On Behalf of | Feb 2, 2021 | Ed Sapone’s Decisions of the Week

A lengthy but interesting decision in Gatto this week, in which, over a dissent from Judge Lynch, CA2 affirmed the wire-fraud convictions of defendants who had been involved in payments to college athletes’ families to induce those athletes to enroll at universities with elite basketball programs.

There were also reversals in New York’s First, Second, and Third Departments that are worth a read.

Second Circuit

On Friday, in United States v. Gatto, CA2 affirmed defendants’ SDNY wire fraud and conspiracy to commit wire fraud convictions, following a jury trial before Judge Lewis A. Kaplan. CA2 rejected defendants’ contentions that the evidence was insufficient to support the convictions, and that several evidentiary rulings and portions of the jury instructions were erroneous. Judge Lynch dissented in part. He would have found that the trial was tainted by a series of sufficiently harmful evidentiary rulings.

Defendants were alleged to have engaged in a scheme to defraud three universities—NC State, Kansas, & Louisville—by paying tens of thousands of dollars to the families of high school basketball players to induce them to attend the schools, which were sponsored by Adidas, and by covering up the payments so that the recruits could certify to the universities that they had complied with NCAA rules barring student-athletes and recruits from being paid.

At trial, defendants admitted that they engaged in the scheme and had broken NCAA rules, but argued that what they did was not criminal. On appeal, they contended that the government failed to prove that they intended to defraud the universities and that their intent instead was to help the universities by bringing them top recruits to ensure winning basketball programs. They argued that under-the-table payments to student-athletes are widespread in college sports, and that many college coaches are aware of, and endorse, the practice. CA2 expressed no doubt that successful men’s basketball programs are major revenue sources at certain major universities, and that there were significant questions as to whether student athletes should be paid, but it declined to enter into the debate over the extent to which college sports is a business.

Defendant Gatto was Adidas’s director of global sports marketing for basketball. Part of his job responsibilities included overseeing the relationship that Adidas had with various schools, including N.C. State, Kansas, and Louisville. This included helping to ensure the success of the sponsorship agreements Adidas signed with the universities pursuant to which Adidas paid the universities for the right to provide their NCAA sports teams with Adidas apparel. Gatto worked with defendant Code, an Adidas consultant. He also worked informally with defendant Dawkins, an aspiring sports agent. Working with others, defendants paid the families of top-tier high school basketball recruits to entice them to enroll at one of the universities. As one example, the family of a Louisville recruit was paid $100,000. This violated NCAA rules. If the NCAA were to discover the payments, the players would not be permitted to play in games and the universities would be subjected to penalties.

On appeal, defendants claimed that they were convicted of a fraud of which they lacked knowledge because they did not know that false representations would be made to the universities. They also argued that, even if there were such a scheme, the government failed to prove that the universities’ athletic-based aid was an object of that scheme.

CA2 disagreed. Defendants were sophisticated actors who were involved in all aspects of top-tier basketball in America, including the amateur grassroots leagues, college basketball programs, and the NBA. They went to great lengths to prevent both Adidas and the universities from discovering that they were paying the recruits’ families. Their co-conspirators admitted on wiretaps that their conduct violated NCAA rules. Together with defendants’ statements that they knew that recruits would be required to sign NCAA forms stating that they had complied with NCAA rules, the proof was sufficient evidence for the jury to find that defendants knew that a materially false representation had to be made for the scheme to succeed.

CA2 also found that the jury was presented with enough evidence to find that the universities’ athletic-based aid to sports recruits was “an object” of their scheme. The loss of property—the  universities’ funds set aside for financial aid—was at the heart of defendants’ scheme. Their original plan included inducing the universities to give the recruits financial aid by concealing from the universities the payments made to the recruits’ families. They feared that if they were discovered the recruits would not be permitted to compete. The scheme depended on the universities awarding ineligible student-athletes athletic-based aid; without the aid, the recruits would have gone to school elsewhere.

CA2 rejected defendants’ challenges to many of the district court’s evidentiary rulings. Among them, CA2 found that the district court did not abuse its discretion when it denied defendants’ request to call an expert witness to discuss the benefits that a successful men’s basketball program creates for a university. This testimony, defendants contended, would have proven that they intended to help, not harm, the schools when they paid the recruits’ families to entice the recruits to attend Adidas-sponsored schools. CA2 agreed with the district court that the testimony would not have been helpful because it was based on a study conducted in preparation for litigation. Second, the district court correctly found that the information the expert would have presented was substantially more prejudicial than probative. Allowing the expert to testify could have invited improper acquittals by enticing the jury to base its decision on the perceived unreasonableness or unfairness of the NCAA’s amateurism rules.

The majority and dissenting Judge Lynch disagreed about whether the district court should have admitted circumstantial evidence to support defendants’ claimed belief that the universities silently approved of the payments to recruits. Judge Lynch would have found that the district court abused its discretion when it excluded several phone calls that the defendants argued would have helped them prove that they did not intend to defraud the universities. For example, the district court excluded a phone call between defendants Code and Dawkins, in which they discussed their understanding that the family of a recruit was asking Kansas for money before committing to play basketball at the school. During the call, Code and Dawkins agreed that paying the athlete had to be worth it for the school for the money they had made off of the athlete. Although the athlete being discussed was not implicated in the scheme charged in the indictment, the defendants contended that the call was relevant because it demonstrated that they believed the universities were happy to violate the rules if they received valuable players for their teams. While Judge Lynch would have held that the evidence was relevant for the defendants’ stated purpose, the majority found it irrelevant because it did not concern any of the recruits in the case and occurred after the defendants had already made the payments at issue.

CA2 also rejected defendants’ challenge to many of the court’s instructions. Among other things, it found that the district court properly instructed the jury on conscious avoidance. CA2 found that the district court properly instructed that the jury could “find that a defendant acted with the necessary knowledge as to particular facts on the basis that the defendant consciously avoided learning those facts by deliberately closing his eyes to what otherwise would have been clear.” The instruction was warranted because the jury heard ample evidence demonstrating that defendants knew that the recruits had to misrepresent their eligibility for the scheme to succeed.

CA2’s decision can be found here.

On Tuesday, in United States v. Burns, in a summary order, CA2 affirmed SDNY Judge Cathy Seibel’s finding that defendant was guilty of five violations of the conditions of his supervised release. CA2 rejected defendant’s challenge to the finding that he violated supervised release by committing grand larceny in New York, as well as his challenge to the 24-month sentence imposed.

Defendant argued that there had been insufficient evidence to establish that he committed the New York State crime of grand larceny by illegally using another person’s debit card to withdraw $3,742.75. CA2, however, found the evidence sufficient where the district court relied on: (1) the debit card owner’s credible testimony that she did not authorize the withdrawals; (2) videos showing defendant making the withdrawals in the middle of the night, at times when the card owner was home with her children; and (3) the fact that the defendant did not defend himself when accused by the card owner.

CA2 also found that the district court provided an adequate explanation for its above-Guidelines sentence where it highlighted several factors for its decision, including the severity of defendant’s violations and the fact that the district court’s original below-Guidelines sentence was based on defendant’s promises that “did not pan out.” Considered in their totality, the district court’s statements satisfactorily explained the sentence and demonstrated her reasonableness.

CA2’s decision can be found here.

In United States v. Morrison, in a summary order, CA2 affirmed SDNY Judge Loretta A. Preska’s denial of defendant’s motion for a sentence reduction pursuant to the First Step Act. Judge Preska had correctly found that defendant was eligible for relief, but CA2 found that she did not abuse her discretion in denying the reduction.

In 2010, defendant pleaded guilty, pursuant to a plea agreement, to conspiracy to distribute and possess with intent to distribute five grams or more of crack cocaine (21 U.S.C. §841(b)(1)(B)), and discharging a firearm during and in relation to a drug trafficking crime (18 U.S.C. § 924(c)). At the time, defendant’s crack-conspiracy conviction carried a mandatory minimum sentence of five years’ imprisonment, while the § 924(c) count, as it does now, carried a mandatory consecutive prison term of ten years. The parties agreed that, for Guidelines purposes, defendant had conspired to distribute and possess with intent to distribute at least 150 grams but less than 500 grams of crack, resulting in a Guidelines range of 97 to 121 months.  The § 924(c) count carried a mandatory consecutive sentence of 120 months. This resulted in a total Guidelines range of 217 to 241 months. At sentencing in 2012, the district court adopted the parties’ Guidelines calculation and then varied downward by sentencing defendant to 72 months on the crack-conspiracy count and to a consecutive 120 months on the § 924(c) count, for a total sentence of 192 months.

Defendant moved to reduce his sentence, arguing that the crack-conspiracy count was no longer anchored by a five-year mandatory minimum and pointing to his rehabilitative efforts during his approximately fourteen years of imprisonment. The district court denied the motion because of defendant’s less than positive disciplinary record and the severity of the offense conduct. CA2 affirmed the denial based primarily on the offense conduct. CA2 agreed with the district court that the severity of the offense conduct made it inappropriate to reduce his sentence because it would give him an undeserved windfall unavailable to defendants who engaged in the exact same conduct post-Fair Sentencing Act. While defendant was only charged for five grams of crack, his violation actually involved a much larger amount: over 150 grams.

CA2 also rejected defendant’s argument that United States v. Johnson, 961 F.3d 181, 192 (2d Cir. 2020) forbid the district court from engaging in “mounting assumptions,” such as conjecturing as to what the government would have charged and could have proved under a different statutory scheme, and that this alleged legal error was an independent ground for vacatur. CA2 found that it had explicitly narrowed the scope of Johnson to answering the “sole question” of whether a defendant was convicted of a “covered offense” and was therefore eligible for relief under Section 404 of the First Step Act. Contrary to defendant’s argument, Johnson emphasized the availability of judicial discretion in denying reductions to eligible defendants in response to the “government’s frustration” with the broad eligibility for sentencing reductions pursuant to the Act.

CA2’s decision can be found here.

Appellate Division, First Department

On Tuesday, in People v. Santiago, AD1 reversed defendant’s Bronx County convictions for leaving the scene of an incident without reporting and driving while ability impaired, finding that supreme court had erroneously denied defendant’s severance motion.

The two offenses that led to defendant’s convictions were unrelated. On September 4, 2011 defendant was charged with leaving the scene when he was alleged to have run over a person who was lying on the Henry Hudson Parkway. There was video footage and still pictures from the toll plaza that showed the cars of the drivers who stopped to help, followed immediately by a dark Acura. Defendant was the registered owner of the dark Acura.

The DWI conviction was based on an incident that occurred four months later, on January 15, 2012. At that time, defendant was observed by police officers weaving in and out of his lane and driving 85 mph in a 50-mph zone. The officer who arrested defendant for the DWI was permitted to testify relative to the charge of leaving the scene that he recognized the vehicle and driver in the video and stills taken on September 4, 2011 as the same vehicle and person he stopped on January 15, 2012.

AD1 found that the cases should have been tried separately. The People did not need the arresting officer in the DWI charge to identify defendant in video and stills, which were only part of the earlier investigation. While certain evidence may be material and admissible to prove a defendant’s identity in joint trials, that was not the case here. The images could have been presented directly to the jury for them to determine if defendant was the same person depicted in them. There were no claims made by the People that by the time of trial defendant had changed his appearance and the officer was more likely to correctly identify the person depicted in the images than was the jury.

AD1’s decision can be found here.

Appellate Division, Second Department

On Wednesday, in People v. Peterson, AD2 reversed defendant’s Queens County second degree burglary convictions, finding that supreme court erroneously allowed the prosecutor to change the People’s theory of burglary during summation.

The defendant was indicted for, among other things, two counts of burglary in the second degree after he was alleged to have entered a rooming house and damaged property, including two doors, and stolen surveillance cameras. The People limited their theory of burglary in their bill of particulars, which incorporated the allegations of the criminal complaint, to the intent to commit property damage and/or theft. But supreme court permitted the prosecutor to argue, during summation, the uncharged theory that the defendant intended to assault the complainant.

AD2’s decision can be found here.

Appellate Division, Third Department

On Thursday, in People v. Kabia, AD3 held the appeal of defendant’s Albany County weapon possession conviction in abeyance and remitted for further proceedings on defendant’s motion to suppress the physical evidence found in his vehicle and on his person following a car stop.

A vehicle in which defendant was a passenger was stopped by police for, among other things, bearing a license plate that did not match the vehicle. Testimony, as well as video footage of the traffic stop, revealed that defendant — who was seated in the rear passenger seat — bent over to the left after the police initiated the traffic stop. A sawed-off shotgun was ultimately discovered under the rear portion of the driver’s seat and a shotgun shell was found on defendant’s person, in the left pocket of his pants. The shotgun was loaded and operable and the shell in the shotgun was of the same caliber and make as the shell found on defendant’s person.

AD3 found that county court’s finding that the shotgun shell was discovered on defendant’s person during a limited protective pat-down search of defendant, which then provided law enforcement with probable cause to search the vehicle, was not supported by the evidence presented at the suppression hearing. At the hearing, the evidence showed that the search of the vehicle actually preceded the search of defendant’s person and discovery of the shotgun shell. AD3 remitted because, although the People raised other arguments that could potentially justify the search of the vehicle and defendant’s person, it was statutorily restricted from considering issues not ruled upon by the trial court.

AD3’s decision can be found here.