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Case 2:22-cr-00374-ES Document 30 Filed 11/21/22 Page 1 of 10 PageID: 100
Not for Publication
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
UNITED STATES OF AMERICA,
Plaintiff,
Criminal Action No.: 22-0374 (ES)
v.
MEMORANDUM OPINION
MARC SCHESSEL,
Defendant.
SALAS, DISTRICT JUDGE
Pending before the Court is the Government’s motion to authorize alternative victim
notification procedures pursuant to the Crime Victims’ Rights Act, 18 U.S.C. § 3771 (“CVRA”).
(D.E. No. 17 (“Mov. Br.”)). Defendant filed a brief in opposition to the motion, and the
Government filed a reply. (D.E. No. 22 (“Opp.”) & D.E. No. 25 (“Reply”)). For the following
reasons, the motion is GRANTED-in-part and DENIED-in-part.
Background. On May 31, 2022, Defendant was charged with two counts of securities
fraud under 15 U.S.C. §§ 78j(b) and 78ff (Count 1) and 18 U.S.C. § 1348 (Count 2). (D.E. No.
1). According to the indictment, between March and April 2020, Defendant, as Chief Executive
Officer of a publicly traded healthcare company (“Company-1”), participated in a scheme through
which he made material misrepresentations and omissions to investors, potential investors, and the
Securities and Exchange Commission (“SEC”) regarding Company-1’s procurement of COVID-
19 testing kits to fraudulently increase and maintain share prices of Company-1’s securities. (Id.
¶¶ 1 & 3–5). The Government specifically alleges that, on or about April 13, 2020, Defendant
caused Company-1 to issue a materially misleading press release regarding its anticipated
procurement of COVID-19 testing kits in the early days of the COVID-19 pandemic that caused
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its stock price to increase. (Id. ¶¶ 5.k. & 5.l.). On or about April 21, 2020, the SEC halted trading
in the securities of Company-1 after the FDA confirmed that Company-1’s supplier was not
permitted to distribute COVID-19 testing kits in the United States. (Id. ¶¶ 5.x. & 5.y.). As a result
of the alleged scheme, investors lost approximately $116 million by purchasing Company-1’s
shares at artificially inflated prices and selling those shares at a loss. (Id. ¶ 5.z.).
On June 7, 2022, Defendant pled not guilty to each count in the indictment. (D.E. No. 8).
On July 27, 2022, the Government filed the instant motion to authorize alternative victim
notification procedures under the CVRA, which was fully briefed. (See generally Mov. Br., Opp.
& Reply).
Legal Standard. Under the CVRA, crime victims have certain enumerated rights,
including the right to “reasonable, accurate, and timely notice” of any public court proceedings.
18 U.S.C. § 3771(a)(2). The Court has an affirmative obligation to ensure that this enumerated
right is afforded. Id. § 3771(b)(1). A crime victim is defined as one who is “directly and
proximately harmed as a result of the commission of a Federal offense.” Id. § 3771(e)(2)(A).
“Victims’ rights under the CVRA begin well before a conviction; thus, the status of ‘victim’ may
be based on allegations rather than proof.” United States v. Saltsman, No. 07-641, 2007 WL
4232985, at *1 (E.D.N.Y. Nov. 27, 2007); see also United States v. Turner, 367 F. Supp. 2d 319,
326 (E.D.N.Y. 2005).
Under the CVRA’s “multiple crime victims” provision, “where the court finds that the
number of crime victims makes it impractical to accord all of the crime victims the rights described
in subsection (a), the court shall fashion a reasonable procedure to give effect to this chapter that
does not unduly complicate or prolong the proceedings.” 18 U.S.C. § 3771(d)(2). Accordingly,
this provision allows courts to approve efforts to notify victims of federal crimes the Government
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is prosecuting where individual notice would be impractical. Id.; see also United States v.
Saferstein, No. 07-0557, 2008 WL 4925016, at *2 (E.D. Pa. Nov. 18, 2008).
In the absence of binding precedent from the Third Circuit regarding what constitutes a
“reasonable procedure” under 18 U.S.C. § 3771(d)(2), the Court has consulted the decisions of the
Second Circuit and other district courts which have found a number of notification efforts to be
“reasonable” under the CVRA. The Second Circuit has set forth that the determination of what is
a “reasonable procedure” is left to the discretion of the district court. In re W.R. Huff Asset Mgmt.
Co., 409 F.3d 555, 563 (2d Cir. 2005) (“Most of the rights provided to crime victims under the
CVRA require an assessment of ‘reasonableness’” and “[t]he district court is far better positioned
to make these assessments and to determine what constitutes ‘a reasonable procedure’ for effecting
these rights than a court of appeals.”) (citation omitted). Thus, “reasonable procedure”
determinations may vary with each case given the district court’s “proximity to the particular facts
and needs of victims that also will likely vary with each case.” United States v. Rubin, 558 F.
Supp. 2d 411, 422 (E.D.N.Y. 2008) (citing In re Huff, 409 F.3d at 562–63). Notably, district courts
have routinely authorized the use of a website by the Government to notify crime victims under
the CVRA where thousands of victims are potentially affected by the charged conduct. See, e.g.,
United States v. Babich, 301 F. Supp. 3d 213, 216–18, (D. Mass. 2017) (holding alternative victim
notification through FBI and U.S. Attorney’s Office websites was reasonable under the CVRA
where alleged RICO conspiracy potentially affected thousands of victims); Saltsman, 2007 WL
4232985 at *2 (holding alternative victim notification through U.S. Attorney’s Office website was
reasonable under the CVRA where alleged securities fraud and money laundering scheme
potentially affected thousands of victims).
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Discussion. The Government submits that the victims of the charged securities fraud
scheme are the thousands of “market participants who traded the stock of Company-1 . . . between
approximately March 2020 and approximately April 2020.” (D.E. No. 17-1 at 1; see also Mov.
Br. at 2–4). Given the large number of potential victims in this case, the Government argues that
it is impractical to identify and provide individualized notice to each crime victim pursuant to the
CVRA. (Mov. Br. at 4). Accordingly, the Government requests authorization to provide notice
to victims by maintaining a Department of Justice website. (Id. (citing United States v. Marc
Schessel, DEP’T OF JUSTICE, https://www.justice.gov/criminal-vns/case/Schessel (last visited Oct.
24, 2022) (“DOJ Website”))). The DOJ Website would provide “a summary of the case,
information regarding the case’s status, and other significant case-related documents.” (Id.). The
DOJ Website would also provide “an e-mail address and telephone number for a Victim Assistance
Line through which individual potential crime victims could contact the [DOJ] with questions
regarding the case.” (Id.).
Defendant challenges the Government’s motion on three grounds.1 The Court will address
each argument in turn.
First, Defendant argues that not all market participants the Government seeks to notify—
those who traded Company-1 securities between approximately March through April 2020—
qualify as crime victims under the CVRA. (Opp. at 4–5). Specifically, Defendant notes that the
indictment alleges that Company-1 issued the press release regarding its procurement of
COVID-19 testing kits on or about April 13, 2020, and the SEC halted trading of Company-1
1
The Government argues that Defendant does not have standing under the CVRA to oppose the Government’s
motion. (Reply at 2). While the CVRA provides that “[a] person accused of the crime may not obtain any form of
relief under this chapter,” 18 U.S.C. § 3771(d)(1), the alternative notification procedure may, as Defendant argues
here, implicate a defendant’s constitutional rights. See, e.g., United States v. Merrill, No. 14-40028, 2014 WL
6387368, at *2 (D. Mass. Nov. 14, 2014) (considering defendants’ arguments that the Government’s proposed
alternative notification procedures may taint the jury pool). Accordingly, the Court will consider Defendant’s
arguments to fashion a reasonable procedure under the CVRA that maintains his constitutional rights.
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securities on or about April 21, 2020. (Id. at 6). Therefore, only market participants who traded
Company-1 securities between approximately April 13 and April 21, 2020, could have suffered
the alleged harm so as to qualify as “direct and proximate” victims of the charged conduct under
the CVRA’s “but for” cause analysis. (Id. at 5–6). See also 18 U.S.C. § 3771(e)(2)(A).2
Defendant further argues that, even within this limited pool of potential victims, the Government
has not shown harm caused by the charged conduct. (Id. at 6). In response, the Government argues
that the market participants it seeks to notify may be considered crime victims under the “inclusive
approach” employed by the District of Massachusetts in Babich. (Reply at 3–4 (citing 301 F.
Supp. at 217 (“absent an affirmative reason to think otherwise, [the court] will presume that any
person whom the government asserts was harmed by conduct attributed to a defendant . . . enjoys
all the procedural and substantive rights set forth in § 3771”))). The Government further argues
that even under Defendant’s limited approach, “such a universe of victims would still number in
the thousands and would be impractical to notify on an individual basis.” (Id. at 4).
The CVRA’s requirement “that the victim be ‘directly and proximately harmed’
encompasses the traditional ‘but for’ and proximate cause analyses.” In re Rendón Galvis, 564
F.3d 170, 175 (2d Cir. 2009) (quoting In re Antrobus, 519 F.3d 1123, 1126 (10th Cir. 2008)
(Tymkovich, J., concurring)). “The necessary inquiry is a fact-specific one.” Id.3 Here, the
2
Defendant appears to further argue that the indictment does not allege that “the vendor” suffered a loss as a
result of the charged conduct. (Opp. at 6–7). While it is not clear to whom “the vendor” refers, the Government seeks
to notify only market participants as crime victims under the CVRA. (See generally Mov. Br.). Therefore, the Court
bases its decision on the Government’s request to notify market participants.
3
The Government argues that requiring “but for” and proximate causation “conflates the notification
procedures” of the CVRA “with the restitution process.” (Reply at 3). The Court disagrees. The Government does
not cite, and the Court has not located, relevant authority that distinguishes the analysis used to determine victim rights
under the CVRA generally from that used to determine restitution rights under either the CVRA or the Mandatory
Victim Restitution Act, 18 U.S.C. § 3663 (“MVRA”). In Galvis, the petitioner sought to enforce her rights to be heard
before sentencing, to confer with the Government, and to receive restitution under § 3771(a)(4)–(6) of the CVRA; the
petitioner additionally sought to enforce her right to restitution under the MVRA. 564 F.3d at 172, 174–175. The
Second Circuit required “but for” and proximate causation to determine whether the petitioner could fairly be
considered a victim so as to assert those enumerated rights, without distinguishing the analysis for restitution under
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Government specifically alleges that Defendant caused Company-1 to issue a materially
misleading press release on or about April 13, 2020 regarding its anticipated procurement of
COVID-19 testing kits, causing its stock price to increase, and that the SEC halted trading in the
securities of Company-1 on or about April 21, 2020. (D.E. No. 1 ¶¶ 5.k.–5.l & 5.x.–5.y.). The
Government further alleges that, as a result of the scheme, market participants lost approximately
$116 million by purchasing Company-1’s shares at artificially inflated prices and selling those
shares at a loss. (Id. ¶ 5.z.). Further, the Government submits that even in this more limited time
frame, there are still thousands of potential victims of the alleged scheme. (Reply at 4). Thus,
even assuming only market participants who traded Company-1 securities between approximately
April 13 and April 21, 2020, suffered the alleged harm so as to assert their rights as victims under
the CVRA, the Court is satisfied that such victims number in the thousands.4
Second, Defendant argues that the Government has failed to establish that individual
notification would be impractical. (Opp. at 7–11). The Court disagrees. Defendant specifically
argues that “a significant portion” of the victim population “has already been identified in a
separate civil stockholder action that was initiated and settled in the Southern District of New York
on behalf of those who acquired Company-1 stock between April 13 and April 17, 2020.” (Id. at
8). Defendant further identifies two instances during that civil action in which a “claims
administrator” mailed a notice packet regarding the settlement to tens of thousands of potential
class members and argues that this demonstrates the practicability of giving individual notice in
this case. (Id.). In response, the Government argues that, unlike a civil action, the CVRA requires
either statute. Id. at 175–76; cf. United States v. Sharp, 463 F. Supp. 2d 556, 563 (E.D. Va. 2006) (noting the standards
for victim rights under the CVRA and the MVRA “are virtually identical”).
4
Defendant alternatively requests, without citation to legal authority, that the Court order the Government to
“proffer facts that establish that the market participants and investors are victims before ruling on this motion.” (Opp.
at 7 n.6). The request is denied. As previously noted, victim status under the CVRA “may be based on allegations
rather than proof.” See Saltsman, 2007 WL 4232985, at *1.
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multiple notifications throughout the course of a criminal action. (Reply at 4–6). Here, the
Government represents that the victim pool, even adopting Defendant’s limited approach, numbers
in the tens of thousands, and notification to each individual victim regarding each court proceeding
would be impractical. (Id. at 4 & 6). As such, the Court exercises its discretion in finding that
alternative notification of the alleged thousands of victims here is reasonable.
Third, Defendant argues that the Government’s proposed alternative procedure risks
tainting the jury pool and depriving him of his right to a fair trial. (Opp. at 11–14). Specifically,
Defendant states that the Government and the SEC published press releases on this case on the day
the indictment was filed,5 which already alerted the public to these allegations. (Id. at 11).
Defendant argues that the Government’s proposed procedure “provides yet another opportunity
for the [G]overnment to quote allegations in the indictment, which [Defendant] vehemently
disputes,” and thus risks Defendant’s right to a fair trial. (Id. at 11–12). Defendant argues that the
proposed notification procedure should at least be modified to (i) “remove any recitations of
allegations contained in the pleadings”; and (ii) “emphasize the language indicating that the
defendant is presumed innocent unless and until proven guilty by moving this section to the top of
the webpage and/or enlarging the font.” (Id. at 14). In response, the Government argues that
notification through the DOJ Website would not prejudice Defendant’s trial rights; however, the
Government does not specifically respond to Defendant’s proposed modifications. (Reply at 6–
9).
5
See Press Release, Dep’t of Justice, Former CEO Indicted for Misleading Investors about COVID-19 Rapid
Test Kits (May 31, 2022), https://www.justice.gov/opa/pr/former-ceo-indicted-misleading-investors-about-covid-19-
rapid-test-kits (last visited Oct. 24, 2022); and Press Release, U.S. Sec. and Exch. Comm’n., SEC Charges Company
and Former CEO with Misleading Investors about Sale of COVID-19 Testing Kits (May 31, 2022),
https://www.sec.gov/news/press-release/2022-94 (last visited Oct. 24, 2022).
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“Recognizing the competing interests at stake, namely, the defendant[’s] Sixth Amendment
right to an impartial jury and a fair trial, the public’s First Amendment right of access to
proceedings and filings as well as the rights of potential victims, courts have imposed certain
restrictions on such alternative notification procedures.” Babich, 301 F. Supp. 3d at 217. In
particular, “courts have held that any press releases and/or notices shall avoid reciting allegations
contained in the pleadings and shall contain language indicating that the defendant is presumed
innocent unless and until proven guilty.” Id. at 217–18; see also Merrill, 2014 WL 6387368, at
*2 (holding that “notices shall avoid reciting allegations contained in the pleadings except as is
necessary to comply with the notification obligations, but such press releases and notices may refer
readers to such pleadings”); Saferstein, 2008 WL 4925016, at *3 (approving a procedure to notify
victims via two separate websites and a press release that summarized the counts in the indictment,
but requiring that the foregoing include a statement that provided “An indictment is an accusation.
A defendant is presumed innocent unless and until proven guilty.”).
Courts have additionally limited alternative notification procedures to those necessary to
provide adequate notice to the victims. For example, in Babich, the Government proposed “five
separate alternative victim notification methods,” including the maintenance of three separate
websites, the issuance of one or more press releases informing the public about the websites, and
the delivery of “blast emails” to victims. 301 F. Supp. 3d at 215–16. The court authorized the use
of the first two of the proposed websites to provide victim notification, but denied the
Government’s request for the third website because the Government had not explained why a third
website was necessary. Id. at 217. The court also authorized the use of press releases so long as
they avoided reciting allegations contained in the pleadings, but denied the Government’s request
to send blast emails as “too vague.” Id. at 217–18.
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Here, the Government seeks to use one website for purposes of victim notification. (Mov.
Br. at 4). The DOJ Website currently provides the following one-paragraph summary of the
criminal charges in this case:
In an indictment filed on May 31, 2022, Marc Schessel, former CEO
of a publicly-traded health care company, was charged with two
counts of securities fraud for his alleged participation in a scheme to
mislead investors about the company’s procurement of COVID-19
rapid test [kits] in the early days of the COVID-19 pandemic.
See DOJ Website. In addition, the DOJ Website provides a link to the indictment as well as a
detailed recitation of the allegations in the indictment. Id. The Court finds that including a
paragraph summarizing the allegations as well as a detailed recitation of the allegations
unnecessarily repeats the allegations contained in the indictment and risks infringing on
Defendant’s constitutional rights. As such, in the course of providing victim notice in accordance
with the CVRA, the Government is directed to avoid unnecessary repetition of the allegations,
although such notices may include a link to the indictment. See Merrill, 2014 WL 6387368, at *2.
The DOJ Website also currently contains the following language:
Presumption of Innocence: It is important to keep in mind that a
criminal indictment is merely an allegation, and defendants are
presumed innocent until proven guilty and that presumption requires
both the court and our office to take certain steps to ensure that
justice is served.
See DOJ Website. The Court is satisfied that the DOJ Website’s current language adequately
apprises readers of the presumption of innocence and does not need to be further emphasized. See,
e.g., Babich, 301 F. Supp. 3d at 217–18.
Conclusion. In light of the guiding authorities discussed herein and upon the Court’s
careful review of the particular facts and arguments of both the Government and Defendant in this
case, the Court finds, in its discretion, that victim notification by publication consistent with the
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procedure described in this Opinion is a reasonable procedure that will both give effect to the
CVRA and will not unduly complicate or prolong the proceedings.
Accordingly, the Government’s motion is GRANTED-in-part and DENIED-in-part.
The Court directs the Government to provide notice to alleged crime victims in accordance with
the procedure described herein. An appropriate Order accompanies this Memorandum Opinion.
Dated: November 21, 2022
/s/ Esther Salas
Esther Salas, U.S.D.J.
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