Free Motion to Dismiss Counts - District Court of Colorado - Colorado

Case 1:04-cr-00103-REB

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Filed 12/30/2005

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO Criminal Case No. 04-CR-103-RB UNITED STATES OF AMERICA, Plaintiff, v. 5. JANNICE McLAIN SCHMIDT, Defendant. ______________________________________________________________________________ MOTION TO DISMISS COUNTS 1, 3-9, 16, 17, AND 20-29 OF SECOND SUPERSEDING INDICTMENT ______________________________________________________________________________ COMES NOW the Defendant Jannice McLain Schmidt, by and through her courtappointed counsel Daniel T. Smith, and respectfully requests this Court enter an order dismissing Counts 1, 3 through 9, 16, 17, and 20 through 29 of the Second Superseding Indictment. The grounds upon which this motion is brought are stated below. This motion is brought pursuant to F.R.Cr.P. 12(b)(2)(3) and case law cited in this motion. The counts enumerated above charge a conspiracy, a scheme to defraud investors using the U.S. mails or wires, and a securities fraud scheme. Within each of these counts, the

conspiracy or fraudulent scheme is subject to dismissal because it is duplicitous in that it charges more than a single conspiracy or scheme within a single count. STATEMENT OF THE CASE 1. On or about March 10, 2004, the Defendant herein was indicted by a grand jury

sitting in the District of Colorado. That indictment contained numerous counts involving a single charge of conspiracy, several charges of mail fraud, wire fraud, and securities fraud. The

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conspiracy that was charged covered a time period from April 1999 through April of 2003. The conspiracy charged the Defendant with participating with other co-Defendants in an investment scheme which involved the fraudulent sale of alleged medium term notes, bank debentures, and other government instruments which allegedly would return significantly high profits. That conspiracy went on to charge that there was a lack of risk in the proposed investment because the monies invested would be held in what was referred to as a non-depletion account in a large well-respected banking institution. Further, the monies invested would be insured by private companies as well as the Security Investor's Protection Corporation. 2. The initial conspiracy charged, alleged that the Defendant and her co-conspirators

had made false representations to potential investors including the following: That Norman Schmidt had a special relationship with the Federal Reserve System which aided and assisted him in trading financial instruments. Further, Norman Schmidt and George Beros had a history of successfully trading financial instruments. Following the conspiracy charge in the initial indictment, there were several counts which charged this Defendant with violation of Title 18 United States Code Section 1341, mail fraud, Title 18 United States Code Section 1343, wire fraud, and Title 15 United States Code Section 77q(a) and 77x, securities fraud. In each of those charges, the substantive allegations of the conspiracy were incorporated within the mail fraud, wire fraud, and securities fraud counts. 3. On or about August 11, 2004, a Superseding Indictment was returned in the

District of Colorado against this Defendant. The allegations contained therein, including the conspiracy count, the mail fraud, wire fraud, and security fraud counts, were identical to the initial indictment. Further, the statutory fraud counts once again incorporated by reference the substantive allegations made in the conspiracy charge.

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4.

On September 14, 2005, a grand jury sitting in the District of Colorado returned

the Second Superseding Indictment against this Defendant which is the subject of this motion. In this indictment, once again a conspiracy under Title 18 United States Code Section 371 is charged in Count 1 and then schemes to defraud potential investors are alleged under the mail fraud, wire fraud and security fraud statutes. 5. In the Second Superseding Indictment, the time period charged for the conspiracy

and the fraudulent schemes is alleged to have begun in April of 1999 and continued through October of 2004. 6. Once again, in Count 1, the allegations revolve around the Defendant's allegedly

trading medium term bank notes in which investors may invest and receive a significant return on their investment. 7. Once again, the investment is represented to be risk free in that the investor's

money will be deposited in "non-depleting" bank accounts at well-known financial institutions. Further, each investor's investment is insured by private insurance companies as well as the Security Investor's Protection Corporation. 8. Again, as was alleged in the First Superseding Indictment, the Second

Superseding Indictment alleges that false and misleading statements were made to potential investors including the allegation that the Defendant Norman Schmidt had a special relationship with the Federal Reserve which aided and assisted him in trading financial instruments and that Norman Schmidt and George Beros had a history of successfully trading financial instruments. 9. Finally, the overt acts alleged to have been committed in furtherance of the

charged conspiracy in the Second Superseding Indictment are almost identical to the overt acts charged in the initial indictment and the First Superseding Indictment.

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10.

In the Second Superseding Indictment, the mail fraud charges against this

Defendant contained in Counts 3 through 9, specifically adopt the substantive allegations made in the conspiracy charge in paragraphs 2, 3, 4, and 5. This same adoption of charges is contained in the wire fraud counts against this Defendant, Counts 16 and 17, and the security fraud counts contained in Counts 20 through 29. In essence, the conspiracy with which this Defendant is charged with being a member of is replicated in the fraudulent schemes which are charged in the mail, wire and securities fraud counts. 11. In the first two indictments returned in this case, alleged victims of this supposed

fraudulent scheme consistently have stated that they were offered the opportunity to participate in an investment which involved the trading of medium term bank notes with most trading taking place overseas and being handled between European banks. This succinctly describes the

conspiracy and fraudulent schemes charged in the first two indictments as they are alleged to have occurred between April of 1999 and April of 2003. 12. With the Second Superseding Indictment, a significant change has occurred in the

conspiracy count and the fraudulent scheme counts. The time period of the conspiracy and schemes has now been enlarged to run from April of 1999 through October of 2004. The facts as alleged in the Second Superseding Indictment which support the conspiracy count, the mail fraud counts, the wire fraud counts, and the security fraud counts under which this Defendant is charged remain consistent with the initial and First Superseding Indictment. 13. However, a review of testimony provided for the grand jury considering the

Second Superseding Indictment, and statements provided by an investor in the Second Superseding Indictment clearly show that the expanded time period charges a separate and distinct conspiracy and scheme to defraud.

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14.

The witness Michael Huffman was called to testify before the grand jury in this

matter. A copy of pertinent parts of that testimony is attached hereto and incorporated herein and identified as Exhibit A. Mr. Huffman describes as having been solicited for the original medium term bank note scheme and to invest in Smitty's Investments. He described that

investment as a program for investing in medium term bank notes which were to be traded and provide a significant return. Exhibit A, pg. 10-13 He further described this trading program as being run through European banks, Exhibit A, pg. 12, involving the sale of medium term bank notes Exhibit A, pg. 12, and having his investment being held secure in well-known American financial institutions and being insured. Exhibit A, pg. 13. Finally, he testifies that these medium term bank notes would be traded internationally. Exhibit A, pg. 16. 15. Mr. Huffman then testifies to his being made aware that search warrants were

executed at the offices of Smitty's Investments Exhibit A, pg. 27 and that money was seized from Smitty's Investments. Exhibit A, pg. 27, 28. 16. It is after the execution of these search warrants and the money seizure that Mr.

Huffman testifies that he was approached by Norman Schmidt about forming a new company to be known as Rocky Mountain Sports Promotions, Inc. Exhibit A, pg. 30. Huffman goes on to testify that this company was in fact set up at Norman Schmidt's suggestion Exhibit A, pg. 30 and was to be operated as a sports promotion business. The promotions would include the marketing of hats, signs and other things that go with sports promotion. Exhibit A, pg. 30. It was then Mr. Huffman's understanding that Normans Schmidt would obtain investors for this company. Exhibit A, pg. 32. At no time does Mr. Huffman ever testify that he had any

understanding that the company Rocky Mountain Sports Promotions, Inc. would be involved in the marketing, investing, or trading of medium term bank notes.

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17.

The government then provides in discovery the statement of an investor in Rocky

Mountain Sports Promotions, Inc. by the name of Cliff R. Seigneur. Attached hereto and incorporated herein are pertinent parts of the investor Seigneur's statement which is identified as Exhibit B. As Exhibit B shows, Mr. Seigneur invested in Rocky Mountain Sports Promotions, Inc. and the investment was later changed to High Track Team, LLC. Seigneur was told by Norman Schmidt that this investment was going into the marketing field of stock car racing. He was given no specific details of exactly how the money would be used for promotion, but that it would be. Mr. Seigneur then invested $25,000 in this particular investment program. 18. While Mr. Seigneur was aware of the prior Smitty Investment program, it is clear

from his statement that it was not his understanding that he was investing in medium term bank notes or anything similar, but, rather, the sports promotion business. ARGUMENT 19. The conspiracy charge contained in Count 1 of the Second Superseding

Indictment, the mail fraud charges contained in Counts 3 through 9 of the Second Superseding Indictment, the wire fraud charges contained in Counts 16 and 17 of the Second Superseding Indictment and the security fraud charges contained in Counts 20 through 29 of the Second Superseding Indictment must be dismissed by this Court as they are duplicitous. Each of the aforementioned counts is duplicitous because it charges more than one crime in an individual count. U.S. v. Dashney 937 F. 2d 532(10th Cir. 1991). 20. The Defendant brings this challenge pursuant to F.R.Cr.P. 12(b)(2)(3) at this time

as the law in the Tenth Circuit requires that such a challenge to an indictment be raised prior to trial. U.S. v. Trammell 133 F3d 1343(10th Cir. 1998), U.S. v. Bowline 593 F2d 944(10th Cir. 1979), U.S. v. Henry 504 F2d 1335(10th Cir. 1974).

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21.

The Tenth Circuit, in discussing the multifaceted problems a duplicitous

indictment offers a trial court and defendant has defined those problems as follows: "The dangers of duplicity are three-fold: (1) a jury may convict a defendant without unanimously agreeing on the same offense; (2) a defendant may be prejudiced in a subsequent double jeopardy defense; and (3) a court may have difficulty determining the admissibility of evidence." U.S. v. Wiles 102 F3d 1043 at pg 1061 (10th Cir. 1996). See also U.S. v. Haddock 956 F2d 1534 (10th Cir. 1992). 22. In the case at bar, the evidence will clearly show that two separate offenses are

charged in each of the counts enumerated above. It is submitted by the Defendant, that there will be no way to determine if a jury has returned a unanimous verdict on any single offense. 23. It is further the position of the Defendant that she will be left in the untenable

position of being unable to plead double jeopardy should a later indictment be brought against her charging the second scheme which is identified in paragraphs 12 through 18 of this motion. The omission of any factual allegation in the Second Superseding Indictment defining the alleged second criminal conspiracy and second alleged scheme to defraud makes a plea of double jeopardy unsustainable. 24. Finally, the Defendant would suggest to this Court that the evidentiary issues

which will be raised in the trial of this matter will be significant and render this Court's prior ruling under F.R.E. 801(d)(2)(e) erroneous. This Court has already ordered the government to file an amended "James" proffer. This proffer will certainly be subject of attack by not only this Defendant but her co-Defendants as well. The basis of the attack in part will challenge the

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government's argument that it has brought a single conspiracy charge and single fraudulent scheme charges. 25. The untenability of the government's position would seem obvious when one

considers the following scenario. While the Defendant Lewis is held in the Federal Detention Center under the first two indictments, and the Defendants Weed, Smith and Beros are released on bond on the first two indictments, the Second Superseding Indictment alleges in its extended time of charge, that these Defendants participated in new criminal conduct. Specifically, the conspiracy charge and the mail fraud Counts 7, 8, and 9 allege that Lewis, Weed, Smith and Beros, along with Norman Schmidt and Jannice Schmidt, participated in the charged criminal conduct all occurring after March of 2004. This date is most important in that all the Defendants charged in the Second Superseding Indictment, save and except the Defendant Moss, had been arrested by this time and had appeared before various United States Magistrates and been advised pursuant to F.R.Cr.P. 5. 26. It thus must be the government's position that, while these Defendants have all

been charged and either jailed or released on bond pending trial of the charges contained in the original or First Superseding Indictment, that they then joined a new conspiracy and/or scheme to defraud without any allegation that they knew of its existence. 27. The government has argued at the bond revocation hearing held for this

Defendant, that it had to bring the aforementioned charges against all Defendants under the case of United States v. Pinkerton 328 U.S. 640 (1946). This theory does not stand legal scrutiny. All of these Defendants, in March of 2004, appeared before various United States Magistrates, and were advised by a judicial officer, that they need make no statement and that any statement they did make could and would be used against them in a court of law. For the government to now

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argue that by not coming forward and renouncing their participation in a conspiracy they are bound by subsequent acts is legally unsustainable. WHEREFORE, the Defendant respectfully requests that this Court enter an order dismissing the criminal charges against the Defendant Jannice McClain Schmidt as they appear in Counts 1, 3 through 9, 16, 17, and 20 through 29 in the Second Superseding Indictment returned in this case and for any further relief the Court deems just and proper in the circumstances. DONE AND ENTERED THIS 30TH DAY OF DECEMBER, 2005 Respectfully submitted, /s Daniel T. Smith Daniel T. Smith 1900 Grant Street, Suite 580 Denver, Colorado 80203 (303) 860-8100 FAX: (303) 860-8018 E-mail [email protected] Attorney for Defendant Jannice McClain Schmidt

CERTIFICATE OF SERVICE (CM/ECF) I hereby certify that on December 30, 2005, I electronically filed the foregoing MOTION TO DISMISS COUNTS 1, 3-9, 16, 17, AND 20-29 OF SECOND SUPERSEDING INDICTMENT with the Clerk of Court using the CM/ECF system with will send notification of such filing to the following e-mail addresses: Wyatt Burwell Angelo [email protected] [email protected];[email protected];[email protected] Matthew T. Kirsch [email protected]

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[email protected];[email protected] Robert Seldis Berger [email protected] Peter R. Bornstein [email protected] [email protected] Paul B. Daiker [email protected] Ronald Gainor [email protected] Thomas Edward Goodreid [email protected] Thomas James Hammond [email protected] Declan Joseph O'Donnell [email protected] Robert Patrick Sticht [email protected] /s Daniel T. Smith Daniel T. Smith 1900 Grant Street, Suite 580 Denver, Colorado 80203 (303) 860-8100 FAX: (303) 860-8018 E-mail [email protected] Attorney for Defendant Jannice McClain Schmidt

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