Dec 6 (Reuters) - A former Securities and Exchange Commission lawyer who was sentenced to eight years in prison for artificially inflating penny stocks has lost his bid to overturn his conviction.
Phillip Windom Offill argued that the trial court abused its discretion by admitting the testimony of two government witnesses who were experts on securities law and who Offill said improperly drew legal conclusions about the case.
The U.S. Court of Appeals for the 4th Circuit rejected that argument, finding that the testimony was necessary to help the jury comprehend highly technical legal issues.
"The jury in this case needed to understand not only federal securities registration requirements but also the operation of several obscure Texas code provisions and their relationship with the federal regime," the court wrote.
Offill worked as an attorney for the SEC for 15 years before becoming a partner at the Dallas law firm Godwin Gruber.
In 2004, while at Godwin Gruber, prosecutors say that Offill and others encouraged investors to buy small stocks by issuing false press releases and tens of millions of "spam" e-mails.
Offill advised another securities lawyer, who represented penny stock companies, on how to issue stock without completing the securities registration process, according to the decision. The co-conspirators coordinated their own trades to drive up the market price of the stocks before dumping their shares on the public for millions of dollars in profits, the opinion said.
At Offill's trial, Steve Thel, a professor of securities law at Fordham University, and Denise Crawford, the Commissioner of the Texas State Securities Board, testified about how the securities markets functioned and explained the meaning of key terms and the criteria for securities registration.
In January 2010, a federal jury convicted Offill of nine counts of wire fraud and one count of conspiracy. The jury sentenced Offill in April 2010 to eight years in prison.
On appeal, Offill argued that Thel and Crawford offered inadmissible legal conclusions to the jury. The experts "wrested the obligation to instruct the jury from the trial court and told the jury how to decide this case," Offill contended.
'INTRICATE REGULATORY LANDSCAPE'
The appeals court disagreed.
While experts are generally not allowed to offer legal conclusions, the court noted that such testimony can be admitted "when the legal regime is complex and the judge determines that the witness' testimony would be helpful in explaining it to the jury."
"We find it difficult to imagine how the government could have presented its case against Offill without the assistance of expert testimony to explain the intricate regulatory landscape and how securities practitioners function within it," Judge William Traxler wrote on behalf of the three-judge panel.
The court also rejected Offill's claim that his sentence should have been based only on the profits he received rather than the gains the entire scheme generated.
Without Offill's advice on avoiding securities registration requirements, the rest of the conspiracy could not have happened, Traxler wrote.
George Kostolampros, a lawyer at Venable who represented Offill pro bono alongside the federal public defender, said they were disappointed in the ruling and considering their options.
The Justice Department declined to comment on the litigation.
The case is USA v. Offill, U.S. Court of Appeals for the 4th Circuit, No. 10-4490.
For the government: Patrick Stokes of the Department of Justice.
For Offill: George Kostolampros of Venable; Federal Public Defender Michael Nachmanoff.
(Reporting by Terry Baynes)
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