Ex-Adviser Can’t Escape $1.3M Hedge Fund Fraud Conviction

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By Antoinette Gartrell

Former investment adviser Rosalind Herman lost her bid to reverse her conviction for defrauding investors of over $1.3 million by selling them interests in a non-existent hedge fund ( United States v. Herman , 2017_BL_35140, 1st Cir., No. 16-2001, 2/6/17 ).

The district court’s jury instruction on what constitutes “reasonable doubt” wasn’t misleading, Chief Judge Jeffrey R. Howard of the U.S. Court of Appeals for the First Circuit said. The court said it has upheld the use of similar language in other cases.

District courts have “significant discretion” in formulating their jury instructions, as long as they correctly convey the concept of reasonable doubt, the appeals court said.

It also disagreed that Herman’s seven-year sentence was too long in light of her physical impairments and family responsibilities.

Fake Hedge Fund

From 2008 to March 2013, Herman and her business partner, Gregg Caplitz, allegedly pitched an investment for a new hedge fund to their clients. In reality, no hedge fund existed; instead, the duo used their victims’ $1.3 million in retirement savings for personal expenses.

Herman was convicted, ordered to pay $1,819,391 in restitution and sentenced to seven years in prison.

Affirming, the appeals court said any suggestion the jury may have been misled is undermined by the district court’s repeated emphasis that proof beyond a reasonable doubt was required for conviction. “The court mentioned the reasonable doubt standard no fewer than nine times in its instructions.”

To contact the reporter on this story: Antoinette Gartrell in Washington at agartrell@bna.com

To contact the editors responsible for this story: Phyllis Diamond at pdiamond@bna.com; Seth Stern at sstern@bna.com

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