New York – Today Paul Hastings LLP, a leading global law firm, secured a Third Circuit appellate victory for its client, David Gibson, the former Chief Financial Officer of Wilmington Trust. The Third Circuit ruled in favor of Mr. Gibson and his three co-defendants in an issue of first impression in the Circuit, reversing all counts of conviction, and remanding for retrial two of the nineteen counts on a limited, secondary theory of prosecution. In adopting an argument that we set forth at both the trial and appellate stage, the Circuit held that a criminal conviction premised on a false statement requires that the prosecution prove that statement was false under each objectively reasonable interpretation of the reporting requirement.
The case at trial charged Mr. Gibson and three co-defendants with conspiracy to defraud the United States, securities fraud, and false statements. Mr. Gibson faced additional charges of false certification of financial reports due to his role as CFO. The government’s trial theory was premised on the notion that Wilmington Trust Bank’s decades old accounting treatment of administratively waiving “past due loans” that were matured, but current for interest and in the process of extension, violated various statutes criminalizing knowing false statements when the bank did not report waived loans in its 2009 and 2010 financial disclosures.
After an over seven-week long trial and six days of deliberation, the jury convicted defendants on all counts. Throughout trial and on appeal, we maintained that a false statement conviction cannot be supported because the available statutory guidance on how to report “past due” loans was ambiguous at best, and at least one bank regulator issued guidance that comported with how the bank treated its past due loans. The Third Circuit agreed, finding that “the government here produced insufficient evidence from which a rational jury could find defendants’ statements false” and reasoning that
[W]here falsity turns on how an agency has communicated its reporting requirements to the entities it regulates and those communications are ambiguous, fair warning demands that the Government prove a defendant’s statement false under each objectively reasonable interpretation of the relevant requirements.
U.S. v. Gibson et al., No. 19-1105, at 5, 21 (3d Cir. Jan. 12, 2021) (internal quotations and citations omitted).
The Government’s burden as to falsity in the face of an ambiguous reporting requirement was a matter of first impression in the Third Circuit. The appellate opinion also criticized the District Court’s denial of defendants’ requests to introduce evidence concerning or instructions to the jury about the alternative interpretation of regulatory reporting requirements.
“We are pleased that all counts of conviction have been overturned on this issue of first impression and that our client has been exonerated on the prosecution’s main case,” said Ken Breen, partner, Paul Hastings LLP.
Paul Hastings represented lead defendant David Gibson at trial and on appeal. The Paul Hastings team was comprised of Partners Ken Breen, Phara Guberman, Stephen Kinnaird, and John Nowak, and Associates Inna Coleman, Jena Sold, Scott Glicksman, Rita Fishman, and Rachel Ofori.
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