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United States v. Connerton

United States District Court, D. Connecticut

September 26, 2019

UNITED STATES
v.
THOMAS CONNERTON

          RULING ON MOTION FOR JUDGMENT OF ACQUITTAL

          Stefan R. Underhill United States District Judge.

         Thomas Connerton was charged via superseding indictment with twelve counts of wire fraud, in violation of 18 U.S.C. § 1343 and 18 U.S.C. § 2 (counts one through twelve); one count of mail fraud, in violation of 18 U.S.C. § 1341 and 18 U.S.C. § 2 (count thirteen); sixteen counts of securities fraud, in violation of 15 U.S.C. §§ 78j(b) and 78ff, 17 C.F.R. § 240.10b-5, and 18 U.S.C. § 2 (counts sixteen through thirty-one); four counts of illegal monetary transactions, in violation of 18 U.S.C. § 1957 and 18 U.S.C. § 2 (counts thirty-three through thirty-six); and one count of tax evasion, in violation of 26 U.S.C. § 7201 (count thirty-nine).[1] See Indictment, Doc. No. 65. The jury found Connerton guilty on all thirty-four counts on September 17, 2018. See Verdict, Doc. No. 201. Connerton now seeks a judgment of acquittal on all counts. See Oral Mot. for Acquittal, Doc. No. 180; Mem. in Supp. Mot., Doc. No. 221. For the following reasons, Connerton’s motion is denied.

         I. Background

         The following general factual evidence was alleged by the government and introduced at trial. Additional facts will be set out below. The government alleged generally that Connerton set out to develop a puncture- and cut-resistant material for use in the surgical glove market through his company, Safety Technologies, LLC (“Safety Tech”). In connection with that development, the government alleged that Connerton engaged in a scheme to defraud investors and potential investors, from roughly 2009 through 2017, by falsely representing the value of the company, the level of interest from glove companies, the ways in which Connerton was using investors’ funds, the amount of money he was taking from the company, and the progress of the glove technology, among other misrepresentations.

         At trial, the following Safety Tech investors testified for the government. Lorraine Ward, who met Connerton on a dating website, invested $12, 500 in December 2011 Tr. 9/4/18, Doc. No. 189 at 669, 689-90; Ex. 222. Margaret Carlson, who met Connerton on a dating website, invested $50, 000 in July 2012 (ex. 16) and $25, 000 in July 2013 (ex. 22), and loaned Connerton $12, 500 in December 2015 (ex. 29). Tr. 8/28/18, Doc. No. 186 at 112-13, 134, 143, 149. Cynthia Hofer, who went to college with Connerton but later reconnected on a dating website, invested $15, 000 in October 2012 (ex. 17) and $10, 000 in November 2012 (ex. 18). Tr. 8/29/18, Doc. No. 187 at 373-75, 380-81. Stacey Maclay, who met Connerton on a dating website, made the following investments: $25, 000 in December 2012; $75, 000 in February 2013; $25, 000 in August 2013; $30, 000 in August 2013; $45, 000 in September 2013; $100, 000 in April 2014; $50, 000 in May 2014; and $25, 000 in September 2015. Tr. 9/4/18, Doc. No. 189 at 511-13, 534, 545-47, 558, 583, 592; Ex. 139. Maclay also loaned Connerton $50, 000 in October 2015. Tr. 9/4/18, Doc. No. 189 at 586; Ex. 139.

         Lisa Manganiello, who met Connerton on a dating website, invested $50, 000 in April 2013 (ex. 21) and $25, 000 in September 2014 (ex. 24). Tr. 8/28/18, Doc. No. 186 at 209, 216; Tr. 8/29/18, Doc. No. 187 at 245. Jason Henry, who met Connerton through Carlson, invested $25, 000 in Safety Tech in August 2013. Tr. 8/28/18, Doc. No. 186 at 50-51, 60; Ex. 1160. Jeffrey Portanova, who met Connerton through Portanova’s wife, invested $110, 000 in Safety Tech in December 2014. Tr. 8/29/18, Doc. No. 187 at 307; Ex. 25. Joyce Shetler Holt, who met Connerton through Maclay, invested $27, 500 in February 2015. Tr. 9/11/18, Doc. No. 197 at 1389-40, 1651; Ex. 26. Thomas Herlihy, who met Connerton through a friend, invested $13, 750 in Safety Tech in May 2015. Tr. 9/4/18, Doc. No. 189 at 644, 660-61; Ex. 27. H. Brett Humphreys, who met Connerton at a cocktail party, invested $75, 000 in March 2016. Tr. 9/12/18, Doc. No. 198 at 1826; Ex. 30.

         In addition to investors, the government called as witnesses the following doctors who were connected to the Safety Tech project. Dr. Michael DiLuna, Chief of Pediatric Neurosurgery at Yale School of Medicine, met Connerton in 2006-2007 and advised him on some of the concerns doctors had with surgical gloves on the market at the time. Tr. 8/29/18, Doc. No. 188 at 425-26, 437-40; Ex. 1105 (email to Connerton about what surgeons look for in gloves). Dr. Walter Ettinger met Connerton in 2008 through Dr. Ettinger’s financial advisor, and was, at that time, president of Massachusetts Memorial Medical Center, and invested $25, 000 in Safety Tech. Tr. 9/5/18, Doc. No. 190 at 787-88, 793. Dr. Mark Russi, professor and doctor at Yale University, met Connerton in 2006 and, like Dr. DiLuna, advised him on doctors’ concerns with surgical gloves. Tr. 9/5/18, Doc. No. 190 at 872, 875, 894. Dr. Russi did not invest money in Safety Tech, but was given a “sweat equity share in the company.” Tr. 9/5/18, Doc. No. 190 at 880.

         The following representatives from glove companies and manufacturing/testing companies testified: Robert Simmonds from Intertek (tr. 9/5/18, doc. no. 191 at 940); Paul Bottcher from Medline (tr. 9/6/18, doc. no. 192 at 1065); Susan Mueller from Cardinal Health (tr. 9/6/18, doc. no. 192 at 1153); Kenneth Pouliot from Kraton Polymers (tr. 9/6/18, doc. no. 192 at 1184; tr. 9/6/18, doc. no. 193 at 1226); Jeanne Marie Lahey from Molnlycke (tr. 9/10/18, doc. no. 194 at 1315); and David Schuck from Killian Latex (tr. 9/10/18, doc. no. 194 at 1400).

         In addition, the following government officials testified about the investigations into Connerton and Safety Tech and various federal regulations: Amee Bhatt from the Occupational Safety and Health Administration (“OSHA”) (tr. 9/4/18, doc. no. 189 at 727); Alfred Day from the Securities and Exchange Commission (“SEC”) (tr. 9/5/18, doc. no. 190 at 812); Elizabeth McCartney from the Federal Bureau of Investigations (“FBI”) (tr. 9/5/18, doc. no. 191 at 1010; tr. 9/6/18, doc. no. 193 at 1274; tr. 9/10/18, doc. no. 195 at 1463); Brian Hanlon from the United States Patent and Trademark Office (“USPTO”) (tr. 9/11/18, doc. no. 196 at 1569); Stephen West from the FBI (tr. 9/11/18, doc. no. 197 at 1690); and Sean Darling from the Internal Revenue System (“IRS”) (tr. 9/11/18, doc. no. 197 at 1752; tr. 9/12/18, doc. no. 198 at 1824).

         Connerton testified in his own defense. Tr. 9/12/18, Doc. No. 199 at 1955; Tr. 9/13/16, Doc. No. 200 at 2114. The defense also called Scott Berry, who worked with Connerton in the beginning stages of Safety Tech to value the company (tr. 9/12/18, doc. no. 198 at 1882); and David Quinlan, a mechanical engineer (tr. 9/13/18, doc. no. 200 at 2196). The jury returned its guilty verdict on all counts on September 17, 2018. See Verdict Form, Doc. No. 201.

         II. Motion for Judgment of Acquittal

         A. Standard

         Pursuant to Rule 29 of the Federal Rules of Criminal Procedure, “the court on the defendant’s motion must enter a judgment of acquittal of any offense for which the evidence is insufficient to sustain a conviction.” Fed. R. Crim. P. 29. “A defendant seeking to overturn a conviction on the ground that the evidence was insufficient bears a heavy burden.” United States v. Best, 219 F.3d 192, 200 (2d Cir. 2000), cert. denied, 532 U.S. 1007 (2001). The reviewing court must view the evidence in the light most favorable to the prosecution and must reject the sufficiency challenge if it concludes that “any rational trier of fact could have found the essential elements of the crime beyond a reasonable doubt.” Jackson v. Virginia, 443 U.S. 307, 319 (1979) (emphasis in original); see also United States v. Payton, 159 F.3d 49, 56 (2d Cir. 1998) (“[t]he ultimate question is not whether [the court believes] the evidence adduced at trial established defendant’s guilt beyond a reasonable doubt, but whether any rational trier of fact could so find” (emphasis in original)). A reviewing court must consider the evidence as a whole, not in isolation. Best, 219 F.3d at 200; see also United States v. Memoli, 2015 WL 1525864, at *2 (D. Conn. Apr. 2, 2015) (“In order to prevail on a Rule 29 Motion, Defendant must establish that the totality of the evidence is insufficient to convict him-it is irrelevant that one piece of evidence, standing alone, would not have been enough.” (Emphasis in original).). The “pieces of evidence must be viewed ‘not in isolation, but in conjunction.’” Memoli, 2015 WL 1525864, at *2 (quoting United States v. Casamento, 887 F.2d 1141, 1156 (2d Cir. 1989)).

         Further, the court must defer to the jury’s determination of the weight of the evidence, credibility of witnesses, and competing inferences that can be drawn from the evidence. Best, 219 F.3d at 200. The district court must “assum[e] that the jury resolved all questions of witness credibility and competing inferences in favor of the prosecution.” United States v. Abu–Jihaad, 630 F.3d 102, 134 (2d Cir. 2010) (internal citations omitted); see also United States v. Morrison, 153 F.3d 34, 49 (2d Cir. 1998) (“We defer to the jury's determination of the weight of the evidence and the credibility of the witnesses, and to the jury's choice of competing inferences that can be drawn from the evidence.”). The jury is “exclusively responsible” for determinations of witness credibility; United States v. Strauss, 999 F.2d 692, 696 (2d Cir. 1993); and the court must be “careful to avoid usurping the role of the jury since Rule 29 does not provide the trial court with an opportunity to substitute its determination of . . . the weight of the evidence and the reasonable inferences to be drawn for that of the jury.” United States v. Cassese, 428 F.3d 92, 98 (2d Cir. 2005) (internal quotation marks omitted). The court should defer to the jury’s credibility assessments and intrude upon that function only where “exceptional circumstances can be demonstrated” such as when “testimony is patently incredible or defies physical realities.” United States v. Sanchez, 969 F.2d 1409, 1413 (2d Cir. 1992).

         B. Discussion

         Connerton argues that he is entitled to a judgment of acquittal on all counts of conviction. See Mem. in Supp. Mot. for Acquittal (“Mem. in Supp.”), Doc. No. 221. He generally asserts that the government failed to establish that he perpetuated a scheme to defraud his investors and/or made materially false statements. With respect to the mail and wire fraud counts, Connerton argues that the government failed to disprove his good faith and, therefore, failed to prove fraudulent intent. Id. at 5-8. Further, Connerton argues that the government failed to prove that the mailing in the mail fraud count was in furtherance of the alleged fraud. Id. at 13-16. With respect to the securities fraud counts, Connerton argues that the government failed to prove that various statements that Connerton made were “material” to the investors’ decisions to invest. Id. at 29-31. With respect to the illegal monetary transaction counts, Connerton argues that the government failed to prove that the expenditures were undertaken to conceal the nature or source of the proceeds. Id. at 10-11. With respect to the tax evasion count, Connerton argues that the government improperly included tax years 2004 and 2005. Id. at 8-9.

         For the reasons that follow, Connerton’s Motion for Judgment of Acquittal is denied with respect to all counts of conviction.

         1. Fraud Counts

         Connerton was convicted of twelve counts of wire fraud, in violation of 18 U.S.C. § 1343 (counts one through twelve); one count of mail fraud, in violation of 18 U.S.C. § 1341 (count thirteen); and sixteen counts of securities fraud, in violation of 15 U.S.C. §§ 78j(b) and 78ff, 17 C.F.R. § 240.10b-5, and 18 U.S.C. § 2 (counts sixteen through thirty-one). See Verdict, Doc. No. 201.

         “To prove mail or wire fraud, the government must show (1) a scheme to defraud victims (2) by obtaining their money or property (3) furthered by the use of interstate mail or wires.” United States v. McGinn, 787 F.3d 116, 122 (2d Cir. 2015). With respect to the scheme to defraud victims, “[t]he government must further establish that the defendant had fraudulent intent or ‘a conscious knowing intent to defraud, ’ and that some harm or injury to the property rights of the victim was contemplated.” Id. at 123 (quoting United States v. Guadagna, 183 F.3d 122, 129 (2d Cir. 1999)). The Second Circuit has held, though, that “a defendant’s belief ‘that ultimately everything would work out so that no one would lose any money’ does not excuse fraudulent conduct.” Id. (quoting United States v. Rossomando, 144 F.3d 197, 199-201 (2d Cir. 1998)).

         To prove securities fraud, the government must prove that, in connection with a sale of securities, the defendant: “(1) employed a device, scheme or artifice to defraud, or made an untrue statement of material fact which made what was said, under the circumstances, misleading, or engaged in an act, practice or course of business that operated, or would operate, as a fraud or deceit upon a purchaser or seller; (2) participated in the scheme to defraud knowingly, willfully and with intent to defraud; and (3) knowingly used, or caused to be used, instrumentalities of interstate commerce in furtherance of the scheme to defraud.” United States v. Teyibo, 877 F.Supp. 846, 861 (S.D.N.Y. 1995).

         Accordingly, for purposes of all fraud counts, the government must prove that Connerton perpetuated a scheme to defraud, furthered by the use of mail and/or wires, with an intent to defraud.

         a. Scheme and Intent to Defraud

         Connerton argues generally that the government failed to prove that he engaged in a scheme to defraud and, relatedly, that he had the intent to defraud, because the government failed to disprove Connerton’s good faith. The government alleged that Connerton engaged in a scheme to defraud investors and potential investors in a number of ways that generally improperly misrepresented the worth and success of Safety Tech and the glove technology Connerton was developing. Taking the evidence in the light most favorable to the government, the jury reasonably could have found that there was a scheme and intent to defraud.

         i. Physician Involvement

         The government alleged that as part of his scheme to defraud investors, Connerton inflated the role that several prominent doctors played in the formation and/or management of Safety Tech. Indeed, many Safety Tech investors testified that Connerton provided them with information about the involvement of certain doctors including Dr. Mark Russi from Yale, Dr. Walter Ettinger, and Dr. Michael DiLuna from Yale.

         Investors testified that Connerton told them that Russi was “one of the founders of Safety Tech.” Tr. 8/28/18, Doc. No. 186 at 64 (Henry); Ex. 1154 (email to Henry); Tr. 9/4/18, Doc. No. 189 at 655 (Herlihy); Ex. 605 (April 2015 email to Herlihy); Ex. 1100 (email to Humphreys); Ex. 1200 (email to investor George Nicita); Ex. 1204 (email to Nicita). Connerton also testified that Russi was a founder. Tr. 9/12/18, Doc. No. 199 at 1973. Russi testified, however, that he was not a founder of Safety Tech. Tr. 9/5/18, Doc. No. 190 at 883, 885, 889. Connerton also told investors that DiLuna was part of a “product development team.” Ex. 151 (email to Carlson); Ex. 1901 (investor update). DiLuna testified, however, that that was false. Tr. 8/29/18, Doc. No. 188 at 446-47. Connerton told investors that Russi and DiLuna were part of a physician development and advisory board. See Ex. 1156; Tr. 8/28/18 at 67-68 (Henry); Tr. 8/28/18, Doc. No. 186 at 214 (Manganiello); Tr. 8/29/18, Doc. No. 187 at 252 (Manganiello); Tr. 8/29/18, Doc. No. 187 at 383 (Hofer); Tr. 9/4/18, Doc. No. 189 at 543, 588 (Maclay); Ex. 133 (email to Maclay); Tr. 9/11/18, Doc. No. 197 at 1642-43 (Holt); Ex. 1902 (email to investor Mark Ricca). Connerton also testified that Russi was on the advisory board. Tr. 9/12/18, Doc. No. 199 at 2000. Both Russi and DiLuna testified, however, that they were not a part of any such board. Tr. 9/5/18, Doc. No. 190 at 889-91 (Russi); Tr. 8/29/18, Doc. No. 188 at 448 (DiLuna).

         Further, Connerton told investors that Russi and DiLuna, among others, “affirmatively stated that the retention of the tactile feel and grip with our technology in the latex film is intact.” Ex. 1156 (email to Henry); Ex. 1902 (email to Ricca). Russi and DiLuna testified, however, that they did not say that. Tr. 9/5/18, Doc. No. 190 at 892 (Russi); Tr. 8/29/18, Doc. No. 188 at 450 (DiLuna). Connerton also told investors that Russi “sits on several committees” at the Center for Disease Control (“CDC”), was “a leading consultant to the Federal Government on bio-terrorism, ” and was on the “pandemic committee.” Ex. 133 (12/10/15 email to Maclay); Tr. 9/4/18, Doc. No. 189 at 656 (Herlihy); Ex. 605 (April 2015 email to Herlihy); Tr. 9/11/18, Doc. No. 197 at 1642-43 (Holt); Ex. 1100 (email to Humphreys); Ex. 1200 (email to Nicita); Ex. 413 (email to Ricca). Russi testified, however, that none of that was accurate. Tr. 9/5/18, Doc. No. 190 at 884-85. In fact, Russi emailed Connerton in 2009, before Connerton made many of those representations, and told Connerton he was not on CDC committees. Tr. 9/5/18, Doc. No. 190 at 886; Ex. 356.

         Connerton also informed his investors in an investor update that Russi was part of Safety Tech’s negotiation team. Tr. 9/4/18, Doc. No. 189 at 652 (Herlihy); Ex. 601 (email to Herlihy); Tr. 9/11/18, Doc. No. 197 at 1663 (Holt); Ex. 179 (investor update). Russi testified, however, that he was not part of any negotiation team. Tr. 9/5/18, Doc. No. 190 at 899. Connerton also stated that Russi “estimates a potential sales price premium of at least 20 percent for gloves with our technology.” Ex. 453 (email to Carlson). Russi testified, however, that he did not say that. Tr. 9/5/18, Doc. No. 190 at 904. Further, Connerton told investors that Russi and DiLuna were investors in Safety Tech. Tr. 8/29/18, Doc. No. 186 at 253 (Manganiello’s testimony); Tr. 9/14/18, Doc. No. 189 at 691 (Ward’s testimony); Ex. 1902 (email to Ricca). Both Russi and DiLuna testified, however, that they were not investors. Tr. 9/5/18, Doc. No. 190 at 880, 891 (Russi); Tr. 8/29/18, Doc. No. 188 at 449 (DiLuna). Connerton also told Carlson that Russi and Ettinger provided assistance valuing the technology and worked on glove market analysis. Ex. 151 (email to Carlson). Russi and Ettinger testified, however, that they did not do so. Tr. 9/5/18, Doc. No. 190 at 794-95 (Ettinger); Tr. 9/5/18, Doc. No. 190 at 899-900 (Russi).

         Many investors testified that Connerton’s representations about the doctors’ involvement was important in making their investment decisions. Henry testified that it was important to his decision to invest that there was a physician development advisory board filled with prominent doctors. Tr. 8/28/18, Doc. No. 186 at 68; id. at 71 (Henry testifying that he would have wanted to know if DiLuna was not involved). Manganiello testified that the involvement of prominent doctors on an advisory board was important to her in her decision to invest because “if they were in the deal, why wouldn’t I be?” Tr. 8/29/18, Doc. No. 187 at 252. She also testified that the fact that the doctors were also investors in Safety Tech it was “absolutely” a factor she considered when deciding whether to invest because it made her feel as though her investment was safe. Id. at 253. Hofer testified that she was impressed by the credentials of the doctors on the advisory board, and their involvement was important to her decision to invest because it made her feel more comfortable. Id. at 384. Maclay testified that Russi’s involvement on the advisory board was “very important” to her investment decision because of his involvement with the CDC and various committees. Tr. 9/4/18, Doc. No. 189 at 543, 588. Further, Herlihy testified that Russi’s involvement on the advisory board was important to his investment decision because his credentials give the project “viability.” Id. at 652, 656. Overall, Herlihy testified that he invested because of the credentials of the doctors on the board, because things seemed “very positive, ” and because he would get a speedy return on his investment. Id. at 660. Holt testified that Russi’s involvement with Safety Tech, as Connerton described it, was very important to her investment decision. Tr. 9/11/18, Doc. No. 197 at 1663

         ii. OSHA Mandate

         The government alleged that as part of his scheme to defraud investors, Connerton told investors that OSHA would mandate the use of his gloves once the technology was finished. Many of the investors testified that Connerton did, in fact, say that there was an OSHA mandate that would require the use of Safety Tech’s technology. See, e.g., Tr. 9/4/18, Doc. No. 189 at 541 (Maclay testifying about email from Connerton (doc. no. 113) in which he references an OSHA mandate); id. at 656 (Herlihy testifying that Connerton told him about the OSHA mandate); id. at 682 (Ward testifying about same); Tr. ...


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