Lube, Inc. v. Witco Corp., 4 F.3d 1153, 1175 (3d Cir. 1993) (quoting Lightning Lube, Inc.

v. Witco, 802 F.Supp. 1180, 1193 (D.N.J. 1992) (internal quotation marks omitted)

(alteration in original)); see also, e.g., Teen-Ed, Inc. v. Kimball Int’l, Inc., 620 F.2d 399,

403 (3d Cir. 1980) (discussing lay opinion testimony about business operations).

Nor did Hutson provide unhelpful testimony amounting merely to “choosing up

sides,” supporting one party’s position over the other’s where the jury was in an equally

good position to draw its own inferences. Stadtmauer, 620 F.3d at 264 (quoting United

States v. Rea, 958 F.2d 1206, 1215–16 (2d Cir. 1992)). On the contrary, Hutson, having

investigated Klimek’s and Holovacko’s accounts according to his typical practice,

provided an informed inference that the patterns Hutson observed demonstrated a likely

misappropriation of assets.3

3 Holovacko also argues, “[p]arenthetically,” that the Government did not make a motion to include Hutson’s testimony regarding misappropriation, moving only to permit

6 Even if Hutson’s statement had been inadmissible, though, we would not grant

Holovacko a new trial because the purported error was harmless. See United States v.

Copple, 24 F.3d 535, 546 (3d Cir. 1994) (stating that we need not reverse a trial error if it

was harmless and that a “[t]rial error is harmless if it is highly probably that [it] did not

affect the judgment”). We agree with the District Court’s finding that “it is highly

improbable that the purportedly impermissible testimony prejudiced [Holovacko].”

Holovacko, 2017 WL 3184175, at *4. Hutson’s contested testimony was brief, and the

Government did not mention it in its closing statement. See United v. Anderskow, 88 F.3d

245, 251 (3d Cir. 2006) (holding that the district court’s error in admitting certain witness

testimony because other evidence was “overwhelming” and the government did not

reference that testimony in its closing argument). Moreover, we agree with the District

Court that the evidence against Holovacko was overwhelming, including Holovacko’s

own admissions, testimony from Klimek, and testimony from another Merrill Lynch

witness in addition to Hutson. We therefore will not vacate the jury’s verdict on this

basis.

B.

Second, Holovacko argues the Government had an obligation to obtain Merrill

questions about “structuring” of deposits. Appellant Br. 13. This suggestion is puzzling. The Government moved to include the structuring testimony because, since that activity took place after the actual taking of the money and was introduced to demonstrate motive, a pretrial motion was potentially required under Federal Rule of Evidence 404(b)(2)(A), which limits the use of evidence of criminal or immoral acts other than the crime prosecuted. Holovacko does not explain why the same concern (or any other) would apply to testimony regarding misappropriation, why curative jury instructions would have been necessary, or why the failure to give them should be considered error.

7 Lynch’s full investigation file regarding Holovacko and provide it to Holovacko prior to

trial. Prior to trial, Holovacko made several discovery motions, including one to compel

discovery of Merrill Lynch’s entire file on the investigation. The District Court denied

the motion on the grounds that the Government stated it had already produced all the

Merrill Lynch documents in its possession, and the Court found no basis to compel it to

produce documents outside its possession. After the close of Holovacko’s case, the

Government presented Holovacko with 122 pages of new documents from Holovacko’s

Merrill Lynch personnel file, which it believed could demonstrate that Holovacko’s

testimony regarding his deferred compensation plan had been untruthful. In court the next

day, Holovacko’s lawyer made “a very strenuous objection to the proposed introduction

of some of these documents.” App. 530. In response, the Government agreed it would not

seek to introduce the documents and would not put on a rebuttal case. The Government’s

lawyer said, “I would just hope that [Holovacko’s lawyer] would agree that the issue is

moot if we do not put on a rebuttal case.” Id. at 532. Holovacko’s lawyer responded, “I

do recognize, your Honor, thank you.” Id. at 533.

Holovacko now contends his right to a fair trial was prejudiced because he did not

receive these documents earlier in the trial. Had Holovacko possessed these documents at

the time of Klimek’s testimony, he argues he would have used them to challenge the

Government’s portrayal of Klimek as an unsophisticated investor because the documents

indicated Klimek had significant assets in addition to his Merrill Lynch retirement

8 account. Appellant’s Br. 19.4

The Government was required to produce the Merrill Lynch documents in its

possession in accordance with its Due Process obligations. See Giglio v. United States,

405 U.S. 150, 154 (1972); Brady v. Maryland, 373 U.S. 83, 87 (1963). The Government

asserted in court, and maintains now, that it produced all the Merrill Lynch documents it

had before trial and continued to produce additional documents the Government obtained

at the time the Government obtained them. Appellee’s Br. 18. Holovacko gives no reason

to doubt this is correct.

Holovacko also points to decisions holding that, in rare cases, the Government

may be required to produce documents held by a third party. See, e.g., United States v.

Risha, 445 F.3d 298 (3d Cir. 2006). Where a third party, especially a related branch of

government, has worked very closely with law enforcement to assist with the

investigation, prosecutors may sometimes be considered to have constructive possession

of evidence held by the third party. Id. at 304. This is not such a case. Risha, which

involved a federal prosecution in which state prosecutors had supported the federal

investigation and held key information never disclosed to the defendant, identified three

factors determining whether prosecutors have constructive possession of evidence held

by a third party: “(1) whether the party with knowledge of the information is acting on

the government’s ‘behalf’ or is under its ‘control’; (2) the extent to which state and

4 The Government argues Holovacko abandoned this claim. Appellees’ Br. 18. Because we find the District Court’s ruling survives review for abuse of discretion, we need not address this issue.

9 federal governments are part of a ‘team,’ are participating in a ‘joint investigation’ or are

sharing resources; and (3) whether the entity charged with constructive possession has

‘ready access’ to the evidence.” Id.

Here, Merrill Lynch could not have acted on the Government’s behalf or as part of

a team with the Government during its investigation of Holovacko, because Merrill

Lynch’s investigation was already completed by the time the Government’s began.

Affidavit of Jeremy Hutson, Holovacko, 2017 WL 3184715 (No. 16-349), ECF No. 29.

And while Holovacko notes the Government was able to obtain 122 pages of additional

documents from Merrill Lynch on relatively short notice, nothing in the record indicates

the Government could have requested Merrill Lynch produce every document it

possessed relating to Holovacko’s employment and its investigation of him. It would be

particularly unusual to find prosecutors in constructive possession of evidence held by

Merrill Lynch, a private party, since private parties’ interests in this context “are often far

from identical to—or even congruent with—the government’s interests.” United States v.

Joselyn, 206 F.3d 144, 154 (1st Cir. 2000). The District Court therefore did not abuse its

discretion in refusing to compel production of Merrill Lynch’s full investigative file or in

its approach to the Government’s late production of additional discovery.

III.

For the foregoing reasons, we will affirm the judgment of conviction and sentence.