Securities and Exchange Commission v. Genovese

Background

The Securities and Exchange Commission (SEC) filed four motions in limine, which are requests for advance rulings about what evidence may be presented at trial. The court addressed the motions under the Federal Rules of Evidence.

First motion in limine

The SEC asked the court to rule that certain facts found undisputed at summary judgment were established for trial. The court denied the application and directed the parties to meet and confer about possible stipulated facts.

Second motion in limine

The SEC asked the court to exclude evidence and argument that Mirman reasonably relied on counsel or compliance professionals as a defense to securities-fraud claims. The court denied the motion. It found that Mirman’s reliance on legal and compliance advice was highly relevant to whether he acted with the required intent. The court also found that Mirman had made a sufficient preliminary showing concerning his practice of having lawyers and compliance professionals review broker representation letters, as well as his efforts to obtain legal advice about Genovese’s insider status.

The court rejected the SEC’s argument under Evidence Rule 403, which permits exclusion when relevant evidence’s danger of unfair prejudice or confusion substantially outweighs its value. The court stated that Mirman had not disclaimed an advice-of-counsel defense and that the evidence’s value concerning intent outweighed the risk of jury prejudice or confusion.

Third motion in limine

The SEC sought to exclude portions of testimony by Mirman’s expert witness, James Reilly. The SEC argued that the testimony addressed Mirman’s reliance on counsel and would improperly take over the jury’s fact-finding role or the court’s role in explaining the law. Under Evidence Rule 702, which governs expert testimony, the court granted in part and denied in part the application.

The court denied any blanket exclusion of expert testimony about the reasonableness of Mirman’s reliance on advice from counsel and compliance professionals. However, Reilly was precluded from testifying to ultimate conclusions of fact or law, including conclusions about whether Mirman was a necessary participant or a “but for” cause, whether he reasonably relied on legal and compliance departments, whether he caused or assisted a manipulative act, what legal requirements bound him, and his understanding, knowledge, or reliance. The court permitted Reilly to testify about whether Mirman’s conduct and the structures of the firms where he worked were consistent with industry standards and practices.

Fourth motion in limine

The SEC asked the court to permit evidence and argument that Robert Genovese had been charged in this case with securities fraud and had settled those charges, and that Tommy Belesis had settled related administrative charges. The court denied the application under Evidence Rules 408 and 403. Rule 408 generally limits the use of settlement evidence to prove liability. The court found that the SEC had not identified another permitted purpose for the settlement evidence. It also found that admitting the evidence could lead the jury to infer guilt by association and assume that Mirman had engaged in misconduct because Genovese and Belesis had settled charges. The court stated that any potential jury confusion could instead be addressed through a jury instruction.

Disposition

The court ordered that the SEC’s first application was denied; its second application was denied; its third application concerning Reilly’s testimony was granted in part and denied in part; and its fourth application to admit evidence of related persons’ settlements was denied. The Clerk of Court was directed to close the four motions at Docket Nos. 188, 190, 192, and 194. Judge Lorna G. Schofield’s order concerned trial-evidence questions rather than the merits of the underlying securities-fraud claims.