Case 3:16-cr-01545-BEN Document 111 Filed 04/07/17 PageID.

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11 UNITED STATES DISTRICT COURT
12 SOUTHERN DISTRICT OF CALIFORNIA
13 UNITED STATES OF AMERICA, CASE NO. 16cr1545-BEN
14 Plaintiff,
vs. FURTHER ORDER ON
15 GOVERNMENTS MOTION
JEFFREY SPANIER, TO RECONSIDER
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Defendant.
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18 Defendant moved to dismiss Counts 2 through 18 of the original indictment
19 based upon the generally applicable five-year statute of limitations found in 18
20 U.S.C. 3282. That motion was granted. On the eve of trial the Government
21 moved to reconsider. That motion was granted and the original indictment was tried
22 along with the new indictment. However, because Defendant had little time to
23 oppose the Governments eve-of-trial motion, he was granted additional time post-
24 trial to brief the issues. Now, Defendant moves for reconsideration of the ruling
25 granting the Governments motion for reconsideration. The Courts ruling
26 reinstating the original indictment Counts 2 through 18 stands.
27 In its most recent brief the Government notes that the statute of limitations for
28 securities fraud offenses has been extended to six years. See 18 U.S.C. 3301. The

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1 six-year limitations period became effective in July 2010.

2 In United States v. Gentile, Case No. 16cr155 (JLL), 2017 U.S. Lexis 12514
3 *6 (D. N.J. Jan. 30, 2017), a securities fraud pump-and-dump case, both parties had
4 overlooked 3301 and had mistakenly been proceeding under the assumption that
5 the general five-year statute of limitations applied. Both parties admittedly were
6 operating under the assumption that the statute of limitations was five years . . . .
7 Presently, the Government argues that notwithstanding the parties assumption . . .
8 the statute of limitations was actually six years, because the enactment of Dodd-
9 Frank clearly extended the statute. . . . Id. Likewise, in the present case the parties
10 had been operating under the assumption that the five-year statute applied.
11 However, the six-year statute of limitations was enacted while Defendant was still
12 carrying out his scheme and applies here.
13 Therefore, for this and other reasons this Courts pre-trial ruling re-instating
14 Counts 2 through 18 of the original indictment stands.
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16 DATED: April 7, 2017
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Hon. Roger T. Benitez
18 United States District Judge
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Case 3:16-cr-01545-BEN Document 110 Filed 04/07/17 PageID.1258 Page 1 of 6

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11 UNITED STATES DISTRICT COURT
12 SOUTHERN DISTRICT OF CALIFORNIA
13 UNITED STATES OF AMERICA, CASE NO. 16cr1545-BEN
14 Plaintiff,
vs. ORDER DENYING MOTION
15 FOR NEW TRIAL
JEFFREY SPANIER,
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Defendant.
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18 Half the Truth is often a great Lie.1 Defendant was convicted of mail and
19 wire fraud among other things, based not on his complete silence but upon spoken
20 half-truths along with omissions of other facts. These other facts were necessary to
21 make his limited statements not fraudulent.
22 Now Defendant moves for a new trial.2 3 Defendant argues, yet again, that
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Benjamin Franklin, Poor Richards Almanack, July 7, 1758, available at
Founders Online, https://founders.archives.gov/documents/Franklin/01-07-02-0146.
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This is not a motion for a new trial based upon newly discovered evidence for
26 which a defendant must satisfy a five-part test in order to prevail. See United States
v. Harrington, 410 F.3d 598, 601 (9th Cir. 2005). Federal Rule of Criminal Procedure
27 33 allows a court to vacate any judgment and grant a new trial if the interest of justice
so requires. See United States v. Mack, 362 F.3d 597, 600 (9th Cir. 2004). The
28 burden of justifying a new trial rests with the defendant and the decision to grant a new
trial is within the sound discretion of the trial court. United States v. Steel, 759 F.2d
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1 the government cannot premise fraud liability on alleged omissions unless there was
2 a duty to disclose the information in question. Def. Mem. In Support (filed 1/5/17)
3 at 1. He argues that United States v. Shields, 844 F.3d 819 (9th Cir. 2106), makes it
4 clear that this Court erred during his trial by omitting a jury instruction on the point.
5 He argues, Shields squarely held that it was error to not instruct the jury that it
6 must find a relationship creating a duty to disclose before it could conclude that a
7 material non-disclosure supports a wire fraud charge. The Government disagrees.
8 Shields does not warrant a new trial in this case.
9 The first reason is the fact that the Ninth Circuit Court of Appeals has already
10 approved of this Courts use of the model jury instructions for Spaniers trial. See
11 United States v. Spanier, 637 Fed. Appx. 998, 1000-01 (9th Cir. Jan. 21, 2016)
12 ([W]e reject his challenge to the district courts jury instructions. The district court
13 acted well within its discretion in using the model jury instructions, and Spanier has
14 cited no persuasive authority holding otherwise.) (citation omitted). Due to the
15 law of the case doctrine, a court is ordinarily precluded from reexamining an
16 issue previously decided by the same court, or a higher court, in the same case.
17 Richardson v. United States, 841 F.2d 993, 996 (9th Cir. 1988) (citations omitted).
18 There is an exception which allows reexamination. Reexamination is permitted if
19 controlling authority has made a contrary decision of law applicable to such
20 issues. Id. at 996 (citation omitted). The law of the case controls here because
21 Shields is not a contrary decision, as discussed next.
22 The second reason no new trial is warranted is that Shields is an omissions
23 case while Defendants is a half-truths case. An omissions case is where the
24 defendant does not speak about the fraud at all (he omits everything). In an
25 omissions case a defendant may commit fraud by mere silence, but only if an
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706, 713 (9th Cir. 1985).
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The motion is timely. Although Rule 33(b)(2) requires a motion be filed within
28 14 days, the time for filing post-trial motions was extended under the authority of Rule
45(b).
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1 independent duty to speak exists. An independent duty can arise from a special
2 relationship. The special relationship may be formal or informal. [T]he
3 relationship creating a duty to disclose may be a formal fiduciary relationship, or an
4 informal, trusting relationship in which one party acts for the benefit of another
5 and induces the trusting party to relax the care and vigilance which it would
6 ordinarily exercise. Shields, 844 F.3d at 823 (citation omitted).
7 In contrast to an omissions case, in a half-truths case the duty to disclose
8 arises from the truth already half-spoken. As the U.S. Supreme Court points out,
9 common law fraud has long encompassed certain misrepresentations by omission.
10 Universal Health Services, Inc. v. United States, 136 S. Ct. 1989, 1999 (2016)
11 (deciding that the federal False Claims Act incorporates the well-settled meaning of
12 the common law understanding of fraud). It can also include half-truths. Claims
13 submitted to the government for payment that are based on half-truths are included
14 within the common law understanding of fraud without the requirement of a
15 special relationship. They fall squarely within the rule that half-truths
16 representations that state the truth only so far as it goes, while omitting critical
17 qualifying information can be actionable misrepresentations. Id. at 2000 & n.3
18 (noting that the rule that half-truths can be fraudulent recurs throughout the
19 common law).
20 Consequently, Defendant is incorrect in arguing that Shields applies to his
21 case. And he is incorrect in arguing that it is plain error to have not instructed
22 Defendants jury that it had to find a special relationship. Shields applies in an
23 omissions case. Defendant was convicted of telling fraudulent half-truths.
24 Of course, even in the absence of a special relationship or a special duty to
25 disclose, a half-truth may be fraudulent. For example, the Ninth Circuit has also
26 observed, [a] broker cannot affirmatively tell a misleading half-truth about a
27 material fact to a potential investor because the duty to disclose in these
28 circumstances arises from the telling of a half-truth, independent of any

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1 responsibilities arising from a truth relationship. United States v. Lloyd, 807

2 F.3d 1128, 1153 (9th Cir. 2015) (quoting United States v. Laurienti, 611 F.3d 530,
3 541 (9th Cir. 2010)) (emphasis added); see also United States v. Harder, 116 F.
4 Supp. 3d 1197, 1206 (D. Ore. 2015) (Omissions of material fact and half-truths
5 may be used to establish a scheme to defraud. Moreover, deceitful statements of
6 half-truths or the concealment of material facts is actual fraud violative of the mail
7 fraud statute. The deception need not be premised upon verbalized words alone.
8 The arrangement of the words, or the circumstances in which they are used may
9 convey the false and deceptive appearance.) (citations and internal quotations
10 omitted).
11 Shields is an omissions case, not a half-truths case, as is evident from the
12 cases it relies on. Chief among these is Chiarella v. United States, 445 U.S. 222
13 (1980). Chiarella is an omissions case. The Court explained, [t]his case concerns
14 the legal effect of the petitioners silence. Id. at 226. Chiarella was a financial
15 printer by trade. In the course of his work he came upon information from which he
16 could deduce the names of companies that would be takeover targets. He then
17 bought and sold shares without disclosing that he was acting on insider information.
18 In this context where Chiarella said nothing, the Court held that there can be no
19 fraud absent a duty to speak. Id. at 235. Chiarella had not told a half-truth; he had
20 said nothing at all.
21 Deceitful half-truths, on the other hand, have been around since the time of
22 Benjamin Franklin and since at least 1967 have been found by the Ninth Circuit to
23 violate the mail fraud statute. See Lustiger v. United States, 386 F.2d 132, 138 (9th
24 Cir. 1967), cert. denied, 88 S. Ct. 1042 (1968) (Moreover, deceitful statements of
25 half truths or the concealment of material facts is actual fraud violative of the mail
26 fraud statute.); see also Coplin v. United States, 88 F.2d 652, 672 (9th Cir. 1937)
27 (finding half-truth amounted to criminal securities fraud where defendants solicited
28 victim to purchase stock by calling attention to its rising price without advising

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1 victim of the fact that the defendants themselves were causing the price to rise). In
2 Lustiger the defendant mailed letters and brochures to prospective buyers of
3 undeveloped land in Arizona. Lustiger, 386 F.2d at 135. He called it Lake Mead
4 City. In the effort to sell, Lustiger made many half-truths about the prospective lots
5 for sale. For example, his advertising materials had photographs of Lake Mead and
6 other smaller lakes and ponds, a favorite swimming hole, and announced Plenty
7 of Water. Id. at 136. While it was literally true that Lake Mead was only five
8 miles from the boundary, Lustiger did not say that by road it was between 15 and 40
9 miles from his Lake Mead City lots. Id. He did not say that the swimming hole was
10 a dirt stock water tank with two feet of mud on the bottom. Id. at 136-37. And he
11 did not say that the only source of water for lot purchasers was a well 28 miles
12 distant from some of the lots. Id. at 137. In another example, the sales brochure
13 said half-truthfully that all Lake Mead City lots are within the franchised area of
14 Citizens Utilities Company. It left out, however, that then-existing electric and
15 telephone lines were between 21 miles and 38 miles away. Id.
16 Based on these and other half-truths, the Ninth Circuit affirmed Lustigers
17 convictions for mail fraud. Id. (The evidence is overwhelming that Lustigers
18 advertising materials were in some respects false and, apart from falsity, were, when
19 considered as a whole, fraudulently deceptive and misleading, exhibiting an intent
20 and purpose to defraud.). There was no need for a jury to find the existence of a
21 formal or informal special relationship giving rise to a duty to speak the whole truth.
22 Lustigers vitality was recognized more recently in United States v. Wood,
23 335 F.3d 993 (9th Cir. 2003). Wood reiterated that in Lustiger, [w]e explained that
24 deceitful statements of half truths or the concealment of material facts is actual
25 fraud violative of the mail fraud statute. Id. at 998. Universal Health Services
26 found the False Claims Act incorporates the common law understanding of fraud
27 and its concept of fraudulent half-truths. Universal Health Services, 136 S. Ct. at
28 1999. Likewise, Wood found that the mail and wire fraud statutes incorporate the

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1 common law understanding of fraud and fraudulent half-truths and that Lustiger
2 comports with that understanding. Wood, 335 F.3d at 999 (Additionally, Lustiger
3 comports with the common-law meaning of fraud, which was to be incorporated
4 into the mail and wire fraud statutes as much as possible.).
5 The point is that the jury instructions given in Defendants trial were correct.
6 Instructions 15, 16, and 18 are based on the model jury instructions previously
7 approved for this case by the Ninth Circuit. They correctly state the law for a half-
8 truths case. Different instructions describing the law for an omissions case were
9 given in the first trial but were not necessary and would have unnecessarily
10 confused the jury, if given again. Shields does not change that. Therefore, the
11 motion for new trial is denied.
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13 DATED: April 7, 2017
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Hon. Roger T. Benitez
15 United States District Judge
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