Free Sentencing Statement - District Court of Colorado - Colorado

Case 1:04-cr-00103-REB

Document 1474

Filed 03/04/2008

Page 1 of 9

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO Judge Robert E. Blackburn Criminal Action No. 04-cr-00103-REB UNITED STATES OF AMERICA, Plaintiff, v. 5. JANNICE McLAIN-SCHMIDT, et al., Defendants. ________________________________________________________________________ DEFENDANT'S SENTENCING STATEMENT RE: CONSPIRACY AND OBJECTIONS TO THE PRESENTENCE ADDENDUM ________________________________________________________________________ Defendant, Jannice McLain Schmidt, submits the following Sentencing Statement Re: Conspiracy and Objections to Presentence Addendum as it relates to particularized findings that this Court must make at sentencing as follows: THE GOVERNMENT FAILED TO PROVE, BY A PREPONDERANCE OF THE EVIDENCE, WHEN MS. SCHMIDT JOINED THE CONSPIRACY AND WHAT SHE AGREED TO UNDERTAKE. As more fully developed in the Sentencing Hearing Memorandum (DOC 1393), this Court must make particularized findings as to when Ms. Schmidt joined the conspiracy and the scope of the specific agreement to which she agreed. See United States v. Schmidt, No. 06-1412 at 9 (10th Cir. September 4, 2007); United States v.

Case 1:04-cr-00103-REB

Document 1474

Filed 03/04/2008

Page 2 of 9

Dazey, 403 F.3d 1147, 1177 (10th Cir. 2005). Ms. Schmidt is not accountable for conduct of other members of the conspiracy prior to her joining the conspiracy, even if she knows of that conduct. Id. citing U.S.S.G. § 1B1.3 n.2. Contrary to the Addendum to the Presentence Investigation Report, the Government failed to produce any evidence that Ms. Schmidt agreed to join the Ponzi scheme or that she knew the essential objectives of the Ponzi scheme, prior to the Spring of 2003. The loss enhancement is $48,000. Ms. Schmidt should be released from jail forthwith. It is the Government's burden to prove the conspiracy or "agreement" that Ms. Schmidt agreed to jointly undertake. U.S.S.G. § 1B1.3 Commentary App. Note 2. We must consider the issues presented for review in light of the expansive, yet somewhat elusive, body of law that governs conspiracy. In so doing, we are mindful that the conspiracy doctrine is inherently subject to abuse and that the government frequently uses conspiracy to cast a wide net that captures many players. Thus, we must be careful to guard against guilt by association, to "scrupulously safeguard each defendant individually, as far as possible, from loss of identity in the mass": When many conspire, they invite mass trial by their conduct. Even so, the proceedings are exceptional to our tradition and call for use of every safeguard to individualize each defendant in his relation to the mass. United States v. Evans, 970 F.2d 663, 668 (10th Cir. 1992) citing Kotteakos v. United States, 328 U.S. 750, 773, 776, 66 S.Ct. 1239, 1252, 1253, 90 L.Ed. 1557 (1946). To support a conspiracy conviction the government must prove that Ms. Schmidt agreed with at least one other person to violate the law, that she knew the essential

-2-

Case 1:04-cr-00103-REB

Document 1474

Filed 03/04/2008

Page 3 of 9

objectives of the conspiracy, that she knowingly and voluntarily took part in the conspiracy, and that the conspirators were interdependent. United States v. Anderson, 981 F.2d 1560, 1563 (10th Cir. 1992). "Mere association" with conspirators does not support a conviction for conspiracy. United States v. Jones, 44 F.3d 860, 865 (10th Cir. 1995). Conspiracy cannot be sustained where the Government's evidence does no more than "create a suspicion of guilt or amounts to a conviction resulting from piling inference on top of inference." Anderson, 981 F.2d at 1564 quoting United States v. Horn, 946 F.2d 738, 741 (10th Cir. 1991). The Government's tendered evidence in support of its loss enhancements did nothing more than pile inference on top of inference to arrive at the conclusion that Ms. Schmidt "must have known" of the Ponzi scheme as early as the first count of conviction. It failed to prove that Ms. Schmidt agreed to the Ponzi scheme as early as 2002. It failed to prove Ms. Schmidt knew the essential objectives of the Ponzi scheme as early as 2002. Although Ms. Schmidt admitted, as part of her plea, that she failed to tell others about Mr. Lewis's prior conviction in 2002, this does not prove that she knew the essential objectives of the Ponzi scheme or agreed to participate in it. The Government's evidence of Ms. Schmidt's agreement, prior to the Spring of 2003, is non-existent. For example, Special Agent Hahn testified that Ms. Schmidt "was aware of" the Cease and Desist Order when she refunded Mr. Peterson's money. (Bond

-3-

Case 1:04-cr-00103-REB

Document 1474

Filed 03/04/2008

Page 4 of 9

Hearing Tr. at 18, ll. 6-12) 1 The implication is that Ms. Schmidt "must have known" that soliciting investors in Nebraska was tantamount to agreeing to participate in the Ponzi scheme and "must have known" the essential objectives of the Ponzi scheme. In support of this theory, the Government submitted a letter Ms. Schmidt sent to Mr. Peterson. But in reviewing that letter (Exhibit 15, Bates Stamped number 310809), Agent Hahn could not connect the fact that Ms. Schmidt's letter did not mention the Cease and Desist Order. (Loss Hearing Vol. II at 303, ll. 12-22) Moreover, on cross examination, when pressed about Ms. Schmidt's actual knowledge of the Cease and Desist Order, Agent Hahn was forced to concede that she did not have evidence that Ms. Schmidt ever saw it, except for a vague notion that Ms. Schmidt had talked about it without using the words "Cease and Desist": Ms. Ray: You have no evidence that Ms. Schmidt ever saw a cease-and-desist order, do you? Ms. Hahn: Yes. Ms. Ray: What evidence do you have? Ms. Hahn: She talked about it. ... Ms. Ray: Where was it she talked about the cease-and-desist order? Ms. Hahn: She talked about her ­ she didn't say cease and desist. She talked about her problem in Nebraska, which to me means that she understood that she was not supposed to solicit or get investments from anyone in Nebraska.

1

Ms. Schmidt respectfully requests that this Court take judicial notice pursuant to Fed. R. Evi.d. 201 of the Hearing on Motion for Release on Bond Pending Re-Sentencing in making its determination herein. -4-

Case 1:04-cr-00103-REB

Document 1474

Filed 03/04/2008

Page 5 of 9

(Loss Hearing Vol. II at 345-346) Even had Ms. Schmidt known about the Cease and Desist Order, which she didn't, such knowledge does not prove that she agreed to participate in the Ponzi scheme and had knowledge of its essential objectives. The Government offered a press release dated April 4, 2002, and fax date of November 11, 2002, apparently for the purpose of proving that Ms. Schmidt "must have known" about the Cease and Desist Order. (Exhibit 15, bates stamped no. 0208731) But the Government offered no testimony that Mike Huffman told Ms. Schmidt about the Cease and Desist Order. The most the Government offered was that Ms. Schmidt had a friendly relationship with Mr. Huffman. (Loss Hearing Vol. II at 306-307) Again, this evidence does not prove that she agreed to participate in the Ponzi scheme and understood its essential objectives. At the loss hearing, the Government submitted Exhibit 12 which contains a list of people who attended a Christmas party in Spokane, Washington, as evidence of Ms. Schmidt's knowledge of the "scope of the high-yield investment program." (Loss Hearing Vol. II at 323, ll. 1-24) But when Agent Hahn was asked about that issue at the Bond Hearing, she did not know about the connection: Ms. Ray: And at this Christmas party about which you testified, you have no evidence to learn what, if anything Ms. Schmidt knew about this Ponzi scheme, do you? Ms. Hahn: Would you repeat your question? Ms. Ray: You testified about this Christmas party. Ms. Hahn: Yes. Ms. Ray: In 2002. Ms. Hahn: Yes.

-5-

Case 1:04-cr-00103-REB

Document 1474

Filed 03/04/2008

Page 6 of 9

Ms. Ray: I think that's December 2002? Ms. Hahn: Yes. ... Ms. Ray: And Mr. Smith was giving that party, correct? Ms. Hahn: Yes. Ms. Ray: Nothing about that Christmas party points to evidence that Ms. Schmidt knew about this huge Ponzi scheme in December of 2002, does it? Ms. Hahn: I don't know. (Bond Hearing Tr. at 30-31) Again, this evidence does not prove that Ms. Schmidt agreed to join the Ponzi scheme and knew about its essential objectives. The Government offered evidence of Ms. Schmidt being the "bookkeeper" for Smitty's to bolster its evidence that Ms. Schmidt "must have known" that she had agreed to join this Ponzi scheme in 2002 and knew the essential objectives of the Ponzi scheme. The theory, apparently, being that bookkeepers know they are joining Ponzi schemes by doing the books. But Agent Marcy had to admit that he had no evidence that Ms. Schmidt kept anything other than green sheets and some other templates on her computer. (Loss Hearing Vol. II at 286, ll. 22-25) Agent Marcy admitted, as an accountant, that bookkeepers should know what a debit and credit is. (Loss Hearing Vol. II at 285, ll. 15-24) Agent Marcy admitted that nowhere on the green sheets that Ms. Schmidt kept were notations of "debits" or "credits." (Loss Hearing Vol. II at 286, ll. 1-10) Ms. Schmidt was a clerk who was euphemistically called the "bookkeeper" by her employer. This is not evidence that she agreed to join the Ponzi scheme and knew about its essential objectives.

-6-

Case 1:04-cr-00103-REB

Document 1474

Filed 03/04/2008

Page 7 of 9

The Government offered Exhibit 14 apparently in support of its theory that because Ms. Schmidt had access to Mr. Herbert's and Mr. Weed's letters , and she "must have known" the essential objectives of the Ponzi scheme and agreed to join it. Mr. Herbert was an attorney. His letters appear to provide legal support for the "investments" in which Ms. Schmidt had invested all of her life savings. Mr. Weed was an Insurance Agent. His letters appear to provide verification that Ms. Schmidt's investment was insured. Again, Exhibit 14 does not support a finding that she agreed to join the Ponzi scheme and knew about its essential objectives. Finally, the Government's case was so weak that the Government attorneys went so far as to imply that Ms. Schmidt had knowledge of Mr. Norman Schmidt's prior criminal history and failed to advise investors of this fact, even though they did not have a good faith basis for this line of questioning. Mr. Kirsch asked the following line of questions: MR. KIRSCH: Did Mr. Norman Schmidt have a prior felony conviction? MS. HAHN: Yes. MR. KIRSCH: Were investors made aware of Norman Schmidt's prior felony conviction at any point during this investment? MS. HAHN: No. (Bond Hearing Tr. at 21, ll. 5-11) On cross examination, however, Ms. Hahn had to admit that she couldn't recall any information that Ms. McLain Schmidt was aware of Mr. Schmidt's prior criminal conviction. (Bond Hearing Tr. at 44, ll. 13-19)

-7-

Case 1:04-cr-00103-REB

Document 1474

Filed 03/04/2008

Page 8 of 9

Not to be outdone, Mr. Angelo continued with this line of questioning in the Loss Hearing: MR. ANGELO: Was there any indication or evidence that the fact of Norman Lewis's [Schmidt's] federal felony fraud conviction was disclosed to any of those investors? MS. HAHN: No. (Loss Hearing Vol. III at 379, ll. 11-14) The Government attorneys have no credible evidence that Ms. Schmidt had any knowledge of Mr. Schmidt's prior felony conviction from 2001 through 2003. A lawyer should not "allude to any matter that the lawyer does not reasonably believe is relevant or that will not be supported by admissible evidence. Colo. R. Prof. Conduct 3.4(e)(emphasis added). These tactics point to the appalling lack of evidence in support of the loss enhancements proffered by the Government. For the above stated reasons, defendant Jannice McLain Schmidt respectfully submits that the Government has not carried its burden of proof with regard to the loss enhancements over the $48,000 that was established by Agent Marcy. DATED this 4th day of March, 2008 PAULA M. RAY, P.C.

s/ Paula M. Ray 1801 Broadway, Suite 1100 Denver, CO 80202-3839 Telephone: 303.292.0110 Email: [email protected]

-8-

Case 1:04-cr-00103-REB

Document 1474

Filed 03/04/2008

Page 9 of 9

CERTIFICE OF SERVICE I hereby certify that on this 4th day of March, 2008, I electronically filed the foregoing 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] Matthew T. Kirsch, Esq. [email protected] I have sent a copy via U.S. mail, postage prepaid to: Caryl Ricca Senior U.S. Probation Officer United States Probation Office 1929 Stout Street, Suite C-120 Denver, CO 80294-5424 Richard N. Stuckey, Esq. [email protected] Thomas Goodreid, Esq. [email protected] Ronald Gainor, Esq. [email protected]

s/ Paula M. Ray

-9-