## Facts

- Paul A. Bilzerian, a securities trader, engaged in complex stock transactions from May 1985 to October 1986 involving Cluett, Peabody & Co.; Hammermill Paper Co.; H.H. Robertson Co.; and Armco Steel.
- The government alleged Bilzerian secretly amassed stock and used devices such as stock “parking” and broker “accumulation” to influence the market and avoid federal disclosure obligations.
- Prosecutors claimed Bilzerian misrepresented or concealed his ownership, financing sources, and intentions concerning the issuers.
- Bilzerian allegedly filed SEC disclosure forms, including Schedule 13D filings, containing material misstatements and omissions about his holdings, plans, and financing.
- A Southern District of New York jury convicted Bilzerian of nine counts: securities fraud (15 U.S.C. § 78j(b)), false statements to the SEC (18 U.S.C. § 1001), and conspiracy (18 U.S.C. § 371).
- The district court sentenced him to imprisonment and a substantial fine; Bilzerian appealed, challenging statutory overlap, evidentiary rulings, and privilege-related limits on a good-faith defense.

## Issues

1. Whether the availability of securities-law-specific civil and regulatory remedies limits criminal prosecution under general statutes such as 18 U.S.C. §§ 1001 and 371 for securities-related misconduct.
2. Whether the evidence was sufficient for a jury to find that the charged misstatements and omissions in SEC filings were material.
3. Whether a defendant may testify to a subjective good-faith belief in legality while preserving attorney-client privilege against inquiry into related attorney communications.
4. Whether the district court abused its discretion in admitting expert and tax-related evidence and in managing rebuttal and cross-examination.

## Decision

- The Second Circuit affirmed the convictions on all counts.
- The court held that securities-law civil enforcement mechanisms did not preempt or bar use of general criminal statutes where the conduct fits those statutes’ terms.
- The court found sufficient evidence for the jury to conclude that Bilzerian’s challenged statements and omissions were material to investors and regulators.
- The court upheld the district court’s ruling that testimony asserting a subjective belief in legality would place attorney advice at issue and trigger a waiver of privilege to the extent needed for fair testing.
- The court found no abuse of discretion in the challenged evidentiary rulings, including admission of expert testimony and limited tax-related evidence to rebut an asserted impression of compliance.

## Legal Principles

- The government may prosecute securities-related conduct under general criminal statutes, including 18 U.S.C. § 1001 and 18 U.S.C. § 371, even when securities laws provide specialized provisions and civil enforcement options, absent congressional intent to displace general statutes.
- Materiality of disclosure-related misstatements and omissions is generally for the jury; convictions stand if the evidence permits a reasonable finding that the information would matter to a reasonable investor or regulator.
- A defendant may not present a one-sided account of legal compliance: offering testimony about a subjective good-faith belief in legality can waive attorney-client privilege as to communications bearing on that belief, so the opposing party may test the claim.
- Trial courts have discretion over the scope of waiver and evidentiary rulings; admission of explanatory expert testimony and rebuttal evidence is permissible when it assists the jury or corrects a misleading impression without unfair prejudice.

## Conclusion

The Second Circuit affirmed Bilzerian’s securities-fraud-related convictions, holding that general criminal statutes may be used alongside securities laws, that the evidence supported a jury finding of material misstatements and omissions, and that a defendant who injects a claimed good-faith belief in legality into the case may be required, as a matter of fairness, to permit inquiry into related attorney communications.


United States v. Bilzerian, 926 F.2d 1285 (2d Cir. 1991)