A few weeks ago, a California federal jury acquitted two former executives of the British software company Autonomy of conspiracy and wire fraud charges. It was a remarkable outcome, particularly since Autonomy’s CFO had been convicted of similar charges a few years ago. The defense pushed for a good faith jury instruction that ultimately helped them prevail at trial. This particular jury instruction can be the cornerstone of defending a white-collar criminal case, which is why we have named it the unofficial Greatest of All Time.
Before we jump in, I want to offer a huge congratulations to all the lawyers who worked on the case at Steptoe, Clifford Chance, and Bird Marella. It’s truly an amazing outcome.
Background of the Autonomy Case
The case arose out of Hewlett Packard’s acquisition of Autonomy in 2011. Following the $11.7 billion acquisition, HP claimed that Autonomy had inflated its value ahead of the sale and that the two former executives, Michael Lynch(Autonomy’s founder and former CEO) and Stephen Chamberlain (former VP), had been personally involved in the alleged scheme. Following the acquisition, HP recognized an $8.8 billion loss. In 2022, a court in the United Kingdom found that Mr. Lynch was at fault.
During the three-month criminal trial in San Francisco, the Department of Justice called more than thirty witnesses. Mr. Lynch testified in his defense and Mr. Chamberlain did not. The primary defense theory was that Mr. Lynch and Mr. Chamberlain had done nothing wrong, had relied on accounting advice they’d received, and that HP wanted to make Autonomy the scapegoat for HP’s own mismanagement and failing financial condition.
Part of Mr. Lynch and Mr. Chamberlain’s story was that they had acted in good faith. The district court included an instruction for good faith, which is a key instruction for nearly all white-collar criminal defense matters. The case is a master class in the type of tenacity needed to press for jury instructions that help the defense tell its story.
The Rules for Jury Instructions
Jury instructions are a key part of any trial because this is when the judge tells the juror what law they must apply to the evidence. They are also key to the defense for two reasons: (1) a strong defense theory must be crafted to take advantage of the instructions, and (2) an error in jury instructions is one of the few ways to reverse a conviction on appeal.
Let’s first talk about the rules.
Rule 30 of the Federal Rules of Criminal Procedure governs jury instructions. Here are the key parts:
- How to make a request for an instruction. “Any party may request in writing that the court instruct the jury on the law as specified in the request.” Rule 30(a).
- Timing for requests: A request for an instruction “must be made at the close of the evidence or at any earlier time that the court reasonably sets.” Rule 30(a).
- Timing for the court’s ruling: “The court must inform the parties before closing arguments how it intends to rule on the requested instructions.” Rule 30(b).
- Objections to instructions: If a party objects to the instructions, the party “must inform the court of the specific objection and the grounds for the objection before the jury retires to deliberate.” Rule 30(d).
- Result of not objecting: A party’s failure to object “precludes appellate review, except as permitted under Rule 52(b),” which is the “plain error” standard discussed more below. Rule 30(d).
If a defendant challenges the jury instructions on appeal, then the court of appeals will look to “whether, taken as a whole, [the jury instructions] accurately state the governing law and provide the jury with sufficient understanding of the issues and applicable standards.” United States v. Washington, 106 F.3d 983, 1002 (D.C. Cir. 1997).However, a defendant’s claim that the court did not give a required instruction is reviewed de novo, meaning that the court of appeals takes a fresh look at the issue and need not defer to the trial court’s decision. United States v. Hurt, 27 F.3d 1347, 1351 (D.C. Cir. 2008).
As Rule 30(d) makes clear, if trial counsel does not object to the jury instructions during the trial, then the court of appeals will only review them for “plain error.” This is a nearly impossible standard to meet. The defendant must show that (1) he did not intentionally give up the instruction, (2) the error in the instruction is “clear or obvious,” and (3) it is reasonably probable that the outcome of the trial would have been different if the correct instruction had been given.
Wrangling over Jury Instructions
In most complex white-collar cases, the parties will propose jury instructions in advance of trial. In the Autonomy case, for example, the parties filed proposed instructions about a month before trial. Both sides proposed instructions and noted where they disagreed with the other side’s proposed instructions.
For example, the government proposed a deliberate indifference instruction that the jury could find a defendant guilty if found that the defendant “was aware of a high probability” of the problematic facts and the defendant “deliberately avoided learning the truth” about those facts. The proposed instruction also said that the jury could not conclude that the defendant had the requisite knowledge if the defendant “actually believed” the exculpatory facts or “if you find that the defendant was simply negligent, careless, or foolish.”
The defense proposed a good faith instruction:
The government has the burden to prove to you, beyond a reasonable doubt, that the defendant you are considering acted with criminal intent and lacked good faith. The burden of proving good faith rests with the government, and not with a defendant, because a defendant does not have any obligation to prove anything in this case. If the government fails to meet its burden to prove a defendant lacked good faith, its failure to do so is a complete and absolute defense to the charges in this case and you must return a not guilty verdict. If a defendant carried out his or her actions in good faith, there was no criminal intent.
A person who acts on a belief or an opinion that an accounting judgment is reasonable is not punishable under the charges in the indictment merely because the belief or opinion turns out to be inaccurate, incorrect, or wrong. An honest mistake in judgment or an honest error in management does not rise to the level of criminal conduct.
If the evidence in the case leaves the jury with a reasonable doubt as to whether a defendant acted with criminal intent and lacked good faith, the jury must acquit that defendant
Two months into trial, the court filed “draft” jury instructions and asked the parties to provide their response to the draft instructions the next day. The court included a good faith instruction to the wire fraud counts.
The good faith of defendant is a complete defense to the charge of wire fraud in Counts Two through Fifteen of the indictment because good faith is, simply, inconsistent with the intent to defraud alleged in those charges. A person who acts, or causes another to act, on an honestly held belief or opinion is not punishable under this statute merely because the belief or opinion turns out to be inaccurate, incorrect, or wrong.
An honest mistake in judgment or an error in management does not rise to the level of intent to defraud. A defendant does not act in “good faith” if, even though he honestly holds a certain opinion or belief, that defendant also knowingly makes material false or fraudulent pretenses, representations, or promises to others.
While the term “good faith” has no precise definition, it means, among other things, a belief or opinion honestly held, an absence of malice or ill will, and an intention to avoid taking unfair advantage of another. In determining whether or not the government has proven that the defendant acted with an intent to defraud or whether the defendant acted in good faith, the jury must consider all of the evidence in the case bearing on the defendant’s state of mind.
The burden of proving good faith does not rest with the defendant because the defendant does not have any obligation to prove anything in this case. It is the government’s burden to prove to you, beyond a reasonable doubt, that the defendant acted with the intent to defraud.
The defense offered a few very minor edits. The government objected to the entire instruction. It proposed a much shorter instruction and proposed line-by-line edits to the proposed instructions.
The government’s proposed new instruction was much shorter:
It is the government’s burden to prove beyond a reasonable doubt that [the defendant] acted with an intent to commit the offenses charged. Good faith on the part of [the defendant] is inconsistent with a finding that [the defendant] knowingly or willfully committed any of the alleged offenses. Thus, if the evidence in the case leaves you with a reasonable doubt about whether [the defendant] acted with intent to commit the crime alleged in a particular count, or instead whether he possessed a good-faith belief that the alleged false or misleading statements were in fact accurate, you must find [the defendant] not guilty on that count.
A few days later, Mr. Lynch proposed that the trial court include the concept of acting in good faith within the willfulness instruction. Mr. Lynch’s argument was that although the as-written instruction informed the jury that a good faith belief that one’s statements are true is a complete defense to the charges, the draft instructions did not inform the jury that this defense exists even if the person mistakenly believed that his statements were true (when they were not).
[Sidenote #1: The defense filings on these points are succinct. These objections, for example, took less than three pages. They focus the judge on the key objections and cite the case law in support. Authored by large law firms, these types of filings are proof that you don’t need to make lengthy arguments to win.]
The trial court denied the government’s objection and gave the good faith instruction, with only a few minor changes to the one it had proposed. Here is the final instruction:
The good faith of a defendant is a complete defense to the charges of wire fraud and conspiracy to commit wire fraud in Counts One through Fifteen of the indictment because good faith is, simply, inconsistent with the intent to defraud alleged in those charges. A person who acts, or causes another to act, on an honestly held belief or opinion is not punishable under this statute merely because the belief or opinion turns out to be inaccurate, incorrect, or wrong.
An honest mistake in judgment or an error in management does not rise to the level of intent to defraud. A defendant does not act in “good faith” if, even though he honestly holds a certain opinion or belief, that defendant also knowingly makes material false or fraudulent pretenses, representations, or promises to others.
While the term “good faith” has no precise definition, it means, among other things, a belief or opinion honestly held, an absence of malice or ill will, and an intention to avoid taking unfair advantage of another. In determining whether or not the government has proven that a defendant acted with an intent to defraud or whether a defendant acted in good faith, the jury must consider all of the evidence in the case bearing on the defendant’s state of mind.
The burden of proving good faith does not rest with a defendant because a defendant does not have any obligation to prove anything in this case. It is the government’s burden to prove to you, beyond a reasonable doubt, that the defendant acted with the intent to defraud.
Using a Good Faith Instruction to Tell a Story
A good faith instruction is helpful to the defense because it allows counsel to tell a story about what happened. We would all love to pretend that the defense is not required to present a defense, only to poke enough holes in the government’s theory to create reasonable doubt. But the truth is, the defense needs a coherent story to tell the jury too.
With the good faith instruction, counsel for Mr. Lynch and Mr. Chamberlain could argue the jury that they acted in good faith when they made representations to HP during the negotiations about Autonomy’s financial condition. This was key to the defense theory of the case.
Every juror can understand the concept of acting in good faith: you say something thinking it is true and then realize later it was wrong. But that doesn’t mean you intentionally lied. It is a very human experience; each juror can put themselves in your client’s shoes.
The good faith instruction also opens the door to evidence at trial that shows your client’s good faith. Even if your client does not testify, then his emails and other communications may reveal why he acted in good faith.
Defense Strategy for Jury Instructions
As shown by the excellent lawyering in the Autonomy case, it is crucial that defense counsel research jury instructions early and have the citations ready to show the judge what instruction is legally defensible. In a jurisdiction without pattern instructions on a particular legal point, counsel must be creative in where to look for guidance.
Legal research databases are only the starting point. What is more powerful are other cases in the same court where the judge’s colleagues have given a similar instruction. Finding those cases may not be easy since searching PACER for cases based on a particular charge is cumbersome. Instead, counsel can research other high-profile cases with similar charges through media articles (sources like Law360 are helpful) and then find the final instructions on PACER that way. Another strategy is to ask other defense counsel for ideas of cases to research—the defense lawyer community is strong and other lawyers can often point you in the right direction.
[Sidenote #2: This is reason enough to join the National Association of Criminal Defense Counsel (NACDL): you get access to the incredibly helpful listserv to ask lawyers across the country for information.]
Even if the jurisdiction has a pattern instruction, they are not legally binding. Counsel can suggest ideas from other circuits, particularly if the pattern instructions have not been updated to reflect recent case law.
Research is only the first step. Next, counsel must draft instructions that are helpful to the client but not so favorably drafted for the defense that the court will say no immediately. It is important to request all the instructions that you want under Rule 30 and to preserve those issues for appeal.
Beyond proposing defense instructions, counsel should make appropriate objections to the instructions proposed by the court or by the government. It is always best to object in writing with citations, even if the court will have a charge conference to discuss the instructions. In the filing, counsel should explain how the proposed defense instructions are in line with the evidence presented and prevailing case law. It can also be helpful to address how the instructions as proposed will confuse the jury or do not fit the facts of the case.
Finally, depending on the timing of this process, counsel should be sure to review the draft instructions after the close of the evidence to see if you need to propose changes based on the evidence or renew a prior request for an instruction. Most federal judges handle instructions near the close of the case for this reason, but nothing in Rule 30 prevents defense counsel from asking for changes at any point in the proceeding.