On Appeal from the United States District Court for the Eastern District of Pennsylvania (D.C. No. 00-cr-00629-1) District Judge: Honorable Mary A. McLaughlin
The opinion of the court was delivered by: Fisher, Circuit Judge.
Before: McKEE, FISHER, and BECKER, Circuit Judges.
Defendant Stefan E. Brodie was found guilty by a jury of conspiring to trade with Cuba in violation of the American Cuban embargo currently in place under the provisions of the Trading with the Enemy Act of 1917 ("TWEA") and the Cuban Assets Control Regulations ("CACRs"). The United States District Court for the Eastern District of Pennsylvania, ruling on a previously reserved motion for judgment of acquittal, thereafter acquitted the Defendant on the ground that there was insufficient evidence of his knowing and willful participation in the charged conspiracy to support conviction. United States v. Brodie, 268 F. Supp. 2d 408 (E.D. Pa. 2002). After reviewing the government's evidence against the Defendant, we conclude that the District Court erred in entering the judgment of acquittal, and accordingly, we vacate the judgment, reinstate the jury verdict, and remand for further proceedings which may, on the present record, include a new trial.
A. The American Cuban Embargo
The backdrop for this appeal is the American Cuban embargo against trading with Cuba which derives in the first instance from the TWEA, 50 U.S.C. App. § 1 et. seq. The TWEA as originally enacted dealt only with the President's use of economic powers in times of war, but was expanded in 1933 to deal with national emergencies that arose during peacetime. See Regan v. Wald, 468 U.S. 222, 226 n.2 (1984). Section 5(b) of the TWEA, in pertinent part, authorizes the President, through a designated agency, to "investigate, regulate,... or prohibit... transactions involving, any property in which any foreign country or a national thereof has any interest, by any person, or with respect to any property, subject to the jurisdiction of the United States." 50 U.S.C. App. § 5(b)(1)(B). *fn1 Section 16, in turn, criminalizes willful violation of any "order of the President issued in compliance with the provisions of th[e TWEA]." 50 U.S.C.App. § 16. Presidential authority under the TWEA has been delegated to the Secretary of the Treasury, who has in turn delegated that authority to the Office of Foreign Assets Control ("OFAC"). See Regan, 468 U.S. at 226 n.2 (citing Exec. Order No. 9193, 3 C.F.R. 1174, 1175 (1942) and Treasury Department Order No. 128 (Rev. 1, Oct. 15, 1962)). In 1963, the CACRs were promulgated pursuant to TWEA Section 5(b) to impose an embargo against Cuba in an effort "to deal with the peacetime emergency created by Cuban attempts to destabilize governments throughout Latin America." Regan, 468 U.S. at 226. The CACRs incorporated and expanded upon prior economic sanctions already imposed against Cuba. See id. at 226 & n.4.
Of particular importance to this appeal is CACR § 515.201(b) which provides:
(b) All of the following transactions are prohibited except as specifically authorized by the Secretary of the Treasury (or any person, agency, or instrumentality designated by him) by means of regulations, rulings, instructions, licenses, or otherwise, if such transactions involve property in which any foreign country designated under this part,[*fn2] or any national thereof, has at any time on or since the effective date of this section had any interest of any nature whatsoever, direct or indirect:
(1) All dealings in, including, without limitation, transfers, withdrawals, or exportations of, any property or evidences of indebtedness or evidences of ownership of property by any person subject to the jurisdiction of the United States; and
(2) All transfers outside the United States with regard to any property or property interest subject to the jurisdiction of the United States.
See 31 C.F.R. § 515.201(b) (2005); see also 31 C.F.R. § 515.201(b) (1992); 31 C.F.R. § 515.201(b) (1993); 31 C.F.R. § 515.201(b) (2000). As CACR § 515.201(b) suggests, business transactions involving Cuba may be specifically authorized by OFAC; here, however, it is uncontested that no such authorization was ever obtained for the business transactions that gave rise to the underlying prosecution.
The phrase "person subject to the jurisdiction of the United States" as used in CACR § 515.201(b) is defined in CACR § 515.329, 31 C.F.R. § 515.329, which provided, at the time the conspiracy charged in this case was allegedly in effect:
The term 'person subject to the jurisdiction of the United States' includes:
(a) Any individual, wherever located, who is a citizen or resident of the United States;
(b) Any person within the United States as defined in § 515.330;
(c) Any corporation organized under the laws of the United States or of any State, territory, possession, or district of the United States; and
(d) Any corporation, partnership, or association, wherever organized or doing business, that is owned or controlled by persons specified in paragraphs (a) or (c) of this section.
31 C.F.R. § 515.329 (1993) (emphasis added); see also 31 C.F.R. § 515.329 (2000); 50 Fed. Reg. 27435 (July 3, 1985). *fn3 The critical phrase "owned or controlled" in CACR § 515.329(d) is not defined in the CACRs, but notably, the CACRs have included a broad "person subject to the jurisdiction of the United States" feature from their inception. See 28 Fed. Reg. 6974, 6978 (July 9, 1963) (CACR § 515.329).
The effect of the prohibition against entities "owned or controlled by persons specified in [31 C.F.R. § 515.329 (a) or (c)]" from undertaking any of the transactions prohibited by CACR § 515.201(b), was substantially muted in prior years by a regulatory exemption permitting foreign subsidiaries of companies owned or controlled by American citizens to trade with Cuba under certain conditions, as well as liberal application of the licensing provision by OFAC. See 31 C.F.R. § 515.559 (1975); 40 Fed. Reg. 47108 (Oct. 8, 1975). *fn4 See also Ralph H. Folsom,1 INT'L BUS. TRANS. § 18.4 (2d ed. 2004); Harry L. Clark, "Dealing with U.S. Extraterritorial Sanctions and Foreign Countermeasures," 20 U. PA. J. INT'L ECON. L. 61, 66 & n. 14 (Spring 1999); John Ellicott, "Between a Rock and a Hard Place: How Multinational Companies Address Conflicts Between U.S. Sanctions and Foreign Blocking Measures," 27 STETSON L. REV. 1365, 1368 (Spring 1998). Thus, in the latter part of the 1970's and throughout the 1980's, "U.S. subsidiaries abroad developed significant trade with Cuba." 1 INT'L BUS. TRANS. §18.4.
In 1992, Congress enacted the Cuban Democracy Act, Act of Oct. 23, 1992, 106 Stat. 2575, codified at 22 U.S.C. §§ 6001-6010, which, inter alia, rescinded OFAC's authority to issue licences for the export of goods to Cuba by "persons subject to the jurisdiction of the United States." See 22 U.S.C. § 6005(a) (popularly known as the "Mack Amendment"). See also Clara David, "Trading With Cuba: The Cuban Democracy Act and Export Rules," 8 FLA. J. INT'L Law 385 (Fall 1993) (author, then a licensing officer for OFAC, stating that the Cuban Democracy Act eliminated the prior exemption to the Cuban embargo for trade by foreign subsidiaries of American firms). The Cuban Democracy Act took effect on October 23, 1992, and the CACRs were subsequently amended to reflect the Act's strict provisions. See 31 C.F.R. § 515.559 (1993). *fn5 In March 1996, Congress further strengthened the American Cuban embargo by enacting the LIBERTAD. Pub. L. No. 104-114, 110 Stat. 785 (1996), codified at 22 U.S.C. §§ 6021-6091 (also known as the "Helms-Burton Act"). The LIBERTAD mandates that the American Cuban embargo, including all restrictions imposed by the CACRs, "remain in effect" unless and until the embargo is suspended or terminated in accordance with statutory procedures. 22 U.S.C. § 6032(h) (crossreferencing 22 U.S.C. § 6064 ("Termination of the economic embargo of Cuba")). Such procedures, in turn, make suspension or termination of the embargo contingent upon a change of political power in Cuba. See 22 U.S.C. § 6064; see also 22 U.S.C. § 6065. Numerous countries, including the European Union, Canada and Mexico, reacted to the strengthening of the American Cuban embargo, and its purported application to American subsidiaries abroad, by enacting countermeasures (often called "blocking statutes" or "blocking orders"). See, e.g., Clark, "Dealing with U.S. Extraterritorial Sanctions," 20 U. PA. J. INT'L ECON. L. at 81-87.*fn6 With this background, we turn now to the present appeal.
The Defendant Stefan E. Brodie and his brother Donald B. Brodie ("Don Brodie") were co-owners of The Bro-Tech Corporation, an entity incorporated in Delaware, which manufactured and sold ion exchange resins for industrial use in water purification under the trade name "The Purolite Company." The Bro-Tech Corporation was headquartered in Bala Cynwyd, Pennsylvania, and had a manufacturing plant and warehouse facility located in Philadelphia, Pennsylvania. The Defendant was the president of The Bro-Tech Corporation; his brother Don Brodie was the vice-president. Purolite product was sold by salesmen operating from sales offices located throughout North America, including one in Ontario, Canada ("Purolite Canada") from which James E. Sabzali ("Mr. Sabzali"), a Canadian citizen, worked from approximately 1990 to 1995 until promoted to a marketing position based in the Bala Cynwyd office.
The Defendant, Don Brodie and The Bro-Tech Corporation owned, in approximately 1/3 shares, another corporation known as Bro-Tech Limited, which was incorporated in the United Kingdom.*fn7 Bro-Tech Limited was the parent company of "Purolite International Limited," which was also incorporated in the United Kingdom, and manufactured ion exchange resins at a facility located in Pontyclun, South Wales. Purolite International Limited (alternatively called "the U.K. entity" herein to differentiate it from "The Purolite Company" or the "U.S. entity") had its own board of directors, sales people, and finance department. The Brodie brothers, however, ultimately owned and controlled the U.K. entities as well as the U.S. entities.
In late 1996-early 1997, the United States Customs Service (which investigates illegal exports on behalf of OFAC) received information leading it to suspect that The Purolite Company was trading in violation of the American Cuban embargo. Customs agents thereafter met with a Purolite official at the Bala Cynwyd office on February 5, 1997, and, following some initial exchange of documents between the agents and the company, a prosecutor was assigned and grand jury subpoenas were issued to the company. On October 5, 2000, a grand jury indicted the Defendant, Don Brodie, The Bro-Tech Corporation d/b/a/ "The Purolite Company," and Mr. Sabzali on a single count of conspiracy to violate 18 U.S.C. § 371 (criminalizing the act of "conspir[ing] either to commit any offense against the United States, or to defraud the United States, or any agency thereof") and 18 U.S.C. § 2 (criminalizing the act of "aid[ing] and abet[ting] the commission of a crime against the United States") by engaging in transactions involving property with Cuba in contravention of the TWEA, 50 U.S.C. App. §§ 5(b) & 16, *fn8 and CACR § 515.201(b), 31 C.F.R. § 515.201(b). The conspiracy was alleged to have existed from approximately April 1993 to May 2000. Overt acts in furtherance of the conspiracy were alleged to have begun on or about June 21, 1994 and to have ended on or about July 31, 1999. The overt acts involved the sale of ion exchange resins, payment for the product, and the payment of expenses related to business travel undertaken by Don Brodie, Mr. Sabzali and others to, from and within Cuba. Additionally, the grand jury indicted Don Brodie, The Bro-Tech Corporation, and Mr. Sabzali for 76 additional substantive violations of the TWEA and CACRs tied to specific sales of Purolite product and expense-related transactions. *fn9 The Defendant was charged only with conspiracy to violate the TWEA and CACR § 515.201(b) as alleged in the first count of the indictment.
The District Court denied numerous pre-trial defense motions to dismiss the indictment. In particular, on August 14, 2001, the District Court denied motions to dismiss the indictment based on (1) an alleged inconsistency between the CACRs and Section 620(a) of the Foreign Assistance Act of 1961, 22 U.S.C. § 2370, and President Kennedy's February 3, 1962 Proclamation 3447 (27 Fed. Reg. 1085); (2) an alleged failure of President Kennedy to declare a national emergency with respect to Cuba; (3) an alleged unconstitutional delegation of legislative powers to the Executive Branch by Section 5(b) of the TWEA; and (4) an alleged termination of the President's authority under Section 5(b) of the TWEA due to the fact that the exercise of that authority by President George H.W. Bush on September 13, 1991, was not published in the Federal Register until September 23, 1991. Additionally, on October 24, 2001, the District Court denied motions to dismiss all or parts of the indictment based on principles of international comity, the foreign sovereign compulsion doctrine and lack of jurisdiction.*fn10
The four defendants, each separately represented by counsel, were then tried together in a single trial. At the close of the government's evidence, the Defendant made a motion pursuant to Fed.R.Crim.P. 29(a) for judgment of acquittal. The District Court reserved the motion pursuant to Rule 29(b), *fn11 and the defense thereafter put on its case. In charging the jury, the District Court gave a willful blindness instruction over the objection of the defense, thereby instructing the jury that it could find the knowledge element of the crime to be satisfied if it concluded beyond a reasonable doubt that the Defendant had deliberately closed his eyes to what otherwise would have been obvious to him concerning the facts in question.*fn12 The jury then found all defendants guilty of the conspiracy charge in Count I. Additionally, Don Brodie was found guilty of 33, The Bro-Tech Corporation of 44, and Mr. Sabzali of 20, of the separate substantive counts related to specific sales of Purolite product and expense-related transactions. *fn13 The jury also found The Bro-Tech Corporation subject to a forfeiture of $665,737.
Following post-trial briefing and oral argument, the District Court on May 31, 2002, granted the Defendant's motion for judgment of acquittal on the ground that there was insufficient evidence from which the jury could have concluded beyond a reasonable doubt that the Defendant had knowingly and willfully participated in the conspiracy. 268 F. Supp. 2d 408. In granting the motion, the District Court reasoned that the government's evidence showed the Defendant did not know it was unlawful under the CACRs for Purolite International Limited, incorporated in and operating from the United Kingdom ("U.K. entity"), to trade with Cuba if The Purolite Company, incorporated in and operating from the United States ("U.S. entity"), was not involved. See id. at 417. Additionally, the District Court reasoned that, to the extent the government had proven that the U.S. entity was actually involved in particular transactions, the evidence also showed the Defendant was unaware of such involvement. See id. The government filed the present appeal.
Approximately a year later, the District Court denied the motions for judgment of acquittal filed by Don Brodie, The Bro-Tech Corporation and Mr. Sabzali, finding their convictions (including those for conspiracy to violate the TWEA and CACRs) supported by sufficient evidence. United States v. Brodie, 268 F. Supp. 2d 420, 423-424 (E.D. Pa. 2003). However, in that same ruling, the District Court also granted all four defendants a new trial on the ground that the government had made certain improper and inflammatory comments and argument during its opening and closing statements which prejudiced the jury. See id. at 424-35. Importantly, the District Court granted a new trial for the Defendant conditional on the outcome of the pending appeal. See id. at 436. The government appealed also from the order granting a new trial, and that appeal was consolidated by this Court with the present appeal. Thereafter, on October 15, 2003, this Court granted the government's motion to remand the appeal taken from the grant of a new trial to allow the District Court to consider the guilty pleas of Don Brodie, The Bro-Tech Corporation and Mr. Sabzali. *fn14 The District Court then dismissed all remaining counts of the indictment as to these three defendants, and the government voluntarily dismissed its appeal of the order granting a new trial. Thus, the only issue before this Court is the propriety of the judgment acquitting the Defendant.
II. STANDARD AND SCOPE OF REVIEW
In ruling on a motion for judgment of acquittal made pursuant to Fed.R.Crim.P. 29, a district court must "'review the record in the light most favorable to the prosecution to determine whether any rational trier of fact could have found proof of guilt beyond a reasonable doubt based on the available evidence.'" United States v. Smith, 294 F.3d 473, 476 (3d Cir. 2002) (quoting United States v. Wolfe, 245 F.3d 257, 262 (3d Cir. 2001)). A finding of insufficiency should be "'confined to cases where the prosecution's failure is clear.'" Smith, 294 F.3d at 477 (quoting United States v. Leon, 739 F.2d 885, 891 (3d Cir. 1984)). Courts must be ever vigilant in the context of Fed.R.Crim.P. 29 not to usurp the role of the jury by weighing credibility and assigning weight to the evidence, or by substituting its judgment for that of the jury. See United States v. Jannotti, 673 F.2d 578, 581 (3d Cir. ) (en banc) (trial court usurped jury function by deciding contested issues of fact), cert. denied, 457 U.S. 1106 (1982); see also Charles A. Wright, 2A FED. PRAC. & PRO. (Criminal 3d) § 467 at 311 (2000) ("A number of familiar rules circumscribe the court in determining whether the evidence is sufficient... It is not for the court to assess the credibility of witnesses, weigh the evidence or draw inferences of fact from the evidence. These are functions of the jury."). On appeal from the grant or denial of a motion for judgment of acquittal, this Court exercises plenary review and independently applies the same standard as the district court. See United States v. Coleman, 811 F.2d 804, 807 (3d Cir. 1987); Jannotti, 673 F.2d at 598.*fn15
Our scope of review is dictated by the procedural posture in which this case comes before us. The Defendant moved for a judgment of acquittal at the close of the government's case pursuant to Fed.R.Crim.P. 29(a), and the District Court reserved decision on the motion under Fed.R.Crim.P. 29(b). Accordingly, the District Court was required to, and properly did, determine whether an acquittal was appropriate based solely on the evidence presented by the government. See Fed.R.Crim.P. 29(b) ("[i]f the [trial] court reserves decision, it must decide the motion on the basis of the evidence at the time the ruling was reserved"). The Advisory Committee Notes to the 1994 Amendments to Fed.R.Crim.P. 29 provide that an appellate court, reviewing a judgment of acquittal under Fed.R.Crim.P. 29(b), is "similarly limited." Advisory Committee Notes to 1994 Amendments. Thus, in reviewing the judgment of acquittal entered below, we too will examine only to the evidence presented in the government's case, which includes evidence elicited on cross-examination of the government witnesses, but not evidence presented in the defense case. See id.; see also United States v. Finn, 375 F.3d 1033, 1037 (10th Cir. 2004).
The elements of conspiracy – i.e., "an agreement, either explicit or implicit, to commit an unlawful act, combined with intent to commit an unlawful act, combined with intent to commit the underlying offense" – can be proven entirely by circumstantial evidence. United States v. Kapp, 781 F.2d 1008, 1010 (3d Cir.), cert. denied, 475 U.S. 1024 (1986); see also Smith, 294 F.3d at 477 (listing requirements for conspiracy and principle that they may be proven entirely by circumstantial evidence); United States v. Fuentes-Coba, 738 F.2d 1191, 1196 (11th Cir. 1984) (listing same factors for conspiracy under the TWEA), cert. denied, 469 U.S. 1213 (1985).
Indeed, the very nature of the crime of conspiracy is such that it often may be established only by indirect and circumstantial evidence. See, e.g., Blumenthal v. United States, 332 U.S. 539, 557 (1947) (because "[s]ecrecy and concealment are essential features of successful conspiracy," the law "rightly gives room for allowing the conviction of those discovered upon showing sufficiently the essential nature of the plan and their connections with it, without requiring evidence of knowledge of all its details or of the participation of others"). Thus, "[t]he existence of a conspiracy 'can be inferred from evidence of related facts and circumstances from which it appears as a reasonable and logical inference, that the activities of the participants... could not have been carried on except as the result of a preconceived scheme or common understanding.'" Smith, 294 F.3d at 477 (quoting United States v. Gibbs, 190 F.3d 188, 197 (3d Cir. 1999) (quoting Kapp, 781 F.2d at 1010)) (ellipsis in the original).
We must, however, give "close scrutiny" to the sufficiency of the government's evidence in a conspiracy case, see Coleman, 811 F.2d at 807, for the reasons that "[s]light evidence of a defendant's connection with a conspiracy is insufficient to support a guilty verdict," id. at 808, and "guilt must remain personal and individual." United States v. Samuels, 741 F.2d 570, 575 (3d Cir. 1984). Conspiracy cannot be proven "by piling inference upon inference" where those inferences do not logically support the ultimate finding of guilt. Coleman, 811 F.2d at 808.
In conducting the sufficiency inquiry, we do not view the government's evidence in isolation, but rather, in conjunction and as a whole. "The court must determine 'whether all the pieces of evidence, taken together, make a strong enough case to let a jury find [the defendant] guilty beyond a reasonable doubt.'" Coleman, 811 F.2d at 807 (quoting United States v. Allard, 240 F.2d 840, 841 (3d Cir. 1957)). See also United States v. United States Gypsum Co., 600 F.2d 414, 417 (3d Cir. 1979) ("'[T]he character and effect of a conspiracy (is) not to be judged by dismembering it and viewing its separate parts, but only by looking at it as a whole.'") (quoting United States v. Patten, 226 U.S. 525 (1913)) (parenthesis in the original). "To sustain a conspiracy conviction, the 'contention that the evidence also permits a less sinister conclusion is immaterial.... [T]he evidence need not be inconsistent with every conclusion save that of guilt.'" Smith, 294 F.3d at 478 (quoting United States v. Dent, 149 F.3d 180, 188 (3d Cir. 1998)).
The bulk of the evidence presented by the government during the joint trial of the Defendant and his three indicted co-conspirators did not directly involve the Defendant's participation in the underlying conspiracy, but rather the accomplishment of particular illegal acts by Don Brodie and Mr. Sabzali. The District Court, in ruling on the Defendant's motion for judgment of acquittal, noted that the Defendant and the government had agreed during oral argument on the motion that:
a reasonable jury could find that [The] Bro-Tech [Corporation] made the following sales to Cuba through intermediaries...
1. From 1992 to 1993, four sales were made by Bro-Tech through a Canadian company. The sales were booked at Bro-Tech, and the product was manufactured by and shipped from Purolite International. These sales were not charged in the indictment.
2. From 1994 to 1996, thirty-five sales were made by Bro-Tech through intermediaries in Canada and Mexico. At times the product sold was manufactured by and shipped from Bro-Tech, and at other times Purolite International.
3. From 1997 to 1999, twenty-four sales were made by Bro-Tech through the intermediary San Marco. All sales in this period were booked at Purolite International, and the product was manufactured by and shipped from Purolite International.
268 F. Supp. 2d at 410-11. The fact that these sales transactions occurred, and the manner in which they were booked, manufactured and shipped, is important background to the evidence presented against the Defendant, but rather than set forth the evidence which would support these facts, we too will incorporate this list of proven transactions accepted by the District Court. See id.
Against the Defendant, the government presented what we will categorize as six key pieces of circumstantial evidence: (1) the basic company structure; (2) the "billing instruction," and series of events related to the 1992 audit of The Bro-Tech Corporation; (3) the "our friends in the Caribbean" speech; (4) Mr. Sabzali's 1995 performance review; (5) the pervasive use of "code words" for Cuba by employees of The Bro-Tech Corporation d/b/a/ The Purolite Company; and (6) several post-investigation events. This evidence is set forth in Section III.A of this opinion. In Section III.B, because we recognize that further proceedings on remand may include a new trial, we clarify the intent requirement for conspiracy to violate the TWEA and CACRs, and address the efficacy of the Defendant's intent-based defense which posited that he did not understand it was unlawful for the U.K. entity to trade with Cuba and/or did not know that the U.S. entity was actually involved in the trading. In Section III.C, we assess the government's evidence against the Defendant as a comprehensive whole and in the light most favorable to the government as required by the governing standard.
A. The Evidence Against The Defendant
1. Basic company structure
As noted above, the Defendant was the President and co-owner with his brother Don Brodie of The Bro-Tech Corporation, d/b/a "The Purolite Company." Together with The Bro-Tech Corporation, the Defendant and Don Brodie also owned, in approximately 1/3 shares, Bro-Tech Limited, which was incorporated in the United Kingdom. Bro-Tech Limited, in turn, controlled Purolite International Limited, which was also incorporated in the United Kingdom. Both the U.S. and the U.K. entities were controlled by the Brodies. The Bro-Tech Corporation made over $2.1 million dollars in gross income from its trade with Cuba.
In his capacity as President, the Defendant oversaw the finances of The Bro-Tech Corporation and Purolite International Limited, had direct supervision of Edward Grossman (who was The Bro-Tech Corporation's Chief Financial Officer), and served as the primary contact for legal counsel to the company. The Defendant also oversaw the European sales force, while Don Brodie oversaw the North American sales force and Philadelphia manufacturing facility. Edward Nace, a former products manager for The Purolite Company from 1993 to 1997 who worked from the Bala Cynwyd office as a liaison between sales and manufacturing, testified that both the Defendant and Don Brodie reviewed on a "fairly frequent" basis the hard-copy log book of daily purchase orders kept at the Bala Cynwyd office, which listed customer name, type and quantity of product ordered. Later, when the company switched to a computerized system, both brothers would review the daily "edit reports" listing orders.
The office in Bala Cynwyd was located on one part of one floor in an office building that housed numerous other companies. Approximately 30 employees worked in the Bala Cynwyd office, including both the Defendant and Don Brodie over the course of the charged conspiracy, as well as Mr. Sabzali beginning in early 1996. Mr. Sabzali and Don Brodie shared a secretary in the Bala Cynwyd office, at least through early 1998, and the Defendant's secretary, at least through early 1998, had her desk physically located directly outside of Mr. Sabzali's office.
On cross-examination, Mr. Grossman testified that during the relevant time period (1993 to 2000), the Defendant spent a "significant amount of time" (estimated at 70 to 80 %) away from the Bala Cynwyd office establishing new manufacturing plants and sales offices in China and Romania.
2. The billing instruction, audit and related events
During 1992, from his office in Canada, Mr. Sabzali sold Purolite product through the Canadian subsidiary ("Purolite Canada") in four transactions to Galax, Incorporated ("Galax"). The product was booked and invoiced from the Bala Cynwyd office, but manufactured by and shipped from the U.K. entity. In 1986, the United States Department of Treasury had designated Galax a "specially designated national," i.e., a company with which American companies were prohibited from transacting business because the designated company was known to have ties with Cuba. *fn16 While these 1992 transactions with Galax were not charged in the indictment, they are important background to much of the evidence presented against the Defendant because trial testimony established that, in early 1993, the auditing firm of Deloitte & Touche LLP conducted an audit of The Bro-Tech Corporation for the year 1992 and found reference to one of the 1992 sales to Galax. The auditorin-charge, Mr. Stephen Coulter, CPA, brought the reference directly to the Defendant's attention, and this touched off a series of events, evidence of which forms the basis for the linchpin inference urged by the government in this prosecution – i.e., that the Defendant knew his company was conducting illegal sales transactions with Cuba and knew that the U.S. entity was involved, or was at least willfully blind to that involvement. That the 1992 transaction with Galax had occurred and how the auditor's concern about it was handled by the Defendant are critical. While the trial testimony concerning this series of events was often confusing and sometimes contradictory, we attempt to set it forth as coherently as possible and in the light most favorable to the government.
We begin with the evidence related to what we will call "the billing instruction." Mr. Grossman (former CFO of The Bro-Tech Corporation) testified on direct examination that he was personally aware of a sales transaction made to Galax in 1992. He explained how he came to possess that knowledge:
Q: And how do you know that – or how were you aware of it?...
A: Yes. During the year, in 1992 at some point,
[the Defendant] called me into his office and indicated that there had been an invoice, this Galax, and that it had a reference to Cuba on there and that I should instruct the customer service department, the billing department, to make certain that they don't include any reference to Cuba in any future invoices on the face of the invoice.
Q: Did you give such an instruction to the billing department?
A. 716 (Grossman, direct).
Next is the evidence related to the audit. Deloitte & Touche had been performing audits for The Bro-Tech Corporation since approximately 1988, and for the year 1992, had been engaged to express an opinion on the combined financial statements of The Bro-Tech Corporation and Bro-Tech Limited. In the course of performing the 1992 audit early in 1993, the auditors "found a shipment into Cuba on a sales transaction.... [in a] dollar amount... between 2 and $300,000..." A. 304 (Coulter, direct). The occurrence of this transaction was significant to the auditors because, as Mr. Coulter explained, "[w]e are aware that U.S. companies were not supposed to be shipping goods into Cuba because of the American boycott," and "to the extent a transaction is a potential illegal act, the auditor is obligated to follow up on that transaction to determine the potential consequences both from a financial reporting as well as a disclosure point of view." A. 304-05 (Coulter, direct). The auditors were concerned that The Bro-Tech Corporation would be subject to a monetary fine for the Galax transaction, which, depending on the likelihood of assessment, would have to be addressed in the audit in a particular fashion. In light of this concern, Mr. Coulter spoke directly to the Defendant, as President of The Bro-Tech Corporation, about the Galax transaction and its implications for the audit. Mr. Coulter testified as to that conversation:
Q: Was that [conversation with the Defendant] on the telephone or face to face or in what way?
A: Well, there were numerous discussions regarding the liability. Some were by telephone, some were face to face and we did have discussions, in addition to [the ...