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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 XXII _______________________________________________________________ Proceedings before the HONORABLE ROBERT E. BLACKBURN, Judge, United States District Court for the District of Colorado, commencing at 8:30 a.m., on the 7th 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 8:30 a.m.) THE COURT: Good morning, ladies and gentlemen.

Mr. Schmidt, good morning. MR. SCHMIDT: THE COURT: MR. WEED: THE COURT: MR. LEWIS: THE COURT: MR. SMITH: THE COURT: Good morning.

Mr. Weed, good morning. Good morning. Mr. Lewis, good morning. Good morning, your Honor. Mr. Smith, good morning to you. Yes. Ladies and gentlemen generally, good

morning, and last but not least, ladies and gentlemen of the jury, good morning. THE JURY: THE COURT: Good morning. Very well. If Mr. Smith is again prepared

to proceed, Mr. Stuckey, he may. MR. STUCKEY: Thank you, your Honor. We have these

other witnesses that, with the court's permission, we will be taking out of order from out of town and appreciate that, and the first one is Mr. Jeffrey Mitchell. THE COURT: Very well. Thank you. If you will come forward

Mr. Mitchell, good morning. to be sworn by the court, please.

To accomplish that, if you

will make your way forward to come stand in this open area in

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front of my bench to be sworn.

About there is fine, sir. If you will please

I am going to administer the oath.

face me and raise your right hand to be sworn. May I have your attention in the courtroom. (Jeffrey Mitchell was sworn.) THE WITNESS: THE COURT: witness stand. I do. Please be seated in that

Thank you.

Sir, good morning. Good morning.

THE WITNESS: THE COURT: in front of you.

As you testify, please use that microphone

It works best if you will leave a speaking Thank you.

distance of about that, six to eight inches. Mr. Stuckey. MR. STUCKEY: THE COURT: Thank you, your Honor.

You are welcome. DIRECT EXAMINATION

BY MR. STUCKEY: Q A Q A Q A Q A Please state your name, sir, and spell your name. Jeffrey D. Mitchell, M-I-T-C-H-E-L-L. Probably ought to spell Jeffrey, too. J-E-F-F-R-E-Y. Where do you live? 2505 East Lincoln Road, Spokane, Washington. And Mr. Mitchell, do you know defendant Michael Smith? Yes, I do.

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Q

Jeffrey Mitchell - Direct Can you relate to the court and the jury the history and

your association with Mr. Smith? A I have been Mr. Smith's business associate for six years. Michael Smith is my best I

have known him for eight years. friend. Q

Before that six years, were you -- let me ask this, did you

grow up in Spokane? A Q A Q A No. I grew up in New Jersey.

When did you move to Spokane? In 2001. Is that when you began your association with Mr. Smith? No. I began my association about two years previous. I was

living in California. Q And you were working with a gentleman whose name I asked you Can you tell us what you

about this morning and I forget again. were doing and with whom? A

I was working with a gentleman named Steven Brittain in Palm

Springs, California. Q A Steven Brittain. How did you meet Mr. Smith? And Mr. Smith and

He was an associate of Mark Perreault.

Mr. Perreault offered marketing services for insurance and financial professionals. Q Did you it come to pass that you moved from Palm Springs to

Spokane? A Yes, it did.

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Q A Q A Q

Jeffrey Mitchell - Direct And that would have been? 2001. Did you immediately go to work with Mr. Smith? Yes. Could you describe the nature of the business you and

Mr. Smith had -- let me ask you first, where was the office? A Q A Q A Q A In Colbert, Washington. Is that in Mr. Smith's home? Yes. Down in the basement? Yes. All right. And what was the nature of your business?

We offered marketing services for insurance and financial

professionals. Q A Q And was there a name for the company? National Marketing Solutions. Okay. Did there come a time, sir, when you became aware of

a program called Capital Holdings? A Q A Q A Q A Yes. About when was that? In 2002. And do you remember what month, maybe? I am not sure. Spring.

And how did you become aware of that? Mr. Smith and Mr. Perreault.

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Q

Jeffrey Mitchell - Direct And did Mr. Michael Smith -- I am not quite sure,

Mr. Perreault, was he still in Spokane? A Q No. He was in Colorado at the time.

Did he come to Spokane or did Mr. Smith go to Denver or were

they both in Spokane? A Q Mr. Smith went to Denver. And then returned. And is that when you learned about the

program? A Q Yes. Did you know before Mr. Smith went to Denver what he was

going there for? A Q No. When he came back what did he tell you about this program? MR. ANGELO: Objection, your Honor. It's not being

offered by a party opponent. THE COURT: Response. MR. STUCKEY: Well, it's not being offered by a party Response. The objection is hearsay.

opponent, but it is to 803(3) show the state of mind of this witness regarding what he knew regarding Capital Holdings. THE COURT: He is not the declarant, and therefore

803(3) is inapposite. MR. STUCKEY: THE COURT: Understood.

That being the response, for now the

objection is sustained.

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Jeffrey Mitchell - Direct MR. STUCKEY: Thank you. BY MR. STUCKEY: Q Did you become involved to the point where you invested in

the program yourself? A Q A Q I didn't have any money to invest. Okay. So the answer is no?

The answer is no. Did you become involved in soliciting other persons to

invest in the program? A I talked to other people and came up to speak to Mike in

Spokane. Q And for what period of time did this cover then? Started

around spring of '02? A Q A Q A Q A Q Six or seven months. Did there come a time when the program ended? Yes. Do you remember when that was? March 2003. How did you know about how it ended? I was at the office the day that Mike found out about it. Okay. I would like to show you Smith Exhibit 1 just in the I believe it's

book.

It's been shown on the screen before. Turn to tab 1, sir.

admitted.

My question, sir, is can you identify -- are you familiar with this document?

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A Q A

Jeffrey Mitchell - Direct Yes, I am. Sir, can you tell us what it is? This is a letter that Michael Smith had wrote upon hearing Asking for

about Capital Holdings program being shut down.

direction and what to do, when things would be addressed. Q Did it concern or explain the gaining the services of an

attorney to help people who had money in the program? A Q A They solicited. How so? Talking about getting the legal fees addressed, resolving

all legal fees, and contacting the contract holders and working with the group returns to help them recover their money. Q All right. Can you put that aside. Now, sir, did you

understand the concept of Capital Holdings program in terms of trading? A Q Repeat the question. Did you understand the concept of the Capital Holdings

program in terms of trading? A Q I understood the concept as explained to me. Did you understand something regarding a person having to

have a trading number? A Q No. Did you ever make any statement regarding Michael Smith

getting his own trading number? A No, I did not.

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Q

Jeffrey Mitchell - Direct Did you ever hear anything about him getting his own trading

number? A Q A Lots of years later. And in what regard years later? Some residents in Spokane claimed I had personally announced

it was a trading number that Mike Smith had in reference to this trading program, and that never happened. Q A Q A Q You never announced that? Never announced it. Never knew it? Never knew it. In your association over these months with Michael Smith,

years, I guess, are you still involved in business with him? A Q A Q Yes, I am. I didn't even ask. That is it still insurance business?

Insurance and mortgages. Okay. And your involvement with him over these six years, But I

have you come to -- you said he was your best friend.

mean just ask you, independent of that, have you an opinion as to Michael Smith's character for honesty? A Q A Yes, I do. What is that? Michael Smith is an honest person. If he wasn't, he

wouldn't be my business partner or my best friend. Q Do you have an opinion regarding Michael Smith's character

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Jeffrey Mitchell - Direct for truthfulness? A Q A Yes, I do. And that opinion, sir? Michael Smith is an honest person. MR. STUCKEY: you, Mr. Mitchell. THE COURT: Examination of this witness on behalf of That's all I have, your Honor. Thank

Mr. Lewis by Mr. Gainor? MR. GAINOR: THE COURT: No questions, your Honor. On behalf of Mr. Weed by Mr. Goodreid? No questions, your Honor.

MR. GOODREID: THE COURT:

On behalf of Mr. Schmidt by Mr. Hammond? Thank you, your Honor. I have no

MR. HAMMOND: questions. THE COURT: Mr. Angelo. MR. ANGELO: second, your Honor. table? THE COURT:

Cross-examination by the government,

Thank you, your Honor.

Excuse me a

If I can retrieve something from counsel

You may.

Thank you, counsel.

CROSS-EXAMINATION BY MR. ANGELO: Q Mr. Mitchell, besides insurance products, can you tell us,

please, what other investment products were offered through National Marketing Solutions?

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A Q A Q

Jeffrey Mitchell - Cross At that time business opportunities? Yes. Business opportunities. Can you specify what those were, please, let's say in the

year 2002, 2001? A 2002 we were affiliated with a company called Heritage

America, which was estate planning, living trust. Q A Q A Q A Who was the principal of Heritage America? Michael Vallone. Did you ever hear the name Mobile Billboards? Yes. What was Mobile Billboards? Mobile Billboards was a business opportunity offered by

another company called Mobile Billboards. Q Did you offer investments in Mobile Billboards to your

clients? A Q A Q A Yes, I did. What about Alpha Telecom? Yes. That was through Strategic Planning Alliance.

You offered investments in those entities to your clients? Yes. They were called business opportunities,

non-investments. Q Why do you choose them to call them business opportunities

instead of investments? A Legally that's what they told me to call them,

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Jeffrey Mitchell - Cross non-investments. Q A Q Who told you that? Strategic Planning and their attorneys. With respect to both of those, your clients lost money,

didn't they? A Q A Q Yes, they did. A lot of money, right? Yes. You in fact marketed those investments or business

opportunities to Mr. Brittain, didn't you? A Q Could you repeat the question? You marketed those opportunities to Mr. Brittain, did you

not? A Q A Q A Q A Q A With Mr. Brittain. Not to Mr. Brittain.

He lost quite a bit of money, didn't he? Yes, he did. Did you make money on commissions? From Mr. Brittain? No. In marketing those investments.

From Alpha Telecom, yes. Now, when was National Marketing Solutions organized? There was a National Marketing Solutions before I moved to The National Marketing Solutions, LLC, that Mike Smith

Spokane.

and I were partners in was in2001. Q Did National Marketing Solutions ever adopt a doing business

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Jeffrey Mitchell - Cross 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 as name? A Q Not that I recall. You don't recall adopting a doing business as name Heritage

America? A Q A Q Yes. We were doing business with Heritage America.

No, doing business as Heritage America was the question? I don't recall. After becoming aware of this investment program called

Capital Holdings or Smitty's Investments, did you travel to Colorado? A Q A Q A Q A Q A Q A Q A Q A Yes, I did, once. For what purpose? To go to a meeting to explain how the program worked. And where was that meeting? It was here in Denver. All right. Did you ever go to the Redstone Castle?

The night before. And who attended this meeting? I don't recall everybody that was there. Well, let me ask you if you recall the name Michael Vallone? Michael Vallone, yes. John Schlabach? Yes. Michael Smith? Yes.

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Q A Q

Okay. No.

Jeffrey Mitchell - Cross And were you aware of an agenda for this meeting?

If we can bring up Exhibit 136, please.

One zero three six.

I am sorry. please.

If we can focus in on the bottom section of it, The middle section where it's numbered.

I am sorry.

So at this meeting, do you recall discussing the encryption of a privacy software? A Q No. And at this meeting do you recall discussing concerns about

the Securities and Exchange Commission? A Q A Q I don't recall. You don't recall? No. In your business that would be a pretty major topic, would

it not? A Q A Q Yes. And you don't recall it? At that meeting, no. Was there a later meeting or another meeting that it was

discussed? A Q A Q Not that I attended. Have you ever heard of the name Robert Wommack? No. Looking at paragraph 3 there, the strategy for advance tax

planning and asset protection planning, you don't remember that

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Jeffrey Mitchell - Cross meeting in Denver for that purpose? A Q No, I don't. Okay. If we can go back up to the top, please. Do you see

the e-mail header there, Mr. Mitchell? A Q A Q A Q Yes. You recognize Mike Smith's e-mail address? Yes, I do. It's NMS for [email protected] is his e-mail address? That was his e-mail address, yes. Did Mike Smith ever discuss these topics with you after

receiving that e-mail? A Q A Q When we were in Denver? At any time? No. So with respect to particularly the concerns about the

Securities and Exchange Commission, he would have kept that from you? A Q He didn't keep it from me. Really? That's not what I said. Did he discuss

Let's go back down to paragraph 2.

that with you at all? A If I understand, yes, how it would be offered and not be

considered a security, yes he did. Q A Q And when did that happen? For several months. I am sorry?

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A Q A Q

Jeffrey Mitchell - Cross Several months. But it wasn't discussed in Denver? It might have been. I don't recall. Have you ever seen that

Let's take a look at Exhibit 7004.

document before, Mr. Mitchell? A Q I can't read it. It's not big enough.

If we can hone in on the top half of the document, please.

Did you ever see that document before, Mr. Mitchell? A Q Not that I recall. Okay. Looking at the dates there, May 16th through 19th,

2002, is that about the time you went to the Redstone Castle? A Q A Q Yes. And you don't recall ever seeing this document before? I don't recall. Okay. Now, with respect to your participation in the

Capital Holdings program, did you receive overrides? A Q A Q A Q No. Did you receive compensation for marketing the program? Yes. How? I was reimbursed money for my business expenses. Okay. Did any entity controlled by you or from which you

benefit receive overrides? A Q I did. You received overrides?

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A Q

No.

Jeffrey Mitchell - Cross I received reimbursement for business expenses. Are you associated or affiliated with an entity

Okay.

called J&C Holdings or Investments? A Q A Q Excuse me? Are you affiliated with an entity known as J&C Investments? I don't know J&C Investments. Let's take a look, if we can, at Exhibit No. 1014. And

maybe the question should be, are you familiar with the name J&C Resources? A Q Not that I recall. If we can take a look at the first page of 1014. Mr. Mitchell, do you recognize that name now? A Q A Q A Q That's my name. Do you recognize the name of the entity? No. Isn't J&C Resources a trust set up for you? I don't recall J&C Resources. Okay. Do you recall -- let's take a look at page 2. Looking at that

Focusing in on the top section first, please. address there, do you recognize that address? A

That was our mailing address when we were National

Marketing. Q A Q When you say our mailing address, who are you talking about? National Marketing Solutions, everybody who worked there. Mr. Mitchell, if we can pan down a little bit, it looks like

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Jeffrey Mitchell - Cross for the month of January of 2003 you took out $37,000 under the name J&C Resources? A Q A Q A Q A Q A Q A Q A Q A Q A I never took out $37,000. Well, who would have controlled that? That's Michael's signature. Michael's signature? Yes. Michael Smith? Yes. So you didn't get the $37,000? No. You didn't get the benefit of the $37,000? No. It's all Mike Smith? I don't know. Okay. Um-hm. And you don't know anything about J&C Resources? I don't recall J&C Resources. MR. ANGELO: THE COURT: MR. ANGELO: If I can have a second, your Honor. Thank you, counsel. You may. Now you are his best friend?

If we could have a second just to examine

something, your Honor. THE COURT: MR. ANGELO: Again, you may. Thank you, your Honor. I have no other

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Jeffrey Mitchell - Cross 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 BY MR. STUCKEY: Q Mr. Mitchell, you have testified here on cross-examination questions. THE COURT: Very well. Redirect examination on behalf

of Mr. Smith by Mr. Stuckey. MR. STUCKEY: THE COURT: Thank you, your Honor.

You are welcome. REDIRECT EXAMINATION

you didn't remember the name of that entity, and what that $37,000 went for and whatnot. Did you have occasion to in May

of 2002 attend a dinner involving folks from Denver and elsewhere? A Q A Q Yes, I did. And who hosted the dinner? Norm Schmidt, Chuck Lewis, George Beros and -Let me correct one thing. Were you sure Chuck Lewis was

there? A Q A Q No. I am sure he wasn't there.

But Norm Schmidt? George Beros and Alan Weed. Did George Beros -- what did George Beros say at that

meeting? MR. ANGELO: Objection, your Honor, it's beyond the

scope of cross-examination. THE COURT: Response.

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Jeffrey Mitchell - Redirect MR. STUCKEY: It's close, your Honor.

I understand.

But I think the questions on cross-examination about his memory and whatnot, and inability to remember certain things will be clarified a little bit by this when I ask him what Mr. Beros said at that meeting. THE COURT: Well, that doesn't drag it within the scope

of the preceding examination. MR. STUCKEY: THE COURT: I said it was close. I understand.

That being the response, for now the

objection is sustained. MR. STUCKEY: All right. At that point, then, your

Honor, I have no further questions. THE COURT: Let me inquire, Mr. Stuckey, may

Mr. Mitchell be excused and released from subpoena, if any, by Mr. Smith? MR. STUCKEY: THE COURT: MR. ANGELO: THE COURT: other defendants? Hearing none, Mr. Mitchell, you are both excused and released from subpoena with our thanks. THE WITNESS: THE COURT: Thank you. Yes, sir.

Any objection by the government? None, your Honor. Thank you.

Any objection by any one or more of the

You are welcome.

(The witness was excused.)

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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 morning.

Jeffrey Mitchell - Redirect THE COURT: And Mr. Stuckey, Mr. Smith may proceed by calling his next witness. MR. STUCKEY: THE COURT: Call Eric Weare, your Honor. Mr. Weare, good morning. If To do

Very well.

you will make your way forward to be sworn by the court.

that if you will come stand in this open area in front of my bench. About there is fine. I am going to administer the oath so if you will face me and raise your right hand to be sworn. And thank you.

May I have your attention in the courtroom. (Eric Weare was sworn.) THE WITNESS: THE COURT: witness stand. THE WITNESS: THE COURT: Thank you. And again, sir, good Yes. Please be seated in that

Thank you.

You are welcome.

THE WITNESS: THE COURT:

Good morning, sir.

As you testify, please use the microphone

in front of you, and by its peculiar design, it works best with a speaking distance of about six to eight inches. THE WITNESS: THE COURT: Thank you.

You are welcome.

Mr. Stuckey. MR. STUCKEY: Thank you, your Honor.

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Jeffrey Mitchell - Redirect THE COURT: You are welcome. DIRECT EXAMINATION BY MR. STUCKEY: Q A Q A Q A Q A Q A Q A Would you please state your name, sir, and spell it. It's Eric Weare, W-E-A-R-E. Where do you live, sir? I live in Noxen, Montana. Oxen? N, Noxen. N-O-X-E-N? Correct. And what do you do there, sir? I am an outfitter. What does that mean for us city folks, an outfitter? I am a hunting guide, professional hunting guide in Montana

and Alaska. Q A Q A Q And Alaska? Yes, sir. Do you know my client in this case, Michael Smith? Yes, sir. Can you tell the court and jury when you first came to know

Michael and how? A Met him through his dad, who happens to live just up the

road from me, or used to live up the road from me, about three or four miles, and I met Mike through him to go on a hunting

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Eric Weare - Direct 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Honor. it. trip. THE COURT: Wherever it is. MR. STUCKEY: Excuse me. Either answer that or muzzle

Excuse the interruption, Mr. Stuckey. It certainly wasn't your fault, your

Thank you, though. THE COURT: You are welcome. And for the record, it

was not my fault. BY MR. STUCKEY: Q Would you repeat that answer, sir, about how you came to You were talking about his father?

know Michael. A Yeah.

His dad lived, two, three, four miles down the road Used to see him at the local bar and just, you know, There is no town there where we live, and I

from me.

super small town.

visited with him, and my cousin actually knew him real well. Q A Q A Talking about Michael Smith or his father? His father. Okay. And then through him, he said that his son, Michael, might

want to go on a bear hunting trip up in Alaska, so I went over to his dad's house at that time, and Mike was there and I met him, and we talked about a hunting trip up to Alaska for grizzly bear. Q A Q What was that last part? For grizzly bear. Oh, grizzly bear. And when about was that, Mr. Weare?

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A

Eric Weare - Direct Best as I can recollect, it was about 2001, in the spring of

2001. Q A Q A Did you have that trip? We did. Yes, we did.

And when was that? It was the following spring, so I am thinking that was the

spring -- it would have been May, roughly this time of year, of 2002. Q A Have a good hunt? We had a good bear hunt. We didn't get a bear but we got

close. Q On that trip -- well, let me ask you this. Did you become

familiar with Michael and his work habits on that trip? A Q A Yes. And on that trip, what can you say about his work habits? Good guy as far as showing up on time and being honest, and

he was there at the airport when he said he was going to be, and paid the balance of the hunt like he said he was going to do, and did everything he said he was going to do. Q Did he work on business like over a cell phone or anything

during that trip? A Q A Yes, he did. Too much to your liking or -Yeah. That's pretty much all he did was he was messing with

these numbers on this Capital Holdings thing, and was talking

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Eric Weare - Direct about it on that trip. Q A Q Would you call him a workaholic? I would say so, yes. A little later in that month of 2002, were you invited to

attend a restaurant meeting with some folks from Denver on this Capital Holdings thing? A Q A Q A Q A Q Yes, sir. Did you go? Yes, I did. And have you invested in Capital Holdings? I did. Before or after that meeting? It would have been certainly after that meeting. At that meeting, do you recall who all was there from Denver

or elsewhere? A Yes, sir. Norm Schmidt was there, Alan Weed was there, and I don't remember his name.

there was one other gentleman there.

And then there was a couple of guys that I remember from Jamaica. as well. Q A Do you remember what they did? They were traders, and we went into a kind of a private room I don't remember them boys' names but they were there

there in the restaurant, and they had a big blackboard, and they asked if we were -- if we liked things laid out, you know, in writing, so you could understand them because they were doing a

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Eric Weare - Direct lot of talking way over my head, and I said, yeah, that would be fine, and they explained that if you took the money from bank A and you give it to bank B, at a certain time, that these investments would pay dividends to the people that gave the money into this program. Q Basically what it amounted to.

And that's where the profits for this program would come

from? A Q A Q Yes, sir. These trades? These trades, yes, sir. Can we have defense Exhibit 35, page 5, and again I believe

that's in evidence, your Honor. THE COURT: Smith Exhibit 35? Yes, sir.

MR. STUCKEY: BY MR. STUCKEY: Q A Q A

I would like you to look on the screen there, sir. Yes, sir. Is this similar to the presentation? Yes, sir, it is. This picture up close, and I don't

remember exactly, but it's bank A, bank B, and bank C thing, yeah. it. And even -- I mean I got out of high school, but that was

I started packing for an outfitter when I was 17 years old

so I am not up on all the things that are going on in the banking world or anything like that, but it seemed pretty silly to me that you could do that, but they had all these, you know,

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Eric Weare - Direct they had insurance, and they had this, and they had that, and they claimed that it was a guaranteed deal. Q A Q A Did -- or do you remember who did most of the explanation? A lot of it was Alan and Norm. And how about this fellow whose name you couldn't remember? Two -- the two Jamaicans, they both did quite a bit of

talking actually, yes. Q But the other fellow whose name you said you couldn't

remember? A He did some talking, yes. It kind of went around the room.

They took turns going up there and pointing stuff out and visiting about it. Q Was Mike Smith a participant in the explanation or was he

just a listener like yourself? A I would have to say he was more of a listener than he was

the explanation. Q A Q A Q A Q A Q So you said then you did invest, right? I did invest, yes. Do you have a son? I do. And did he? He did invest, yes. What happened to your investments? Lost them. Lost everything.

What about your son's?

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A Q A

Eric Weare - Direct He lost his money as well. Did you get anything back? The only thing he got back is that Mike gave him back his My son was twelve years old at the

money out of his own pocket.

time, and met him over there at the house, and he had lost his money in it, just like I did, and he wound up -- he asked me how much money Cap had lost, and I said, well, he invested 300, and Mike pulled the money out of his pocket and gave it back to him and said, well, a little kid like that shouldn't lose his money. Q A Q Cap is your son? Yes, sir. Throughout this association it may be obvious, sir, but your

association with Michael Smith, have you come to form an opinion as to his character for honesty? A I think Mike is a square guy. I met a lot of people in my

life and taken a lot of hunters into the woods from all walks of life, from people that do what you are doing here to people that sell pizzas, and met a lot of people, and I always thought Mike was square. Q Do you have an opinion as to his character for being

truthful? A I have no reason to believe he ever lied to me. MR. STUCKEY: Honor. Thank you. THE COURT: You are welcome. That's all I have of Mr. Weare, your

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Eric Weare - Direct Examination of this witness by Mr. Lewis, by Mr. Gainor? MR. GAINOR: THE COURT: No questions, your Honor. Thank you.

On behalf of Mr. Weed by Mr. Goodreid? Yes, your Honor. Thank you.

MR. GOODREID: THE COURT:

You are welcome. CROSS-EXAMINATION

BY MR. GOODREID: Q I hope the court will indulge me with the loss of my voice. Good afternoon, Mr. Weare. Howdy. Now, you indicated you were at a meeting in Spokane, Or good morning, rather.

Washington where you indicated Mr. Weed and Mr. Schmidt did most of the talking, right? A Q A Q A Q A That's correct. Was that meeting on May 28th or May 29th? I don't have any idea, sir. Well, was it in May of 2002? I think it was, yes. Where was that meeting? It was at a restaurant there downtown by the river. I think. I think Do you recall?

it was Shenanigans. Q A

And was the meeting in the evening or was it in the daytime? No. It was in the afternoon, towards evening. Definitely.

Because I had to drive -- see, you have to remember that I live

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Eric Weare - Cross three hours from Spokane. I don't live in Spokane.

So three

hours drive for me, and I had to get off work, so it was around 4:30, 5:00 o'clock before I got there. MR. GOODREID: Your Honor, may I have a moment to

glance at my computer, please? THE COURT: BY MR. GOODREID: Q If we could pull up Smith's Exhibit No. 9, please, first Do you see that, Mr. Weare? You may, counsel.

page. A Q

Yes. And that says this document is a transcript of the meeting Do you see that?

of downtown branch of US Bank in Spokane. A Q A Q A Q A Q Yeah, I see that. Is that the meeting that you attended? I don't know.

You think the one you attended was at a restaurant? I know it was at a restaurant. It was not at a bank? It was not at a bank. It was at a restaurant. If we could

Let me ask you to look at Smith's Exhibit 10.

pull that up, the first page, please.

And do you see that

transcript or see the first page there? A Q Yeah. I see it there.

Do you see that this is a transcript of a meeting held in

Colbert, Washington?

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Eric Weare - Cross 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 BY MR. ANGELO: Q Mr. Weare, can you tell us, please, what it costs to go A Q A Q Um-hm. Does that address mean anything to you? No. So as far as you know, that was not the meeting you were You weren't present at that meeting either?

present at. A Q No.

Because the restaurant you were talking about was in Spokane

itself, it is not in Colbert? A Q A Q A That's correct. Was that meeting, as far as you know, tape-recorded? Oh, I don't think so. You didn't see anybody tape-record it? I didn't see anybody, no. MR. GOODREID: THE COURT: That's all I have, your Honor.

Examination of this witness on behalf of

Mr. Schmidt by Mr. Hammond. MR. HAMMOND: THE COURT: No questions, your Honor.

Cross-examination of this witness by the

government, Mr. Angelo. MR. ANGELO: THE COURT: Thank you, your Honor. You are welcome. CROSS-EXAMINATION

hunting in Alaska for grizzly bears?

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A Q A Q

Eric Weare - Cross At that time it was about $7,000. And do you remember how you were paid for that? Yeah. Okay. By check. Do you remember what the entity was that was on the

account for the check? A Q I just had Mike's name on the check, Mike Smith. Okay. Now, as I recall it, you had indicated that you were

an investor? A Q A I was. When did you invest, if you recall? Well, I was trying to think about that. I would say it was

late in 2003. Q A Q A Q Okay. Would it have been 2002?

Could it have been? Um-hm? Could have been, yeah. Okay. Do you remember signing a contract for the

investment? A Q A Sure did. Do you remember what that contract was called? Boy, it was with Capital Holdings. I remember all that.

No, I don't exactly remember what it was or anything. Q Could it have been a Cooperative Private Placement

Agreement? A Could have been.

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Q A Q A Q A Q A Q

Eric Weare - Cross Do you recall signing that on June 6th of 2002? Probably. After the meeting that you have discussed? Probably. And your initial investment was $68,000? Sounds about right. And you add $23,000 to it? Yep. And what was your -- who actually told you about this

investment? A Q Well, Mike is the one that told me about it. Now, as I understand it, you withdrew all your monies in Do you recall that?

August of 2002. A Q A Q A Q A Q A No.

That's not right.

About $109,000? No. That's not right.

Did you withdraw some money? I withdrew some money, yes. Didn't you request a complete disbursal of your account? Did I? Um-hm. No. No, I didn't. Because there was 60 some thousand

dollars in there that the government seized, so if I would have requested that it be disbursed, I guess I would have had it, so no.

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Q

Eric Weare - Cross As I understand it, you took out a second mortgage on your

property in order to invest, correct? A Q I did. And did you not withdraw funds to repay that second mortgage

in August of 2002? A Q is? A It was an account set up by Mike's office. It was a guy Yes. I withdrew -- yes, 40 some thousand, I think it was.

And you also -- can you tell us, please, what Ibex Holdings

there by the name of John somebody. name. Q A Q A Q A Q A Schlabach? That's him, yeah.

I can't remember his last

And he set up this account for us, yep.

And when you say "us", who are you talking about? Me and my wife. Did you invest some funds in Capital Holdings through Ibex? Yes. And how much? Man, I don't know. I don't handle the paperwork end of it. Sorry.

That's my wife's department. Q Okay.

Did you make withdrawals under the Ibex account at

various times? A Q Oh, yeah, sure. Do you recall requesting, let's say for instance, $90,000 to

buy additional land?

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Eric Weare - Cross 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A Q A Q A No. Okay. B&K. Do you recall an entity called B&K Holdings? Yes, yes. That was my friend, yeah.

What's your friend's name? Boss. His real name is Brent but he goes by Boss.

Mr. Fitchett. Q A Q And did Mr. Fitchett invest in Capital Holdings? He did. Did you receive what is known as overrides for that

investment? A Well, yeah. I guess they said I was supposed to get it, but

I never did get it. Q A Q A What about J&M Holdings? That's his brother, Johnny. Did you also receive overrides for that investment? I guess that was supposed to be the case, but I never did

get any of it. Q A Q A Q A Q Did you go to a Christmas party in Coeur D'Alene? Yes. Who sponsored that? Capital Holdings. Do you know who paid for it? No. I don't have any idea.

At some point after that Christmas party you became uneasy

about your investment, didn't you?

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Eric Weare - Cross 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A Q A Q A Q A Very. What about that Christmas party made you uneasy? Well, to be honest with you, Norm made me uneasy. And did you express that concern to Michael Smith? I did. What did you tell him? I just said that this thing looked shaky, and I had been

talking to a few people that, you know, I make a lot of contacts in my hunting world, and I talked to a couple of attorneys like yourself and stuff, and knew a few guys, and I would call them up and say, hey, you know, I am doing this thing and I have my house invested and everything, I don't know, have you heard about this and does this work. And, unfortunately, every one of

them told me that this thing is -MR. HAMMOND: him as hearsay. THE COURT: MR. ANGELO: Response. We are not eliciting this for the truth, I object to what every one of them told

but to show notice to the defendant, Mr. Smith. THE COURT: And not the statements by these particular

declarants by definition and, therefore, for now, the objection is sustained. BY MR. ANGELO: Q Did you pass along this information that you had received to

Michael Smith?

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Eric Weare - Cross 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 BY MR. STUCKEY: Q Did Mr. Smith tell you where he got that information about A Q A Q Yes. What was his response? I guess I would have to say he still felt like it was solid. Okay. Now, after the funds were frozen, who told you about

that? A Nobody told me. I went in there to get some money and

couldn't get it. Q A Q Did you talk to Mike Smith about that? Oh, sure. Do you recall what he told you about the reason for the

frozen funds was? A Q A The government took it. Didn't he tell you that it was frozen under the Patriot Act? Yeah. Yeah, that's true, he did. I have nothing else, your Honor. Redirect examination on behalf of Mr. Smith

MR. ANGELO: THE COURT: by Mr. Stuckey. MR. STUCKEY:

One question, your Honor. REDIRECT EXAMINATION

the Patriot Act? A No, sir. MR. STUCKEY: THE COURT: I have no other questions.

Therefore may this witness be excused and

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Eric Weare - Redirect released from subpoena, if any, by Mr. Smith? MR. STUCKEY: THE COURT: MR. ANGELO: THE COURT: other defendants? Yes, sir.

Any objection by the government? None, your Honor. Thank you.

Any objection by any one or more of the

Hearing none, Mr. Weare, you are both excused

and released from subpoena with our thanks. THE WITNESS: THE COURT: Thank you, sir.

You are welcome.

(The witness was excused.) THE COURT: Very well. Mr. Smith may call his next

witness, Mr. Stuckey. MR. STUCKEY: THE COURT: David Dodd, your Honor. Mr. Dodd, good morning.

Thank you.

THE WITNESS: THE COURT:

Good morning.

If you will make your way to come forward

and stand in this open area in front of my bench, please. THE WITNESS: THE COURT: administer the oath. hand to be sworn. Okay. I am going to

About there is fine.

If you will face me and raise your right

And thank you.

May I have your attention in the courtroom. (David Dodd was sworn.) THE WITNESS: THE COURT: I do. Please be seated in that

Thank you.

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witness stand.

Eric Weare - Redirect And again, good morning. Good morning.

THE WITNESS: THE COURT: in front of you.

As you testify, please use the microphone

And it works best with a speaking distance of

about six to eight inches, please. THE WITNESS: THE COURT: Okay. Mr. Stuckey.

Thank you.

MR. STUCKEY: THE COURT:

Thank you, your Honor.

You are welcome. DIRECT EXAMINATION

BY MR. STUCKEY: Q Would you please state your name, sir, and spell your last

name? A Q A Q A Q A Q A Q A Q David Dodd, D-O-D-D. Where do you live, Mr. Dodd? I live in Chattaroy, Washington. Chattaroy? Washington. Can you spell that for our record? C-H-A-T-T-A-R-O-Y. Where is that in relation to Spokane? It's just north. How far? Oh, about 20 miles, 25 miles. Do you know Michael Smith?

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David Dodd - Direct 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A Q A Yes. And when and how did you come to know Michael Smith? He come to the Spokane area -- I believe it was about '83,

'84, something like that, and I bought a life insurance policy from him. Q A Q I forgot to ask you, what do you do, sir? I work in the woods. I am a logger.

And how was it that you came -- did you go to him or did he

solicit you? A No. The insurance guy I was going through, Michael went to That's how I met him.

work for him. Q

Did you maintain a relationship or friendship with him

throughout the years? A Q A Q A Q Yes. How would you describe that relationship? Really good. Good friends? Yep. And did you know what Michael's business was, Michael

Smith's business was? A At what time? He has always been in insurance since I have

known him, off and on. Q Do you have a friend, your significant other, I believe,

right? A Significant other? What do you mean?

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Q A Q A Q A Q A Q A Q

David Dodd - Direct A girlfriend with whom you reside? Yeah. You are not married, though? No. Her name is? Paula Galley. Where, in say 2002, where did she work? She worked for Mike. Did she meet him because you knew him? Yes. All right, sir. Did you also know a Mr. Donald Hoener,

H-O-E-N-E-R? A Q A Yes, I do. How do you know Mr. Hoener? He is -- would be one of my uncle's nephews. My uncle is

married to his sister. he was six years old. Q A

I have known him for, oh, probably since

And where does he live, Spokane area? He lives over in the Spokane area, about not too far from

where I am at. Q A Q A And you know his wife? Yes. What is her name? Caron -- they don't use the same last name. I can't

remember her last name.

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Q A Q

David Dodd - Direct Christianson? Christianson, yes. Did there come a time, sir, when you introduced Mr. Hoener

to Michael Smith? A Q A Yes. And do you remember about when that was? I don't remember -- I am not good at dates. I don't

remember when that was. Q A Q Would it have been in 2002? It could have been. Was that when Paula Galley, your significant other, that

worked for him? A Q A Yes. She didn't work in 2001, or 2003? I don't know. But that's

I am not positive of the years she worked there.

when I introduced Mr. Hoener, she was working there. Q What was your purpose of introducing Mr. Hoener to Michael

Smith? A Q A Q A Q The investment program he had going. You knew about this investment program? Yes. Did you know the name of it? No. I couldn't tell you. It's been long enough that --

Okay.

What arrangements were made for you to bring

Mr. Hoener and his wife to meet Mr. Smith, too?

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A Q A

David Dodd - Direct Um, I met with them. There at Mike's office. Did you drive them? No, no. I just met with them there. They drove themself.

I drove there myself. Q A Q Do you remember what time of day it was? It was probably mid-day. Okay. And had you talked with Mr. Hoener about this Why you wanted him to meet Michael Smith?

investment program?

Did you just ask him or how did that work? A Q A Q I told him about it, and he was interested in it. So he said he wanted to meet? Yeah. Okay. So you meet there. Where did you -- can you describe

Michael's house, right? A Q A Q A Q Right. At that time was in Colbert, Washington? Yes. And Michael's office was in the basement? Yes. Did -- well, let me just ask you to carefully describe what

took place. A We met there. I introduced -- we went downstairs to Mike's And I sat It

office, and I introduced Caron and Don to Mike. there.

Paula Galley and we sat there through this meeting. We were there about half hour or 45

didn't last very long.

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minutes. Q A Q

David Dodd - Direct And they decided to invest in it and they left.

Did Michael explain the program to them? Yes. Did they have questions about the safety and soundness of

this program? A Q Yes. At any time during that meeting did you hear any mention

about anyone in England? A Q No. Specifically I wanted to ask you, did you hear Michael Smith

say anything about he had been in England? MR. KIRSCH: THE COURT: BY MR. STUCKEY: Q A The question is, did you hear anything about him saying? The only thing that was said about going was to watch him -MR. KIRSCH: THE COURT: Objection. Hearsay. Response. Objection. Not yet. Hearsay.

Overruled, but without prejudice.

Now we have hearsay.

MR. STUCKEY: Mr. Hoener about this. that.

We had this direct testimony from This is rebuttal testimony in answer to

It is his rendition of an out-of-court statement, but I

think it goes directly to negate the implication the government made through witness Hoener and admissible under 803(3) showing Michael Smith's state of mind. THE COURT: Well, reply.

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David Dodd - Direct MR. KIRSCH: Your Honor, it certainly wasn't clear from the witness's answer that he was beginning to recount a statement by Michael Smith. I don't believe that he was. And I

stand by the hearsay objection. THE COURT: Counsel, was he? To my knowledge he was. We will all

MR. STUCKEY: THE COURT: listen carefully. objection may lie.

That too is my recollection.

If it's something other than that, an But this is being offered again as an

exception to the hearsay rule, so-called state of mind exception, found at Rule 803(3). And on that basis, I overrule the objection. Now, sir, you may complete your response, if you remember where you were, otherwise I will ask counsel to reiterate his last question. THE WITNESS: BY MR. STUCKEY: Q A What, if anything, did Michael Smith say about England? While we were in this meeting all Michael Smith said was he That was Okay. You want to repeat that.

was waiting for an opportunity to go watch him trade. it. Q A Q A So you had known Michael for some time, right? Yes. Did you ever invest in the program?

I was going to but it went away before I got there.

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Q

David Dodd - Direct Did you -- over the years you have come to know Michael and

had an association with him, have you formed an opinion as to his character for honesty? A Q He has always been really honest with me. And have you an opinion as to his character for

truthfulness? A As far as I have seen, yeah. MR. STUCKEY: you. THE COURT: You are welcome. He has always been truthful. Thank

That's all I have, your Honor.

Examination of this witness on behalf of Mr. Lewis by Mr. Gainor. MR. GAINOR: THE COURT: Mr. Goodreid? MR. GOODREID: THE COURT: No questions. Thank you, your Honor. No questions, your Honor. You are welcome. Thank you.

On behalf of Mr. Weed by

Or on behalf of Mr. Schmidt by Mr. Hammond? No objection, your Honor.

MR. HAMMOND: THE COURT: Mr. Kirsch. MR. KIRSCH: THE COURT:

Cross-examination by the government,

Thank you, your Honor. You are welcome. CROSS-EXAMINATION

BY MR. KIRSCH: Q Mr. Dodd, did you say that you had originally purchased a

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David Dodd - Cross life insurance policy from Michael Smith in 1983 or '84? A It was somewhere right in there. I am not exactly sure of

the year. Q All right. And that it's your understanding that since that

time Michael Smith has always been involved in the insurance business? A Q Yeah. And you, um, don't remember what year it was that Paula

Galley was working for Michael Smith? A It was between 2001 and 2003, right in that area. I mean I

am not positive, so. Q All right. And I think -- am I right that you didn't you didn't remember Mr. Hoener's wife's last

remember Mr. --

name without prompting by Mr. Stuckey? A I have known Mr. Hoener and his wife by Hoeners. But Caron

uses a different last name. Q All right.

I don't pay much attention to it.

And you also don't remember the name of the

investment program? A Q A Q I sure don't. That Mr. Smith was selling? No. I am not good with names.

But you are very good with remembering specifically that

Mr. Smith said that he was waiting for an opportunity to go to London to see trading happen? A Yes.

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Q A Q

David Dodd - Cross You remember that statement exactly? Yes. All right. And you, um, said that you -- you never had a

chance to put any money into whatever this investment was called? A No. My business, it's feast or famine during certain times So at the time I didn't have money to put into it

of the year.

or I would have. Q A Q A Q You did have an entity set up for you, though, right? It's something like that. Timberline Holdings? Yes. And you did get overrides for referring other people into

the investment? A Q I had one -- I had two people referred, yes. You got overrides from Terry Heffeling, right, from

referring him in? A Q A Q Yes. And you got overrides for Mr. Hoener and Ms. Christenson? Right. And you got overrides for $400 that each of their daughters

put in, didn't you? A Q I believe so. And in fact, you, around the end of January, you requested

all of that money that you had earned by making these referrals

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David Dodd - Cross back out, didn't you? A Q What do you mean by that? I mean you requested a disbursement of $3,510.05 at the end

of January, didn't you? A Q A Q A Q A Q I don't believe so. You don't? No. I don't believe so.

Do you recall getting monthly statements? Yes. For Timberline Holdings? Yes. If you looked at one of those monthly statements, do you

think that would refresh your recollection if you requested that money back? A Well, hold on a minute. I thought those things came in like I am not positive. I didn't

every two weeks or three weeks.

know that there was -- I kind of understand what you are saying, but I thought those things came like it was either every two weeks or three weeks on the statement. Q Let's start over and make sure you understand what I am I am asking you whether or not you recall at the end of

saying.

January requesting a disbursement of $3,510 from the Timberline Holdings account? A I could have. But I thought that they was on a two or

three-week deal, and we left them set for so long.

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Q A Q A Q

David Dodd - Cross Did you request money back at any time? I believe we did. Did you get it? I believe so. Okay. Why did you all of a sudden decide to request all of

the money out of your account at the end of January of 2003? A Q I don't have any idea. We just took the money out.

You never had any conversation with Mr. Smith in which he

suggested that maybe you ought to take all that money out? A Q A Q No. I did not.

You would remember that, I am sure? I am sure I would. You also said that, as far as you know, throughout the time

you have known him since '83 or '84, Mr. Smith has always been an honest person? A Q As far as I know. Are you aware that Mr. Smith lost his license to sell

insurance in Washington for making false statements in connection with insurance applications? A Q A Q No. You weren't aware that that happened in 1993? No. Mr. Smith never told you about that during the course of

your friendship? A Not -- I am not sure. But I am pretty sure he didn't, so.

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Q

David Dodd - Cross Would that affect your opinion at all about whether he is an

honest person? A No. Because we don't work on the same deal. I have a

totally different thing in my business, and we don't usually discuss much about the businesses of what he does. I don't know

much about what he does, and he knows nothing about what I do as far as work ethics go. MR. KIRSCH: THE COURT: by Mr. Stuckey? MR. STUCKEY: THE COURT: None, your Honor. Thank you, Mr. Dodd. Redirect examination on behalf of Mr. Smith

May Mr. Dodd be excused and released from

subpoena, if any, by Mr. Smith? MR. STUCKEY: THE COURT: MR. KIRSCH: THE COURT: defendants? Hearing none, Mr. Dodd, you are both excused and released from subpoena, if any, with our thanks. THE WITNESS: THE COURT: All right. Thank you. Please, your Honor.

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

You are welcome.

(The witness was excused.) THE COURT: witness. Very well. Mr. Smith may call his next

Mr. Stuckey.

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David Dodd - Cross MR. STUCKEY: Paula Galley, your Honor. THE COURT: Thank you. If you will come forward to

Ms. Galley, good morning. be sworn by the court.

And to accomplish that, if you will come Right about there

all the way forward to my open bench, please. is fine. I am going to administer the oath.

If you will please face me and raise your right hand to be sworn. And thank you.

May I have your attention in the courtroom. (Paula Galley was sworn.) THE WITNESS: THE COURT: witness stand. Yes, I do. Please be seated in that

Thank you.

And again, good morning. Good morning.

THE WITNESS: THE COURT: in front of you. THE WITNESS: THE COURT:

As you testify, please use the microphone

Okay.

And it works best with a speaking distance

of about six to eight inches. THE WITNESS: THE COURT: All righty. Mr. Stuckey.

Thank you.

MR. STUCKEY: THE COURT:

Thank you, your Honor.

You are welcome. DIRECT EXAMINATION

BY MR. STUCKEY:

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Q A Q A Q A Q A Q A Q A Q A Q

Paula Galley - Direct Please state your name, ma'am. Paula Galley. Spell your last name. G-A-L-L-E-Y. Where do you live, Ms. Galley? Well, Chattaroy, Washington. We have already had the spelling of Chattaroy. Okay. Who do you live with? David Dodd. Is he your significant other? Yes, he is. Do you know Michael Smith? Yes, I do. And was there a period in the early -- early in this decade

when you worked for Mr. Smith? A Q Yes, I did. Can you tell us the dates about when you were employed by

Michael Smith? A Um, well, it's probably been about four to four-and-a-half

years since I worked there, and I worked for him a couple of years prior to that, so early 2000s, yeah. Q A Q Would you have been there in 2002? Yes. And what did you do?

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A

Paula Galley - Direct Oh, I did a lot of just printing off applications and flyers

and, you know, putting that stuff together for him for his -the insurance and the mortgages and stuff like that. Q A Q General secretarial or clerical work? Yeah. Did you become familiar with the program that he was

involved in soliciting other persons called Capital Holdings? A Um, I didn't go into a whole lot of it, no. I mean I knew

of it, and basically what they were doing, you know, but -Q A Q A Q A Q A Q A Q A Q And did you mention this to Mr. Dodd? Did I mention it to him? Yes. To David.

What was -- difficult mention the program to him? Yes. Well, I probably did, yeah. I don't -- go ahead.

Do you know Mr. Donald Hoener? Yes, I do. And his wife? Yes. And her name? Caron. Did there come an occasion in the summer of early 2002 when

you and David Dodd accompanied Mr. Hoener and his wife to Michael Smith's office? A Yes, we did.

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Q

Paula Galley - Direct Can you tell us -- well, first of all, we have heard that

that's in -- at that time was in Michael's home in Colbert? A Q Yes. And I guess the office where he worked was the basement of

the home? A Q A Q Yes. Did you have a separate desk or cubicle? I had my own desk, yes. What happened at there meeting with Michael Smith and the Can you describe the kind of

Hoeners, yourself and David? stuff? A Q

Mike explained the program to them. First of all, can you describe it kind of step by step,

where were you, where did you go, who introduced whom to whom? A David and I -- I don't know if we met them at the house or Anyways we brought them in

if they followed us there, whatever.

and introduced them to Mike, and Mike sat them down in his office and explained the program to them. He told them to go

ahead and go home and think about it and decide what you want to do, and that's what they did. Q Were you present there, you and David, listening to the

whole presentation? A Q Yes, I was. Did you at any time hear Michael Smith make statements

regarding England?

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A Q A

Paula Galley - Direct Regarding what? England. Going to England?

There had been talk of if there, you know, if there had been

a chance to maybe go, but never ever materialized with that. Q Were you in a position to handle travel arrangements and

whatnot? A Q A For Mike? Yes. No. I didn't do any of that. Tammie Goulet did most of

that for him. Q A Well, if he had gone to England, would you have known? Well, yeah. I worked in the office. I would have known,

you know. Q Did Michael Smith ever make a statement that he had been in

England and see these trades? A Q A No, he didn't. Are you sure of that? I am positive. MR. STUCKEY: all I have. THE COURT: Very well. Thank you very much, Ms. Galley. That's

Examination of this witness on behalf of Mr. Lewis, by Mr. Gainor. MR. GAINOR: THE COURT: No questions, your Honor. On behalf of Mr. Weed by Mr. Goodreid?

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Paula Galley - Direct MR. GOODREID: No questions, your Honor. THE COURT: On behalf of Mr. Schmidt by Mr. Hammond? A couple of questions, your Honor.

MR. HAMMOND: Thank you. THE COURT:

Very well. CROSS-EXAMINATION

BY MR. HAMMOND: Q A Q Good morning, ma'am. Good morning. Just a couple of questions. When that meeting happened and

Mike explained the program, do you recall when in 2002 that was? A Q A Q A Q A Q A Q A No, I don't. Do you know if it was in May? Pardon me? Do you know if it was in May or not? I don't recall a date, no. Was your name always Paula Galley? No. Was it Paula Richardson at one time? No. Wrong person.

Do you know who that is? Yes. I know Paula. MR. HAMMOND: THE COURT: Thank you. That's all I have.

You are welcome.

Cross-examination of this witness by the government,

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little more detail the kinds of work that you did for Mr. Smith. A Mike had a -- was selling some insurances, different

insurances, and mortgages, and I would print off and copy applications and flyers for that and put them together for him. Q A Q And this was in Spokane? Colbert, yes. Were you aware his license to sell those insurances had been

revoked in 1993? A Q A Q A No. He never told you that? Not to my knowledge. Did you have an association with an entity called MJR? I have heard that -- I don't know exactly what that was. I

have heard the name before. Q A Q A Q And where did you hear the name? In the office. Okay. What was it?

I don't know. Was Mr. Smith associated with it?

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A Q A Q A Q

Paula Galley - Cross I would assume so. Okay. How about Mr. Carneiro? I don't know.

He may have been.

How about Mr. Schlabach? I don't know. Okay. You are the signatory on MJR as a trustee, are you

not? A Q A I may have been. You don't have a clue at this time? There was times when John would come to me and ask me to be

a signer on a trust, and he said, that's all you have got to do, it's no