## Facts

- Defendants participated in the initial offering and later trading of European Auto Classics (EAC) stock during 1980–1981.
- The government alleged a stock-manipulation scheme designed to inflate price and trading volume and sell at a profit.
- The prosecution case relied mainly on (1) a cooperating co-conspirator testifying under a plea agreement and (2) an SEC regional office chief investigator who testified as an expert.
- Over objection, the expert testified that certain individuals were active participants in a manipulative and fraudulent scheme to defraud EAC investors.
- The expert repeatedly used terms drawn from the charged securities-law provisions (e.g., “manipulative,” “fraudulent,” “scheme to defraud,” “manipulation”).
- On cross-examination, the expert acknowledged that his opinions were based in part on his favorable view of the credibility of other prosecution witnesses, including the cooperating co-conspirator.
- A jury in the Southern District of New York convicted defendants of mail fraud, securities fraud, and conspiracy; two defendants were also convicted of false declarations to a grand jury.

## Issues

1. Whether an expert may testify using statutory or regulatory terms of art (e.g., “fraud,” “manipulation,” “scheme to defraud”) in a way that communicates a legal conclusion to the jury.
2. Whether an expert may base an opinion, and present it to the jury, as resting on the expert’s credibility assessment of other witnesses.
3. Whether admitting such expert testimony was harmless error given the role it played in the government’s proof.

## Decision

- The court held the expert’s testimony was inadmissible because it stated legal conclusions in specialized legal terminology and was grounded in the expert’s credibility judgments about other witnesses.
- The court reversed the mail fraud, securities fraud, and conspiracy convictions and remanded for further proceedings.
- The court initially affirmed the false-declaration convictions.
- On rehearing, the court reversed the false-declaration convictions as well because they were closely tied to the same improper expert testimony and credibility bolstering.

## Legal Principles

- Fed. R. Evid. 704(a) permits opinion testimony that touches an ultimate issue, but it does not authorize expert opinions that embody legal conclusions.
- Expert testimony is improper when it uses statutory or regulatory terms of art with specialized legal meaning to tell the jury that the defendants’ conduct satisfied the legal standard.
- In securities cases, an expert may explain trading practices and how certain trading patterns can affect markets, but should not label conduct as “fraud” or “manipulation.”
- Fed. R. Evid. 703 does not permit an expert to present an opinion as based on the expert’s view that a fact witness is truthful; credibility determinations are for the jury.
- When improper expert testimony supplies a central link in the government’s case and reinforces key witness testimony, the error is not harmless.

## Conclusion

The Second Circuit reversed the convictions because the government’s expert crossed the line from explaining securities-market practices to giving legal conclusions and vouching for witness credibility, invading the jury’s role and the court’s responsibility to state the law.


United States v. Scop, 846 F.2d 135 (2d Cir. 1988)