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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO Criminal Action No. 04-cr-103-REB UNITED STATES OF AMERICA, Plaintiff,

NORMAN SCHMIDT, GEORGE ALAN WEED, CHARLES LEWIS, MICHAEL D. SMITH, Defendants. _______________________________________________________________ REPORTER'S TRANSCRIPT TRIAL TO JURY - VOLUME XXV _______________________________________________________________ Proceedings before the HONORABLE ROBERT E. BLACKBURN, Judge, United States District Court for the District of Colorado, commencing at 2:00 p.m., on the 10th day of May, 2007, in Courtroom A701, Alfred A. Arraj United States Courthouse, 901 19th Street, Denver, Colorado. APPEARANCES WYATT B. ANGELO, MATTHEW KIRSCH, Assistant United States Attorneys, 1225 Seventeenth Street, #700, Denver, Colorado, appearing for the Government. Suzanne M. Claar, Official Reporter 901 19th St. Denver, Colorado, 80294-3589 (303)825-8874 PROCEEDINGS REPORTED BY MECHANICAL STENOGRAPHY TRANSCRIPTION PRODUCED BY COMPUTER

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APPEARANCES (Continued) PETER R. BORNSTEIN, 1600 Broadway, #2350, Denver, Colorado, THOMAS J. HAMMOND, 1544 Race Street, Denver, Colorado, appearing with Defendant Schmidt. THOMAS E. GOODREID, 1801 Broadway, #1100, Denver, Colorado, appearing with Defendant Weed. RONALD GAINOR, 6414 Fairways Drive, Longmont, Colorado, appearing with Defendant Lewis. DECLAN J. O'DONNELL, 777 Fifth Street, Castle Rock, Colorado, RICHARD N. STUCKEY, 2150 West 29th Avenue, #500, Denver, Colorado, appearing with Defendant Smith.

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P R O C E E D I N G S (Proceedings resumed at 2:00 p.m.) THE COURT: Good afternoon, and thank you. Please be

Good afternoon.

We convene on the record in open court

as assembled and constituted deliberately outside the presence and the hearing of the jury, who remains in recess pursuant to the order of this court until Monday morning at 8:30 a.m. We convene to complete our post-evidentiary proceedings, to include announcement of the court's ruling with respect to the defendants' respective Rule 29 motions made at the close of all the evidence, and to conduct a jury instruction that is a charging conference. First, with respect to the pending defense Rule 29 motions made at the close of all the evidence, the court finds and concludes as follows: With the exception of Counts 11, 33,

35, 43, and 46 of the Second Superseding Indictment, some of which have been renumbered, ill advisedly by the court for purposes of the trial, which counts were dismissed during mid-trial proceedings conducted subsequent to the completion of the government's case-in-chief, I found and concluded generally; one, that all remaining counts were sufficiently pled; two, that none of the remaining counts as pled violated the constitutional rights of any defendant; and three, that the relevant evidence, both direct and circumstantial, was adequate and sufficient to support jury verdicts finding the defendants guilty beyond a

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reasonable doubt of all remaining and surviving counts. At the close of all the evidence, the defendants either reiterated, renewed, and/or supplemented their respective mid-trial oral motions for judgment of acquittal under Rule 29. I approve, adopt, and incorporate the findings of fact and conclusions of law that I entered in response to the defendants' respective mid-trial Rule 29 motions, and I find and conclude further: One, that the remaining and surviving counts

of the Second Superseding Indictment are not vitiated by defendants' subsequent arguments; two, that Count 1 is pled adequately and sufficiently to support a theory of and prosecution for vicarious liability under Pinkerton v. United States, as announced by the United States Supreme Court in 1946, and in the context of its relevant progeny; and three, that the relevant evidence, both direct and circumstantial, remains adequate and sufficient to support jury verdicts finding the defendants guilty beyond a reasonable doubt of all remaining and surviving counts. I digress briefly to discuss the case of United States v. Cherry, 217 F.3d 811, Tenth Circuit, 2000, on which defendant Schmidt relied in part during his argument in support of relief under Rule 29, vis-a-vis Count 1. I find and conclude that Cherry is wholly irrelevant and inapposite. In Cherry, the government urged the Court of

Appeals to adopt the principles of conspiratorial liability

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enunciated in Pinkerton in the context of Rule 804(b)(6) and the confrontation clause waiver by misconduct doctrine. The analysis of Pinkerton principles of conspiratorial liability and that esoteric evidentiary context is irrelevant to the issue under consideration in this case. Therefore, it is ordered that each defendant's post-evidentiary Rule 29 motion is respectfully denied. Now, before commencing the charging conference, counsel, I entreat you to begin thinking about your position with respect to retaining or discharging the one or more of the three alternate jurors which, as of Wednesday afternoon, had survived the trial experience. And we will be discussing that

hopefully later this afternoon, time permitting. Of course the time not to have that discussion is with all fifteen members of the jury, three of whom are alternate jurors, right before they retire to commence their solemn deliberations. So let us anticipate that issue and allow the

court to resolve it before that time. Now, directing your attention to condign jury instructions and verdict forms. With the assistance of my

staff, I have provided to each counsel of record for the government and defendants alike, the court's proposed instructions and verdict forms. We shall consider them one at a time. modify the courtroom etiquette somewhat. Now, let me

There are going to be,

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I suspect, any number of pattern or stock instructions, or I hope, to which there is no formal or substantive objection. there is none, you need not rise to address the court. If

And even

to object you need not rise, but at the point the court receives or entertains your argument, either in support or opposition of a discrete instruction or verdict form, I do ask that you employ the traditional etiquette, courtroom etiquette. I also respectfully request that in our discussion of proposed jury instructions and verdict forms, that you call to my attention any typographical, grammatical, or syntactical error that you have discovered during your review of the proposed instructions and verdict forms. At the conclusion of the consideration of the court's proposed jury instructions and verdict forms, each party, the government and each of the four defendants, will be provided with an opportunity to tender additional jury instructions and verdict forms. Directing your first attention first to Instruction No. 1. Any objection by the government? MR. KIRSCH: THE COURT: No, your Honor. Any objection by any of the defendants?

Hearing none, Instruction No. 1 is approved. Instruction No. 2, any objection by the government? MR. KIRSCH: No, your Honor.

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THE COURT:

Or any of the defendants?

Hearing none, Instruction No. 2 is approved. Instruction No. 3, any objection by the government? MR. KIRSCH: THE COURT: No, your Honor. Or by any of the defendants?

Hearing none, Instruction No. 3 is approved. Instruction No. 4, any objection by the government? MR. KIRSCH: THE COURT: No, your Honor. Or any of the defendants? One moment, your Honor, if I could, No objection.

MR. BORNSTEIN:

Thank you, your Honor. THE COURT:

Hearing no objections to Instruction No. 4,

therefore Instruction No. 4 is approved. Instruction No. 5, any objection by the government? MR. KIRSCH: THE COURT: No, your Honor. Or by any of the defendants? Yes, your Honor. I believe this is the

MR. BORNSTEIN:

time if I might address the court. THE COURT: seat, Mr. Bornstein. Very well. And you may do so from your

I imagine there are going to be any number And as long as you

of objections by any number of the parties.

speak loudly enough for all in attendance, and a fortiori the court reporter to hear, you may make your presentation from your table. MR. BORNSTEIN: Your Honor, I don't object to the two

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paragraphs in Instruction No. 5.

But I believe that this would

be the appropriate time to repeat the instruction that you gave to the jury earlier in the trial regarding the felony convictions of Mr. Lewis and Mr. Schmidt, and I believe it would fit in here would be the time to regive that instruction. THE COURT: Instruction No. 1? MR. BORNSTEIN: THE COURT: MR. KIRSCH: THE COURT: defendants? Then the Bornstein plan concerning Instruction No. 5 is adopted and approved by the court. Instruction No. 5 shall be Yes, sir. And you are referring to limiting

Any objection by the government? No, your Honor. Any objection by any of the other

amended, revised, and modified to include the language contained in limiting Instruction No. 1, adapted, if necessary, to inclusion in a final charge to the jury. MR. GAINOR: Your Honor, I know I probably don't have

to do this for the record, but I would join obviously and ask that that be read in connection as it has been in the past with Mr. Lewis. Specifically I didn't voice any objection. I just

wanted to make sure that we are part of that request. THE COURT: You are. Thank you.

Instruction No. 6, any objection by the government? MR. KIRSCH: No, your Honor.

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THE COURT:

Or any of the defendants?

Instruction No. 6 is approved. Instruction No. 7, other than to note that we will retab paragraph 1, and this is a propitious time to note that with respect to some of the instructions as they were printed, we had embedded comments which affected the use of tabs concerning those instructions. of cleaning those up. Of course we are in the process

And such is the case with the first Obviously that

paragraph in court's proposed Instruction No. 7. first paragraph should be indented.

Any objection by the government to Instruction No. 7? MR. KIRSCH: Your Honor, no objection, but I believe

Mr. Feigin's name is spelled I-N at the end as opposed to A-N. THE COURT: Well, when you work at 11:30 that's what

happens, and that's p.m. Any objections by the defendants? MR. BORNSTEIN: Judge, I wanted to -- excuse me, I We went past it

found a typographical matter on Instruction 6. so fast I didn't get to page 2. THE COURT:

Digressing to discuss Instruction No. 6 on

MR. BORNSTEIN:

The last paragraph, I believe, in

reaching a conclusion on particular point, the grammar needs to be fixed up. THE COURT: You would like the article "a" after the

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preposition "on"? MR. BORNSTEIN: grammar up. THE COURT: Granted. And while I am on it, I made a note. I I believe so, yes. That would fix the

MR. BORNSTEIN:

know it's not an objection, but I would ask if you would be willing to add that not only the mere number of witnesses testifying, but also the number of exhibits introduced, because this particular trial has so many hundreds of exhibits. THE COURT: Instruction No. 6. Any objection -- again, we are back on We are at page 2. We are at the concluding

paragraph, which I will correct by inserting the article "a" in reaching a conclusion "on", and at that point a particular point. Any objection to the court crafting similar language with respect to the myriad exhibits admitted in evidence in this trial? By the government? MR. KIRSCH: THE COURT: No, sir. By any of the other defendants? And the court will

Then that request is also granted.

draft and craft similar language concerning exhibits. And as amended, Instruction No. 6 is approved. MR. BORNSTEIN: THE COURT: And on 7, your Honor --

Just a moment, Mr. Bornstein. Sorry.

MR. BORNSTEIN:

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THE COURT:

Redirecting our attention to Instruction

No. 7, any objection by any of the defendants? MR. BORNSTEIN: No objection, your Honor. But I could

ask Mr. Kirsch, but I believe Mr. Feigin also spelled his name Philip with only one L as opposed to the traditional two Ls. THE COURT: Let's look. What I will do is reference

the record, and whatever the correct speaking of his Christian and cognomen are, it will appear in Instruction No. 7. I show it, at least in the government's witness list as Phillip, P-H-I-L-L-I-P, F-E-I-G-I-N. And therefore as amended

to correctly spell the surname of Messr. Feigin, Instruction No. 7 is approved. Directing your attention to Instruction No. 8. objection by the government? MR. KIRSCH: THE COURT: No, sir. Or any of the defendants? Any

Hearing none, Instruction No. 8 is approved. Instruction No. 9, any objection by the government? MR. KIRSCH: THE COURT: defendants? MR. HAMMOND: On behalf of Mr. Schmidt, your Honor, I No, your Honor. Any objection by any one or more of the

don't have an objection, but I believe the second sentence of the first paragraph needs a period. THE COURT: It certainly does. And now has one. Thank

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you.

Any other comments or objections by other defendants

vis-a-vis Instruction No. 9? Hearing none, Instruction No. 9 as corrected is approved. Instruction No. 10, any objection by the government? MR. KIRSCH: THE COURT: No, your Honor. Any objection by any of the defendants?

Hearing none, Instruction No. 10 is approved. Instruction No. 11, any objection by the government? MR. KIRSCH: THE COURT: No, your Honor. Or by any of the defendants?

Hearing none, Instruction No. 11 is approved. Instruction No. 12, any objection by the government? MR. KIRSCH: THE COURT: No, your Honor. Or by any of the defendants?

Hearing none, Instruction No. 12 is approved. Instruction No. 13, any objection by the government? MR. KIRSCH: Your Honor, the government does not object

to Instruction No. 13 based upon what I anticipate is going to be a request from one or more of the defendants for a Special Verdict Form with respect to the theories of liability. The government is -- if that request is made, the government is going to respond by requesting that the court instead give a single unanimity instruction regarding the possible theories of offense.

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It might be that Instruction No. 13 would be the instruction where we would suggest that. I am obviously a

little bit premature but I don't want to waive the right to come back to 13, if in fact that request is made. THE COURT: Understood.

Any objections by the defendants to Instruction No. 13? MR. BORNSTEIN: Um, your Honor, on behalf of

Mr. Schmidt, if I remember, I cannot find any authority for Instruction No. 13. Although I know that to some degree that

that is a true statement about conjunctive and disjunctive, I can't find that in any of the pattern jury instructions. So I

don't know what the authority is for giving that instruction, and therefore object to it. THE COURT: And what authority has disapproved this

instruction that is so common in jury trials conducted in all fifty states and all federal jurisdictions in this country, Mr. Bornstein? MR. BORNSTEIN: don't know. As the court so cogently pointed out, I

It is given in some form in almost all states and It's this form that I have my problem with But there is

federal courts.

because I couldn't find where that form came from.

no negative -- there is no negative authority to disapprove that instruction. THE COURT: defendants? Any other objections by any other

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Defendant Schmidt's objection is respectfully overruled. Instruction No. 13 pro tanto is approved.

Instruction No. 14, any objection by the government? MR. KIRSCH: THE COURT: No, your Honor. Or by any of the defendants?

Hearing none, Instruction No. 14 is approved. Instruction No. 15, any objection by the government? MR. KIRSCH: THE COURT: No, your Honor. Or any of the defendants?

Hearing none, Instruction No. 15 is approved. MR. BORNSTEIN: the uptake. Excuse me, your Honor. I am slow on

I object to Instruction No. 15 because of the Since I

inclusion of the reference to Instruction No. 28.

intend to make a real record on Instruction No. 28, I make a passing record on Instruction No. 15. THE COURT: is deferred. Redirecting your attention to Instruction No. 16, any objection by the government? MR. KIRSCH: THE COURT: defendants? MR. HAMMOND: address the court? THE COURT: You may. Mr. Schmidt objects, your Honor. May I No, your Honor. Any objection by any one or more of the I understand. Instruction No. 15 for now

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MR. HAMMOND:

If you don't mind, I am going to use the

THE COURT:

I do not mind. Your Honor, as the court knows, I did One of One

MR. HAMMOND:

file a memorandum last night regarding the instruction.

the -- there are three areas that I focused on last night.

of which was, as I understood the Tenth Circuit instruction, it included no language of actually stating that the defendants were presumed innocent. Instruction 16 as drafted for this

trial includes that, so I don't have an argument regarding that. THE COURT: As do other instructions. That's correct, your Honor.

MR. HAMMOND:

The -- there is still, however, no language regarding the hesitation to act, that a reasonable person would hesitate to act in a matter of importance to himself or herself, and I believe that that is required. And as I read the case law, I

think in an abundance of caution, I am going to cite both the Fifth and Sixth Amendments as well as Holland v. United States, and a number of Tenth Circuit cases that I read this morning, including United States v. Litchfield, 959 F.2d 1514. And I

just said Holland v. the United States, 348 U.S. 121, 1955 case. United States v. Barrera-Gonzales, B-A-R-R-E-R-A, hyphen, G-O-N-Z-A-L-E-S, 952 F.2d 1269. THE COURT: 1992 Tenth Circuit case.

Are any of those jury instruction cases? Yes.

MR. HAMMOND:

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THE COURT:

Okay. And going as far back as United States v.

MR. HAMMOND:

Pepe, P-E-P-E, 501 F.2d 1142, Tenth Circuit, all of which adopt, as referring to Holland v. United States, that language regarding the hesitation to act in matters of importance. There is also the issue of the two inference language that has been specifically disapproved in this district and this circuit in United States v. Dowlin. As I said in the memorandum, the problem with the reasoning in Dowlin is that it ignores, as very frankly, does I believe the Second Circuit after United States v. Kahn, K-A-H-N, what the problem really was. And the problem was that the two

inference language, that if there is evidence that is subject to two equal interpretations, one of innocence and one of guilt, the jury must adopt that which is consistent with innocence. The argument goes that that language weakens the burden of proof to a preponderance of the evidence standard. In Kahn

as I stated, the Second Circuit said, the problem with this, although it is technically correct, is that it does not go far enough. I don't believe there has been any case since Kahn. And the only circuits I have been able to find on this issue are the Second, Third and Tenth Circuit. There has been no case And

that says, well, if this doesn't go far enough, what does. what is the appropriate way to handle this issue.

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It's my position that when you take that language out, I think that that weakens the presumption of innocence instruction and the burden of proof. I understand the argument, but I don't think that exclusion is the appropriate remedy for the problem. I think

that the appropriate remedy is to follow that language up. As I indicated in the proffered instructions to the court, with further language that states, if the evidence is such that it is stronger than that which is consistent with evidence but not rising to the burden of proof beyond a reasonable doubt, the jury still has a duty to acquit. I have provided two forms of instructions that have been submitted in other cases. I have not seen anything from

any other circuit that gives me any other direction than what I can give to the court. And I didn't know if you had any

questions about that or not. THE COURT: I do not. Thank you.

MR. HAMMOND: THE COURT:

Thank you.

Any other objections by any other

defendants to Instruction No. 16? Response by the government. MR. KIRSCH: Your Honor, the government believes that

the instruction as tendered by the court is correct -- a correct statement of the law. That it clearly and adequately describes

what proof beyond a reasonable doubt is.

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The government's position is that the various alternatives to the disapproved two inference instruction that defendant Schmidt has proposed don't clarify the issue for the jury. In fact, they make the issue more confusing for the jury. We oppose the inclusion of the language on that basis, and we believe that the current -- the instruction as currently tendered by the court provides a more clear explanation of the relevance standard. THE COURT: Does the government have any specific

objection to inclusion to the matters of importance language? MR. KIRSCH: I apologize for not addressing that, your

We do not object to the inclusion of a sentence or two,

however many are appropriate to include that standard instruction from the Devitt and Blackmar. THE COURT: Such a doubt as would cause reasonable

people to hesitate to act in matters of the utmost importance to themselves. Any objection by the government? MR. KIRSCH: Your Honor, I just wanted to check, and I I don't -- my recollection doesn't But I believe that I

may be splitting hairs.

include the word "utmost" importance.

can -- I believe that was in the defendants ---in the actual Devitt and Blackmar was in the defendants' instructions which I can probably put my hands on. THE COURT: Well, and you need not. But language to

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that effect. MR. KIRSCH: In general the government does not object

to language to that effect, your Honor. THE COURT: Or do the defendants? Because I am

inclined to include such language. MR. HAMMOND: it. Mr. Schmidt certainly doesn't object to

I might ask to, in that sentence, include that it is based

on the evidence or lack of evidence as well. THE COURT: I think I have already included that. In that case, I apologize.

MR. HAMMOND: THE COURT: MR. KIRSCH: THE COURT:

Let me look. Yes. Yeah, I added it, Mr. Hammond. I do it And

almost as a knee-jerk reaction as an ex-state court judge.

because I can still quote that definition of reasonable doubt verbatim. MR. HAMMOND: you. THE COURT: With respect to Instruction No. 16, I am And I appreciate that, your Honor. Thank

going to approve defendant Schmidt's request to include matters of importance language. But I overrule his objection and

respectfully reject his proposed tendered instructions otherwise focusing on the so-called two inference language. The two inference language without some modification, of course, risks the mischief that is described as a matter of

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logic by the Tenth Circuit in the Dowlin decision, and with all due respect, the iterations proposed by defendant Schmidt do not eschew obfuscation concerning that mischief. And therefore, Instruction No. 16, once modified to include appropriate matters of importance language, will be approved. MR. STUCKEY: Your Honor, for defendant Smith he had

initially proposed the two inference instruction too, but upon review of Dowlin and authority which your Honor just cited here, we, for the record, withdraw the objection and have no objection to 16. THE COURT: Well, good. Instruction No. 16 as to be

modified by the court stands approved. MR. O'DONNELL: THE COURT: If it please the court.

Why am I being double-teamed, gentlemen? I have another question on a different

MR. O'DONNELL: level. THE COURT:

Concerning Instruction No. 16? Regarding inferences. Does that apply

MR. O'DONNELL:

to comments that may be used with analogies in closing arguments? THE COURT: Mr. O'Donnell? MR. O'DONNELL: I don't want it to be -- to estop How is that relevant to Instruction No. 16,

someone in closing argument to making an analogy like that.

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THE COURT:

Well, I am not Judge Arraj, which means if

it was not admitted in evidence, you may not refer to it in final argument. That probably resolves your question. Okay.

MR. O'DONNELL: THE COURT:

And I would note that we have other

instructions that deal with inferences, conclusions, and deductions. But the instructions are inherently irrelevant to

the proper purview of closing argument. Directing your attention now to Instruction No. 17, any objection by the government? MR. KIRSCH: THE COURT: No, your Honor. Or by any of the defendants?

Hearing none, Instruction No. 17 is approved. Instruction No. 18, any objection by the government? MR. KIRSCH: THE COURT: No, your Honor. Or by any of the defendants?

Hearing none, Instruction No. 18 is approved. Instruction No. 19, any objection by the government? MR. KIRSCH: THE COURT: No, your Honor. Or by any of the defendants? Mr. Bornstein

on behalf of Mr. Schmidt. MR. BORNSTEIN: Just a point of clarification, your

Is the court also going to in any sense read the

indictment to the jury? THE COURT: Had you been listening carefully as I bid

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the jury goodbye Wednesday afternoon, I promised them that the first thing I would do Monday morning after telling them good morning is again read the indictment to them. MR. BORNSTEIN: I did hear that, your Honor. That's

why I wanted to make sure. THE COURT: Then what's your question? My question is that then this is

MR. BORNSTEIN:

exactly the language of the indictment that the court is going to read to the jury, and then I object because it is repetitious and repeats the same thing that the court has done when it reads the indictment to the jury. THE COURT: The objection is duly noted but

respectfully overruled. Objections by other defendants. by Mr. Stuckey. MR. STUCKEY: briefly. THE COURT: You may. To put these things down. We had made an Thank you, your Honor. If I may approach On behalf of Mr. Smith

MR. STUCKEY:

objection to Instruction No. Smith 20, comp, competing, and I had noted five places for the use of the word "fraudulent" appear. THE COURT: And you will notice that I have, I believe,

assiduously preceded them by the mitigating adverb "allegedly". MR. STUCKEY: By my count, your Honor, 22 times.

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THE COURT:

Did I miss one? No.

MR. STUCKEY: THE COURT:

Is that not sufficient mitigation? I am just saying we are withdrawing any

MR. STUCKEY:

objections we had to that based on, like I said, I don't know where I came up with five, but we do appreciate your Honor doing that. Now, then, my question is, and we had made sort of an argument in our brief regarding instructions, as Mr. Bornstein pointed out, will your Honor be reading the indictment with, for example, looking at page 2, paragraph 2, manner and means of the conspiracy, which states the defendants made and caused to be made false statements and representations about the nature of a fraudulent high-yield investment program. the word "allegedly" there. THE COURT: No because the grand jury didn't. And it The Will you be inserting

will be clear to the jury that I am reading the indictment. jury will again be instructed for the third or fourth time

already that the indictment is not evidence, that the charges in the indictment are not evidence, and that the allegations in the indictment are not evidence, and may not be used or considered by them as evidence. MR. STUCKEY: That will be satisfactory to us, and we

have no objection to 19. THE COURT: Very well. That Instruction No. 19 is now

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approved. Instruction No. 20, any objection by the government? MR. KIRSCH: THE COURT: No, your Honor. By any one or more of the defendants? Not to anticipate any I am

pausing for you, Mr. Bornstein.

objection, but to eschew digression. MR. BORNSTEIN: THE COURT: Thank you. Thank you, Judge.

You are welcome. Um, I don't have any notes on that one.

MR. BORNSTEIN:

I don't have any notes on that one, so I think I will pass on 20. THE COURT: Very well. Hearing no objections,

Instruction No. 20 is approved. Instruction No. 21, any objection by the government? MR. KIRSCH: THE COURT: No, your Honor. By any one or more of the defendants? Yes, your Honor.

MR. BORNSTEIN: THE COURT:

Mr. Schmidt's objection. Your Honor, in paragraph 2 of

MR. BORNSTEIN:

Instruction No. 21, the language is, quote, once a person becomes a member of a conspiracy, he is held legally responsible for the acts of the other members done in furtherance of the conspiracy, even though he was not present when or aware that the facts were being committed. That statement of law, in light of both the concept of

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foreseeability and the concept of during the duration of the conspiracy, and the concept of duration and foreseeability, is left out of that generally. And so therefore we object because

it is an incorrect statement because it is not a full statement. But if the court then makes it a full statement, we object to it because the court is also doing the same thing again in later instructions, and therefore it's double instructing the jury on the same concept. court fixes it, we object to it. THE COURT: Other objections by any other defendants? And so even if the

Response, if any, by the government? MR. KIRSCH: Your Honor, the language to which

Mr. Schmidt is objecting I believe comes from the Tenth Circuit pattern instruction. the law. tendered. THE COURT: With respect to Mr. Schmidt's objection, it The court finds and I believe that it is not a misstatement of

We would ask that the instruction be given as

is duly noted but respectfully overruled.

concludes that this is not only consistent with the Tenth Circuit's pattern criminal jury instruction on this subject, but is consistent with Supreme Court and Tenth Circuit law. To the extent that there are other elements, doctrines, or principles about which the jury must be instructed by the court, the court finds and concludes that those required additional doctrines, principles, precepts and concepts are

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fairly contained in other discrete instructions, and that the instructions considered as a whole on this discrete topic sufficiently advise the jury of all relevant principles and matters of law. Instruction No. 21 is approved. Instruction No. 22, any objection by the government? MR. KIRSCH: THE COURT: No, your Honor. Or by any one or more of the defendants?

Hearing none, Instruction No. 22 is approved. Instruction No. 23, any objection by the government? MR. KIRSCH: THE COURT: No, your Honor. Or by any one or more of the defendants? Thank you,

And I appreciate your visual cues. gentlemen. Instruction No. 23 is approved.

Instruction No. 24, any objection by the government? MR. KIRSCH: THE COURT: No, your Honor. Or by any one or more of the defendants?

Instruction No. 24, hearing no objections, is approved. Instruction No. 25, any objection by the government? MR. KIRSCH: THE COURT: No, your Honor. Or by any one or more of the defendants? Yes, your Honor.

MR. BORNSTEIN: THE COURT:

Mr. Bornstein on behalf of Mr. Schmidt. We object to Instruction No. 25 in its

MR. BORNSTEIN:

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entirety, in that, No. 1, we don't believe that it's necessary. THE COURT: Because it's duplicative of the elemental

instruction crafted by the court? MR. BORNSTEIN: Correct. And then the last sentence

relating to defendant being bound by the acts or declarations of other participants until it is established that a conspiracy existed, we object to that language, particularly, and also in connection with the fact that in this case, so much of the declarations of the other participants were admitted only for such a limited purpose as to be for the effect on the hearer that that instruction about declarations of other participants is creating juror confusion, because of the way the evidence in this case came in, in particular with so many of the declarations by alleged conspirators being offered only for a limited non-hearsay purpose. general declarations. THE COURT: be present. MR. BORNSTEIN: THE COURT: defendants? Mr. Stuckey, on behalf of Mr. Smith? MR. STUCKEY: No objection. But for the record we We think it should be Correct. You urged the incongruency that appears to But now we are talking about

Any additional objections by any other

object to Mr. Bornstein's objection. given.

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THE COURT:

I will treat that as a response in

opposition to Mr. Schmidt's objection. Response by the government, if any? MR. KIRSCH: Your Honor, the government also believes Again, the government

this instruction should be given.

believes that correctly reflects both the Tenth Circuit pattern as well as Tenth Circuit law. The court in a previous instruction will have already instructed the jury about limited purposes for which evidence -particular items of evidence have been admitted. The government does not believe that those instructions inherently conflict or that they are -- it is inherently confusing to have both. THE COURT: In view of the other instructions

concerning conspiracy crafted by the court and now considered, is Instruction No. 25 necessary from the perspective of the government? MR. KIRSCH: Your Honor, the portion of Instruction No.

25 that I believe is unique, and I will have to go back and check, but I believe it's the next-to-last sentence instructing the jury that they must consider only the defendant whose -- the acts and statements of the defendant whose case they are considering. I don't believe that that portion of that

instruction appears elsewhere. THE COURT: Well, would the government have objection

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if I plucked that sentence out and inserted it in one of the previous instructions in a relevant and propitious place and way concerning conspiracy? MR. KIRSCH: We would not, your Honor. That it would

be the -- that is the sentence that -- the only sentence that the government would be concerned about, if it were not given. THE COURT: And that's particularly solicitous by the My concern,

government because it has a defense ring to it.

gentlemen, overall with the instruction, is the first paragraph consisting of -- well, the first sentence of the first paragraph fairly implies to the jury that maybe the essential elements about which they have already been instructed are not sufficient or that they are in some way incomplete or that the jury must find more. And that, in my mind, vitiates or undercuts the

completeness and the efficacy of the court's instruction articulating and enumerating the essential elements otherwise for conspiracy. So as concerns Instruction No. 25, the Schmidt objection is granted in part, the Smith response and objection to the Schmidt objection is granted in part, and the court is going to -MR. GOODREID: Your Honor, maybe I am not following the

protocol here but I didn't realize we had to stand up and say that we affirmatively go against someone else's objection. If that's necessary, on behalf of Mr. Weed I would like

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to say Mr. Weed would request that the instruction remain as is. THE COURT: All right. And among other things, I understand the

MR. GOODREID:

court's concern about being redundant, but I think it is important to emphasize to the jury they do have a two-part task, A, to find there is a conspiracy, and just because they find there is a conspiracy doesn't necessarily mean any given defendant was a part of that. So with respect to the court's original authorship, Mr. Weed would ask that the instruction remain intact as is. MR. GAINOR: position. MR. STUCKEY: done that. THE COURT: Mr. Bornstein, the opposition is mounting. The court will take Instruction No. 25 The same to the extent we haven't already And Mr. Lewis would join in Mr. Weed's

The tide may be turning. under advisement.

I have the benefit of your respective

positions and arguments. MR. BORNSTEIN: Your Honor, could I please have leave

to reconsider my position and consult with my co-counsel? THE COURT: You may. And the reason I am going to

allow this is because, as I read the instruction, it's defense oriented from my view. MR. BORNSTEIN: THE COURT: Okay.

So I am surprised when you rose to object

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about what I considered to be essentially a defense-based and oriented instruction. But you may confer. And my real objection is to the last

MR. BORNSTEIN: sentence.

That's the one that primarily caused me to object,

but I am being convinced by -- well, let me confer. I rise to address the court. And withdraw my objection

after conferring with co-counsel who has convinced me that the language is sufficiently defense-oriented that it would be wise to go along with the other defendants and seek to leave it in. THE COURT: Well, and the point that you wish to make

concerning limitations on declarations as they appear in the final sentence of Instruction No. 25 may be done in argument. Very well. We have come full circle. Objections have

been made and withdrawn.

Others have joined in the fray, but at

the end of the day, excuse my interline run, Instruction No. 25 as crafted and proposed by the court is approved. Instruction No. 26, any objection by the government? MR. KIRSCH: THE COURT: No, your Honor. Or by any one or more of the defendants?

Hearing none, Instruction No. 26 is approved. Instruction No. 27, any objection by the government? MR. KIRSCH: THE COURT: defendants? Hearing none, Instruction No. 27 is approved. No, your Honor. Any objection by any one or more of the

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Instruction No. 28, any objection by the government? MR. KIRSCH: THE COURT: No, your Honor. Or by any one or more of the defendants?

Mr. Bornstein on behalf of Mr. Schmidt concerning Instruction No. 28. MR. BORNSTEIN: THE COURT: If I may use the podium, your Honor. Thank you.

Counsel, you may.

MR. BORNSTEIN:

Your Honor, Instruction No. 28 for

shorthand purposes I am going to call the Pinkerton instruction. Because it is -- its source begins with the case of United States v. Pinkerton, the 1946 Supreme Court case. And my objections to Instruction No. 28 are multiple. My first objection to Instruction No. 28 is that it was not charged in the indictment. And throughout other instructions in

this case, references are made to charges in the indictment, or alleged in the indictment, and this manner and means of liability was not charged in the indictment. That's No. 1. No. 2, um, is that -- well, No. 2 is

that this instruction creates a -- well, No. 1, this instruction undoes all the other substantive instructions this court has crafted. So that if we go -- when we get to the substantive

elements to prove in mail fraud, I have it here somewhere, substantive elements to prove in wire fraud, we get to the substantive what to prove in, um, securities fraud, and the substance of what to prove in both forms of money laundering,

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although Mr. Schmidt is the only one charged in the 1956 version of money laundering, by giving this instruction the court is essentially allowing the jury to disregard the -- what needs to be proved for all of the other substantive counts. And if we can replace then all of the substantive instructions of law given by this court with respect to not only the acts needed but the mens rea needed for all -- for liability on all the other counts. Third, it contradicts the jury verdicts that the court has crafted. The jury verdicts say, for example, we the jury on

our oaths unanimously find the defendant, and in this case I am picking on George Alan Weed, as to the crime of mail fraud as charged in Count 7 of the indictment. So that by giving the jury cart blanche to look at Instruction No. 28, we are allowing the jury to undo the language used in each of the individual forms of the verdict. And then we would have a problem with the whole concept that there are unindicted coconspirators. And so that gets me So that as

to the issue of the need for a Special Verdict Form.

to each and every count of the indictment, we submit that there has to be or should be a Special Verdict Form where the jury says, we find that the defendant, in this case, is liable, pursuant to Instruction No. 28, we find that the person who committed the act of wire fraud, securities fraud, is so and so, which might be another codefendant or it might be Leon Harte, or

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it might be Mr. Michael Huffman, it might be Rebecca Taylor, it might be Mr. Smith's partner up in Spokane, who is an unindicted coconspirator, it could be Mr. Perreault who testified. If the

jury finds that any one of those people committed a substantive offense, and were a part of the conspiracy, there is no way to know that with a general verdict form. And we would then object

to using general verdicts if the court gives this blanket instruction on Pinkerton-style liability. So we would submit that for those three reasons, and adopting some of the other arguments that I have made, as the court knows I have fought this issue throughout the trial, but I am now fighting it on the level of the jury instructions, and giving the jury now what amounts to a third option, three different ways, to find somebody substantively liable. They can

be an actor, as alleged in the indictment, they can be an aider and abettor as alleged in the indictment, or they can be a Pinkerton liable person, unalleged in the indictment, by virtue of the act of some unknown or unnamed person for whom we have no finding that they were a conspirator and no finding whether they joined the conspiracy because it includes unindicted coconspirators. And for that reason we object. Objections or responses by any other

THE COURT: defendants?

Response, if any, by the government. MR. KIRSCH: Your Honor, the government believes that

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Instruction No. 28 should be given. about Instruction No. 28.

There is nothing novel

It follows the Pinkerton case which It follows

has been around for approximately fifty years. well-established Tenth Circuit authority.

There has never in any authority -- no authority of which the government is aware has ever required that the government specifically plead Pinkerton liability within an indictment. Just as there is no authority that requires the

government to specifically plead aiding and abetting liability. In fact, the authority on both issues is that the government is not required to specifically plead either of those. That they are a part of the charges in a case like this

where the government has alleged both the conspiracy and has alleged substantive crimes committed in furtherance of that conspiracy. I would point out that, although Mr. Bornstein's argument referenced the money laundering counts, the government has not asked for a Pinkerton instruction with respect to the money laundering counts because money laundering is not an object of the conspiracy. The court's proposed instruction does

not apply to the money laundering counts, so I don't believe that that is in issue at all. I frankly don't fully understand Mr. Bornstein's argument with respect to how this instruction undoes the verdict forms. And I -- so I don't have any further response to that.

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I am prepared, whenever the court wants to address that, to talk about his request for Special Verdict Forms. I

don't know whether the court wants me to do that now or when we get to the verdict forms. THE COURT: MR. KIRSCH: Later, please. Thank you.

That concludes my response unless the

court has any other questions. THE COURT: And I do not. Thank you.

Brief reply, Mr. Bornstein. MR. BORNSTEIN: Um, a couple of observations. No. 1, I

stand corrected on money laundering, so I withdraw the issues as to that. I am looking in my notes because I have one case in which it was specifically noted by the Circuit Court that the concept of Pinkerton liability was pled in the indictment, and thereby giving notice to the court. So I take issue, but I am

looking in my notes to see if I can find that authority with Mr. Kirsch. And I would -- and I can't find it fast enough right But I do know that it was duly noted in at least one of

the circuit opinions that the charging instrument gave adequate notice of what kind of Pinkerton liability was being charged. But I would note this as a practitioner in these courts for sometime, that I have never seen such blanket use of Pinkerton in any case that I have ever tried in these courts.

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I have seen Pinkerton used with a scalpel, but not as the government is using in this case with a shotgun. And it's

because of this shotgun approach to the use of Pinkerton to the inability to know exactly how this jury -- the permutations of how this jury could find unanimity, agreeing that they all agree that the same particular or one or two conspirators committed the act, and therefore Mr. Schmidt should be liable for the act of somebody else. The permutations are mathematically very,

very large, so that even the unanimity instruction they had to agree on which conspirator committed the overt act in order to find Mr. Schmidt liable vicariously, we find mind boggling in this case, and those are my observations and rebuttal. THE COURT: deferred. The court's ruling on Instruction No. 28 is

I am going to give you, Mr. Schmidt, a reasonable

opportunity to continue to scour your notes in search of the opinion that you cited, at least in general terms. Instruction 29, any objection by the government? MR. KIRSCH: THE COURT: defendants? MR. BORNSTEIN: THE COURT: approved. Instruction No. 30, any objection by the government? MR. KIRSCH: No, your Honor. One moment, your Honor. No. No, your Honor. Any objection by any one or more of the

Hearing none, Instruction No. 29 is

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THE COURT:

Or by any one or more of the defendants?

Mr. Stuckey on behalf of Mr. Smith. MR. STUCKEY: Thank you, your Honor. We had noted our

objection before in the memorandum, and I believe Mr. Schmidt also then objected on the third page of the third paragraph at the top the language, the representation is false if it's known to be untrue or made with reckless indifference as to its truth or falsity. The government in its supplemental memorandum concerning revised proposed jury instructions, document 1069 in this case, paragraph 5 at page 3, stated that they felt our objections were based on a faulty premise that this wording that is read constituted a deliberate ignorance instruction. They

footnoted that they did not intend to ask for a deliberate ignorance instruction. Glad they did not.

I have had some problem in reading the various other instructions, form instructions from the Tenth Circuit, as to 1001, which uses that same language, and I know this is language from the form instruction. what's the difference. But I have had some problem telling

And the government says the language to

which the defendants object, when I read it, does not address the issue of the defendant's knowledge. Instead, it merely

forms part of the definition of a false representation. Well, it says a representation is false if it is known, addressing knowledge, to be untrue, or made with reckless

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indifference as to its truth or falsity. I just think it's so troublesome to have that in the definition of representation in terms of what it can lead to in terms of closing argument by the government, and submit that respectfully it amounts to a deliberate ignorance instruction, at least in terms of defining what's false. I am not sure -- I am not here to say that I don't think the Tenth Circuit in committing formulated the Tenth Circuit model instructions and whatnot gave it enough thought, but that would be my argument, that they did not, and that that business about a representation being false if it's known to be untrue, agreed, or if it's made with reckless indifference as to truth and falsity is too troublesome, and would move, as we asked before, and as defendant Schmidt -- I am sorry -- it's defendant Weed, we would also -- made in his memorandum an objection to that kind of language. That language specifically.

If the court were to grant it, just put a period after the word "untrue". THE COURT: Strike the rest of the line. Thank you.

Now, any other objections or response by

any of the other defendants to the Smith objection? Mr. Bornstein, on behalf of Mr. Schmidt. MR. BORNSTEIN: objection. Your Honor, I would join the Smith

And I also have a grammatical matter that I wanted On page 2 -- on page 2 the first

to raise with the court.

element that the defendant whose case you are considering

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knowingly devised, or intended to devise, "a" scheme, I think it should be "the" scheme, and the court on page 3 in the paragraph beginning for the specific count, you have a scheme in line 3, and the scheme in line 5. THE COURT: instruction, please. MR. BORNSTEIN: THE COURT: Page 3. And again, redirect me to that point in the

Yes, sir. Paragraph beginning for the specific

MR. BORNSTEIN:

count you are considering. THE COURT: Yes, sir. And line 3 of that paragraph says, "a" Line 5 does say "the"

MR. BORNSTEIN:

scheme and we would say "the" scheme.

scheme, and so we think consistently throughout that it should be "the" scheme. THE COURT: Mr. Lewis. MR. GAINOR: Thank you, your Honor. On behalf of Other defendants. Mr. Gainor on behalf of

Mr. Lewis we would join. THE COURT: MR. GAINOR: THE COURT: MR. GAINOR: Join whom? I would join Mr. Smith. All right. Thank you for clarification. And your

Honor, when it comes to that paragraph that Mr. Smith was referring to, the paragraph that deals with the quotation a

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half-truth, in effect what this instruction says is the representation would also be false when it constitutes a half-truth or in effect some truth, and I just think and agree with Mr. Stuckey that it's inherently troublesome to have that type of language in there. for this jury. THE COURT: MR. KIRSCH: Response by the government. Your Honor, with respect to I think it could create confusion

Mr. Bornstein's proposed grammatical corrections, the government opposes those. Beginning with the paragraph -- third paragraph

on page 3, if you read the entire sentence, it's clear why the court is using "a" scheme in the first instance. Because that

is modified by that was substantially the same as "the" one alleged in the indictment. That is a correct statement of the law. That the

government believes makes the use of "a" scheme in the first instance in the description of the elements also correct. THE COURT: MR. KIRSCH: I agree. That objection is overruled.

With respect to the definition of a false

statement, again, the government's position is that this definition comes from the Tenth Circuit pattern, it is a correct definition of the false statement as under -- according to Tenth Circuit precedent. The only authority that any defendant has cited in support of their contention are cases which deal with deliberate

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ignorance instructions.

That is a different animal.

That is an

instruction that deals specifically with the mens rea element of a particular statute. That is clearly not what this portion of It addresses the definition of a

the instruction addresses. false statement.

The government does not believe that this

creates the various dangers outlined by the defendants, and the government believes that this instruction should be given as written. THE COURT: government. In this case, gentlemen, I side with the

The definition of a false representation is a

correct statement of the law of this circuit, taken from the circuit's now pattern criminal jury instructions. The Smith objection joined by Mr. Schmidt and Mr. Lewis in that regard is respectfully overruled. Thus, Instruction No. 30, as proposed by the court, is approved. MR. STUCKEY: 3 another tab. THE COURT: We will catch all the tabs. Okay. Thank you. If I may, your Honor, the bottom of page

MR. STUCKEY: THE COURT: internal comments. MR. STUCKEY: reading every word. THE COURT:

Because we deleted all of the embedded

I just wanted to make sure that I was

I am duly impressed, Mr. Stuckey.

Thank

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you.

And even though I am smiling broadly, I mean that. Directing your attention next, counsel, to Instruction

No. 31.

Any objection by the government? MR. KIRSCH: THE COURT: No, your Honor. Or by any one or more of the defendants? One moment, your Honor, please.

MR. BORNSTEIN: THE COURT:

I am stalling deliberately, gentlemen.

Mr. Stuckey rises on behalf of Mr. Smith. MR. STUCKEY: On page 3, the fourth full paragraph,

same objection as made to Instruction No. 30. MR. GAINOR: THE COURT: Mr. Lewis would seek permission to join. Permission granted. I presume joinder by

Mr. Schmidt, but we will see. MR. BORNSTEIN: THE COURT: Yes. Yes, thank you.

Any other objections to Instruction No. 31? Your Honor, in -- we believe that the

MR. BORNSTEIN:

language that was in instruction 30 on page 3, that paragraph about the specific count you are considering, needs to be repeated in 31. THE COURT: And where should that be inserted? Um, let's see. In 30 it's next to the Yes. We would say it

MR. BORNSTEIN: last.

Let me see if that works in 31.

should be next-to-the-last paragraph. next-to-the-last paragraph. THE COURT:

It should become the

Well, I am not following you.

Let us

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digress to Instruction No. 30. MR. BORNSTEIN: THE COURT:

Orient me there, please.

On page 3.

On page 3, yes, sir. The paragraph beginning, for the

MR. BORNSTEIN:

specific count you are considering for the defendant whose case you are considering what must be proved. THE COURT: Yes, sir. That paragraph has to be amended about

MR. BORNSTEIN: mails. fraud.

But that first sentence should be repeated for wire And I am suggesting that the place to repeat it would be

as the next-to-last paragraph of the instruction. THE COURT: The penultimate paragraph of the All right. I am tracking. Which is at least a

instruction on page 3.

Any response to that proposal? quasi objection.

Response by the government? Your Honor, I believe that but for what I

MR. KIRSCH:

think is a missing tab, that that language is essentially already repeated in what is currently the penultimate paragraph of Instruction No. 31. The only difference is that the first clause -- well, a little bit more than that. Um, jumping back to Instruction No.

30, the only thing that is missing is the text up to, beyond a reasonable doubt. Otherwise essentially the same information is

repeated in the appropriate format for the wire fraud as opposed to for mail fraud.

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If the -- if Mr. Bornstein's suggestion is to simply repeat the language up to the beyond a reasonable doubt, the government has no objection to that. THE COURT: And I would presume your response to the

other objections as to a representation is false to be the same as with respect to Instruction No. 30. MR. KIRSCH: for overlooking it. THE COURT: Let me do this. Any defendant's objection It is the same, your Honor. I apologize

to Instruction No. 31 focusing on page 3 as to the definition of a false representation is respectfully overruled for the reasons stated and authorities cited by the court in connection with its similar ruling vis-a-vis Instruction No. 30. Now, Mr. Bornstein, you may continue the colloquy which you started and which has been continued by Mr. Kirsch for the government. MR. BORNSTEIN: What I am requesting, your Honor,

specifically is that the jury be instructed that the scheme to defraud has to be the one alleged in the indictment. The paragraph in the wire -- the sentence in the wire fraud that I am alluding to says, it must be proved beyond a reasonable doubt that the defendant knowingly devised, or intended to devise, a scheme to defraud that was substantially the same as the one alleged in the indictment. I requested the jury be told that same matter of law

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with respect to wire fraud, and that it would be wrong not to tell them that what they -- the scheme to defraud that they must find is not just any old scheme to defraud, it has to be the one that is substantially like the one that is alleged in the indictment, and since the court is reading the indictment to the jury, they will know and we can argue what that's all about. THE COURT: Now, that further clarified any further

response by the government, Mr. Kirsch? MR. KIRSCH: Your Honor, I am interpreting that as a

request to include the language up to the second comma in that first sentence. The government doesn't object to the request as

interpreted that way. THE COURT: Well, I understand the gravamen of the And I intend to use -- I intend to

request and the response.

import at least a portion of Instruction No. 30 at page 3 at the paragraph, for the specific count you are considering and for the defendant whose case you are considering what must be proved beyond a reasonable doubt is that the defendant knowingly devised, or intended to devise, a scheme to defraud, that was substantially the same one, the same as the one charged in the indictment. That much of that paragraph in Instruction No. 30 I

intend to import and interweave some way to Instruction No. 31. Now, knowing that to be clear as mud, let us proceed. Directing your attention now to the court's proposed Instruction No. 32. Any objection by the government?

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MR. KIRSCH: THE COURT:

No, your Honor. Or by any one or more of the defendants?

Mr. Bornstein on behalf of Mr. Schmidt concerning Instruction No. 32. MR. BORNSTEIN: Your Honor, the first element of

Instruction No. 32 says that, um, that the defendant whose case you are considering offered or sold a security described in the indictment, that is investment contracts described as Cooperative Private Placement Agreements, duh, duh, duh, duh, duh, et cetera, et cetera, et cetera, et cetera. That does not track the individual count of the indictment that it is all of the above. I think that that first

one should simply say that the defendant whose case you are considering offered or sold the security described in the indictment, period, and leaving out the rest of the description. And then second objection is in paragraph 1A where it says that Norman Schmidt had previously been convicted of a felony, comma, mail fraud, wire fraud, et cetera. That is not

what the evidence -- there was apparently an agreement that that was prejudicial and that we were striking that. MR. HAMMOND: Your Honor, I don't want to double team

but I can do this for Mr. Bornstein a little bit more succinctly. THE COURT: All right. The tag has been made and

Mr. Hammond is now in the ring.

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MR. HAMMOND: stopped up.

Thank you.

I can't laugh when my nose is

When we agreed to the admission of the exhibits

pertaining to Mr. Schmidt's underlying felony conviction, the language pertaining to wire fraud and mail fraud or any fraud was taken out so it just showed