Case: 1:14-cr-00551 Document #: 48 Filed: 10/05/15 Page 1 of 28 PageID #:872
`
`UNITED STATES DISTRICT COURT
`NORTHERN DISTRICT OF ILLINOIS
`EASTERN DIVISION
`
`
`
`
`14 CR. 551
`
`Judge Harry D. Leinenweber
`
`
`
`UNITED STATES OF AMERICA
`
`v.
`
`
`MICHAEL COSCIA,
`
`
`
`Defendant.
`
`
`
`
`
`
`
`
`
`
`
`MEMORANDUM OF LAW IN SUPPORT OF DEFENDANT’S
`OMNIBUS MOTION IN LIMINE
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`October 5, 2015
`
`
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`
`
`
`SULLIVAN & CROMWELL LLP
`125 Broad Street
`New York, New York 10004
`(212) 558-4000
`
`
`Attorneys for Defendant Michael Coscia
`
`

`

`Case: 1:14-cr-00551 Document #: 48 Filed: 10/05/15 Page 2 of 28 PageID #:873
`
`TABLE OF CONTENTS
`
`ARGUMENT .............................................................................................................................1 
`
`I. 
`
`EVIDENCE RELATED TO REGULATORY INVESTIGATIONS OF
`MR. COSCIA’S TRADING ACTIVITY SHOULD BE EXCLUDED. .......................1 
`
`A. 
`
`B. 
`
`C. 
`
`Evidence Of Mr. Coscia’s Regulatory Settlements Is Inadmissible
`Under Rule 408. .................................................................................................2 
`
`Even If Admissible Under Rule 408, Evidence Of Mr. Coscia’s
`Regulatory Settlements Would Be Unfairly Prejudicial. ...................................4 
`
`Evidence Of The Fact Of The Regulatory Investigations Should
`Also Be Excluded. .............................................................................................5 
`
`EVIDENCE RELATED TO UNCONNECTED MARKET HARM OR
`DISRUPTION SHOULD BE EXCLUDED. .................................................................5 
`
`EVIDENCE RELATED TO EXTERNAL ECONOMIC AND MARKET
`EVENTS AND CONCERNS SHOULD BE EXCLUDED. .........................................6 
`
`A. 
`
`B. 
`
`Evidence Of External Economic And Market Events And Concerns
`Is Not Relevant. .................................................................................................7 
`
`Even If Relevant, Evidence Of External Economic And Market
`Events And Concerns Would Be Unfairly Prejudicial. .....................................7 
`
`II. 
`
`III. 
`
`IV. 
`
`EVIDENCE RELATED TO MR. COSCIA’S ECONOMIC
`CIRCUMSTANCES SHOULD BE EXCLUDED. .......................................................8 
`
`A. 
`
`B. 
`
`Evidence Of Mr. Coscia’s Economic Circumstances Is Not
`Relevant. ............................................................................................................8 
`
`Even If Relevant, Evidence Of Mr. Coscia’s Economic
`Circumstances Would Be Unfairly Prejudicial. .................................................9 
`
`V. 
`
`REFERENCES TO “MANIPULATION” SHOULD BE EXCLUDED. ....................10 
`
`A. 
`
`B. 
`
`References To “Manipulation” Are Not Relevant. ..........................................11 
`
`Even If Relevant, References To “Manipulation” Would Be
`Unfairly Prejudicial. .........................................................................................12 
`
`VI. 
`
`LAY WITNESS CHARACTERIZATIONS OF MR. COSCIA’S
`TRADING ACTIVITY AS “SPOOFING” SHOULD BE EXCLUDED. ...................13 
`
`VII.  CME GROUP OR ICE WITNESS TESTIMONY RELATED TO
`COMPLAINTS ABOUT MR. COSCIA’S TRADING ACTIVITY
`SHOULD BE EXCLUDED. ........................................................................................15 
`
`-i-
`
`

`

`Case: 1:14-cr-00551 Document #: 48 Filed: 10/05/15 Page 3 of 28 PageID #:874
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`VIII.  EVIDENCE RELATING TO TRADING BY MR. COSCIA
`UNRELATED TO AND AFTER THAT CHARGED IN THE
`INDICTMENT SHOULD BE EXCLUDED. ..............................................................17 
`
`IX. 
`
`CERTAIN EVIDENCE IN MR. COSCIA’S CFTC BACKGROUND
`QUESTIONNAIRE SHOULD BE EXCLUDED. ......................................................17 
`
`CONCLUSION ........................................................................................................................20 
`
`
`
`
`
`
`-ii-
`
`

`

`Case: 1:14-cr-00551 Document #: 48 Filed: 10/05/15 Page 4 of 28 PageID #:875
`
`TABLE OF AUTHORITIES
`
`
`
`Page(s)
`
`Cases
`
`Abbott Labs. v. Sandoz, Inc.,
`743 F. Supp. 2d 762 (N.D. Ill. 2010) ................................................................................... 4
`
`Abu Dhabi Commercial Bank v. Morgan Stanley & Co.,
`No. 08-cv-7508, 2013 WL 1155420 (S.D.N.Y. Mar. 20, 2013) ...................................... 7, 8
`
`Aristocrat Leisure Ltd. v. Deutsche Bank Trust Co. Ams.,
`No. 04-cv-10014, 2009 WL 3111766 (S.D.N.Y. Sept. 28, 2009) ................................. 7, 12
`
`Broeski v. Provident Life & Accident Ins. Co.,
`No. 06-cv-3836, 2007 WL 1704012 (N.D. Ill. June 8, 2007) .............................................. 3
`
`Carpenters Health & Welfare Fund v. Coca-Cola Co.,
`No. 00-cv-2838, 2008 WL 9358563 (N.D. Ga. Apr. 23, 2008) ........................................... 5
`
`Frey v. CFTC,
`931 F.2d 1171 (7th Cir. 1991) ........................................................................................... 11
`
`Gage v. Metro. Water Reclamation Dist. of Greater Chicago,
`365 F. Supp. 2d 919 (N.D. Ill. 2005) ................................................................................. 19
`
`Highland Capital Mgmt., L.P. v. Schneider,
`551 F. Supp. 2d 173 (S.D.N.Y. 2008) ................................................................................ 12
`
`In re Amaranth Natural Gas Commodities Litig.,
`730 F.3d 170 (2d Cir. 2013)............................................................................................... 11
`
`In re Cenco Inc. Sec. Litig.,
`601 F. Supp. 336 (N.D. Ill. 1984) ........................................................................................ 4
`
`In re Platinum & Palladium Commodities Litig.,
`828 F. Supp. 2d 588 (S.D.N.Y. 2011) .............................................................................. 4, 5
`
`Island Intellectual Prop. LLC v. Deutsche Bank AG,
`No. 09-cv-2675, 2012 WL 526722 (S.D.N.Y. Feb. 14, 2012) ........................................ 7, 8
`
`Kinsey v. Cendant Corp.,
`588 F. Supp. 2d 516 (S.D.N.Y. 2008) .................................................................................. 8
`
`Moore v. Principi,
`No. 00-cv-2975, 2002 WL 31767802 (N.D. Ill. Dec. 10, 2002) .......................................... 5
`
`Old Chief v. United States,
`519 U.S. 172 (1997) ........................................................................................................... 10
`
`-iii-
`
`

`

`Case: 1:14-cr-00551 Document #: 48 Filed: 10/05/15 Page 5 of 28 PageID #:876
`
`Pucci v. Litwin,
`No. 88-cv-10923, 1993 WL 405448 (N.D. Ill. Oct. 4, 1993) ............................................ 10
`
`Stagman v. Ryan,
`176 F.3d 986 (7th Cir. 1999) ............................................................................................. 14
`
`Strobl v. New York Mercantile Exchange,
`768 F.2d 22 (2d Cir. 1985)................................................................................................. 11
`
`Tan v. City of San Francisco,
`No. 08-cv-1564, 2010 WL 726985 (N.D. Cal. Feb. 26, 2010) .......................................... 19
`
`Thompson v. City of Chicago,
`472 F.3d 444 (7th Cir. 2006) ............................................................................................... 7
`
`United States ex rel. Tirado v. Bombard,
`423 F. Supp. 1245 (S.D.N.Y. 1976) ..................................................................................... 9
`
`United States v. Baskes,
`649 F.2d 471 (7th Cir. 1980) ............................................................................................. 14
`
`United States v. Boone,
`628 F.3d 927 (7th Cir. 2010) ............................................................................................. 17
`
`United States v. Bradley,
`644 F.3d 1213 (11th Cir. 2011) ........................................................................................... 9
`
`United States v. Cassese,
`290 F. Supp. 2d 443 (S.D.N.Y. 2003) ............................................................................ 9, 10
`
`United States v. Davis,
`No. 09-cr-343, 2009 WL 3646459 (E.D. Pa. Nov. 4, 2009) ................................................ 4
`
`United States v. Espino,
`32 F.3d 253 (7th Cir. 1994) ............................................................................................... 13
`
`United States v. Fuesting,
`845 F.2d 664 (7th Cir. 1988) ............................................................................................... 9
`
`United States v. Gomez,
`763 F.3d 845 (7th Cir. 2014) (en banc) ....................................................................... 18, 19
`
`United States v. Hays,
`872 F.2d 582 (5th Cir. 1989) ............................................................................................... 3
`
`United States v. Jackson-Randolph,
`282 F.3d 369 (6th Cir. 2002) ........................................................................................... 8, 9
`
`United States v. Locke,
`643 F.3d 235 (7th Cir. 2011) ....................................................................................... 13, 14
`
`-iv-
`
`

`

`Case: 1:14-cr-00551 Document #: 48 Filed: 10/05/15 Page 6 of 28 PageID #:877
`
`United States v. Miller,
`673 F.3d 688 (7th Cir. 2012) ............................................................................................. 19
`
`United States v. Noel,
`581 F.3d 490 (7th Cir. 2009) ............................................................................................. 13
`
`United States v. Quattrone,
`441 F.3d 153 (2d Cir. 2006)............................................................................................... 10
`
`United States v. Roti,
`484 F.3d 934 (7th Cir. 2007) ............................................................................................... 2
`
`United States v. Santos,
`201 F.3d 953 (7th Cir. 2000) ............................................................................................. 16
`
`United States v. Socony-Vacuum Oil Co.,
`310 U.S. 150 (1940) ........................................................................................................... 10
`
`United States v. Stahl,
`616 F.2d 30 (2d Cir. 1980)................................................................................................... 8
`
`United States v. Whiting,
`471 F.3d 792 (7th Cir. 2006) ................................................................................................ 9
`
`Van Bumble v. Wal-Mart Stores, Inc.,
`407 F.3d 823 (7th Cir. 2005) ......................................................................................... 9, 10
`
`Visser v. Packer Eng’g Assocs., Inc.,
`924 F.2d 655 (7th Cir. 1991) ............................................................................................. 14
`
`Wielgus v. Ryobi Techs., Inc.,
`No. 08-cv-1597, 2012 WL 1853090 (N.D. Ill. May 21, 2012) ...................................... 9, 10
`
`Williams v. Chevron U.S.A., Inc.,
`875 F.2d 501 (5th Cir. 1989) ............................................................................................... 4
`
`Winchester Packaging, Inc. v. Mobil Chem. Co.,
`14 F.3d 316 (7th Cir. 1994) ................................................................................................. 3
`
`Zurich Am. Ins. Co. v. Watts Indus., Inc.,
`417 F.3d 682 (7th Cir. 2005) ............................................................................................... 3
`
`Statutes
`
`7 U.S.C. § 9(1) ......................................................................................................................... 11
`
`7 U.S.C. § 13(a)(2) ................................................................................................................... 11
`
`7 U.S.C. § 13(a)(5) ................................................................................................................... 11
`
`Other Authorities
`
`76 Fed. Reg. 41,398 (2011) ..................................................................................................... 11
`
`-v-
`
`

`

`Case: 1:14-cr-00551 Document #: 48 Filed: 10/05/15 Page 7 of 28 PageID #:878
`
`78 Fed. Reg. 31,890 (2013) ..................................................................................................... 12
`
`Fed. R. Crim. P. 49.1 ............................................................................................................... 19
`
`Fed. R. Evid. 403 ................................................................................................................. 4, 19
`
`Fed. R. Evid. 404 ......................................................................................................... 17, 18, 19
`
`Fed. R. Evid. 408 ....................................................................................................... 1, 2, 3, 4, 5
`
`Fed. R. Evid. 602 ..................................................................................................................... 14
`
`Fed. R. Evid. 608 ..................................................................................................................... 19
`
`Fed. R. Evid. 701 ......................................................................................................... 13, 14, 15
`
`Fed. R. Evid. 801 ..................................................................................................................... 16
`
`Fed. R. Evid. 803 ................................................................................................................... 4, 5
`
`-vi-
`
`

`

`Case: 1:14-cr-00551 Document #: 48 Filed: 10/05/15 Page 8 of 28 PageID #:879
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`
`Defendant Michael Coscia respectfully submits this Memorandum of Law in
`
`support of his Omnibus Motion In Limine to exclude evidence, testimony, and/or argument as
`
`to the following:
`
`(1) Regulatory investigations related to the subject matter of this case and Mr.
`Coscia’s settlement of them;
`
`(2) Alleged market harm or disruption that is unconnected to the trading activity of
`Mr. Coscia that is charged in the Indictment;
`
`(3)
`
`External economic and market events;
`
`(4) Mr. Coscia’s economic circumstances;
`
`(5) Any reference to “manipulation”;
`
`(6)
`
`Lay witness characterizations of Mr. Coscia’s conduct as “spoofing”;
`
`(7) Complaints by non-testifying market participants as to Mr. Coscia’s trading
`activity;
`
`(8)
`
`Trading by Mr. Coscia unrelated to and after that charged in the Indictment; and
`
`(9) Certain information contained in a questionnaire completed by Mr. Coscia in
`connection with providing testimony to the CFTC.
`
`As explained below, these matters are not relevant to any issue in this case,
`
`present a substantial risk of unfair prejudice to Mr. Coscia, or are otherwise barred by the
`
`Federal Rules of Evidence.
`
`ARGUMENT
`
`I.
`
`EVIDENCE RELATED TO REGULATORY INVESTIGATIONS OF MR.
`COSCIA’S TRADING ACTIVITY SHOULD BE EXCLUDED.
`
`The Court should preclude the Government from referring to, offering evidence
`
`of, or making arguments relating to the regulatory investigations of the same trading conduct
`
`alleged in the Indictment, including Mr. Coscia’s settlement of them. Such evidence is
`
`expressly prohibited by the bar on compromise evidence of Federal Rule of Evidence
`
`408(a)(1), irrelevant, and/or unfairly prejudicial.
`
`
`
`

`

`Case: 1:14-cr-00551 Document #: 48 Filed: 10/05/15 Page 9 of 28 PageID #:880
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`
`
`Before he was charged in this matter, Mr. Coscia and his company, Panther
`
`Energy Trading, LLC, were subject to investigations by the U.K. Financial Conduct Authority,
`
`the CME Group, and the CFTC for the same trading conduct alleged in the Indictment. In July
`
`2013, Mr. Coscia settled these investigations, agreeing to pay fines and to cease certain trading
`
`for a limited period. See FCA, Final Notice (July 3, 2013) (“FCA Settlement”); CME Group,
`
`Notice of Disciplinary Action (July 22, 2013) (“CME Group Settlement”); CFTC, Order
`
`Instituting Proceedings Pursuant to Sections 6(c) and 6(d) of the Commodity Exchange Act, as
`
`Amended, Making Findings and Imposing Remedial Sanctions (July 22, 2013) (“CFTC
`
`Settlement”).
`
`In entering into these settlements, Mr. Coscia did not admit any facts, legal
`
`violations, or wrongdoing. Indeed, he explicitly neither admitted nor denied the violations
`
`alleged by the CME Group and the CFTC in his settlements with them. CME Group
`
`Settlement; CFTC Settlement 1. Mr. Coscia’s settlement with the CFTC, moreover, made
`
`clear that he did not consent “to the use of the Offer [of Settlement] or [the resulting] Order, or
`
`the findings or conclusions in [the] Order consented to in the Offer, by any other party in any
`
`other proceeding.” CFTC Settlement 1 n.1.
`
`A.
`
`Evidence Of Mr. Coscia’s Regulatory Settlements Is Inadmissible Under
`Rule 408.
`
`Under Rule 408(a)(1), evidence of “furnishing . . . a valuable consideration in
`
`compromising . . . [a] claim” is not admissible to “prove or disprove the validity . . . of a
`
`disputed claim.” Rule 408(a)(1) applies in both civil and criminal proceedings. United States
`
`v. Roti, 484 F.3d 934, 936-37 (7th Cir. 2007). The rule encourages compromise and settlement
`
`of disputes and recognizes that such compromise and settlement is not relevant to assessing a
`
`defendant’s culpability in subsequent civil or criminal proceedings. See, e.g., Fed. R. Evid.
`
`408 advisory committee’s note (“[U]nlike a direct statement of fault, an offer or acceptance of
`
`a compromise is not very probative of the defendant’s guilt. Moreover, admitting such an offer
`
`
`
`
`-2-
`
`

`

`Case: 1:14-cr-00551 Document #: 48 Filed: 10/05/15 Page 10 of 28 PageID #:881
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`or acceptance could deter a defendant from settling a civil regulatory action, for fear of
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`evidentiary use in a subsequent criminal action.”); Zurich Am. Ins. Co. v. Watts Indus., Inc.,
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`417 F.3d 682, 689 (7th Cir. 2005) (“[T]he law favors out-of-court settlements, and allowing
`
`offers of compromise to be used as admissions of liability might chill voluntary efforts at
`
`dispute resolution.”).
`
`Although not probative of a defendant’s guilt, evidence of a compromise or
`
`settlement is easily misconstrued by a jury. “[A]s the framers of Rule 408 clearly
`
`contemplated, the potential impact of evidence regarding a settlement agreement with regard to
`
`a determination of liability is profound.” United States v. Hays, 872 F.2d 582, 589 (5th Cir.
`
`1989). For “[i]t does not tax the imagination to envision the juror who retires to deliberate with
`
`the notion that if the defendant[] had done nothing wrong, [he] would not have paid” the
`
`settlement amount. Id.; see also, e.g., Winchester Packaging, Inc. v. Mobil Chem. Co., 14 F.3d
`
`316, 320 (7th Cir. 1994) (“although parties typically are willing to settle for less than they
`
`would demand at trial, in order to avoid the expenses and uncertainty of a full-blown litigation,
`
`this strategy might be difficult to make credible to a jury”). The rule therefore plainly bars
`
`admission of evidence of settlements like the ones Mr. Coscia entered into.
`
`The only conceivable reason the Government might seek to bring these
`
`settlements to the attention of the jury is to invite the forbidden inference that Mr. Coscia has
`
`somehow acknowledged wrongdoing in connection with his trading activity. But “[a]
`
`settlement agreement is not an adjudication (or even evidence of) misconduct,” Broeski v.
`
`Provident Life & Accident Ins. Co., No. 06-cv-3836, 2007 WL 1704012, at *3 (N.D. Ill. June 8,
`
`2007), and such use of a settlement agreement is precisely what Rule 408(a)(1) prohibits.
`
`Evidence as to the fact and terms of Mr. Coscia’s regulatory settlements should thus be
`
`excluded.
`
`
`
`
`-3-
`
`

`

`Case: 1:14-cr-00551 Document #: 48 Filed: 10/05/15 Page 11 of 28 PageID #:882
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`
`
`B.
`
`Even If Admissible Under Rule 408, Evidence Of Mr. Coscia’s Regulatory
`Settlements Would Be Unfairly Prejudicial.
`
`To the extent that the Government seeks to offer evidence of Mr. Coscia’s
`
`regulatory settlements for a purported purpose other than to prove or raise inferences about his
`
`culpability, such evidence should be excluded because its probative value is substantially
`
`outweighed by the risk of unfair prejudice to Mr. Coscia. That Mr. Coscia settled regulatory
`
`investigations of the same trading conduct charged in the Indictment is so unfairly prejudicial
`
`that it should not be admitted for any purpose. His settlement could easily mislead the jury into
`
`believing that Mr. Coscia accepted and admitted the impropriety of his trading strategy. In
`
`other words, there is a significant danger that the jury would “view the agreement[s] as a
`
`confession of . . . guilt, regardless of the purpose for which the evidence is received.” United
`
`States v. Davis, No. 09-cr-343, 2009 WL 3646459, at *5 (E.D. Pa. Nov. 4, 2009) (excluding
`
`evidence relating to settlement agreement under Rule 403). See also, e.g., Williams v. Chevron
`
`U.S.A., Inc., 875 F.2d 501, 504 (5th Cir. 1989) (affirming under Rule 403 district court’s
`
`exclusion of settlement evidence because “it is undoubtedly possible that the jury would have
`
`confused its purpose for that precluded by Rule 408”); Abbott Labs. v. Sandoz, Inc., 743 F.
`
`Supp. 2d 762, 767 (N.D. Ill. 2010) (“[G]iven the marginal relevance of the settlement
`
`agreements, their probative value is outweighed by the danger of unfair prejudice under Rule
`
`403.”). Accordingly, the fact and terms of Mr. Coscia’s settlements should be excluded as
`
`substantially more unfairly prejudicial than probative.1
`
`
`
` 1
`
` Mr. Coscia’s regulatory settlements are also plainly inadmissible hearsay. The Court should reject
`any reliance by the Government on the Federal Rule of Evidence 803(8)(A)(iii) hearsay exception for
`“[a] record or statement of a public office” that “sets out . . . factual findings from a legally authorized
`investigation.” First, Mr. Coscia’s settlement with the CME Group does not fall under this exception
`because the CME Group is not a “public office.” It is a shareholder-owned, publicly-traded, for-profit
`corporation. See, e.g., CME Group Inc., Annual Report (Form 10-K), at 5 (Feb. 26, 2015). Second,
`Mr. Coscia’s settlements with all three entities fall outside Rule 803(8)’s ambit because they do not set
`out “factual findings from a legally authorized investigation.” The settlements were “not based on
`formal findings . . . following a hearing on the record.” In re Cenco Inc. Sec. Litig., 601 F. Supp. 336,
`337 n.3 (N.D. Ill. 1984). Rather, they “recite[] only unproven allegations” that Mr. Coscia neither
`
`-4-
`
`
`

`

`Case: 1:14-cr-00551 Document #: 48 Filed: 10/05/15 Page 12 of 28 PageID #:883
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`
`
`C.
`
`Evidence Of The Fact Of The Regulatory Investigations Should Also Be
`Excluded.
`
`The Court should also exclude and prohibit any mention of the fact of the
`
`regulatory investigations that Mr. Coscia settled. That the FCA, CME Group, and CFTC
`
`conducted investigations of the trading activity at issue here has no probative value; the fact of
`
`the investigations proves nothing and has no bearing on any element of the Government’s
`
`commodities fraud and spoofing charges.
`
`Indeed, the only reason the Government might offer such evidence is to invite
`
`the jury to infer improperly that the mere fact that investigations were conducted tends to
`
`establish the wrongfulness of the trading activity. That would “unfairly prejudice the jury by
`
`giving the appearance that the ultimate issues to be decided by it had already been decided by
`
`another entity.” Moore v. Principi, No. 00-cv-2975, 2002 WL 31767802, at *8 (N.D. Ill. Dec.
`
`10, 2002) (excluding as unfairly prejudicial evidence of an agency’s prior investigation). The
`
`Court should therefore exclude this evidence.2
`
`II.
`
`EVIDENCE RELATED TO UNCONNECTED MARKET HARM OR
`DISRUPTION SHOULD BE EXCLUDED.
`
`The Court should preclude the Government from offering at trial evidence of or
`
`making arguments relating to alleged harm or disruption, either to particular counterparties or
`
`to the futures markets, that is not directly linked to the trading activity of Mr. Coscia that is
`
`
`admitted nor denied. Id. As such, Mr. Coscia’s regulatory settlements do not contain the type of
`formal, adjudicated “factual findings” that warrant application of the public records exception. See In
`re Platinum & Palladium Commodities Litig., 828 F. Supp. 2d 588, 594 (S.D.N.Y. 2011) (prohibiting
`plaintiffs from relying on a CFTC order to plead the “underlying facts of liability” because “[a]lthough
`the CFTC Order included certain factual findings, it nevertheless was the product of a settlement . . . ,
`not an adjudication of the underlying issues”) (citation omitted). Third, the public records exception “is
`not a back door vehicle for the introduction of evidence which is otherwise inadmissible.” Carpenters
`Health & Welfare Fund v. Coca-Cola Co., No. 00-cv-2838, 2008 WL 9358563, at *4 (N.D. Ga. Apr.
`23, 2008). Rule 803(8) “merely creates an exception to the normal hearsay rules excluding out of court
`statements offered for the truth”; it “does not provide an independent basis for admissibility.” In re
`Platinum & Palladium Commodities Litig., 828 F. Supp. 2d at 594, 595 (Rule 803(8) inapplicable
`where “admissibility is governed by Rule 408, which . . . excludes Plaintiffs’ intended use”).
`2 At trial, the parties should be required to refer to any prior interviews or testimony from the regulatory
`investigations as “prior interviews [or testimony] related to this matter.”
`
`
`
`
`-5-
`
`

`

`Case: 1:14-cr-00551 Document #: 48 Filed: 10/05/15 Page 13 of 28 PageID #:884
`
`
`charged in the Indictment. Absent a direct connection between any alleged harm or disruption
`
`and the charged trading activity, such evidence is both irrelevant and unfairly prejudicial.
`
`Materials produced in discovery suggest that the Government may offer
`
`evidence from market participants who purportedly observed and complained about the
`
`cancellation of large orders in certain futures markets, or otherwise commented on perceived
`
`market disruption. See, e.g., Email from Alex Gerko to Peter Barenthein (Oct. 5, 2011) (Ex.
`
`A); Email from Chris Roenbaugh to Brenda Tucker (Oct. 14, 2011) (Ex. B). None of these
`
`market participants was able to identify who was placing the orders at issue. See, e.g., Ex. A
`
`(“[s]omebody” was placing “short lived” orders); Ex. B (“[s]omeone” was placing orders that
`
`were cancelled “[b]efore you can lift them”).
`
`Unless such market behavior can be directly linked to the trading activity of Mr.
`
`Coscia charged in the Indictment, it is plainly irrelevant, having no bearing on any issue in this
`
`case. The admission of such evidence would also present a substantial danger of unfair
`
`prejudice to Mr. Coscia, inviting the jury to speculate or assume that the trading activity of Mr.
`
`Coscia charged in the Indictment harmed other traders or disrupted markets without any basis
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`for doing so. The Court should therefore require the Government to offer proof of a direct
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`causal connection to the trading activity of Mr. Coscia that is charged in the Indictment before
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`admitting any such evidence.
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`III. EVIDENCE RELATED TO EXTERNAL ECONOMIC AND MARKET
`EVENTS AND CONCERNS SHOULD BE EXCLUDED.
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`The Court should preclude the Government from offering at trial evidence of or
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`making arguments relating to external economic and market events and concerns, including the
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`2008 financial crisis, the recession, the 2010 “flash crash,” or general trepidations about “Wall
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`Street” and high frequency trading. Such evidence is both irrelevant and unfairly prejudicial
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`and should be excluded.
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`Case: 1:14-cr-00551 Document #: 48 Filed: 10/05/15 Page 14 of 28 PageID #:885
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`A.
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`Evidence Of External Economic And Market Events And Concerns Is Not
`Relevant.
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`External economic and market events are just that, external; they rarely have
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`any bearing on individual liability in a civil or criminal case. As a result, courts regularly
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`exclude as irrelevant evidence relating to large-scale economic and market events, such as the
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`financial crisis. See, e.g., Abu Dhabi Commercial Bank v. Morgan Stanley & Co., No.
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`08-cv-7508, 2013 WL 1155420, at *3 (S.D.N.Y. Mar. 20, 2013) (excluding as irrelevant
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`evidence of certain rating processes “insofar as it would be introduced for the purpose of
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`implicating defendants in the financial crisis more generally”); Island Intellectual Prop. LLC v.
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`Deutsche Bank AG, No. 09-cv-2675, 2012 WL 526722, at *3 (S.D.N.Y. Feb. 14, 2012)
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`(excluding as irrelevant “abstract discussion of the financial crisis” where “claims relate[d] to
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`financial products”); Aristocrat Leisure Ltd. v. Deutsche Bank Trust Co. Ams., No.
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`04-cv-10014, 2009 WL 3111766, at *7 (S.D.N.Y. Sept. 28, 2009) (excluding “statements that
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`do not bear on the issues being tried,” including “statements linking the Bondholders, or hedge
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`funds in general, to the financial crisis”).
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`Mr. Coscia is not on trial for the financial crisis, the recession, the flash crash, or
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`any other external economic or market event. Nor is he charged with general concerns relating
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`to Wall Street or high frequency trading. Evidence or argument as to these issues obviously has
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`no bearing on the charges in the Indictment. It does not “advance the inquiry” even minimally.
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`Thompson v. City of Chicago, 472 F.3d 444, 453 (7th Cir. 2006) (citation omitted). Such
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`evidence should therefore be excluded as irrelevant.
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`B.
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`Even If Relevant, Evidence Of External Economic And Market Events
`And Concerns Would Be Unfairly Prejudicial.
`
`Evidence or argument as to external economic and market events may also play
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`to jury members’ anger, frustration, and fear, not their rational consideration of the charges at
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`issue. As courts have recognized, “[t]he financial crisis has deeply affected this country, and
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`-7-
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`Case: 1:14-cr-00551 Document #: 48 Filed: 10/05/15 Page 15 of 28 PageID #:886
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`efforts to connect [litigants] to that crisis may cause the jury to view them unfavorably” on an
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`improper basis. Island Intellectual Prop. LLC, 2012 WL 526722, at *3. So too for other
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`large-scale economic and market events. Courts have thus excluded evidence as to such events
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`because its probative value is significantly outweighed by the danger of unfair prejudice. See,
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`e.g., Abu Dhabi Commercial Bank, 2013 WL 1155420, at *3; Island Intellectual Prop. LLC,
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`2012 WL 526722, at *3.
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`Evidence and argument relating to external economic and market events and
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`concerns should be excluded here for this reason as well. Litigants “are not permitted to argue
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`to the fact finder’s potential economic sympathies or prejudices,” and introducing evidence at
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`trial as to the financial crisis, recession, and flash crash would do just that. Kinsey v. Cendant
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`Corp., 588 F. Supp. 2d 516, 518-19 (S.D.N.Y. 2008). Similarly, inflammatory language about
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`the malaises of Wall Street and high frequency trading would appeal to jury members’
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`potential anxiety about larger economic concerns, improperly diverting their attention from the
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`charges against Mr. Coscia. Because of the substantial danger of unfair prejudice to Mr.
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`Coscia, the Court should exclude evidence and argument of this sort.
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`IV.
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`EVIDENCE RELATED TO MR. COSCIA’S ECONOMIC CIRCUMSTANCES
`SHOULD BE EXCLUDED.
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`The Court should preclude as irrelevant and unfairly prejudicial evidence or
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`argument relating to Mr. Coscia’s economic circumstances, including his annual earnings, net
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`worth, real estate holdings, bank accounts, and other assets.
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`A.
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`Evidence Of Mr. Coscia’s Economic Circumstances Is Not Relevant.
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`Evidence of a defendant’s financial circumstances is often offered to try to
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`“equate wealth with wrongdoing and to appeal to the potential bias of not-so-wealthy
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`jurors”—an “improper” strategy with “no place in a court room.” United States v. Stahl, 616
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`F.2d 30, 31, 33 (2d Cir. 1980); see also, e.g., United States v. Jackson-Randolph, 282 F.3d 369,
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`377 (6th Cir. 2002) (“[I]t is illogical and improper to equate financial success and affluence
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`-8-
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`Case: 1:14-cr-00551 Document #: 48 Filed: 10/05/15 Page 16 of 28 PageID #:887
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`with greed and corruption.”). Accordingly, courts in the Seventh Circuit regularly exclude as
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`irrelevant evidence of economic circumstances. See, e.g., Van Bumble v. Wal-Mart Stores,
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`Inc., 407 F.3d 823, 826 (7th Cir. 2005); United States v. Fuesting, 8