Case 1:13-cr-00452-ENV Document 301 Filed 10/19/15 Page 1 of 3 PageID #: 2446

U.S. Department of Justice

United States Attorney

Eastern District of New York
CAO/TJS
F. #2013R01274

271 Cadman Plaza East

Brooklyn, New York 11201

October 19, 2015

By Hand and ECF
The Honorable Eric N. Vitaliano
United States District Court
Eastern District of New York
Brooklyn, NY 11201
Re:

United States v. Kershner, et al., 13-CR-452 (S-2) (ENV)

Dear Judge Vitaliano:

The government submits this letter to request an additional jury charge based
on defense questioning in the above-captioned case. Specifically, on October 15, 2015, Mr.
Stein questioned one of the victim-investors regarding a Forward-Looking Disclaimer
present on the press releases for the companies named in the Indictment. As set forth below,
that disclaimer does not provide a defense to a criminal charge of either wire fraud or
securities fraud. Accordingly, the government requests a charge making clear that the
Forward-Looking Disclaimer does not insulate the defendants from responsibility for false
statements that were knowingly made.
Press releases issued by the companies named in the Indictment included at
their end a statement, which says something to the effect of:
FORWARD-LOOKING DISCLAIMER
This press release contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of
1934, as amended. All statements other than statements of
historical facts included in this press release are forward-looking
statements. Forward-looking statements involve risks and
uncertainties including, but not limited to, economic and
political factors; developments of the Chinese and North
American markets and changes in regulatory matters; our
business strategies and future plans and operations; the market
acceptance and amount of sales of our products and services;

Case 1:13-cr-00452-ENV Document 301 Filed 10/19/15 Page 2 of 3 PageID #: 2447

our historical losses; the competitive environment within the

industries in which we compete; and our ability to raise
additional capital, currently needed for expansion. The company
cautions that forward-looking statements are subject to certain
risks and uncertainties that could cause actual results to differ
materially from those indicated in the forward-looking
statements due to several important factors.
See, e.g., GX 2O. Those disclaimers attempt to place the press releases within the safe
harbor provided by the Private Securities Litigation Reform Act of 1995, which states that
in any private action arising under [that] chapter that is based on an untrue statement or
omission of a material fact necessary to make the statement not misleading, a person . . .
shall not be liable if the forward-looking statement is identified as a forward-looking
statement, and is accompanied by meaningful cautionary statements identifying important
factors that could cause actual results to differ materially from those in the forward-looking
statement. 15 U.S.C. 78u-5(c)(1) (emphasis added). Notably, that safe harbor does not
apply to criminal charges. See 15 U.S.C. 78u-5(c); see also United States v. Weaver, No.
13-CR-120 SJF AKT, 2014 WL 173489, at *2 (E.D.N.Y. Jan. 10, 2014) (finding that 15
U.S.C. 78u did not apply because defendants were charged with violating the mail and
wire fraud statutes, which criminalize use of the mails or wires in the execution of any
scheme or artifice to defraud, and do not contain a similar safe harbor for forward-looking
statements.).
During questioning of David Carlin on October 15, Mr. Stein asked Mr. Carlin
to read the disclaimer from one press release and asked whether Mr. Carlin had read it.
(Transcript 694:19-695:14). That questioning may confuse the jury into believing that such a
forward-looking disclaimer could make the defendants not guilty for knowing false
statements made in connection with those securities, which would be an incorrect statement
of the law.

Case 1:13-cr-00452-ENV Document 301 Filed 10/19/15 Page 3 of 3 PageID #: 2448

Accordingly, the government asks that Court give the following charge:
You have heard some testimony about forward-looking disclaimers present on
press releases that were discussed in this case. Those statements say, among other things,
that forward looking statements are subject to certain risks and uncertainties that may
make actual results differ from predicted results. I instruct you that those disclaimers are not
a defense to wire fraud or securities fraud. If you find that the government has proved every
element of wire fraud as to a defendant, then you should find that defendant guilty regardless
of the fact that press releases contained forward-looking disclaimers. Similarly, if you find
that the government has proved every element of securities fraud as to a defendant, then you
should find that defendant guilty regardless of the fact that press releases contained forwardlooking disclaimers.
Respectfully submitted,
ROBERT L. CAPERS
United States Attorney
By:

Cc:

Joel Stein, Esq.

Larry Dubin, Esq.

/s/ Tyler J. Smith

Tyler J. Smith
Christopher Ott
Mark Bini
Assistant U.S. Attorney
(718) 254-7000