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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 XIX _______________________________________________________________ Proceedings before the HONORABLE ROBERT E. BLACKBURN, Judge, United States District Court for the District of Colorado, commencing at 8:25 a.m., on the 1st 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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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.

P R O C E E D I N G S (Proceedings resumed at 8:25 a.m.) THE COURT: Thank you, and please be seated.

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

Mr. Weed, good morning. Good morning, your Honor. Mr. Lewis, good morning. Good morning, your Honor. Mr. Smith, good morning. Good morning. Counsel, good morning. Good morning, your Honor. Ladies and gentlemen otherwise, good

We convene again on the record in open court deliberately outside the presence and hearing of the jury to continue our colloquy concerning Government's Exhibits 9500A through 9514A. It is my understanding that, at the insistence and requirement of the court, those proposed government summary exhibits have been redacted specifically to provide revised information appearing in the gray oval at the top of each of the summary exhibits. Very well. Mr. Kirsch.

In that respect, the government's report.

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MR. KIRSCH:

Your Honor, that is correct.

We have

provided to defense counsel this morning revised copies of 9500A through 9514A. I will proffer to the court that the information that is contained in the gray ovals at the top of those exhibits now is based on a combination of evidence that has been admitted during the course of the trial. That evidence includes generally testimony from people who testified about investing in one of the high-yield investment programs such as Gary Bell, Mary Anne Gough, Wendy Delaney, Boyd Brown, Gordon Hulbert, Linden Markham, Don Hoener, Jeff Stan, Carol Hendrikson, Tom Trotter. The account balance that is listed at the bottom of each gray oval now comes from the bank records that has the appropriate amount, and it depicts the balance at the end of the day before the transaction that is at issue. The information in the gray oval also reflects other information admitted during the course of the trial, such as a combination of the override sheets that were admitted as Government's Exhibits 1010 and 1011 as a part of the files for Asset Holdings and for Miloka Holdings. The testimony from Susan Veik and other people was that those override sheets listed investors on whom those entities received overrides for their investments. The information from those override sheets was compared

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with the bank records that are in evidence, and deposits that were made in names that matched names that were listed on the override sheets are included, along with the deposits from the various investors who testified themselves in the figure deposits from investors. So that figure now reflects all information that has been adduced during the course of the trial, as does all of the information that's contained in the remainder of the charts, which we had already discussed yesterday. THE COURT: Very well. It is my understanding that,

because of the court's requirement, that the information under consideration be tethered to actual evidence adduced during the trial, that the government proposes now to modify its proffer, and to offer in evidence for substantive purposes under Rule 1006 these summaries. Is that correct? proffer? MR. KIRSCH: That is, your Honor. It's correct, and it And is that now the government's

is the government's proffer at this point. THE COURT: Very well. Thank you. I note that

Mr. Bornstein has arrived. forward and be seated. MR. BORNSTEIN: THE COURT:

Good morning.

If you will come

Thank you, Judge.

You are Welcome. Apologize for my tardiness here.

MR. BORNSTEIN:

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THE COURT:

Your apology is appreciated and accepted. I

Now, any objection by any one or -- let me digress. presume, nay, I will require the foundational predicate articulated eloquently by Mr. Kirsch to be repeated by Agent

Stockley from the stand, and thus, we are having this discussion in the superintending context of not only Rule 104(a) but Rule 104(b). Knowing that, any objections by any one or more of the defendants to the government's proffer of these summaries under Rule 1006 for substantive and all purposes, speaking again of Government's Exhibit 9500A through 9514A, inclusive. Any objections by Mr. Schmidt? MR. HAMMOND: Your Honor, would the court mind if we

passed for a moment so Mr. Bornstein can get up to speed on what we just received? THE COURT: You may. Thank you.

Any objections on behalf of Mr. Weed? MR. GOODREID: Your Honor, having just been handed

these about five minutes ago myself, I also would like to pass for the moment. THE COURT: MR. GAINOR: THE COURT: MR. GAINOR: Any objections on behalf of Mr. Lewis? May I approach the lectern? Thank you. You may.

Your Honor, it is 8:30 in the morning.

About eight minutes ago we were supplied with these new exhibits

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and new spreadsheets. If I can direct the court's attention to 9504A and the accompanying spreadsheet labeled Count 36. THE COURT: MR. GAINOR: to Count 40. Yes, sir. And then also direct the court's attention And its accompanying spreadsheet.

That's 9508A.

Those are the two exhibits that directly deal with Mr. Lewis, and I figured it would be more germane to my objection and my comments on the record to have them in front of your Honor. THE COURT: MR. GAINOR: Very well. Your Honor, I am not in a position at this Unfortunately, I have had

point to say whether or not I object.

about six minutes to review these exhibits. Government got done with them around 1:30 in the morning. So I don't put any burden on them to get them over to

my office because I wouldn't turn on the computer at that time anyway. But if the court reviews the spreadsheet for Count 36, it lists a multitude of names starting in terms of clear dates on September 13th, 2001, all the way up to 2002. The great majority of these people who were listed in this spreadsheet, I would say somewhere in the area of 90 percent of these names, perhaps more, I could identify Mr. Peterson, Ms. Markham, Mr. Ortiz, Mr. Hector on the first page who has testified.

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Everyone else I have marked in orange who have not testified, who I have not prepared for on a will-call or may-call list, and whose amounts have been totaled into an amount that equals the sum on page 3 of $1,294,789. I need some time, your Honor, to go through these figures on these non-testifying victims, non-testifying investors, and what I would request the court to consider at this point, because I think it would be inappropriate for me to object before I know what I am talking about, is to either be afforded the opportunity to work with my forensic accountant now, or after Agent Stockley testifies, almost akin to like a Jencks scenario where we are given information and we have the ability to ask for a recess prior to conducting cross-examination. I do have the opportunity to put on Ms. Betzer, if necessary, but I have prepared a particular cross. One aspect

of that cross was to deal with those gray ovals that the court has labeled. Now, something that has been thrown into the mix with a lot more specificity and I need a little bit more time. So I

would be requesting either a recess prior to Agent Stockley taking the stand or right before my cross-examination, and then I will be able to give the court a position with regard to an objection. I don't think I am going to have one, but I think I

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need time to have effective cross-examination of this agent. THE COURT: let me inquire. Mr. Gainor, while you are at the podium,

You joined in the various objections to the

information contained in the gray oval yesterday, did you not? MR. GAINOR: THE COURT: I did. And I assumed, and now I can see

erroneously, that you -- I assumed that you had prepared your cross-examination in the alternative, and that is based on at least two scenarios, and of course knowing counsel and its preparation, perhaps a continuum of scenarios. One to include the court's overruling of the objection, which would have required you to cross-examine the oval information as is, and certainly the other end of that continuum, the possibility, because of the objection, that it may be sustained, and if it would be sustained, I would have anticipated that counsel would have prepared cross-examination for that. And then, of course, knowing that counsel is astute, there is a number of other scenarios that are easily anticipated here for and through the use of an expert witness could have been anticipated, contemplated, and for which preparation in advance could have been made. What I am hearing today is that you prepared cross-examination on the assumption that the court would overrule the objection. Is that correct?

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MR. GAINOR:

Your Honor, there was preparation done on

several different aspects of the potential for what Agent Stockley would testify to. What I am concerned with is the new names and the new amounts and how the government arrived at its methodology for including these amounts. For instance, Mr. Kirsch stands up and tells you that, well, we have looked at the spreadsheets, and there may have been other data in terms of bank account deposits, and also override sheets. I don't know if, for instance, Esther Graves

or Sharon Tracy did deposit $10,000. THE COURT: Why don't you ask Agent Stockley to show

you in the evidence where that is. MR. GAINOR: I intended to. But I just hate going in

there without the opportunity to have my expert take a look at their numbers, the way they have broken up their numbers this morning. I just think it's more prudent to request at least some time for Ms. Betzer to go through the number accounting because we didn't have that before. I was prepared for Agent Stockley before on the way the information was set up, but with all the specificity of all these other non-testifying investors, I am just a little bit hesitant to go up there without her at least reviewing these charts.

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Now, what I can do is over a break ask if my investigator can deliver the charts to her and have her take a look at them. I will avail myself of every opportunity, but I

am just thinking that if we have some amount of time, whether it's just an hour or two, just to have my expert review it, I would feel a lot more comfortable. THE COURT: I understand your position. What I am

going to do is allow the testimony of Agent Stockley to be completed. And then after cross-examination, if you find

yourself in a position that you believe is reasonably incomplete, and I am convinced that it could not and should not have been anticipated and in connection with preparation should not have already been made, then I will entertain your request for a modest, albeit brief, opportunity to confer further with your putative expert witness. MR. GAINOR: THE COURT: MR. GAINOR: Thank you, your Honor. You are welcome. As it turns out, your Honor, I think I

will have a break between the government resting and me putting on my case. I just want to, out of an abundance of caution,

letting the court know what my concerns are. THE COURT: Thank you. Response to the proffer on behalf of Mr. Smith by Mr. O'Donnell. And I understand and appreciate that.

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MR. O'DONNELL:

Thank you, your Honor.

We have

calculated 85 percent of Mr. Smith's relevant documents are names that we have not seen in court. The other objection is that I think it's 801(c). THE COURT: Hearsay. Well, more than that. It's the definition of

MR. O'DONNELL: THE COURT:

That's 801(c).

MR. O'DONNELL:

I know, your Honor, but the evidence

that they are saying was presented in court, as I remember it, most of it came in under ruling by the court that it was not hearsay because it was not offered for the truth of anything. And to make then a turnaround and say all those numbers are true, and here they are, sorry, is a problem in my mind. Maybe I don't know enough about how this works, but there is a logical problem in my mind that -- I know if I was putting on a case of this importance, and I had to put in the vast majority of my evidence under such a constraint, I would hesitate before having anybody swear to the truth of any of the evidence that was put in on that basis, i.e. it was proffered not for the truth of anything. Thank you, Judge. THE COURT: You are welcome. We are back to Mr. Weed

because Mr. Goodreid is standing, apparently in position of readiness.

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MR. GOODREID:

I thought it might move the matter

If I can have the opportunity to confer with

government counsel briefly, I think we may be able to resolve my potential objection. THE COURT: Thank you. You may.

MR. GOODREID:

Your Honor, based on that colloquy that

I had with government counsel, Mr. Weed does not have any objection to these exhibits. THE COURT: Mr. Schmidt. Response to the proffer now on behalf of

Heads, it's Hammond and tails, it's Bornstein. Mr. Hammond has convinced me since I am

MR. BORNSTEIN:

doing the cross-examination of Mr. Stockley that probably it's my role to do it. THE COURT: Nice job, Mr. Hammond. Thank you, your Honor.

MR. HAMMOND: THE COURT:

You are welcome. Um, we agree that the government has

MR. BORNSTEIN:

substantially cleaned up the problem that occurred that we raised yesterday and complied with the court's order. However, we still object to those numbers based on documentary evidence of investor lists and numbers that appear on investor lists where those particular investors have not testified in this courtroom. And the basis of our objection is two-fold. One is

Mr. Smith's objection that those lists were not admitted for the

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truth of the matter asserted, therefore the numbers on those lists were not admitted for the truth of the matter asserted, and No. 2, those lists were admitted, for example, let me just give you a for example, found in a search of an office. right. All

So there is an investor list with numbers on it found in

the search of Mr. Smith's office or at Mr. Lewis's office or the Capital Holdings office that Mr. Lewis ran. And we object because those numbers have never been verified as correct numbers by any witness that's been called to testify. THE COURT: MR. KIRSCH: Response by the government, Mr. Kirsch. Thank you, your Honor.

Your Honor, if I could begin just by offering a little bit of additional information to supplement the record. In

addition to providing the revised charts 9500A through 9514A this morning, the government did also provide spreadsheets that Mr. Gainor referred to. Those spreadsheets represent a printout from the database that Special Agent Stockley testified about yesterday that identify by each deposit item that is included in the new totals of deposits from investors that are now contained in the gray boxes. And continuing to further supplement the record and to inform the court, there was also discussion yesterday about summary exhibits in the beginning with 9600 and moving forward,

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and there was some discussion about objections to those exhibits. The government does not intend to offer any of those exhibits in any fashion. The government does intend to ask

Special Agent Stockley to report the results of his analysis of some of the transactions that were initially contained in those summaries. That would, of course, again be limited to money -monies that have come out of accounts which received investor money as identified using the methodology that is applicable to the 9500A exhibits and the payments that are out will be to entities about which there has been evidence in the record as well. The government has also provided defense counsel this morning with spreadsheets that summarize those calculations. The government does not intend to offer the summary exhibits or the spreadsheets into evidence, but we have provided those to defense counsel so that they will have those and be able, if they want, to cross-examine Special Agent Stockley about those. With respect to the objections and/or issues that were raised concerning the defendants' lack of notice, or lack of time to prepare adequately for a cross-examination, the government would simply point out that the numbers that are now reflected in the gray ovals at the top of 9500A through 9514A are essentially a subset of the numbers that were contained in

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the initial version of those exhibits which the government was offering yesterday. And the government is at a loss to understand why it is that defense counsel would need extra time to cross-examine on a subset of information that presumably they were prepared to cross-examine on yesterday. With respect to the hearsay objections, the testimony -- the evidence, in particular the override sheets, were admitted as a part of Government's Exhibits 1010 and 1011. The government does not recall that those documents were admitted in connection with the limiting instruction. As

the court will recall, those were documents that were admitted during the testimony of Susan Veik. She described them as

essentially business records of the Capital Holdings operation, and the government believes -- and she furthermore testified about the process whereby those records were kept. She

testified about -- she provided a great deal of testimony that established the reliability of those records that were kept in that office. The remainder -- and those documents also constitute, arguably at least, admissions by Mr. Lewis and Mr. Smith. were the files for entities that they controlled; their signatures and handwriting were identified in many of those documents. That would also make those documents non-hearsay. Those

With the exception of those documents, the government

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doesn't believe that the various other records on which -- the other evidence on which these summaries are now based did constitute hearsay. The documents that the investors themselves provided concerning their investment were not admitted for hearsay purposes. Statements that the defendants made describing the

program were admitted for non-hearsay purposes as well, including the statements that were contained in the contracts and that have been described by all of the investors that their money was going to go into a purported non-depleting account. So the government does not believe that the hearsay objection is well taken as it applies to the particular evidence that supports the calculation of the figures of deposits from investors that are contained in these exhibits. THE COURT: Well, I intend to take a moment, a few

minutes, if you will, and look, because I have assiduously recorded not only the date but the page and line in my real-time transcript when these various exhibits, including but not limited to Government's Exhibit 1010 and 1011 were admitted. And I am going to take a brief time to review the context in which those exhibits were admitted to ascertain to what extent limiting instructions were tethered to the admission of those exhibits, after which you will have the benefit of the court's ruling, and again hovering above us in penumbral fashion is Rule 104(b), the records of foundational testimony by Agent Stockley

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to coincide with the proffer articulated by Mr. Kirsch. Mr. Bornstein. MR. BORNSTEIN: THE COURT: If I may address the court.

About what? About Mr. Kirsch's representation --

MR. BORNSTEIN: THE COURT:

No, sir. -- of Exhibits 1010 and 1011. I am going to look, and unless

MR. BORNSTEIN: THE COURT:

No, sir.

you have the record memorized and have a transcript for me, then it will not prove an efficient or cogent substitute for what I am going to do. I am going to go look at the record itself. Okay. I am sorry, your Honor.

MR. BORNSTEIN: THE COURT: court is in recess.

And what's troublesome here is -- well, the

(Recess at 8:50 a.m., until 9:15 a.m.) THE COURT: Thank you, and again please be seated.

Again, we resume and proceed on the record in open court, again deliberately outside the presence of the jury, continuing our colloquy vis-a-vis the government's offer as summaries under Rule 1006, Government's Exhibits 9500A through 9514A. First, I have reviewed the record concerning the circumstances and context in which Government's Exhibits 1010 and 1011 were admitted in evidence. They were offered and

admitted over the objection of defendant Schmidt in one case,

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and defendant Schmidt joined by defendant Lewis in another case under 801(d)(2)(D), and therefore the information contained in Exhibits 1010 and 1011 are not hearsay and may be considered as non-hearsay but for the truth of the matters asserted. The court neither has the time nor inclination to review and scour the otherwise prodigious evidentiary record to determine whether or not any of the information in these putative summaries contained in their gray ovals contain hearsay information. precedent. They may not, of course, under Tenth Circuit

So the court strikes a balance.

The court exercises its discretion under 611(a)(1), and denies the government's request to introduce these exhibits as summaries or substantive and all purposes under Rule 1006, but will permit the government to use these putative summaries for demonstrative purposes, so we are essentially back to where we were yesterday with revised and redacted demonstrative exhibits. And thus, that is the ruling of the court, again, with respect to Government's Exhibits 9500A through 9514A, which may be used by the government for demonstrative purposes, once the government connects the dots under 104(b) through the anticipated foundational testimony of Agent Stockley. Now, with that ruling, we are prepared to proceed with the jury in place. Madam clerk, if you will retrieve it, and show the jury into the courtroom and jury box, please.

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THE COURTROOM DEPUTY: THE COURT: MR. ANGELO: Thank you.

Yes, your Honor.

Your Honor, may I have leave to go get the

THE COURT:

Thank you, you may.

That would be most

Agent Stockley, again good morning. forward and be seated.

And you may come

(Wayne Stockley was recalled to the stand.) (Jury in at 9:20 a.m.) THE COURT: Thank you, and please be seated.

I have already bid all else a good morning, ladies and gentlemen of the jury, therefore good morning. THE JURY: THE COURT: indulgence. Good morning. Again, we thank you for your patience and

Again, I represent that while you have been waiting We have completed the business

we indeed have been working.

required to be considered and transacted outside your presence and hearing, and are therefore prepared to proceed. Agent Stockley, good morning. THE WITNESS: THE COURT: Good morning.

I, of course, remind and admonish you that And do

you continue to testify during this trial under oath. you understand that? THE WITNESS: I do.

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THE COURT:

Thank you.

Therefore, Mr. Kirsch, you may

continue and resume your direct examination. MR. KIRSCH: THE COURT: Thank you, your Honor. You are welcome. DIRECT EXAMINATION BY MR. KIRSCH: Q Special Agent Stockley, when we left off, I believe that you

had begun to testify about the process that you used to prepare a series of summary charts marked for identification as Government's Exhibit 9500A through 9514A. A Q Yes, I do. And I believe you had testified that you had prepared those Do you recall that?

charts as a means of providing a visual representation of the financial transactions at issue in money laundering counts; is that correct? A Q That's correct. All right. I want to begin again with you today the process

of having you describe how it is that you gathered the information, and the information on which you relied in preparing those charts. a group. And I am going to attempt to do this as

And so I want to begin by directing your attention to

what are marked as Government's Exhibits 9500A, 9501A, and 9502A. A Q Okay. Do you have those in front of you?

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Wayne Stockley - 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 Yes. All right. And do those exhibits pertain to transactions

that have a relationship to a common bank account? A Q A Yes, they do. And which bank account is that? That would be the Bank One account under the name of Reserve

Foundation, LLC. Q And were the records from that account admitted into

evidence as Government's Exhibit 9022? A Q That's correct. Now, does each of these exhibits have a gray oval at the top

of the page? A Q Yes, they do. And again, without talking about the specific contents of

that oval at this point, can you describe, please, generally what kind of information is contained in those gray ovals? A Okay. The information in those gray ovals includes the date

that the Bank One account was opened. Q A Q Where specifically within the oval is that reflected? That's at the top. Okay. And what is the second date that's reflected at the

top of each gray oval? A That would be the date -- the date prior to the financial

transaction related to the count. Q Can I ask you to speak back from that microphone just a bit,

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please, sir.

Wayne Stockley - Direct What information then is contained in the next

line underneath the date range that you have just described? A That's an amount of deposits from investors that were

deposited into this purported non-depleting account. Q And in computing the deposits from investors, did you rely

on various information that has been admitted into evidence during the course of this trial? A Q I did. For the purposes of these three charts, 9500A through 9502A,

was there testimony and/or exhibits from specific investors during the course of the trial on which you relied? A Q A Yes. Who were they? For Count 30, 31, and 33. So for 31, those would be Gary

Bell, Mary Anne Gough, however you pronounce it, Gordon Hulbert and Boyd Brown. Q All right. And did you review bank records for the Reserve

Foundation, LLC, account that you previously described for deposits from those individuals or entities associated with those individuals? A Q I did. Are there any other deposits that are included for those

three counts as in your total of deposits for investors? A Q There is. All right. And can you explain what that is, please?

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A

Okay.

Wayne Stockley - Direct Admitted into evidence were override sheets for Asset

Holdings. Q Special Agent Stockley, let me interrupt you for just a

minute and let me remind you we are talking about right now the charts for Counts 30 through 33 pertaining to the Reserve Foundation, LLC, account. A I am sorry. I skipped it. I am sorry. Okay. The other

evidence that I relied upon in determining the investors was records admitted regarding Jerry Landsman, there was a letter from Alan Weed that -- and there was Exhibit 181. It provided a

listing of investors, and on that were Gordon Hulbert and Boyd Brown. Q And are you aware of testimony by those investors and

testimony from other witnesses concerning the fact that investor money had been sent to a Reserve Foundation Trust account at CIBC in St. Vincent in the Grenadines? A Q That's correct. And have records pertaining to that account been admitted

during the trial in the form of Government's Exhibit 12000 as one of them? A Q That's correct. And did you find evidence within the records for the Bank

One Reserve Foundation, LLC, account at Government's Exhibit 9022 of a deposit from CIBC? A I did. And that was in the amount of 331,985. It was

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Wayne Stockley - Direct deposited in the Reserve Foundation Bank One account, and it was from CIBC, the Reserve Foundation, the account in St. Vincent that was the account that Gordon Hulbert and Boyd Brown put their monies into. Q All right. And that evidence that you have just summarized,

does that constitute essentially the total of the information contained in the line deposits from investors in Government's Exhibits 9500A through 9502A? A Q That's correct. There is an additional entry at the bottom of each gray Can you explain what that entry is, please?

oval. A

That is the account balance of the Bank One account, Reserve That was the balance on the night before the

Foundation, LLC. transfer out. Q All right.

And what was the source of the information that

you used to determine that account balance? A Q Those were from bank records that were admitted. Were those again from Government's Exhibit 9022, the records

for the Reserve Foundation, LLC, account? A Q That's correct. The information that is contained starting at -- on Count

30, in the yellow rectangle, underneath the gray oval, what was the source of that information? A That was from the bank records that were admitted in

evidence, Government's Exhibit 9022, and also Government's

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Wayne Stockley - 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 Exhibit 9040. Q Now, 9040, that was the compilation of wire transfers from

the Federal Reserve? A Q That's correct. And that information -- where would that information be

reflected in the charts for Government's Exhibit 9500A as well as 9501A? A The Federal Reserve exhibit would pertain to the green box

on the charts. Q Is there a green box on each of these charts? We are

talking about 30, 31, and 33 right now. A Q Yes. There is a green box.

And what information is contained in the green box in each

of those charts? A The amount of the wire transfer from the purported

non-depleting account, and the date that the wire transfer occurred on. Q And with respect to Count 33, does that reflect a different

kind -- does the green box reflect a different kind of financial transaction? A Yes. Instead of a wire transfer, that was a check that had

cleared. Q And in each of those cases, does the green box reflect the

financial transaction that is at issue in the particular money laundering count?

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A Q

Wayne Stockley - Direct Yes, it is. Is there additional information that is contained below the

green rectangle in each of these charts? A Q Okay. Let's start with the yellow box. There is another yellow

box underneath each green rectangle? A Q A Yes, there is. And what information is contained in that box? Okay. In the first two exhibits, Count 30 and Count 31, the

information in that is that the company bank where the funds transferred into. Q And what is the source of the information for -- contained

in that second yellow box in 9500A and 9501A? A Q That would be bank records and also Exhibit 9160. That's the bank record that pertains to the account

identified there? A That's correct. Let me see. That's correct. Those are

bank records from Norwest Bank of Colorado now known as Wells Fargo Bank. account. Q All right. And then you mentioned, I believe, that the That's where Aspen Title Corporation has its escrow

yellow box in 9502A is not from -- is from a different source, the second yellow box at the bottom of that exhibit? A Basically that shows the disbursement from the check out of That source of information

the purported non-depleting account.

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Wayne Stockley - Direct came from the bank records from Bank One showing the check that was cleared. Q All right. Directing your attention back for a moment to

Counts 30 -- the charts for Counts 30 and 31, 9500A and 9501A, there is some additional information contained in a final set of boxes at the bottom of those charts; is that right? A Q That's correct. And what is the source of the information that is contained

in those boxes? A Okay. The source is from bank records. It's also from

records of individuals that have testified about the purchase of the castle properties, and it was exhibits that were entered regarding those individuals that testified. Q Does that include Exhibits 150 through 152, identified and

admitted through the testimony of Michael Brudwick? A Q That's correct. Does it also include records of deeds related to the

purchase of those properties identified and admitted as Government's Exhibit 12025 through 12027? A Q That's correct. Finally, with respect to Count 30, are there also pictures

of properties contained in that exhibit? A Q Yes, there is. And again, what is the source of those pictures with respect

to the evidence that's been adduced during the course of this

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Wayne Stockley - 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 trial? A That would be Exhibits 160 through 165. MR. KIRSCH: Your Honor, at this time the government

would ask for leave to publish Government's Exhibits 9500A through 9502A as demonstrative aids for the purpose of helping Special Agent Stockley explain these financial transactions. THE COURT: MR. KIRSCH: Leave is granted as requested. Your Honor, could I ask to use the ELMO

for that purpose, please? THE COURT: BY MR. KIRSCH: Q Special Agent Stockley, are you able to see the Government's And you may. Thank you.

Exhibit 9500A on the screen in front of you now? A I am. The green box is a little dark. Is there any way we

can lighten that up? Q If there is, I am not aware of it. I think we are going to

have to work with that. A Q Okay. So can you begin, please, by walking us through the

information contained at the top in the gray oval. A Q Okay. Remind us again what the between, the line that begins What does that information reflect?

between. A

That reflects the date the account was opened, the purported

non-depleting account at Bank One under the name Reserve

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Wayne Stockley - Direct Foundation, LLC, through and including May 14th, 2000, which is the day prior to the financial transaction related to this count. Q And the total amount of deposits from investors that you

were able to calculate during that time period based on evidence admitted during the course of the trial so far is what amount? A Q $1,985,660. Now, the information listed there is account balance.

Remind us again what that represents, please? A Okay. The balance in the account on the day prior to the

transfer, and that comes off the bank records, is $2,900,865.88. Q A Q The yellow box represents what? That represents the purported non-depleting account. Okay. And the green box is what? And I am going to -- does Can

it help at all for me to move that?

It doesn't appear to.

you read for us again the information contained in the green box? A Okay. It's a $2,164,737.03 wire transfer out of the Bank

One Reserve Foundation account, LLC, on May 15th, 2000. Q A And where did that end up? That ended up in Wells Fargo Bank, previously known as

Norwest, in the Aspen Title escrow account. Q And from the Aspen Title Corporation escrow account, do the

records indicate that money then went further? A Yes. Then records show that those monies were used to

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Wayne Stockley - Direct purchase the Redstone Castle properties. Q And do the gray boxes at the bottom here list corporate

names in which that purchase was made? A Q That's correct. And what are the references to the various parcels

identified at the bottom of those boxes? A Okay. This Redstone Castle properties was split up into Okay. The purchase included

three properties, three parcels. three parcels.

One parcel was purchased under the name of

Tranquil Options, LLC, and that was called the castle parcel. The barn parcel was purchased under entity called Serenity Options, LLC, and the third parcel, the carriage house parcel, was purchased under the entity Peaceful Options, LLC. Q And if we turn to page 2 of this chart, what is depicted

there? A That's a photograph of the castle parcel, which is under the

entity Tranquil Options, LLC. Q Does that reflect the structure that's commonly known as the

Redstone Castle? A Q That is. Turning to page 3 of that exhibit, that has a number of What do those pictures represent? It was --

pictures. A

They are outbuildings to the total properties.

these outbuildings are considered the barn parcel, and those are under the entity -- purchased under the entity Serenity Options,

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Wayne Stockley - 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 LLC. Q And then finally page 4 of the exhibit, can you tell us

what's represented there, please? A Yes. Attached to this Redstone Castle properties is a That's what's depicted in this

carriage house parcel. photograph.

And that was purchased under the entity Peaceful

Options, LLC. Q Special Agent Stockley, I am now going to put on the screen

for you Government's Exhibit 9501A for demonstrative purposes. Does this chart represent your graphical representation of the financial transaction at issue in Count 31? A Q Financial transactions, yes. Okay. Again, can you walk us through the information in the

gray oval at the top, please? A Okay. That was from -- the gray oval starts off and shows

between the date of this account opening, through the date prior to the first financial transaction, and it shows on the second line the amount of deposits from investors that have been identified through the evidence that has been admitted in court, and that's an amount -Q A Q Yeah. What's that amount, please?

That amount is 1,440,975.00. Now, that's a smaller amount than the amount that was in the

chart that we just looked at, isn't it? A That's correct. Because these monies were moved out of

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Wayne Stockley - Direct purported non-depleting account approximately a month earlier. Q And the account balance on April 13th of 2000 was what

amount? A Q A $6,926,164.70. Those monies were initially deposited into which account? They went from the purported non-depleting account at Bank

One. Q Just a minute. Into which account were those monies

initially deposited? A Um, first -- oh, initially deposited into -- excuse me -- in

Bank One, the purported non-depleting account. MR. O'DONNELL: MR. BORNSTEIN: Excuse me. Your Honor, I am going to object to his It's a Bank One account, and

call this a non-depleting account.

adding the extra words we object to. THE COURT: Mr. O'Donnell. Same objection, your Honor. I think

MR. O'DONNELL:

the court previously instructed on this. THE COURT: I have. If you are going to refer to

non-depleting, then you will have to use the theurgical adjective "alleged". MR. KIRSCH: THE COURT: Thank you, your Honor. And I suspect, Agent, you will have to do That's just

that in every criminal trial in which you testify. surmise on my part.

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Wayne Stockley - Direct The objections are sustained. instructed. BY MR. KIRSCH: Q

The witness has been

Special Agent Stockley, what has been represented in the

second gray rectangle here on Government's Exhibit No. 9501A? A The second gray rectangle depicts the first financial It's a financial transaction that

transaction in Count 31.

precedes the financial transaction that's the basis of the count. Q A Okay. And what is that transaction?

It's a $6 million wire transfer on April 14, 2000, from the

Reserve Foundation, LLC, to First Union Bank into an foreign currency exchange account called SunState FX. Q All right. And then the transaction actually at issue in

this count is contained in the green rectangle? A Q A That's correct. And what is that transaction? It's a wire transfer out of SunState FX into Aspen Title

Corporation escrow account at Wells Fargo Bank, formerly known as Norwest, and that particular transaction was a $3,500,000 wire transfer on 5/16, 2000. Q And does that account, that Aspen Title account, is that the

same account that you identified when you were discussing the transaction at issue in Count 30? A That's correct. And those amounts were combined with the

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Wayne Stockley - Direct one on Count 30 to purchase the Redstone Castle properties. Q And those are the properties identified at the bottom of

this exhibit pertaining to Count 31? A Q That's correct. I am going to display for you now what's been marked for Do you

demonstrative purposes as Government's Exhibit 9502A. have that on the screen now in front of you, sir? A Q I do. Okay.

What is the amount calculated as deposits for

investors with respect to this count? A Q A That would be $551,985. And that's over what period of time? That would be between the opening of this account, 1/31/2000

and March 22nd, 2000. Q All right. And what was the account balance on March 22nd

of 2000? A Q $961,189.19. That oval represents monies that were deposited into the

same account that you have previously described in the name of the Reserve Foundation, LLC? A Q That's correct. And then what is the specific financial transaction that is

at issue in this case? A It was a check that cleared from that account, check No.

1012, in the amount of $20,000, cleared on March 23rd, 2000, and

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Wayne Stockley - Direct it was -- that check was payable to America West Packaging. Q I want to direct your attention to a second group of

demonstrative exhibits, if I could now, please, Special Agent Stockley. And I am going to direct your attention to

Government's Exhibits 9503A, 9504A, 9505A, 9506A, 9509A, 9510A, and 9512A. A Q I do. And do those exhibits have a common feature with respect to Do you have access to those exhibits?

an account identified within them? A Q A They do. What is that feature? They all -- the deposits from investors all go into the same It's the Smitty's account at Wells Fargo Bank.

account. Q

And were the records pertaining to that Smitty's account at

Wells Fargo Bank previously admitted in evidence during the course of this trial? A Q A Q They were. Are those records contained at Government's Exhibit 9330? That's correct. Now, do each of these exhibits also contain a gray oval at

the top of the page? A Q They do. And what kind of information generally is reflected within

the gray oval at the top of these exhibits? A The same information as the previous three charts, only it's

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Wayne Stockley - Direct going into Smitty's account. Q And again just to walk through that, that includes the date

of opening of the account? A Q That's correct. Does it include a calculation of deposits from investors

between the date of opening and the date preceding the financial transaction at issue? A Q It does. Does it also include the account balance on the day

preceding the financial transaction at issue? A Q That's correct. Is the information concerning the account opening date and

the account balance obtained from the bank records that you have previously identified for the Smitty's account? A Q What was your question? I am sorry.

Is the information concerning the account opening date and

the account balance contained in that gray oval, is that contained in the bank records for the Smitty's account that you have previously identified? A Q It is. And in calculating the figure for deposits from investors,

upon what evidence admitted during the trial did you rely to make that calculation? A Well, testimony and exhibits that were admitted into

evidence in this court from the start of this trial, from some

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Wayne Stockley - Direct of the investors. Q Can you give us some examples of investors on whose

testimony that computation is partially based? A Yes. Warren Peterson, Lindy Markham -- I might not be

pronouncing her first name correctly -- Ben Ortize and Gregory Hector. Q Okay. Did you also look at documents that were admitted

into evidence through those witnesses concerning investments that they had made into a purported high-yield investment program? A Q I did. And did you examine other exhibits in the course of

computing that figure concerning deposits from investors? A Q A Q I did. What other exhibits did you examine? They were override sheets from Asset Holdings and Miloka. Were those contained in Government's Exhibits 1010 with

respect to Miloka Holdings, and Government's Exhibit 1011 with respect to Asset Holdings? A That's correct. MR. KIRSCH: Your Honor, I am going to publish at this

time a portion of Government's Exhibit 1010, which has previously been admitted. THE COURT: BY MR. KIRSCH: Thank you.

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Q

Wayne Stockley - Direct Special Agent Stockley, I am putting on the screen now page Is that large enough for you to

6 of Government's Exhibit 1010. be able to read? A Q Yes. Okay.

Now, is this one of the override sheets that you

described for the Miloka -- from the Miloka Holdings file? A Q That's correct. And -THE COURT: Just, excuse me, counsel. I am getting the

signal from the jurors that it's not being published to them. Madam clerk, your assistance. opposed to shaking. interruption. MR. KIRSCH: THE COURT: BY MR. KIRSCH: Q Special Agent Stockley, how is it that you used -- well, let Is there -- did you rely on a similar override Thank you, your Honor. You are welcome. The heads are nodding as Excuse the

That's a good sign.

me back up.

sheet in Government's Exhibit 1011, the Asset Holding file? A Yes. It's a similar override sheet just like this, only

it's for Asset Holdings. Q And how is it that you used these override sheets in the

process of computing the figures represented as deposits from investors in these exhibits that we are discussing? A Well, in using these exhibits that have been admitted and

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Wayne Stockley - Direct the testimony of Sue Veik, we determined that there are investors that are listed on these override sheets, because that's how to determine the overrides. And so these have

been -- a lot of these individuals have been identified as investors by Sue Veik and by this override sheet that's in evidence. Q And did you then compare the names from this override sheet

to any other records that have been admitted into evidence? A I compared this to the bank records, and if there was a

deposit in the bank records into, in this situation, Smitty's account, then these individuals were identified as investors for this purpose. Q And were those deposits then included in the total

represented as deposits from investors in those gray ovals? A Q That's correct. Does the remainder -- were the remainder of the charts that

we are currently discussing constructed on the basis of the same types of records that you identified for the first three charts that we examined concerning transactions related to the Reserve Foundation, LLC, account? A Q A Q Yes. Could you --

Do you need me to ask that question again? Yes. Considering now the portion of the charts below the gray

ovals.

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Wayne Stockley - 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 Okay. On the exhibits that we are now discussing concerning

transactions from the Wells Fargo Smitty's account, was the remaining information under the gray ovals, meaning the yellow boxes and the green boxes, was that constructed on the basis of the same types of evidence that you described with respect to those same boxes on the exhibits that pertained to the Reserve Foundation? A That's correct. MR. KIRSCH: Your Honor, at this time I would ask for

leave to publish 9503 through 9506A, 9509A, 9510A, and 9512A as demonstrative aids for Special Agent Stockley's testimony. THE COURT: MR. KIRSCH: THE COURT: BY MR. KIRSCH: Q Special Agent Stockley, we are now looking at Government's Leave is granted as requested. Thank you. You are welcome.

Exhibit 9503A, which relates to the transaction at issue in Count 35; is that correct? A Q That's correct. And what was the total amount of deposits from investors

that you calculated during the relevant time period here? A Q A $676,285.52. What was the -- and that was into which account? That goes into the Smitty's account at Wells Fargo Bank.

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Q

Wayne Stockley - Direct And what was the balance on that account as of June 17th of

2002? A Q $604,969.20. And then what's the actual transaction that is at issue in

Count 35? A That would be a wire transfer on June 18th, 2002, in the

amount of $24,273.75, and it went into the Asset Holding account at US Bank in Spokane, Washington. Q Show you now the chart marked as Government's Exhibit 9504A.

Does this chart represent the transaction at issue in Count 36 of the indictment? A Q A Q That's correct. Does that make that easier to read or harder? I actually can read the green box now. What was the amount -- first of all, what was the date range

at issue for deposits in connection with this count? A Q April 23rd, 2001, through 7/22/2002. What was the total amount of deposits from investors you

were able to identify based on evidence admitted during the course of this trial during that period? A Q A Q $1,294,789.40. What was the account balance on July 22nd of 2002? $1,086,813.23. And then can you describe, please, the particular

transaction that's at issue in this count?

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A

Wayne Stockley - Direct That would be a clearing of check No. 1412 on July 23rd,

2002, in the amount of $20,000, and that check was payable to Miloka Holdings or Miloka Holding. Q Showing you now demonstrative Government's Exhibit 9505A,

does that concern the financial transaction at issue in Count 37? A Q That's correct. What was the total amount of deposits that you were able to

calculate from investors into the Smitty's account at Wells Fargo during -- that related to this account? A Okay. Between the period of 4/23, 2001, and 8/4, 2002,

there were -- there was $1,475,789.40 deposited from investors that are identified. Q What was the account balance on the day preceding this

transaction? A Q A $667,799.13. And what then was the particular transaction at issue here? Okay. The check cleared on the Wells Fargo Bank Smitty's

account, check No. 1428, cleared on August 5th, 2002, in the amount of $35,000, and that check was payable to Team Walker Motor Sports. Q Showing you now government demonstrative Exhibit 9506A.

Does this document contain the same total for deposits for investors as the one we just looked at? A That's correct.

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Q

Wayne Stockley - Direct What was the account balance on the day previous to the

transaction at issue here? A Q A $707,930.53. And what was the particular transaction at issue here? It was check No. 1460 that cleared on the Wells Fargo Bank

Smitty's account on August 7th, 2002, in the amount of $50,000, and that check was made payable to Jannice McLain. Q Showing you now government demonstrative Exhibit 9509A.

Does this pertain to the financial transaction at issue in Count 41? A Q Yes. And what was the relevant time period for deposits from

investors with respect to this count? A Q It would be April 23rd, 2001, through September 30th, 2002. What was the total amount of deposits from investors you

were able to calculate during that time period? A Q $1,725,789.40. What was the account balance on the day preceding the

transaction at issue? A Q $353,846.52. And what was the particular transaction at issue in this

count? A It was a wire transfer out of the Smitty's account at Wells The amount was $25,000. And

Fargo Bank on October 1st, 2002.

it went to the North Fork Bank into an account called Federal

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Wayne Stockley - Direct Recovery Group. Q Are you aware of testimony admitted during the course of the

trial that ties the Federal Recovery Group to a particular witness? A Q Yeah. Name is Bienstock.

Showing you now what's marked as government demonstrative

Exhibit 9510A, is this the chart that pertains to Count 42? A Q That's correct. And what was the relevant time period for deposits into the

Wells Fargo Smitty's bank for this count? A Q A Q Between April 23rd, 2001, and November 17th, 2002. And what was the total during that time period? $1,815,789.40. What was the account balance on the day before this

transaction occurred? A Q A $654,926.49. And what was the particular transaction at issue here? Check No. 1621 cleared on the Smitty's Wells Fargo Bank

account on November 18th, 2002, in the amount of $130,000, and that check was payable to Compliance Holding Company. Q Showing you now government demonstrative Exhibit 9512A. Is

this the chart that pertains to the transaction at issue in Count 44? A Q That's correct. What's the relevant time period for deposits into the Wells

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Wayne Stockley - Direct Fargo Smitty's account for this account? A Q Be April 23rd, 2001, through December 29th, 2002. And what is the total amount of deposits you were able to

calculate for that time period? A Q A Q A $1,844,289.40. What was the account balance on December 29th of 2002? $312,505.66. And what was the particular transaction at issue here? It was a check that cleared on December 30th, 2002, check

No. 1735, cleared on the Smitty's Wells Fargo Bank account in the amount of $65,000, and that check was payable to Concrete Building Systems. MR. KIRSCH: Your Honor, could I please ask for the

computer evidence presentation system to be activated momentarily? THE COURT: BY MR. KIRSCH: Q Special Agent Stockley, I would like you to take a look at We are going to publish You may. Thank you.

Government's Exhibit 9503A, please.

that, the first page of that on the screen here in just a moment. I am sorry. 9503B. Can we go to the next page of that I am sorry. One more.

document, please.

One more, please.

And if we can enlarge that text. Special Agent Stockley, is this the document that provides the -- do you notice who had signatory authority over

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Wayne Stockley - Direct this account at Wells Fargo Bank? A That's correct. And it's dated 4/23/2001, the date it was

opened. Q A Q Who was it who had signature authority over that account? Norm Schmidt and Scott Schmidt. If we could now publish, please, Government's Exhibit 9500B.

Is this the signature card for the Reserve Foundation, LLC, account that we discussed with respect to the first three charts pertaining to Counts 30, 31, and 33? A Q That's correct. And who is it that had signatory authority over that

account? A Q Norm Schmidt and Leon Harte. Now, Special Agent Stockley, did you also prepare charts

pertaining to financial transactions involving the Capital Holdings, LLC, account at Wells Fargo Bank? A Q I did. And are those charts marked as Government's Exhibits 9507A,

9508A, and 9511A? A Q That's correct. Were there bank records on which you relied in preparing

those charts? A Q A Yes. Which records were those? Those would be in Exhibit No. 9331.

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Q

Wayne Stockley - Direct Those were the records from Wells Fargo Bank for that

account? A Q That's correct. And with respect to Government's Exhibits 9507A and 9511A,

was there also an exhibit concerning wire transfers on which you relied? A Yes. That would be the Government's Exhibit 9040, which

were the wire transfer documents from the Federal Reserve. Q Directing your attention now to the gray ovals contained at

the tops of those exhibits, do the gray ovals reflect the same information concerning account balances that you have previously described? A Q Yes. And was that information concerning account balances

obtained from the bank records of the Capital Holdings, LLC, account? A Q Yes. Do those gray ovals also contain information about the date

range between the account opening date and the day preceding the transaction at issue? A Q That's correct. Do they also contain information that you calculated as

deposits from investors? A Q Yes. And upon what evidence or types of evidence did you rely in

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Wayne Stockley - Direct calculating the deposits from investors with respect to these exhibits, 9507A, 9508A, and 9511A? A Documents or evidence that was admitted in court relating to So their testimony also.

specific investors that testified.

And including the two override sheets that we previously talked about, and including the testimony of Sue Veik. Q Were there different investors or additional investors who

testified during the course of the trial pertaining to deposits into these accounts? A Q A Q Yes. Can you identify some of those people? Mr. Trotter, and Hendrikson. And with respect to some of the later accounts, was there

also testimony from Mr. Gianos? A Let me see. Let me get to that count. That is correct. I

know that from looking at the chart. Q Okay. And did you also rely in part on testimony from

George Beros about investors -- about people or entities that he identified as investors with whom he had worked? A I did. And I also -- Dellapenna, that was an investor I Brittain.

relied upon. Q A

Stephen Brittain? Stephen Brittain. Stan. I am sorry. I pronounced that name

wrong.

These are other investors I relied on their

testimony and exhibits that came in, already admitted into

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Wayne Stockley - 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 evidence. MR. KIRSCH: Your Honor, at this time I would ask for

leave to publish demonstrative Government's Exhibits 9507A, 9508A, and 9511A. THE COURT: MR. KIRSCH: THE COURT: BY MR. KIRSCH: Q Special Agent Stockley, we now are looking at Government's Leave is granted as requested. Thank you, your Honor. You are welcome.

Exhibit No. 9507A pertaining to the financial transaction at issue in Count 39? A Q That's correct. Okay. And this concerns -- at the beginning of the chart,

this concerns deposits into what account? A Q Into the Capital Holdings, LLC, account at Wells Fargo Bank. Are you aware of contracts that were presented to the

investors that you have described that described this account as a non-depleting account? MR. BORNSTEIN: a specific exhibit. Objection, your Honor. Unless there is

This is demonstrative exhibit that should

be based on exhibits in evidence. THE COURT: MR. KIRSCH: Response. Yo