Nature of the Case
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Facts
D was convicted on nine counts of an indictment charging violations of securities fraud, making false statements to the Securities and Exchange Commission (SEC), and conspiracy to commit specific offenses, and to defraud the SEC and the Internal Revenue Service (IRS). In April and May of 1985 D raised $9 million to buy Cluett stock from various individual investors. On the Schedule 13D, D stated that the stock was purchased with 'personal funds,' and did not disclose that they were raised from other investors with whom he had a profit-sharing and guarantee-against-loss agreement. In June 1986 D raised $ 8 million from an individual investor for the purpose of purchasing Hammermill stock. The disclosure relating to the stock purchase and tender offer stated that D's contribution to the partnership was from 'personal funds.' When purchasing stock in each of these companies D arranged to have an employee of the brokerage firm accumulate stock on his behalf. On July 21, 1986, he purchased 551,000 accumulated shares of Hammermill. D failed to file on time and also did not disclose the accumulation agreement. D also engaged in 'stock parking' transactions in shares of Robertson and Armco. 'Parking' refers to a transaction in which a broker-dealer buys stock from a customer with the understanding that the customer will buy the stock back at a later date for the purchase price plus interest and commissions. As with 'accumulation,' there is no market risk to the broker-dealer who is the owner of the shares in name only. D parked 58,000 shares of Robertson with his broker for 30 days. The stock price fell substantially, and D refused to honor his commitment. The broker incurred a $250,000 loss. D compensated the broker in part for this loss by generating approximately $125,000 in commissions for the broker. D paid the remaining $125,000 with the understanding that it would be refunded when an additional $125,000 of commissions was generated. The broker sent D a false invoice in the amount of $125,000 for 'financial services' that were never performed, and the latter deducted the payment on a 1985 tax return. When additional commissions were generated in 1986 he sent the broker fictitious invoices for 'consulting services' seeking a refund of the $125,000. D parked 306,600 shares of Armco with the broker for a 30-day period beginning September 2, 1986. The broker agreed to accumulate Armco stock in its own account on d's behalf and then sell him the accumulated stock when he repurchased the 306,600 shares. On October 2 D purchased 818,900 shares of Armco from the broker at the prevailing market price of $8 per share. Although the broker realized a $575,000 gain on the sale, the profits belonged to D by virtue of the stock parking and accumulation agreements. D sent his broker an invoice for fictitious 'consulting services' in order to account for the profits he realized on the trade. For the parking, D was charged with conspiring to defraud the SEC and the IRS and to commit specific offenses including violations of 15 U.S.C. §§ 78g, 78q, and 78ff (1988) and 18 U.S.C. § 1001, in violation of 18 U.S.C. § 371. At trial, a motion was made in limine seeking a ruling permitting D to testify regarding his belief in the lawfulness of describing the source of his funds as 'personal' without being subjected to cross-examination on communications he had with his attorney on this subject, discussions ordinarily protected by the attorney-client privilege. The judge ruled that if D testified regarding his good faith regarding the legality of the disclosure, it would open the door to cross-examination with respect to the basis for his belief and that such cross-examination would allow inquiry into communications with his attorney. D did not testify regarding his good faith. D was convicted and appealed. D claims the trial court's ruling prejudiced his defense and infringed his constitutional right to deny each element of the charge against him.
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