Free Post Trial Brief - District Court of Federal Claims - federal

Case 1:97-cv-00579-MCW

Document 155

Filed 02/13/2008

Page 1 of 52

No. 97-579C (Judge Williams) IN THE UNITED STATES COURT OF FEDERAL CLAIMS SGS-92-X003, Plaintiff, v. THE UNITED STATES, Defendant.
DEFENDANT'S POST-TRIAL BRIEF

JEFFREY S. BUCHOLTZ Acting Assistant Attorney General

JEANNE E. DAVIDSON Director

February 13, 2008

J. REID PROUTY Trial Attorney Commercial Litigation Branch Civil Division Department of Justice Attn: Classification Unit 8th Floor 1100 L Street, N.W. Washington, D.C. 20530 Tele: 202-305-7586 Fax: 202-514-7969 Attorneys for Defendant

Case 1:97-cv-00579-MCW

Document 155

Filed 02/13/2008

Page 2 of 52

TABLE OF CONTENTS PAGE DEFENDANT'S POST-TRIAL BRIEF ........................................................................................ 1 INTRODUCTION ......................................................................................................................... 1 STATEMENT OF FACTS ............................................................................................................ 2 I. The Recruitment Of The Princess And Her Utilization As A DEA Informant ..... 2 A. B. Early Use Of The Princess ......................................................................... 2 Undercover Operations Utilizing The Princess Involving Money Laundering ................................................................................................. 3 The Kidnaping And Release Of The Princess ........................................... 5

C. II.

Discussions Regarding Compensation Between The Princess And Members Of The DEA ................................................................................................................ 6 A. JDET Members Were Unaware Of Any Deal Between The Princess And ASAC Salvemini And Made No Deals With Her, Themselves ............................................................................................... 7 The Evidence Of Promises To The Princess By ASAC Salvemini ........... 9

B. III.

DEA Headquarters And Department Of Justice Involvement With The Princess ................................................................................................................ 12 A. No Persons Above ASAC Salvemini Were Aware Of Any Promises That He Made To The Princess Regarding Compensation ...... 12 No Documents Should Have Made DEA Officials Aware Of Any Promises Made By ASAC Salvemini To The Princess .............. 18

B.

IV.

Management Of Funds Related To The Princess ................................................ 23 A. B. Management Of Commission Funds ....................................................... 24 Asset Forfeiture Funds ............................................................................. 28

V.

The DEA's Payment Of The Princess ................................................................. 29 A. B. Payments Made Prior To The Kidnaping ................................................ 29 Final Payments To The Princess .............................................................. 30 -i-

Case 1:97-cv-00579-MCW

Document 155

Filed 02/13/2008

Page 3 of 52

TABLE OF CONTENTS -continuedPAGE

ARGUMENT ............................................................................................................................... 30

I.

ASAC Salvemini Did Not Possess The Implied Actual Authority To Make Contracts With The Princess ............................................................................................................... 32 ASAC Salvemini's Alleged Promises To The Princess Were Were Never Ratified By Those With The Authority To Do So ................................................................................................................... 37 ASAC Salvemini's Alleged Promises Were For Less Than Claimed By The Princess ................................................................................................................ 41 The United States Is Not Contractually Liable For Any Kidnaping Of The Princess ................................................................................................................ 42 The United States Owes The Princess No Quantum Meruit Damages ................ 45

II.

III.

IV.

V.

CONCLUSION ............................................................................................................................ 47

-ii-

Case 1:97-cv-00579-MCW

Document 155

Filed 02/13/2008

Page 4 of 52

TABLE OF AUTHORITIES CASES PAGE(s)

AT & T Co. v. United States, 177 F.3d 1368 (Fed. Cir. 1999) ...................................................................................... 46 Aetna Casualty & Surety Company v. United States, 228 Ct. Cl. 655 F.2d 1047 (1981) ................................................................................... 43 Awad v. United States, 301 F.3d 1367 (Fed. Cir. 2002) ...................................................................................... 43 Barrett Refining Corp. v. United States, 242 F.3d 1055 (Fed. Cir. 2001) ...................................................................................... 46 City of El Centro v. United States, 922 F.2d 816 (Fed. Cir. 1990) ........................................................................................ 45 Cottrell v. United States, 42 Fed. Cl. 144 (1998) .................................................................................................... 43 Cruz-Pagan v. United States, 5 Fed. Cl. 59 (1996) .................................................................................................. 32, 35 Dick Tracy v. United States, 55 Fed. Cl. 679 (2003) .............................................................................................. 33, 37 Doe v. United States, 58 Fed. Cl. 479 (2003) .................................................................................................... 32 Federal Crop Ins. Corp. v. Merrill, 332 U.S. 380 (1947) .................................................................................................. 31, 45 Gary v. United States, 67 Fed. Cl. 202 (2005) .............................................................................................. 38, 40 International Data Products v. United States, 492 F.3d 1317 (Fed. Cir. 2007) ...................................................................................... 46 Janowsky v. United States, 133 F.3d 888 (Fed. Cir. 1998) .................................................................................. 38, 46

-iii-

Case 1:97-cv-00579-MCW

Document 155

Filed 02/13/2008

Page 5 of 52

TABLE OF AUTHORITIES -continuedCASES PAGE(s)

Kania v. United States, 650 F.2d 264 (Ct. Cl. 1981) ................................................................................ 43, 44, 45 Khairallah v. United States, 43 Fed. Cl. 57 (1999) ................................................................................................ 32, 33 Leonardo v. United States, 63 Fed. Cl. 552 (2005), aff'd, 424 F.3d 1253 (Fed. Cir. 2005) ....................................... 32 Moon v. United States, 227 Ct. Cl. 750, 1981 WL 21432 (Ct. Cl.) ...................................................................... 43 Prestex, Inc. v. United States, 320 F.2d 367 (Ct. Cl. 1963) ............................................................................................ 46 SGS-92-X003 v. United States, 74 Fed. Cl. 637 (2007) ............................................................................................. passim Salles v. United States, 156 F.3d 1383 (Fed. Cir. 1998) ................................................................................ 33, 37 Sanders v. United States, 252 F.3d 1329 (Fed. Cir. 2001) ................................................................................ 43, 44 Somali Development Bank v. United States, 205 Ct. C 508 F.2d 817 (1974) ....................................................................................... 43

STATUTES 28 U.S.C. § 524(c ) ..................................................................................................................... 33 28 U.S.C. §1491(a)(1) ................................................................................................................. 43

-iv-

Case 1:97-cv-00579-MCW

Document 155

Filed 02/13/2008

Page 6 of 52

IN THE UNITED STATES COURT OF FEDERAL CLAIMS SGS-92-X003 Plaintiff, v. THE UNITED STATES, Defendant. ) ) ) ) ) ) ) ) )

No. 97-579C (Judge Williams)

DEFENDANT'S POST-TRIAL BRIEF In accordance with the Court's September 26, 2007 order, the United States respectfully submits this post-trial brief. INTRODUCTION At the trial in this case, plaintiff, SGS-92-X003 ("the Princess"), bore the burden of establishing that the Drug Enforcement Administration ("DEA") entered into a binding contract with her to pay to her fixed percentages of assets seized and money "laundered" as a result of her efforts as an informant, and that her kidnaping was caused by a breach of a contractual duty by the United States. She did not meet these burdens. The evidence adduced at trial demonstrated what the Government has always claimed: the Princess was a very valuable resource to the DEA for its money laundering investigations and she was very well-compensated by the agency for her assistance. Moreover, as the Princess has claimed, DEA headquarters never objected to requests from the field to provide her with significant compensation because it found that the information that the Princess provided was worth the money that the she was being given. Nevertheless, the evidence demonstrated no breach of any contract with the United States because no person with proper authority ­ express or implied ­ made such a contract with the Princess and no individual with proper authority ever

Case 1:97-cv-00579-MCW

Document 155

Filed 02/13/2008

Page 7 of 52

ratified such a contract. Indeed, the closest that any written document from Fort Lauderdale Assistant Special Agent in Charge ("ASAC") Joseph Salvemini (the man who allegedly made the compensation promises to the Princess) comes to setting forth the details of any agreement with the Princess is Defense Exhibit ("Dx") 11. In this document, ASAC Salvemini assures the reader that requests for compensation for the Princess "will in no way even near" the amount (i.e., the 25 percent of seized assets, up to a cap) that Princess is claiming here. Dx 11, p. 3. STATEMENT OF FACTS I. The Recruitment Of The Princess And Her Utilization As A DEA Informant A. Early Use Of The Princess

In late 1991, the Princess's incarcerated ex-husband recommended to members of a DEA Joint Drug Enforcement Task Force ("JDET")1 in South Florida that they interview her for information relating to drug smuggling. Tr. 682 (Morris). Acting upon this recommendation, JDET Officers2 James Hughes and Richard Morris visited the Princess in her Boca Raton, Florida home and asked that she consider becoming a confidential informant for the DEA. Tr. 683 (Morris); Tr. 641-42 (Hughes). As the Princess would later testify, her past history and connections to the Columbian cocaine smuggling cartels provided her with intimate knowledge of the drug smugglers and made her an excellent prospect as an informant. See generally Tr. 2846; 55-56 (Princess); Tr. 293 (Salvemini).

A JDET utilizes deputized members of local law enforcement agencies to act in concert with the DEA. See generally pages 247-55 of the trial transcript of Mr. Salvemini's testimony ("Tr.__ ( )"). Because the JDET members were treated as Federal officers, Tr. 267 (Salvemini), we refer to them as "officers" when they were acting in their Federal capacity, as opposed to the ranks that they held in their local police departments. -22

1

Case 1:97-cv-00579-MCW

Document 155

Filed 02/13/2008

Page 8 of 52

The Princess contemplated the JDET officers' request and ultimately agreed to become an informant. Tr. 55-57 (Princess); Tr. 690-91 (Morris). At the time, she was given no specific promises of compensation, except that she could make "a lot" of money. Tr. 65, 68 (Princess). Her first accomplishment as an informant for the DEA involved requesting several hundred kilograms of cocaine from a source in Columbia to be brought to West Palm Beach, Florida. Tr. 650-51 (Hughes). This operation led to the seizure of the cocaine and a reward3 of $ 15,000 being paid to the Princess. Tr. 652 (Hughes); Px 25.4 B. Undercover Operations Utilizing The Princess Involving Money Laundering

After the JDET's successful use of the Princess in the cocaine seizure, they began to explore other means to utilize her connections. Tr. 75 (Princess). Ultimately, it was decided that she should be involved in money laundering for the drug cartels. Tr. 75 (Princess); Tr. 293 (Salvemini). Through money laundering operations, the JDET hoped to obtain information regarding the drug smugglers and have the opportunity to seize smuggler assets. Tr. 297

Throughout this case, the Princess has stressed the distinction between a "reward" for a confidential informant and an "award" - suggesting that promises of "rewards" were funded by operational moneys controlled by local DEA agents, while "awards" reflected money paid from the Asset Forfeiture Fund. See, e.g., Plaintiff's Post -Trial Brief, page 4 ("Pl. Br. __"). The evidence shows that the agents involved in paying the Princess did not necessarily make this distinction in their use of award versus reward in their vocabulary, Tr. 276-77 (Salvemini) (stating his belief that "award" referred to payments of expenses and to maintain an individual); Tr. 734 (Lees) ("I don't know if I ever differentiated between award and reward"); 755 (Lees); nor did others involved in this case. See Tr. 538 (Michelotti); Tr. 843 (Devaney) ("the terms in DEA have been interchangeable for a number of years")Tr. 1326 (Constantine); Tr. 1378 (Nieves) ("the words are interchangeable"); Tr. 1562 (Schuitema); Tr. 1516 (Warren) (Department of Justice not familiar with such a distinction). Throughout this brief, we will refer to payments made to the Princess as "rewards," although this, by no means, indicates that we agree with plaintiff's distinction between the terms.
4

3

"Px__" refers to a plaintiff's trial exhibit. -3-

Case 1:97-cv-00579-MCW

Document 155

Filed 02/13/2008

Page 9 of 52

(Salvemini). Money laundering typically involves taking cash earned through illegal transactions (such as drug smuggling) and transferring it to a bank account along with a fraudulent description of is origins so that the funds may appear to be the fruits of legitimate business transactions. See Dx 19, p. 3 (Operation Pisces handbook). Usually, money launderers are paid a "commission" upon their activities that may range from two to ten percent of the funds laundered. Tr. 332-33 (Salvemini); Dx 19, p. 9-10. At the time that the Princess was performing undercover money laundering operations for the DEA, the commission she negotiated with drug smugglers ranged from 1 to 16 percent, which was in line with the going rate in South Florida at the time. Dx 17 (reflecting commissions typically between thee to eight percent) Dx 19, p. 9 (typical commissions between 5 and 14 percent). In the usual laundering operation involving the Princess, she would arrange a "pickup" of money to be laundered and an undercover DEA or JDET agent, posing as a confederate of the Princess, would physically take possession of the money cash from the drug dealer's agent. Tr. 120 (Princess). The DEA would then take the money to a bank ,where it would be counted and deposited into a DEA-operated bank account. Tr. 400-01 (Salvemini); Dx 19, p. 8. After a few days, money from this bank account (minus the agreed-upon commission) would be transferred to a bank account specified by the drug dealer. Tr. 654 (Hughes); Dx 19, p. 8. This commission money, which totaled $1,983,806, see Dx 16, p. 5, was kept by the DEA, as described in greater detail below. On occasion, the DEA would formally seize funds that had been given to the Princess for laundering. Tr. 404 (Salvemini). In these cases, the DEA and the Princess would take actions to cover the Princess's role in the matter and make it appear that the seizure was the fault of the

-4-

Case 1:97-cv-00579-MCW

Document 155

Filed 02/13/2008

Page 10 of 52

drug dealer or his courier. Tr. 404-05 (Salvemini). All told, the DEA seized $22,380,383 as a result of its operations with the Princess. Dx 16, p. 4. The Princess began acting as a money launderer on August 21, 1992, see Dx 17, and continued to do so through August 1995, when she was reported to have been kidnaped in her native Columbia. Tr. 167 (Princess); Dx 12. She engaged in 128 money-laundering transactions, totaling approximately $62,731,354. Dx 16, p.4; Dx 17, pp. 1-5.5 Her travel as an erstwhile money-launderer and friend of drug dealers was extensive. The Princess often traveled throughout the United States and to Europe and Columbia6 in furtherance of her role as a DEA confidential informant. Tr. 654-55 (Hughes); Tr. 702 (Morris). Usually, she traveled with DEA agents acting undercover, Tr. 138 (Princess), although she eschewed DEA agent bodyguards in Columbia because that would have caused her to stand out as a target. Tr. 215 (Princess). C. The Kidnaping And Release Of The Princess

The Princess traveled to Columbia in August 1995. Tr. 138 (Princess). In September 1995, the Princess had her brother contacted by telephone and informed that she had been kidnaped. Tr. 174 (Princess). Her brother immediately contacted the DEA. Id., Tr. 347 (Salvemini). The DEA, Department of Justice ("DOJ"), and the Federal Bureau of Investigation

Defense Exhibit 17 is a spreadsheet created by DEA agent Beth Kenshaw that reflects every transaction that the Princess was involved in. Tr. 807 (Devaney). On occasion, a single "pick up" would lead to money being disbursed to multiple bank accounts; thus, for example, line 9 of Defense Exhibit 17 reflects a pick up of $239,900 which had $53,963.16 disbursed to one bank account (reflected in line 9) and $175,141.34 disbursed to another bank account as reflected in line 10. The five percent commission on the pick up of the $239,900 is reflected in the commission box of line 9. See Tr. 808-09 (Devaney) (explaining). Despite her contrary testimony at trial, see Tr. 214 (Princess), the Princess traveled to Columbia for personal reasons, as well, such as managing her rental properties and other investments there. Px 91, pp. 3-4. -56

5

Case 1:97-cv-00579-MCW

Document 155

Filed 02/13/2008

Page 11 of 52

("FBI") conducted many high-level meetings to formulate a strategy for obtaining the Princess's freedom and both Attorney General Reno and Administrator Constantine of the DEA were made aware of the kidnaping. Tr. 347 (Salvemini); Tr. 1032 (Wankel); Tr. 1335 (Constantine); Px 95. One of the key concerns discussed during these meetings was the notion of ransom: the kidnapers were demanding it from the Princess's family, but the United States has a longstanding policy of not paying ransom to kidnapers because paying such ransom would encourage future hostage takers. Tr. 1526 (Warren). Ultimately, after three to four months, the DEA arranged to make a payment to one of its informants who, in turn, secured the freedom of the Princess. Tr. 178; 216 (Princess); Dx 12, pp. 2-3. The Princess was flown out of Columbia and returned to Florida. Tr. 182 (Princess). The Princess and the DEA are of the opinion that her kidnapers did not know that she was a confidential informant, because, had they known, the Princess would have likely been killed. Tr. 216 (Princess). Upon her return, the Princess's use as a confidential informant ceased. Tr. 187. (Princess); Tr. 582 (Tiderington). II. Discussions Regarding Compensation Between The Princess And Members Of The DEA With the exception of ASAC Salvemini, no DEA agent testified to making any compensation promises to the Princess. Indeed, with the possible exception of JDET officer Richard Morris, the DEA agents most involved with the Princess testified affirmatively that they never heard any such promises being made (by ASAC Salvemini or anybody else) and that they had cautioned the Princess that nothing could be promised to her and that she ought to save the money that she was being given for a "rainy day."

-6-

Case 1:97-cv-00579-MCW

Document 155

Filed 02/13/2008

Page 12 of 52

A.

JDET Members Were Unaware Of Any Deal Between The Princess And ASAC Salvemini And Made No Deals With Her Themselves

The JDET agents who worked most closely with the Princess universally testified that she had been told that she could receive "up to" 25 percent of cash seizures, up to $250,000 per seizure, although they never promised that she would definitively get all of that money. Officer James Hughes, who was one of the first JDET officers to approach the Princess, testified that, although he had told the Princess that she might be eligible for up to 25 percent of funds seized (with a cap), he made very clear that this was "up to" and not a promise of the full amount. Tr. 644, 646, 649, 650; 657 (underscoring that it was not a promise of the full amount) (Hughes). Officer Richard Morris, who was with Officer Hughes when he first approached the Princess, testified that he had made no promises to the Princess, either: Q: (Mr. Avery) Did you ever make any promises to the Princess with regard to compensation? A: (Officer Morris) I'm not ­ I don't think I ever did. I think what the situation was, we were trying to get money for her, and I think she understood at the time that we were struggling to get payment for different things. Tr. 716 (Morris). Officer Morris, in fact, generally understood any payment to the Princess to be discretionary, as opposed to the specific product of any agreement. Tr. 686 (Morris) ("I don't think there's any documentation recorded for [any agreement to pay to the Princess], sir. I think it's a fluctuation. I believe it's up to the discretion of Joe Salvemini and his, you know, people above him."). -7-

Case 1:97-cv-00579-MCW

Document 155

Filed 02/13/2008

Page 13 of 52

Officer Greg Lees, who essentially succeeded Officer Morris in dealing with the Princess when the money laundering aspect of her work increased, see Tr. 125 (Princess), did discuss the possibility of the Princess receiving up to 25 percent of money seized (up to a cap), but made the contingent nature of this award clear. See Tr. 737 (Lees) (his awareness of the 25 percent limit with a cap); Tr. 737 (Lees) (when compensation discussed with the Princess, it was only "up to" 25 percent). All of his discussions about compensation were in only general terms, see Tr. 768 (Lees), and, as he told the Princess: "`Yes, you are entitled to up to 25 percent of whatever case,' and it would depend on different factors, what was seized, who was locked up, you know, different factors would factor into that, the level of compensation based on a case." Tr. 750 (Lees).7 Thus, when he made payments to the Princess, he told her to be careful with the money because it could stop at any time. Tr. 768-69 (Lees). The JDET group supervisor, Tom Tiderington, made similar statements. Indeed, rather than make any promises to the Princess, he did just the opposite, telling her (so often that it became almost a running joke) that DEA stood for "don't expect anything." Tr. 631 (Tiderington); see also Tr. 99 (Princess). When Officer Tiderington made these statements, the Princess never corrected him or challenged him. Tr. 630-31 (Tiderington). Thus, officers Hughes, Lees, and Tiderington all testified that they had no recollection of hearing ASAC Salvemini make any specific promises to the Princess. Tr. 631 (Tiderington); Tr. 645 (Hughes); 751 (Lees). Moreover, none of these officers or Officer Morris, ever heard such a promise relayed to any DEA or DOJ higher-ups. Tr. 631 (Tiderington); Tr. 667 (Hughes);

The Princess cites this same portion of Officer Lees's testimony in support of her allegation that he made a specific promise to her. See Pl. Br. 31. Plainly, his statement was limited by the "up to" caveat and his statement that "different factors" would be considered. Tr. 750 (Lees). -8-

7

Case 1:97-cv-00579-MCW

Document 155

Filed 02/13/2008

Page 14 of 52

Tr. 725 (Morris); Tr. 749 (Lees). Of course, the testimony of these agents contradicts the Princess's astonishing claim that Plaintiff's Exhibit 1 constitutes a written agreement to pay her, that was introduced by the JDET agents when she requested a deal in writing. See Tr. 149 (Princess). None of the DEA agents so testified (Officer Lees, who signed the document for the JDET, thought nothing of the document beyond its four corners, see Tr. 739-40 (Lees)) and review of the actual document in Plaintiff's Exhibit 1 makes clear that it was an agreement by the Princess to not use DEA-created bank accounts to obtain personal credit. Px 1. Indeed, ASAC Salvemini (who was the witness most supportive of the Princess's claims) agreed that the purpose of Plaintiff's Exhibit 1 was clear from its face and that the direction to use it came from the DEA counsel's office. Tr. 325 (Salvemini). B. The Evidence Of Promises To The Princess By ASAC Salvemini

To be very candid, we are skeptical of there ever having been clear, firm promises from ASAC Salvemini to the Princess: as will be discussed later in this brief, it is against DEA policy; ASAC Salvemini never told his subordinates about such a deal (as discussed above); ASAC Salvemini has reasons to be bitter towards the DEA (see Tr. 1059-60 (Marshall) (DEA investigation found him to be violating rules)); and he is close to the Princess ­ having demonstrated his lack of detachment by bringing her, as his guest, to a DEA get-together the night before he testified in this trial. Tr. 633-34 (Tiderington). Nevertheless, we have no witnesses who can directly contradict what was allegedly said in a private conversation between the Princess and ASAC Salvemini approximately 15 years ago. Thus, we turn to the testimony of the Princess and ASAC Salvemini to determine what they have claimed was promised. As

-9-

Case 1:97-cv-00579-MCW

Document 155

Filed 02/13/2008

Page 15 of 52

will be seen, both parties recollect different promises, and the version set forth by the Princess is both more generous than the one avowed by ASAC Salvemini and impossible. The Princess alleged in her complaint (filed in 1997), some three or four years after the alleged agreement was made, that she had a very specific agreement with the United States: payment of 25 percent of the value of all confiscated or seized funds or property (with no mention of a statutory cap); four percent of all funds laundered as a direct result of her assistance; and three percent of all funds laundered as an indirect result of her assistance. Comp. ¶ 10.8 In an affidavit signed and sworn to in 1998, the Princess stated that she was expecting eight percent commission on the money laundered (in addition to the 25 percent commission on the moneys seized). Dx 21; Tr. 210 (Princess). When she was deposed later in 1998, the Princess revised the commission to be realized from laundering down to five to seven percent. Tr. 212 (Princess). At this trial, the Princess testified that some time in 1992, ASAC Salvemini promised her 25 percent of all the seizures with a cap of $250,000 and that she would get a percentage of the money that was laundered: "[a]t the beginning it was seven percent and then it went down to five or three percent." Tr. 100 (Princess). Finally, the Princess testified that she would receive "[t]en percent of the indirect." Id.; see also Tr. 151 (Princess) (repeating the 25 percent per seizure, ten percent "indirect" and seven to five to three percent "of launder money"). Elaborating, the Princess later testified that Officers Morris, Hughes, and Tiderington had made her a promise of seven percent of money laundered, but that that number "dropped to between five to three" because of the amount of business that they were doing. Tr. 118-19 (Princess). The Princess also testified that it was Officer Tiderington who told her that the

8

"Comp. ¶__" refers to a paragraph of the complaint that plaintiff filed to initiate this case. -10-

Case 1:97-cv-00579-MCW

Document 155

Filed 02/13/2008

Page 16 of 52

percentage from laundered money would be reduced. Tr. 207 (Princess). As detailed above, officers Morris, Hughes and Tiderington, all testified that they made no promises to the Princess, directly contradicting this version of events. E.g. Tr. 716 (Morris); Tr. 650; 677 (Hughes); Tr. 631 (Tiderington). Indeed, this testimony by the Princess regarding Officer Tiderington is contradictory because she also acknowledged that Officer Tiderington told her that she should not "expect anything." Tr. 99 (Princess). ASAC Salvemini's testimony of the promises made to the Princess differs from hers. Admittedly, ASAC Salvemini agrees that he promised the Princess a percentage (25) of the seizures, up to a $250,000 "statutory" limit. Tr. 332 (Salvemini). ASAC Salvemini also testified that he promised the Princess a percentage of funds from "spin-off" investigations, stating, " I think it was about ten percent of all spin-off cases." Tr. 336 (Salvemini). When it comes to the percentage of laundered funds, the two differ dramatically. While the Princess testified that she was promised a percent (somewhere between three and eight percent) of the funds laundered, ASAC Salvemini testified that she was only promised a percent of the money placed into the undercover account, Tr. 332 (Salvemini), and that the number was between five and eight percent ­ he could not remember which. Tr. 335; 417 (Salvemini). This was discussed as a "percent of a percent" because the money placed in the undercover account from which she was compensated ("the Michael Shepherd account") was, itself, only a small percentage (perhaps three percent or more, depending upon the "market rate" of the transaction fees charged by the Princess) of the funds actually laundered. See Tr. 332-35 (Salvemini). ASAC Salvemini testified, under cross-examination, that it would have been impossible to promise the Princess five to eight percent of the money actually laundered because his operation only received three

-11-

Case 1:97-cv-00579-MCW

Document 155

Filed 02/13/2008

Page 17 of 52

to nine percent of the money laundered (as commission) and that money, in addition to going to the Princess, was used to pay all of the operational expenses of the investigation. Tr. 418-20 (Salvemini). III. DEA Headquarters And Department Of Justice Involvement With The Princess As would be expected, the DEA hierarchy was well-aware of the Princess, e.g., Tr. 971 (Wankel), but nobody besides ASAC Salvemini was aware of the particular promises that he and the Princess allege were made by him to her. Moreover, had any individual in upper DEA or DOJ management become aware of such promises, they would have been upset by such promises and taken action to remedy the situation and disavow such promises. A. No Persons Above ASAC Salvemini Were Aware Of Any Promises That He Made To The Princess Regarding Compensation

Ten witnesses in the DEA or DOJ chain of command above ASAC Salvemini, or privy to the information provided to that chain of command, including two DEA Administrators, a DEA Chief Of Operations and a Deputy Assistant Attorney General ("DAAG"), testified at this trial. Each and every one of them conclusively testified that they did not know of and had never heard of any promises made by ASAC Salvemini to the Princess prior to her bringing the allegations in this case. See Tr. 1554-55 (Schuitema); Tr. 782 (Coward) (although Mr. Coward was not technically in ASAC Salvemini's chain of command, his supervision of the EMG made his knowledge important); Tr. 866-67 (Cash) (former Special Agent in Charge ("SAC") of Miami Field Division ("FD")); Tr. 543 (Michelotti) (responsible for administration of SARC); Tr. 1395 (Nieves) (former head of DEA money laundering investigations); Tr. 1137, 1155 (Passic) (former DEA Chief of Financial Invetigations); Tr. 1022 (Wankel) (former DEA Chief of Operations, who chaired the Sensitive Activities Review Committee ("SARC")); Tr. 1062 -12-

Case 1:97-cv-00579-MCW

Document 155

Filed 02/13/2008

Page 18 of 52

(Marshall) (former DEA Chief of Operations and Administrator); Tr. 1334 (Thomas Constantine) (former DEA Administrator); Tr. 1513 (Warren) (DAAG). This is consistent with the testimony of all of the other agents at the local level who (as discussed in section II A, above) testified that they were unaware of any promises made by ASAC Salvemini to the Princess. ASAC Salvemini testified that any time he would have spoken with SARC committee members about payment promises to the Princess, any local agent that he brought with him to the meeting would have been present and could have heard such a discussion; Tr. 440 (Salvemini), but Officers Tiderington and Lees, who did accompany him to these meetings, testified that they never heard ASAC Salvemini tell the SARC ­ or anybody else ­ of such promises. Tr. 631 (Tiderington); Tr. 749 (Lees). Had any of these individuals outside of the DEA Fort Lauderdale Office been aware of any promises made by ASAC Salvemini to the Princess, they would have most certainly remembered it and many would have objected, halting the practice. Administrator Marshall,9 who has a total of 32 years of law enforcement experience, testified that the practice in handling confidential informants is to make no firm promises except to seek fair compensation. Tr. 107677 (Marshall). For this reason, had he become aware of any promises to the Princess, Administrator Marshall testified, he would have recalled it. Tr. 1095-96 (Marshall). Chief of Operations Wankel discussed his understanding, that rewards to informants were generally not determined until a criminal case is completed and its significance could be evaluated. Tr. 980 (Wankel). As he explained under examination by the Court, promises to informants regarding

Mr. Marshall was Chief of Domestic Operations during the time of the Princess kidnaping and only became Administrator later. Tr. 1051 (Marshall). -13-

9

Case 1:97-cv-00579-MCW

Document 155

Filed 02/13/2008

Page 19 of 52

specific payments would not be made, except that one could promise that a reward might be applied for. Tr. 1034 (Wankel). Mr. Wankel further stated that, if he had been aware of any promises, he would have made a point of raising the issue "[b]ecause it was something that was not allowed for in DEA operations. It was very problematic ­ potentially problematic and difficult and dangerous." Tr. 1023 (Wankel). SAC Cash, who was ASAC Salvemini's second level supervisor as Special Agent in Charge of the DEA Miami FD, testified that even he could not make promises to informants. Tr. 864-65 (Cash). So, too, did Associate SAC Dale Schuitema, ASAC Salvemini's direct supervisor. Tr. 1555 (Schuitema) (he would have recalled having heard about any arrangement with the Princess "[b]ecause you really can't make deals with informants. You can encourage them, you can entice them with possibility of things they can get."). Robert Nieves, a one-time Chief of Foreign Operations and Chief of Major Operations for the DEA, see Tr. 1357 (Nieves), testified about this matter extensively. First, he stated that, "Promise is not a word in most agents' vocabulary. . . Because "promise" connotes that you're boxing yourself into a payment . . . and I think it's a bad practice to get into that." Tr. 1386 (Nieves). Relating the "promise" issue to DEA practice, he stated that, "I don't think DEA had a practice, and I think DEA would discourage anybody . . . that you really shouldn't get into a dollarized agreement with an informant." Tr. 1388 (Nieves). Further, "That was always the kind of guidance I would give the people that worked for me. Promise you're going to be fair. That's all you can promise." Tr. 1391 (Nieves). Mr. Nieves testified that, had he become aware of any such promise from ASAC Salvemini, he "would have objected . . . It's not a practice I would have condoned, and I think it's certainly something I would have remembered." Tr. 1395

-14-

Case 1:97-cv-00579-MCW

Document 155

Filed 02/13/2008

Page 20 of 52

(Nieves). Mr. Nieves explained extensively that, had there been knowledge of such a promise, it would have been cause for an immediate meeting and resolution, explaining to the agent that he could not make such a promise, even if he had access to "bottomless" funding accounts. Tr. 1397-401 (Nieves). Greg Passic, who was responsible for financial investigations for the DEA, see Tr. 1128 (Passic), expressed the same understanding. Tr. 1148, 1154-55 (Passic). Mr. Passic stated that he would have remembered hearing any information about promises made by ASAC Salvemini because such a promise would be "contrary to DEA policy." Tr. 1155 (Passic). DAAG Warren, the ranking DOJ member of the SARC, explained that the only kind of promise to a confidential informant that she ever heard about in any SARC meeting10 was that "there would be a consideration at the close of the case of the value of the case, and that would be the only promise if it were a financial arrangement." Tr. 1513 (Warren). DAAG Warren testified further and made perfectly clear that she would have objected to any promises of the kind alleged by the Princess: Q (Mr. Prouty): Directing your attention to the Princess, did you ever hear that she was promised a particular amount of the proceeds from the operation? A (DAAG Warren): No. Absolutely not. I'm sure that would have rested in my mind because that would affect a later prosecution. I think would render the witness less valuable. That

DAAG Warren was demonstrably in attendance for at least two SARC meetings involving the Princess: those held in March and August 1994. See Px 14 (committee minutes bearing attendance list) ; Px 251 (same). -15-

10

Case 1:97-cv-00579-MCW

Document 155

Filed 02/13/2008

Page 21 of 52

was the kind of thing that I concentrated, the affect on a later prosecution of an operation and I was somewhat of a pit bull about things like that. Q: Would you have kept those concerns to yourself? Would you have said something? A: I'm not known for being quiet. The purpose of the SARC was to bring out these kinds of concerns, and I often participated very vocally in the SARC reviews. Tr. 1513-14 (Warren). Furthermore, DAAG Warren took contemporaneous actions demonstrating her lack of knowledge of any agreement allegedly entered by ASAC Salvemini and the Princess. When the Princess was kidnaped, the DEA Administrator, Thomas Constantine, requested that she evaluate what a proper level of reward would be for the Princess. Tr. 1515 (Warren). DAAG Warren personally conducted an extensive review and drafted the memorandum found at Plaintiff's Exhibit 13. This document makes no mention of any agreement, see Px 13, because DAAG Warren was aware of none. Tr. 1515 (Warren). Plainly, if the DEA or DAAG Warren had been aware of any agreement with the Princess, there would have been no need for the Deputy Assistant Attorney General to have wasted her time creating this memorandum, because DEA management could have simply relied upon its agreement with the Princess to determine what was owed to her. ASAC Salvemini's very broad testimony that he made the United States Attorneys' Office "aware of all promises and commitments" to the Princess, see Tr. 343 (Salvemini) and

-16-

Case 1:97-cv-00579-MCW

Document 155

Filed 02/13/2008

Page 22 of 52

that he told the SARC11 of his alleged promises to the Princess "two or three times," see Tr. 369 (Salvemini), is simply not credible and cannot withstand its contradiction to the overwhelming contrary testimony discussed above.12 ASAC Salvemini is not specific in identifying the individuals who he allegedly told of his promises, except for SAC Cash, who denied it. Tr. 867 (Cash). SAC Cash, in fact, did not talk very much with ASAC Salvemini, who avoided him. Id. Moreover, ASAC Salvemini's testimony, that he openly informed the SARC of his promises to the Princess, is contradictory to his testimony that he had been told to minimize requested payments to the Princess because it had the potential to offend Attorney General Reno's supposed "liberal Democrat" disinclination to be engaged in money laundering cases. See Tr. 379-80 (Salvemini). Inasmuch as DAAG Warren attended the SARC meetings and ASAC Salvemini testified that he believed that Attorney General Reno was apprized by her of the Princess investigation, see Tr. 346 (Salvemini), the notion that ASAC Salvemini would freely tell the SARC (and DAAG Warren) of extensive payment promises to the Princess, but not submit applications for payment to the DEA and the Asset Forfeiture Fund for fear of raising the Attorney General's ire, is farfetched and demonstrates that ASAC Salvemini's testimony is

The Princess asserts that ASAC Salvemini attended five to ten SARC meetings about her case. Pl. Br. 22. This is an inaccurate summary of ASAC Salvemini's testimony. ASAC Salvemini, in fact, clarified that, when he testified that he had been to five to ten meetings regarding the Princess, he did not mean that he had been to five to ten SARC meetings, and that he did not recall the actual number of SARC meetings that he attended beyond there being "a couple." Tr. 364 (Salvemini). Mr. Michelotti, the SARC's effective recording secretary, testified that there were no more than five SARC meetings about the Princess. Tr. 548 (Michelotti). This is consistent with ASAC Salvemini's demonstrated propensity to provide accounts of events that are contrary to those of every other witness to them. See, e.g., Tr. 1059-60 (Marshall). -1712

11

Case 1:97-cv-00579-MCW

Document 155

Filed 02/13/2008

Page 23 of 52

inaccurate.13 B. No Documents Should Have Made DEA Officials Aware Of Any Promises Made By ASAC Salvemini To The Princess

With the exception of the regular $10,000 monthly "salary" paid to the Princess to allow her to look and act the part of a successful money launderer, see Px 22, there is no indication in any of the documents that were in any DEA file that would have been reviewed that would have indicated promises to the Princess. ASAC Salvemini has testified that, notwithstanding regulatory requirements to put any agreement with an informant in writing, see Dx 3, p. 16; Dx 20, Section 6612.43 A. 3, no document ever set out the details of any agreement between he and the Princes. Tr. 394-96 (Salvemini). This includes the telexes to DEA headquarters seeking authority to pay the Princess more than $25,000 per quarter (and providing justifications) that may be found (with the headquarters responses) in Plaintiffs Exhibits 113 through 152. Px 113152. Moreover, documents created by ASAC Salvemini that were reviewed by his superiors, and which would have provided the opportunity for him to explain any such promises, made no mention of them. Defense Exhibit 11 is illustrative. ASAC Salvemini testified that he wrote this memorandum, in February 1995, at the request of DEA headquarters "to give them an overview of everything that had been done so far in the way of remuneration, and a general assessment as to, you know . . . the rationale behind the payments." Tr. 446 (Salvemini). In this memorandum, ASAC Salvemini complains to his superiors that funds requested for the Princess from the Asset

Moreover, SAC Cash, who had a longstanding personal relationship with Attorney General Reno going back to the time that she was the Miami, Florida State's Attorney, testified that the allegation that they were to minimize information to the Attorney General was a flat out falsehood. Tr. 868 (Cash). -18-

13

Case 1:97-cv-00579-MCW

Document 155

Filed 02/13/2008

Page 24 of 52

Forfeiture Fund have not yet been paid. Dx 11. This document explains that an earlier request for $250,000 had been "arbitrarily" reduced to $100,000 and that another pending request for $250,000 remained unresolved. Dx 11, p. 2. He also explains the $10,000 monthly "salary" to the Princess as being used to help her support her family and to allow her to live the affluent lifestyle of an apparent money launderer. Id. Nowhere in the document does he relate that any of these amounts were mandated by a bargain that he had with the Princess, nor does he complain that the amounts paid were less than a percentage that DEA management would have reason to know had been guaranteed. Dx 11. ASAC Salvemini wrote that $23 million in drug dealer proceeds had already been seized, see Dx 11, pp. 1, 3, but that future award requests would be "no way even near" the amount to which the Princess might be entitled under statute. Dx 11, p. 3. Indeed, ASAC Salvemini admitted that the representations contained in this document were contrary to what he had allegedly promised the Princess: "Q (Mr. Prouty): You were going to ask for less than you had agreed to her to pay? A (Salvemini): Yes." Tr. 447 (Salvemini). ASAC Salvemini's testimony on re-direct examination, that SAC Cash directed him to change Dx 11, to remove references to any promises to the Princess, see Tr. 449 (Salvemini) is not accurate and quite suspect. He did not raise this point until after he was confronted with the implications of Defense Exhibit 11 (surely, if true, SAC Cash's alleged interference would have been very telling, even without his having to refute the point made in cross examination). Moreover, SAC Cash denied ordering the change and, in fact, had retired from his position as SAC several months before ASAC Salvemini issued the letter. Tr. 867-68 (Cash). Moreover, ASAC Salvemini's allegation is contradicted by the fact that SAC Cash would have never

-19-

Case 1:97-cv-00579-MCW

Document 155

Filed 02/13/2008

Page 25 of 52

countenanced an ASAC writing a letter directly to the DEA Assistant Director of Operations when he was in charge of the Miami FD. Tr. 868 (Cash). Although there is no evidence that the document was ever seen by ASAC Salvemini's superiors, his draft application for an Attorney General's Exemption for Operation Princess,14 in Plaintiff's Exhibit 4 is another example of ASAC Salvemini's not mentioning his supposed deal with the Princess when presented an opportunity. The document makes no mention of any deal with the Princess, although it is rather extensive, otherwise. See Px 4. The January 28, 1996 memorandum from Associate SAC John Costanzo to Chief of Operations Wankel, see Px 12, though not written by ASAC Salvemini, is another document originating from the field that would have given the DEA hierarchy reason to believe that there was no deal with the Princess. In particular, Associate SAC Constanzo represents that the Princess sought 8 million dollars as services-rendered for her work over the last four years and that he had replied that this was not a reasonable request. Px 12, pp. 1-2. Nowhere in this document is there any reference to a deal made between the Princess and ASAC Salvemini. Px 12. If such a deal had been made, the reader would have expected to be informed of it. Tr. 1062-64; 1098 (Marshall). Moreover, if, as alleged by the Princess, the DEA hierarchy knew of such an agreement, the reader would certainly expect to see the matter discussed ­ especially in that portion of the memorandum where Associate SAC Costanzo reported that the Princess was threatening a lawsuit. See Px 12, p. 2.

In an exaggeration not atypical, ASAC Salvemini stated that the August 25, 1994 SARC granted a new exemption to Princess independent of Pisces. Px 4, p. 1. As is demonstrated in Section IV A below, the SARC had no authority to grant an exemption and only directed ASAC Salvemini to begin the process of obtaining one. -20-

14

Case 1:97-cv-00579-MCW

Document 155

Filed 02/13/2008

Page 26 of 52

Plaintiff's Exhibit 16, the closing report for Operation Princess, written by Officer Lees, but signed by ASAC Salvemini and others, also indicated that there had been no agreement. First, the report made no reference to any agreement between the DEA and the Princess. See Px 16. Second, the report states that all "payments to CS's [confidential sources] . . . have been documented . . . As of 2/25/97 all commission accounts have been closed and all funds properly disbursed or seized." Px 16, p. 5. Thus, the report would imply that there was no deal with the Princess, and certainly not one that left the DEA with unpaid obligations upon Operation Pisces funds. A significant basis of the Princess's case is the notion that the DEA "should have known" about any agreement between herself and ASAC Salvemini E.g., Pl. Br. 58-59, 67-68. Throughout the trial, the Princess has suggested that, with all of the review and oversight of the Princess case and Pisces exemption, the DEA hierarchy should have asked more questions and been alerted to any dubious dealings by ASAC Salvemini. This is simply not the case. First and foremost, it is important to recognize that none of those individuals reviewing or auditing the Operation Princess accounts would have reason to inquire whether ASAC Salvemini had made an unauthorized arrangement with the Princess. Associate SAC Schuitema testified that he did not quiz ASAC Salvemini about whether he had made a deal with the Princess because he expected that ASAC Salvemini understood that DEA rules and regulations would have prohibited such a thing. Tr. 1556-57 (Schuitema). Mr. Nieves never felt the need to ask ASAC Salvemini whether he had made any promises to the Princess, "Because in my experience, it wasn't a practice." Tr. 1396 (Nieves). Mr. Wankel testified, similarly to Mr. Nieves, that because he would have expected that the experienced individuals working on the

-21-

Case 1:97-cv-00579-MCW

Document 155

Filed 02/13/2008

Page 27 of 52

Princess case for DEA would not have made such promises, there would be no need to ask. Tr. 1029 (Wankel). As Administrator Marshall stated: "I didn't feel that I had any reason to look for it because [he would have expected to be told of such promises if they had been made.] Tr. 1064; 1104 (Marshall); see also Tr. 1095 (Marshall). SAC Cash made similar statements. See Tr. 874 (Cash). Although the expenses incurred in the case (including the $10,000 monthly "salary" for the Princess) were objectively high, as ASAC Salvemini explained, they were appropriate for the level of money laundering that was occurring. Dx 11, p. 2. Although DEA officials explained that the requests for large payment authorizations might have generated an inquiry for an explanation, see Tr. 1151-52 (Passic), there is no reason to believe that the explanation offered by ASAC Salvemini (or the agents referenced in the teletype that sought the payment, e.g., Px 116, Px 119; Px 133) would have been unsatisfactory. Indeed, Officer Tiderington testified that he had received such phone calls and that his response had satisfied the caller. Tr. 616 (Tiderington). Since Officer Tiderington knew of no promises by ASAC Salvemini to the Princess, his response to the telephone calls would not have brought any such promise to their attention. As Mr. Nieves stated, the amount of money spent on the Princess case "wouldn't necessarily ring a bell." Tr. 1393 (Nieves). Moreover, nothing about the amounts of money paid to the Princess would have alerted Mr. Schuitema to there being anything necessarily questionable about the operation or that there were any promises made to her. Tr. 1560-62 (Schuitema). At most, the only promise that could be inferred from a review of the documents before the DEA was that the Princess would regularly receive a $10,000 stipend during the active portion of the investigation.

-22-

Case 1:97-cv-00579-MCW

Document 155

Filed 02/13/2008

Page 28 of 52

Nor would any minor irregularities noted in the payment paperwork cause an inquiry about promises made to the Princess. Although Mr. Nieves considered it problematic to call the $10,000 monthly stipend to the Princess a "salary," had he been aware of that terminology, he would merely have instructed the field office to change the wording. Tr. 1377 (Nieves). Similarly, although SAC Cash was initially deeply concerned with some of the payment paperwork that Princess's counsel showed him during the trial (in particular the signatories upon the documents), see Tr. 886, 888, 897-98 (Cash), upon further review, his concerns abated. Tr. 930-31 (Cash). Notably, none of the other witnesses called before or after SAC Cash expressed any concern over the signatories upon these documents. Finally, the investigation regarding Agent Rene Delacova, who stole money from the drug traffickers during Operation Princess, would give no cause for the investigators or the DEA hierarchy to believe that ASAC Salvemini had made any deals with the Princess. That investigation was about theft by a DEA agent, see Px 239, and, as appalling as its circumstances were, there was no testimony that anything explored in that investigation had anything to do with any promises ASAC Salvemini would have made to the Princess, much less that the investigation uncovered evidence of such promises. IV. Management Of Funds Related To The Princess To understand the ability of ASAC Salvemini and the DEA to make payments to the Princess, it is helpful to discuss the manner in which funds generated by the Princess's money laundering activities were controlled. Given the amounts of money involved, it will come as no surprise there were controls upon them exceeding the whims of the agents involved in her investigation. ASAC Salvemini testified that he spent none of his "PE/PI" (purchase of evidence

-23-

Case 1:97-cv-00579-MCW

Document 155

Filed 02/13/2008

Page 29 of 52

/ purchase of information) funds upon the Princess investigation. Tr. 433 (Salvemini). Instead, as noted above, the entire operation was funded by "commissions" earned upon money laundered. Tr. 418-20 (Salvemini). As described at the trial, these funds were controlled, in the first instance, by personnel in the DEA Miami FD, before being transferred to the Princess bank accounrt. Moreover, even after they were transferred to the Princess bank account controlled by ASAC Salvemini, they remained subject to significant limitations, which ASAC Salvemini recognized. Those funds that were actually seized from the drug dealers were not given to ASAC Salvemini's control and their disbursement was strictly controlled by DOJ. A. Management Of Commission Funds

In the early 1990s, when the DEA first started money laundering operations with the Princess, the DEA's Miami FD had an extraordinary infrastructure in place to manage such operations: Operation Pisces and its Exemption Management Group ("EMG"). Operation Pisces had been a money-laundering investigation that was run by the Miami FD in the 1980s and had successfully led to criminal charges. Tr. 773-74 (Coward). Rather than close the operation after its completion, the DEA Miami FD decided to continue use of its hard-earned expertise and highly developed infrastructure to support other money laundering investigations. Id. In essence, it was to become an "umbrella" organization providing essential services to money laundering investigations. Id. Central to the use of Operation Pisces as an umbrella organization was its possession of an "Attorney General's Exemption." Tr. 773-74 (Coward). An Attorney General's Exemption, at the time, was a formal finding by the Attorney General him or herself that permitted an agency to undertake certain otherwise-illegal acts in furtherance of a criminal investigation. Tr. 774

-24-

Case 1:97-cv-00579-MCW

Document 155

Filed 02/13/2008

Page 30 of 52

(Coward); Tr. 805-06 (Devaney). One of the most significant aspects of such an exemption involved the ability to obtain and spend funds not appropriated by Congress. Tr. 775 (Coward); Tr. 806 (Devaney). With an Attorney General's Exemption, it can be lawful for a law enforcement agency to "earn" money from criminals in the course of investigating them and to spend that money in furtherance of the investigation. Id.; see also Tr. 1511 (Warren). Operation Pisces was granted an Attorney General's Exemption in the 1980s and that Exemption provided the legal authority for multiple money laundering investigations conducted by the DEA Miami FD in the late 1980s and early 1990s. Dx 9; Dx 19, p. 3. The Princess investigation was just one such operation covered by the Pisces umbrella. Tr. 778 (Coward). DEA agents attached to Operation Pisces performed a full range of services for those investigations that availed themselves of the Pisces Attorney General's Exemption. All funds transfers in nominal money laundering were accomplished through Pisces-controlled bank accounts and by personnel attached to the EMG (which reported to a chain of command that did not include ASAC Salvemini, Tr. 782 (Coward)). After a money pick-up was made by personnel involved in the Princess operation, the cash was turned over to EMG personnel, who deposited it into Pisces-created bank accounts. Tr. 401 (Salvemini); Tr. 775 (Coward). The EMG personnel would then transfer the money to the drug dealers' specified bank accounts, while withholding the agreed-upon commission. Tr. 77677 (Coward). EMG personnel would then take a portion (approximately 20 percent) of the commission to apply towards EMG expenses and forward the rest to a bank account used to fund the Princess investigation, although, on occasion, when large amounts of money were involved, the EMG would hold onto the funds before parsing them out. Tr. 777-78 (Coward).

-25-

Case 1:97-cv-00579-MCW

Document 155

Filed 02/13/2008

Page 31 of 52

The DEA Fort Lauderdale Office running the Princess operation opened up a bank account under the name "Michael Shepherd" ("the Michael Shepherd account") to place the Pisces-forwarded proceeds into and to draw upon for operational expenses related to the investigation. Tr. 399-400, 420-21 (Salvemini). This account was controlled by ASAC Salvemini and others, but was subject to EMG oversight and DEA rules and regulations. Tr. 780 (Coward); Tr. 426-27 (Salvemini). The EMG performed regular audits upon the Michael Shepherd account to ensure that its funds were being spent consistently with the strictures of the Pisces Attorney General's Exemption. Tr. 780 (Coward). Moreover, rules governing limitations upon the payments of confidential informants continued to apply to funds spent originating from an Attorney General's Exemption. See Dx, p.4. Thus, although ASAC Salvemini may have theoretically had the ability to (unlawfully) write a check to the Princess upon the Michael Shepherd account for any amount that he chose (within the account's limits), he was required to seek authority from higher DEA headquarters when his payments to the Princess exceeded $25,000 in a quarter of a year. Tr. 426 (Salvemini). ASAC Salvemini recognized this limitation and scrupulously sought permission from DEA headquarters prior to making payments to the Princess that exceeded this quarterly amount ­ even waiting inconveniently long periods of time to pay the Princess because he felt compelled to await authorization from headquarters before spending these funds upon the Princess. Tr. 432 (Salvemini); Tr. 612 (Tiderington). The Princess alleges that Operation Princess ultimately possessed its own Attorney General's Exemption, perhaps implying that ASAC Salvemini greater authority to control the funds. See Pl. Br. 66. ASAC Salvemini has testified to this, see Tr. 398 (Salvemini), and,

-26-

Case 1:97-cv-00579-MCW

Document 155

Filed 02/13/2008

Page 32 of 52

admittedly, early in this litigation, the Government thought that it might be so.15 A more thorough examination of the evidence indicates that this supposition was mistaken, though the mistake is understandable and not indicative of an intentional misrepresentation or exaggeration by ASAC Salvemini or anybody else involved. In the Fall of 1994, DOJ leadership encouraged the DEA to begin to phase out "umbrella" Attorney General's exemptions and replace them with individual Attorney General's Exemptions should be utilized for such operations as the Princess. See Tr. 1144 (Passic); Dx 9 (reflecting concerns in 1993 that "umbrella" exemptions should be phased out). At a SARC meeting in August 1994, the direction was given to begin the process of obtaining a separate exemption in the Princess case. Px 251. Notably, the SARC minutes stated that, until that time, Princess had operated under the Pisces exemption. Id. The SARC could not issue an exemption, because SARC recommendation was only one step along the way towards ultimate approval by Attorney General Reno, herself. Tr. 1514, 1521 (Warren). However, as subsequent SARC minutes and testimony made clear, the shift to an exemption for the Princess case never happened and it was delayed past the time that the Princess case came to an end.16 Tr. 525-26 (Michelotti) (Operation Princess always worked under the Pisces exemption); Tr. 992 (Wankel); Tr. 1139 (Passic). The March 30, 1995 SARC minutes, in particular, stated that Operation

Even DAAG Warren testified that she "believed" that Operation Princess was granted an Attorney General's exemption, Tr. 1512 (Warren), but she did not have the advantage of reviewing the later-discovered SARC minutes. The newly-discovered SARC minutes for the meetings held on August 25, 1994 and March 30, 1995 underscore this point perfectly. See Px 251; Px 252. Indeed, they greatly enhance the credibility of those witnesses who testified that there had been no new exemption for Operation Princess because these witnesses were unaware that their testimony would later be corroborated so well. -2716

15

Case 1:97-cv-00579-MCW

Document 155

Filed 02/13/2008

Page 33 of 52

Princess would be continued "for an additional period of six months, utilizing the Pisces exemption." Px 252. Six months after this meeting, of course, the Princess was in captivity. Indeed, as demonstrated by Defense Exhibit 18, the September 1995 EMG Financial Statement for Operation Princess, Operation Pisces managed Princess money until the very end. Dx 18, see also, Px 72; 73; 74; 75 (payment vouchers to the Princess through the end of 1995 referring to "Operation Pisces Funds"). B. Asset Forfeiture Funds

Whenever the DEA decided to seize funds directly from drug traffickers, it followed a strictly defined procedure that involved centralized control of the funds. The seized cash would immediately be taken to a bank, where it would be deposited and the bank would provide a cashier's check for the deposited amount. Tr. 405-06 (Salvemini); Tr. 813 (Devaney). The cashier's check would be placed into the custody of the United States Marshall's Service. Id. After legal proceedings successfully confirmed the seizure of the funds, the money would be placed in the Asset Forfeiture Account at the Department of Justice. Tr. 813-14 (Devaney). The DOJ Asset Forfeiture Unit would then consider recommendations for disbursement of these funds, but would apportion them within its own discretion, limited only by statute. Tr. 408 (Salvemini); Tr. 813-15, 818 (Devaney). When assets were seized pursuant to Operation Pisces or any other exemption, they were not placed in the exemption's bank accounts, even briefly. Tr. 407 (Salvemini); Tr. 820 (Devaney); Tr. 779 (Coward) (expressing, to some degree, his disappointment that Operation Pisces could not access seized funds). ASAC Salvemini testified that his promises to pay the Princess a portion of seized funds

-28-

Case 1:97-cv-00579-MCW

Document 155

Filed 02/13/2008

Page 34 of 52

were based upon the Asset Forfeiture Fund or agency coffers because he did not possess the money to make the payments, even in the Michael Shepherd account. Tr. 470 (Salvemini). When the Princess alleges that ASAC Salvemini promised to pay the 25 percent out of trafficker directed funds (i.e., the Michael Shepherd account), see Pl. Br. 26, she misconstrues ASAC Salvemini's testimony since he, in fact, explained to the Princess's counsel that the 25 percent was to come from seizures. Tr. 378 (Salvemini). V. The DEA's Payment Of The Princess A. Payments Made Prior To The Kidnaping

The first DEA payment made to the Princess was for $766.00 on January 10, 1992. Px 22. She began receiving significant sums thereafter. Id. ASAC Salvemini testified that he originally would use DEA-controlled funds to pay bills upon the Princess's behalf (e.g., a credit card bill that included meals purchased as part of the investigation), but that he was later informed that the better practice was to pay the Princess directly, which he did. Tr. 300 (Salvemini). We have no reason to doubt this. Sometime in mid to late 1992, ASAC Salvemini directed that the Princess be paid a $10,000 monthly "salary" that would help maintain her and allow her to live in the lifestyle of a money launderer. Tr. 330-31 (Salvemini). As of February 13, 1995, the Princess had been paid $270,000 in "salary;" $196,951.58 for "operational expenses;" and $183,000 as "rewards." Dx 11, p. 2. By the time of her kidnapi