Free Response - District Court of Colorado - Colorado

Case 1:04-cr-00103-REB-MEH

Document 1049

Filed 03/13/2007

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO

Criminal Action No 04-cr-00103-REB-06 UNITED STATES OF AMERICA Plaintiff, v. 6. MICHAEL SMITH, Defendant. _____________________________________________________________________ GOVERNMENT'S SURREPLY AND OBJECTION TO DEFENDANT SMITH'S STATEMENT AS TO EXPERT WITNESS FOR TRIAL _____________________________________________________________________ The Government, by Wyatt Angelo and Matthew T. Kirsch, the undersigned Assistant United States Attorneys, as ordered by the Court during the initial pre-trial conference on March 2, 2007, files this surreply to the REPLY TO OBJECTIONS RE: DEFENDANT SMITH'S EXPERT WITNESS [Doc. # 977]. The government requests that the Court bar the proffered witness's testimony based defendant Smith's continued failure to comply with the Court's ORDER MARSHALING EXPERT WITNESS TESTIMONY [Doc. # 426] and based on Federal Rules of Evidence 402 and 702, as explained below: 1.
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The Court's ORDER MARSHALING EXPERT WITNESS TESTIMONY [Doc. #

As the Court indicated was permissible during the initial pre-trial conference, the government maintains its separate and additional objection to defendant Smith's proffered expert testimony based on the untimeliness of his disclosures. See Doc. # 946.

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426] as incorporated into the THIRD SUPPLEMENTAL SCHEDULING ORDER [Doc. # 724], required the defendant to disclose for "each putative expert witness . . . a. a statement of each opinion to be offered by the expert; and b. the bases for each opinion to be offered by the expert . . . ." The Court's Order further specifically required disclosure of the facts and principles on which the expert relies in support of each opinion. 2. Defendant Smith's reply still fails to meet the first requirement of the Court's order ­ that he provide a statement of each opinion to be offered by his expert. Instead, defendant Smith's proffer begins with the caveat that he "anticipates the rebuttal expert to opine approximately as follows . . ." REPLY [# 977] at 1. He then forecasts that his expert will opine that "Capital Holdings underwriters and issuers went to great lengths to camouflage their fraud so that outsiders would not detect it" and that "there are differing levels of due diligence standards." The first opinion that relates directly to defendant Smith comes with the further equivocation that his expert "suspects that Mr. Smith is an outsider," without defining that term, followed by a claim that the expert "cannot yet opine on Mr. Smith's exact securities law category he fell into [sic] until testimony is taken with cross examination." Id. at 2. The reply concludes by suggesting that the expert "may be called upon to speak on any of those matters featured as important by Plaintiff." Id. at 4. By the end of his reply, defendant Smith has done nothing more than identify possible general topics for his expert's testimony, including differing levels of due diligence standards applicable in the securities industry

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and private placement exemption rules and their application to the securities sold by defendant Smith and his codefendants. He never identifies a single, specific opinion to be offered by his expert at trial and therefore has still failed to comply with the Court's Order. This failure continues to prevent the government from being able to challenge and the Court from being able to evaluate the relevance and helpfulness of any of the expert's opinions. 3. Because defendant Smith fails to identify any specific opinions to be offered by his expert, it follows that he also fails to identify any bases for any opinions (other than to suggest that they will be based on evidence introduced at the trial), to explain any principles or methods used in forming those opinions, or how any such principles or opinions were reliably applied to the relevant facts. This represents another failure to comply with Court's Order and further prevents any evaluation of the reliability of any of his expert's opinions. 4. Another basic problem with defendant Smith's reply is that it fails to establish even a threshold for admissibility, based on Federal Rules of Evidence 401 and 702, in that defendant Smith does not explain how his expert's proffered testimony "will assist the trier of fact to understand the evidence or determine a fact in issue," Fed. R. Evid. 702, or how it will be otherwise relevant, Fed. R. Evid. 401. Neither of the general topics for testimony identified in defendant Smith's reply will be relevant at trial. 5. The first general topic mentioned in defendant Smith's reply is "differing levels of due diligence standards" in the securities industry. REPLY [# 977] at 2. This

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issue is irrelevant to the charges against defendant Smith. Only Counts 1 and 23-29 of the Second Superseding Indictment relate to securities fraud; Counts 59 charge him with mail fraud, Counts 16-17 charge him with wire fraud, and Counts 36 and 40 charge him with money laundering. Even the jury instructions proposed by defendant Smith as to the elements of these charges would not require the government to prove anything about the due diligence standard applicable to defendant Smith, if any, or that he exercised any particular degree of diligence before selling the securities at issue. It is possible that defendant Smith's own knowledge or belief concerning any due diligence requirements applicable to him would be relevant to his purported defense of good faith, but his proposed expert testimony on this subject would do nothing to establish his own honest belief about these requirements at the time of the charged offenses. 6. The other general topic mentioned in defendant Smith's reply is "private placement exemption rules and how they apply here, the exclusion of wealthy or sophisticated investors, and how the general statutory rule applies even when the SEC specific rules may not appear to have been followed." REPLY [# 977] at 3. Again, this information is irrelevant to the charges against him, which neither allege nor require the government to prove that he violated any private placement rules. Even assuming that defendant Smith's personal beliefs about the applicability of any private placement rules could be relevant to a good faith defense, his expert's testimony cannot establish those beliefs. 7. In short, defendant Smith's reply still does not comply with the Court's Order requiring him to identify specific opinions and their bases, nor does it identify any 4

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proposed testimony from his expert which would be relevant or helpful to the jury, Fed. R. Evid. 401, 402, & 702. This testimony should therefore be excluded. 8. Finally, although his reply provides no specifics, it also seems likely that his expert's testimony would relate to a number of specific and technical regulations promulgated by the United States Treasury Department and Securities and Exchange Commission. Even if defendant Smith could later establish some minimal relevance for this testimony, its probative value is likely to be substantially outweighed by the danger or jury confusion and problems of undue delay and wasting time. If so, the testimony should also be excluded pursuant to Rule 403 of the Federal Rules of Evidence. THEREFORE, based on the arguments set forth above, the government requests that defendant Smith be prohibited from offering the testimony described in REPLY TO OBJECTIONS RE: DEFENDANT SMITH'S EXPERT WITNESS [Doc. # 977].

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Respectfully submitted this 13th day of March, 2007. TROY A. EID United States Attorney

s/Matthew T. Kirsch Matthew T. Kirsch Wyatt B. Angelo Assistant United States Attorneys 1225 17th Street, Suite 700 Denver, CO 80202 Phone: (303) 454-0100 Fax: (303) 454-0402 email: [email protected] [email protected]

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Case 1:04-cr-00103-REB-MEH

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CERTIFICATE OF SERVICE (CM/ECF) I hereby certify on this 13th day of March, 2007, I electronically filed the foregoing GOVERNMENT'S SURREPLY AND OBJECTION TO DEFENDANT SMITH'S STATEMENT AS TO EXPERT WITNESS FOR TRIAL with the Clerk of the Court using the CM/ECF system which will send notification of such filing to the following e-mail addresses:

Peter Bornstein, Esq. [email protected] Thomas Hammond, Esq. [email protected] Declan J. O'Donnell, Esq. [email protected] Ronald Gainor, Esq. [email protected]

Richard N. Stuckey, Esq. [email protected] Thomas Goodreid, Esq. [email protected] Mitchell Baker, Esq. [email protected] Richard K. Kornfeld, Esq. [email protected]

s/Matthew T. Kirsch Matthew T. Kirsch Assistant United States Attorney 1225 17th Street, Suite 700 Denver, CO 80202 Phone: (303) 454-0100 Fax: (303) 454-0402 email: [email protected]

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