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United States v. Jordan

United States Court of Appeals, First Circuit

March 2, 2016

JOHN C. JORDAN, Defendant, Appellant



Inga L. Parsons on brief for appellant.

Leslie R. Caldwell, Assistant Attorney General, Sung-Hee Sue, Deputy Assistant Attorney General, David M. Lieberman, Attorney, Criminal Division, Appellate Section, United States Department of Justice, Carmen M. Ortiz, United States Attorney, and Stephen E. Frank and Sarah E. Walters, Assistant United States Attorneys, on brief for appellee.

Before Howard, Chief Judge, Selya and Thompson, Circuit Judges.


SELYA, Circuit Judge.

Defendant-appellant John C. Jordan once again appeals from the imposition of sentence. This time around, he advances two claims of sentencing error. First, he asserts that the district court abused its discretion in admitting certain expert testimony at sentencing. Second, he asserts that the court committed clear error in determining the amount of the loss attributable to the offense of conviction. Concluding, as we do, that these claims of error are fruitless, we affirm.

We sketch the background. The reader who hungers for more exegetic detail should consult our opinion regarding the defendant's earlier appeal. See United States v. Prange, 771 F.3d 17, 21-25 (1st Cir. 2014).[1]

In 2011, the Federal Bureau of Investigation (FBI) mounted a sting operation designed to ferret out fraud in the market for penny stocks (securities typically traded at less than $5 per share and not listed on any organized stock exchange). In the typical iteration of the sting, an undercover agent, posing as a corrupt hedge fund manager, would propose a deal to executives of a small public company: the agent would offer to overpay for restricted shares of a company's stock, in return for a kickback (disguised as a consulting fee) equal to 50% of the amount invested.

The defendant, then the president and chief executive officer of Vida Life International Ltd. (Vida Life), bought into the FBI's sting. After being approached by an undercover agent in August of 2011, the defendant agreed that his company would sell 400,000 restricted shares[2] for an aggregate price of $32,000 to the fictitious hedge fund. Once the sale was effected, the defendant kicked back one-half of the investment.

In due course, a federal grand jury indicted the defendant for conspiracy to commit securities fraud, see 18 U.S.C. § § 1348, 1349, and several counts of mail and wire fraud, see id. § § 1341, 1343, 1349. A ten-day jury trial ended in the defendant's conviction on all charges and, on August 12, 2013, the district court sentenced the defendant to a 30-month term of immurement for the fraud offenses.

In fraud cases, the amount of actual or intended loss is an important integer in the calculation of a defendant's guideline sentencing range (GSR). U.S.S.G. § 2B1.1(b)(1) & comment. (n.3(A)(i)-(ii)); United States v. Lilly, 13 F.3d 15, 17 (1st Cir. 1994). Here, the defendant's sentence was at the nadir of his GSR -- a range based partly on the court's determination that the defendant should be held accountable for a loss of $32,000 (the full amount of the purchase price of the shares).

On the defendant's initial appeal, we affirmed his convictions. See Prange, 771 F.3d at 37. However, we vacated his sentence for securities fraud after finding procedural error in the district court's calculation of the loss amount. See id. at 21, 35-37. We remanded for resentencing, directing the district court, en route to its calculation of the loss amount, to make factual findings regarding the value of the Vida Life shares acquired by the FBI. See id. at 37.

On remand, the parties offered conflicting expert testimony anent the value of the Vida Life shares in the form of competing affidavits.[3] The government proffered the affidavit of Thomas Carocci, senior counsel for the Financial Industry Regulatory Authority (FINRA). Carocci concluded that the 400,000 shares of restricted Vida Life stock had no value, so the amount of loss equaled the full price paid for the shares ($32,000). The defendant proffered the affidavit of James Watts, an investment banker. Employing a " subjective" approach to the valuation of micro-cap stocks, Watts concluded that " a per share price equal to half the amount invested . . . represents a price an investor . . . would pay." Under Watts' ...

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