FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF
MASSACHUSETTS. Hon. Denise J. Casper, U.S. District Judge.
J. Koury for appellant.
E. Lelling, Assistant United States Attorney, with whom
Carmen M. Ortiz, United States Attorney, was on brief, for
Kayatta, Stahl, and Barron, Circuit Judges.
on obviously nonpublic information that a golfing buddy
received from a corporate insider, Douglas Parigian made in
excess of $200,000 trading in securities. The United States
subsequently indicted Parigian for criminal securities fraud.
As ultimately amended, the indictment pressed a so-called
misappropriation theory against Parigian, arguing that
Parigian knew or should have known that, by providing the
inside information to Parigian, his buddy both breached a
duty of trust and confidence and personally benefited by
doing so. See generally United States v.
O'Hagan, 521 U.S. 642, 651-53, 117 S.Ct. 2199, 138
L.Ed.2d 724 (1997); SEC v. Rocklage, 470 F.3d 1, 6-7
(1st Cir. 2006). After unsuccessfully moving to dismiss the
indictment for failure to allege a crime, Parigian reached an
agreement with the government whereby he pled guilty to the
charges conditionally, under Federal Rule of Criminal
Procedure 11(a)(2), so that this court could then rule on the
questions raised by his challenge to the superseding
indictment. We now do so, holding that Parigian's
preserved challenges to the indictment fall short of the
ultimately amended, the grand jury's indictment charged
Parigian and his golfing buddy co-defendant Eric
McPhail with violating 15 U.S.C. § §
78j(b), 78ff(a), and 18 U.S.C. § 2, by " knowingly
and willfully . . . employ[ing] manipulative and deceptive
devices and contrivances in connection with the purchase and
sale of securities in contravention of [Securities and
Exchange Commission (" SEC" )] Rule 10b-5."
See 17 C.F.R. § 240.10b--5(c). Another count charged
them both with conspiracy to commit the same
offense. See 18 U.S.C. § 371.
because this appeal follows a guilty plea, we would derive
the facts from the plea agreement, the change-of-plea
colloquy, the unchallenged portions of the presentence
investigation report, and the sentencing hearing transcript.
See United States v. Ocasio-Cancel, 727 F.3d 85, 88
(1st Cir. 2013). But because Parigian's appeal trains
solely on the legal adequacy of the challenged superseding
indictment, we focus our review within the indictment's
four corners. See United States v. Horton, 580
Fed.Appx. 380, 383 (6th Cir. 2014) (unpublished), cert.
denied, 135 S.Ct. 1006, 190 L.Ed.2d 879 (2015) (limiting
appellate review " to the four corners of the
indictment" when defendant entered conditional guilty
plea preserving right to appeal denial of motion to dismiss
based on indictment's failure to state a crime).
addition to its recitation of the offenses as described and
the laws allegedly violated by the defendants, the
eighteen-page indictment contained numerous factual
allegations describing each person's role in the insider
trading scheme. The scheme's insider ("
Insider" ) was an un-indicted individual who served from
2004 to 2011 as an executive at American Superconductor
Corporation (" AMSC" ), a publicly-traded
Massachusetts-based corporation in the business of producing
components used in the wind power industry. McPhail and
Insider were friends. The indictment claimed that, by 2009,
the relationship between McPhail and Insider was one of
" trust and confidence, including a history, pattern,
and practice of sharing professional and personal
confidences." They also shared " an understanding
that information conveyed between them was to remain
confidential." The indictment expressly alleged that
Parigian " was aware of" that relationship and
" knew" that Insider was an executive at AMSC.
no later than July of 2009, Insider began revealing to
McPhail highly material inside information about AMSC that
allowed McPhail to predict the upshot of impending,
yet-to-be-announced earnings reports and major commercial
transactions. Notwithstanding his alleged understanding with
Insider that he was to treat the information confidentially,
McPhail began to disseminate the information about
developments at AMSC, mostly via email, to a circle of
regular golfing companions, including Parigian. During the
next two years, the tips allowed Parigian to time his
purchases and sales of AMSC securities (and options) so as to
avoid losses and secure gains in the wake of certain public
announcements of the information previously passed to him by
email traffic accompanying this prescient trading indicated
that secrecy was the order of the day. One of McPhail's
early tips concluded with "
SHHHHHHHHHHHHH!!!!!!!!!!!!!!!!!" The group discussed
whether the information would remain " safe" while
they tipped off another person. McPhail stressed the need to
use a dedicated email thread, while Parigian claimed that he
was deleting his emails.
is no allegation that McPhail himself engaged in trading.
Rather, the indictment posits that he solicited "
getting paid back" by Parigian and the others with wine,
steak, and visits to a massage parlor. Parigian assured him
that " I will take you for a nice dinner at Grill
23." Another tipped trader offered McPhail a free golf
moved to dismiss the superseding indictment, arguing that it
failed to adequately allege several elements of the crime of
securities fraud committed by trading on misappropriated
inside information. After this motion was denied by the
district court, see United States v. McPhail, No.
14-cr-10201-DJC, 2015 WL 2226249, at *5 (D. Mass. May 12,
2015), Parigian entered into a plea agreement that preserved
his right to appeal the denial of the motion. He was
sentenced to time served and three years of supervised
release, with eight months of home confinement.
Standard of Review
reviewing a district court's denial of a motion to
dismiss an indictment, we review legal questions de novo, any
relevant factual findings for clear error, and the
court's " ultimate ruling" for abuse of
discretion. United States v. Doe, 741 F.3d 217, 226
(1st Cir. 2013) (quoting United States v.
Lopez--Matias, 522 F.3d 150, 153 (1st Cir. 2008)).
indictment is sufficient " if it contains the elements
of the offense charged, fairly informs the defendant of the
charges against which he must defend, and enables him to
enter a plea without fear of double jeopardy."
United States v. Yefsky, 994 F.2d 885, 893 (1st Cir.
1993) (citing Hamling v. United States, 418 U.S. 87,
117, 94 S.Ct. 2887, 41 L.Ed.2d 590 (1974)). A well-pleaded
indictment can parrot " the statutory language to
describe the offense, but it must also be accompanied by such
a statement of facts and circumstances as to inform the
accused of the specific offense with which he is
charged." United States v. Savarese, 686 F.3d
1, 6 (1st Cir. 2012); see also Fed. R. Crim. P. 7(c)(1) (the
" indictment . . . must be a plain, concise, and
definite written statement of the essential facts
constituting the offense charged" ).