Free Transcript - District Court of Colorado - Colorado

Case 1:04-cr-00103-REB

Document 1593

Filed 06/17/2008

Page 1 of 247

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 v.

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 XVIII _______________________________________________________________ Proceedings before the HONORABLE ROBERT E. BLACKBURN, Judge, United States District Court for the District of Colorado, commencing at 8:35 a.m., on the 30th day of April, 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

Case 1:04-cr-00103-REB

Document 1593

Filed 06/17/2008

Page 2 of 247

3689

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

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.

Case 1:04-cr-00103-REB

Document 1593

Filed 06/17/2008

Page 3 of 247

3690

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

P R O C E E D I N G S (Proceedings resumed at 8:35 a.m.) THE COURT: and gentlemen. Thank you. And please be seated, ladies

Mr. Schmidt, good morning. Good morning.

MR. SCHMIDT: THE COURT: MR. WEED: THE COURT: MR. LEWIS: THE COURT: MR. SMITH: THE COURT:

Mr. Weed, good morning. Good morning, your Honor. Mr. Lewis, good morning. Good morning. Mr. Smith, good morning. Good morning, your Honor. Certainly last but not least, ladies and Good morning.

gentlemen of the jury. THE JURY: THE COURT:

Good morning. I presume we are prepared to proceed. It may by calling its next

Let's find out if the government is. witness, Mr. Kirsch. MR. KIRSCH: THE COURT: THE COURT:

The government calls Darren McGee. Thank you. Mr. McGee, good morning. If you will come

forward to be sworn by the court.

And if you will make your way

forward to be sworn in this open area in front of my bench. About there is fine. I am going to administer the oath. and raise your right hand to be sworn. If you will face me

Thank you.

Case 1:04-cr-00103-REB

Document 1593

Filed 06/17/2008

Page 4 of 247

3691

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 you.

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

Thank you.

And again, sir, good morning.

As you testify, please use the microphone in front of And by its peculiar design, it works best with a speaking Thank you.

distance of about six to eight inches. Mr. Kirsch. MR. KIRSCH: THE COURT:

Thank you, your Honor. You are welcome. DIRECT EXAMINATION

BY MR. KIRSCH: Q A Q A Q A Q Sir, could you please state and also spell your name? Darren McGee, D-A-R-R-E-N, M-C-G-E-E. In what city do you live in, sir? I live in New York. What do you do for a living there? I am a carpenter. At some point in the latter part of 2002, did you learn

about a possible investment in a high-yield investment program? A Q A Q I did. How did you learn about that? Through a friend of mine, Cheryl Hall. And did Ms. Hall put you in contact with anyone else to get

Case 1:04-cr-00103-REB

Document 1593

Filed 06/17/2008

Page 5 of 247

3692

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

Darren McGee - Direct additional information about this program? A Q A Q She put me in touch with Jan. Do you know Jan's last name? I don't. At some point did you receive some correspondence from Jan

that contained additional information about this program? A Q I did. Let me ask you to take a look, please, at what we have Can I

marked for identification as Government's Exhibit 560. ask you to turn to that tab, please, sir. A Q A Q A Q Okay. I have it.

Do you have that now?

Are you able to recognize that document? Yes. How do you recognize it? Jan faxed this to me. And how did her faxing of this document to you relate in

terms of time to your -- had you spoken to her -- how had you spoken to Jan? A Q Let me ask that first.

She called me at my home phone. Okay. And did you receive this document before or after she

had called you at your home phone? A Q A I think I received it before. Okay. Did you discuss it when she called you?

Um, yes, briefly. MR. KIRSCH: I move to admit Government's Exhibit 560.

Case 1:04-cr-00103-REB

Document 1593

Filed 06/17/2008

Page 6 of 247

3693

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

Darren McGee - Direct THE COURT: Any objection by any one or more of the defendants? MR. HAMMOND: document. THE COURT: MR. KIRSCH: Response. Your Honor, this document is being offered On behalf of Mr. Schmidt, it is a hearsay

for the non-hearsay purposes of demonstrating its effect on Mr. McGee. THE COURT: That being the basis for its admission,

that is non-hearsay, therefore, the objection based on hearsay is overruled. And thus, on this limited basis and for that

limited purpose, Government's Exhibit 560 for identification admitted in evidence, with leave to publish. MR. KIRSCH: Thank you, your Honor. Let me publish the

first page of that, please. BY MR. KIRSCH: Q Mr. McGee, there is a sentence in the first line that makes

reference to you being a friend of Troy's and therefore having an opportunity to invest. A Q A Q Cheryl's brother. Troy Hall? Yeah. Did you have a telephone conversation with Ms. Schmidt about Who is Troy there?

the amount of money necessary to invest in this program? A Yes. I think it was a million dollars but because I was a

Case 1:04-cr-00103-REB

Document 1593

Filed 06/17/2008

Page 7 of 247

3694

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

Darren McGee - Direct friend of Troy's, it was 10,000. THE COURT: Sir, excuse me. If you get too close to

that microphone it simply meets itself coming and going and cuts in and out. Thank you.

BY MR. KIRSCH: Q Could I ask you to repeat that one more time so the jury can

hear you. MR. HAMMOND: hearsay. THE COURT: MR. KIRSCH: Response. Your Honor, this statement also is offered I will object then on the basis of

to demonstrate its effect on Mr. McGee and to demonstrate one of the terms of the offer that was made to Mr. McGee. THE COURT: The answer itself is not pure hearsay as The question seemed to beg for hearsay That objection is overruled.

defined by Rule 801(c).

and then the answer wasn't.

The reason it is being offered is as stated by the government, and for that limited reason and on that limited basis, I allow the examination. Now, you may need to reiterate your question for the benefit of the witness, please. MR. KIRSCH: BY MR. KIRSCH: Q Mr. McGee, could you tell us again, please, what Jan told Thank you, your Honor.

you about the minimum investment for this program?

Case 1:04-cr-00103-REB

Document 1593

Filed 06/17/2008

Page 8 of 247

3695

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

Darren McGee - Direct I think the minimum was a million dollars but because I was

a friend of Troy's, I could invest for $10,000. Q And around the time that you received the document that we

are looking at now, Government's Exhibit 560, did you also receive a copy of the contract for this Smitty's Investments program? A Q Yes, I did. Let me ask you to take a look now, please, at what's marked Should be the

for identification as Government's Exhibit 561. next document in your book there.

And let me ask you to take

that one out of the plastic sleeve, please, so you can look at each of the pages. Do you recognize that document? A Q I do. And do you recognize the initials in the lower left corner

of each page? A Q A Q I do. Whose are those? They are mine. What about the signature of party A on page 5 of that Do you recognize that?

document? A Q A Q I do.

And whose is that? That's mine. And what did you -- did you do anything with this document

Case 1:04-cr-00103-REB

Document 1593

Filed 06/17/2008

Page 9 of 247

3696

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

Darren McGee - Direct after you signed it? A I faxed it to Jan. MR. KIRSCH: 561. THE COURT: defendants? Hearing none, Government's Exhibit 561 for identification admitted in evidence, with leave to publish. MR. KIRSCH: THE COURT: BY MR. KIRSCH: Q Mr. McGee, can you read the date for us there in the bottom Thank you, your Honor. You are welcome. Any objection by any one or more of the I would move to admit Government's Exhibit

corner? A Q It's March 12th, '03. And was it your understanding that this document described

the investment program that you had discussed with Jan? A Q Yes, somewhat. There is a reference on page 1 to the yield of ten percent Did you have a discussion with Jan about that yield?

per month. A Q A

Yes, I did. Was -- how did that compare with what she told you? She just told me that I had a return of ten percent, and the

investment was insured by Lloyd's of London. Q Did you get any information from Ms. Schmidt about how this

investment worked?

Case 1:04-cr-00103-REB

Document 1593

Filed 06/17/2008

Page 10 of 247

3697

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

Darren McGee - Direct They bought up debt, and sold it to other investors around

the world. Q Did you in fact ever receive a signed copy of this document

back? A Q A Q A Q A Q A I don't believe I did. Did you in fact make an investment with Smitty's? I did. Of how much? $14,000. And was that all your money? No. Can you describe the breakdown of that for us, please? Ten thousand of it was mine, and 4,000 of it was a friend of

mine. Q A Q A Q A Q A Q A Q And what was her name? Alisch Keating. How do you spell her name? A-L-I-S-C-H. And then Keating, K-E-A-T-I-N-G? Yes. And in what form did you provide that investment? Cashier's check. And what did you do with the cashier's check? I sent it to Jan. Was that around -- how did that compare to the date that you

Case 1:04-cr-00103-REB

Document 1593

Filed 06/17/2008

Page 11 of 247

3698

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

Darren McGee - Direct signed this contract on March 12th? A Q A Q I think it was probably around the 14th of March. That you sent the cashier's check? Yeah. Now, did you remain in -- where were you living at the time

you made this investment? A Q A Q I was in New York and a few days later I went to Australia. And how long were you in Australia? For six months. Did you make any arrangements with anyone to assist you with

your financial affairs while you were in Australia? A Q A Q Ms. Keating. She was handling that for you? Yes. Did you at some point while you were in Australia have a

discussion with Ms. Keating about making an additional investment through Jan? A Q A Q A Q I did. Did you in fact make such an investment? I did. For how much money? $2,000. And do you know the entity to which that investment was

directed? A It was supposed to go to, I think, a casino boat.

Case 1:04-cr-00103-REB

Document 1593

Filed 06/17/2008

Page 12 of 247

3699

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

Q

Darren McGee - Direct Was there a particular name of a company name akin to

Smitty's that you are familiar with? A Q A Q I don't recall. All right. Was it the same company name? Do you recall?

It could have been. After you came back to the United States, did you receive

some additional correspondence from Jan? A Q I did. Let me ask you to look, please, at what's marked for Again, you may need Do

identification as Government's Exhibit 563.

to remove that document from the book or from the sleeve. you have that? A Q A Q I do. 563? I do. Do you have that one in front of you now? Okay.

Do you

recognize the first page of that document? A Q A Q A Q A Q I do. How do you recognize that? I received it in a fax. And what about the remaining pages of the document? Yes, I do. And did those all come with the fax on page 1? Yes. And who did you understand this fax was coming from?

Case 1:04-cr-00103-REB

Document 1593

Filed 06/17/2008

Page 13 of 247

3700

Darren McGee - 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 I did. Who was that? Jan. MR. KIRSCH: THE COURT: defendants? MR. HAMMOND: I believe that 563 is also a hearsay I move to admit Government's Exhibit 563. Any objection by any one or more of the

document on behalf of Mr. Schmidt, your Honor. THE COURT: MR. KIRSCH: Response. We are offering this document for the same

purposes I described before, your Honor. THE COURT: Very well. The purpose for admission is

non-hearsay, again either as proof of verbal conducts or acts or to demonstrate the effect of the utterance on the hearer, or in this case the effect of the writing on the reader, which is a non-hearsay purpose. The objection is overruled, and Government's Exhibit 563 for identification is admitted in evidence, with leave to publish. MR. KIRSCH: THE COURT: MR. KIRSCH: BY MR. KIRSCH: Q Mr. McGee, do you recognize the 212 number at the top of the Thank you, your Honor. You are welcome. Publish page 1, please.

page on your screen now?

Case 1:04-cr-00103-REB

Document 1593

Filed 06/17/2008

Page 14 of 247

3701

Darren McGee - 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 Q I do. What number was that? That was my home phone. There is a reference here in the first paragraph to original

funds and earnings being totaled together to make a new contract. document? A Q I believe it does. All right. There is then a reference to an earnings sheet Is that at the last page of the Does the new contract begin at page 2 of this

enclosed dated from July 1st. document, page 10? A Q Yes, it is. Okay.

Can we publish page 10 now, please.

Mr. McGee, did you understand what money was included in the $16,720 that was listed there as original funds? A Q A Q A Q Yes. What did that include? It was the 14,000 and the extra 2,000. Okay. And what about the 720?

I am not sure about the 720. Okay. Did you -- if we could go back to page 1 of that Did you sign this new agreement, Mr. McGee?

document, please. Do you recall? A Q I did.

And what did you do with it?

Case 1:04-cr-00103-REB

Document 1593

Filed 06/17/2008

Page 15 of 247

3702

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

Darren McGee - Direct I faxed it back to Jan. Did you provide Ms. -did you provide Jan with an address

where you were going to be receiving mail? A Q Yes. And if we could go to page 2 of that document, please. Is

this the first page of the new agreement that was enclosed here? Look on the screen. Is that the first page of the agreement

that was enclosed with this document? A Q Yes, it is. Okay. Now, after you received this document -- well, one On page 10, again, the --

other question about this document.

this statement appears to cover the period of time from August 1st to September 1st of 2003. How does that correspond

with when you would have received this document? A I received this document I guess when it started in

September. Q All right. After you mailed back the agreement for -- I am

sorry -- faxed back the agreement for High Track Team, did you receive additional monthly statements like this one? A Q I did. Let me ask you to look now, please, at what's marked for Again, you may

identification as Government's Exhibit No. 564. need to pull that one out of the sleeve. documents? A I do.

Do you recognize those

Case 1:04-cr-00103-REB

Document 1593

Filed 06/17/2008

Page 16 of 247

3703

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

Q A Q

Darren McGee - Direct How do you recognize those? I received them in the mail. And do you recognize the address that's listed on those

documents? A Q A I do. How do you recognize that address? It's an address I was receiving at. MR. KIRSCH: No. 564. THE COURT: defendants? MR. HAMMOND: Once again, on behalf of Mr. Schmidt, Any objection by any one or more of the I would move to admit Government's Exhibit

your Honor, it's a hearsay document. THE COURT: MR. KIRSCH: Response. Your Honor, we are offering these again

for the same purpose, to demonstrate the statements that were made to Mr. McGee. THE COURT: Very well. Again, the writings are being

offered not for the truth of any matter asserted in them, but instead for the fact that they were made in this case to this reader, now testifying. That is a non-hearsay purpose, and the

objection based on hearsay is overruled. Government's Exhibit 564 for identification admitted in evidence, with leave to publish. MR. KIRSCH: Thank you, your Honor. You are welcome.

Case 1:04-cr-00103-REB

Document 1593

Filed 06/17/2008

Page 17 of 247

3704

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

Darren McGee - Direct Again, can we publish page 1, please. BY MR. KIRSCH: Q And then if we could go to page 5 of that document, please. Mr. McGee, this statement that's now on your screen, page 5 of the exhibit, that's for the period of December of 2003; is that correct? A Q Yes, it is. And if we then go back to page 1 of that document, that's It's on your

for the period of April of 2004; is that right? screen again if that's any easier. A Q Right.

And did you do anything with these documents after you

received them? A Q No. Did these documents have any effect on you in terms of how

you felt about this investment? A Q Well, it looked pretty good to me. Did you -- you, I believe, said that you had received these

documents in the mail? A Q I did. Let me ask you to look, please, at Government's Exhibit No. That one is simply one page. Are you able to recognize

565. that? A Q

I do. How do you recognize that?

Case 1:04-cr-00103-REB

Document 1593

Filed 06/17/2008

Page 18 of 247

3705

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

Darren McGee - Direct That's the address where I was living at. Okay. Is this a photocopy of an envelope?

Yes, it is. And looking at the date on the postmark, are you able to

relate that envelope to any of those statements that we just looked at? A Q A Yes, I do. To which one? I guess for the April/May. MR. KIRSCH: THE COURT: defendants? MR. STUCKEY: Objection, your Honor. 403. First I move to admit Government's Exhibit 565. Any objection by any one or more of the

clause primarily -- the first clause primarily. clauses also.

The other

This relates to Count 8 of the indictment.

However, this gentleman, this mailing, is not charged in Count 8. I don't know how much further your Honor wants me to go with

my argument. THE COURT: That's fine. You have implicated both

relevance under Rules 401 and 402, and your concern is what under 403? MR. STUCKEY: That the prejudicial value is

substantially outweighed by the danger of unfair prejudice, confusion of the issues, and misleading. THE COURT: Thank you. Response.

Case 1:04-cr-00103-REB

Document 1593

Filed 06/17/2008

Page 19 of 247

3706

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

Darren McGee - Direct MR. KIRSCH: Mr. Stuckey is right.

It's not implicated I believe

in Count 8, but it's directly implicated in Count 9.

that makes it relevant, and I don't believer there is any dangers of prejudice or wasting of time or confusion. THE COURT: I agree. It's relevant as liberally

defined under 401, thus ostensibly it's entitled to admission under Rule 402. That brings us to Rule 403, and the issue, as you know, ladies and gentlemen, is the probativity of the evidence substantially outweighed by the dangers. them that I have recited previously. There are three of

Or the considerations, and

there are three of them, which I have recited previously. Doing a 403 analysis, I find that the probativity is not substantially outweighed, therefore the objections are respectfully overruled, and Government's Exhibit 565 for identification admitted in evidence, with leave to publish. BY MR. KIRSCH: Q Are you able to -- are you able to make out the date on

that, Mr. McGee? A Q Oh, man, 2004. At some point, Mr. McGee, did you request some of your money

back? A Q A I did. How did you do that? In returned, one of the receipts that I received.

Case 1:04-cr-00103-REB

Document 1593

Filed 06/17/2008

Page 20 of 247

3707

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

Q A Q A Q A Q

Darren McGee - Direct One of the statements that we looked at? Yes. And how much money did you ask for? $10,000. To whom did you return that? To Jan. After you made that request, did you receive additional

correspondence from her concerning that request? A Q I did. Let me ask you, please, to look at what's marked for And there are two

identification as Government's Exhibit 566.

pages to that document, so you may again need to take that one out of the sleeve. the document? A Q A Q A Q A Q A I do. What is it? It's a letter. Copy of an envelope? I did. And what about page 2, do you recognize that document? Yes, I do. How do you recognize that? It was in the envelope. MR. KIRSCH: No. 566. I would move to admit Government's Exhibit And did you receive that envelope? Are you able to recognize the first page of

Case 1:04-cr-00103-REB

Document 1593

Filed 06/17/2008

Page 21 of 247

3708

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

Darren McGee - Direct THE COURT: Any objection by any one or more of the defendants? MR. HAMMOND: It's a hearsay -- foundation generally,

and it's a hearsay document. THE COURT: MR. KIRSCH: Response. As to foundation, the witness has

testified that he received this document after sending a request for his money back to Jan. As to hearsay, the government is again not offering the statements in this letter for the truth, but to demonstrate they were in fact made to Mr. McGee. THE COURT: The objection based on foundation is

respectfully overruled for the reasons stated by counsel for the government. Again, the proffer here is not for the truth of any matter asserted either in the envelope or in the form of a letter, but again for purposes, non-hearsay purposes, as defined under Section 249, McCormick on Evidence, sixth edition. Therefore, the objection based on hearsay is also overruled, and Government's Exhibit 566 for identification admitted in evidence, with leave to publish. MR. KIRSCH: THE COURT: BY MR. KIRSCH: Q If we could publish the first page briefly, please. And if Thank you, your Honor. You are welcome.

Case 1:04-cr-00103-REB

Document 1593

Filed 06/17/2008

Page 22 of 247

3709

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

Darren McGee - Direct we could go to the second page, please, and zoom in on the text. Mr. McGee, did you ever receive any money back from Jan? A Q No, I didn't. At any point during any of these conversations before you

returned to the United States, did Jan mention any searches or seizures? A Q No, she did not. Did she mention the fact that she or anyone else had been

arrested? A She did not. MR. KIRSCH: THE COURT: Mr. Stuckey. MR. STUCKEY: THE COURT: Thank you, your Honor. Just briefly. Thank you, Mr. McGee. Cross-examination on behalf of Mr. Smith by

You are welcome. CROSS-EXAMINATION

BY MR. STUCKEY: Q A Q A Q A Not lastly. Good morning, sir.

Good morning. How did you know Troy? Troy was Cheryl's brother. You knew Cheryl? I knew Cheryl. I had known Cheryl for like eight to ten I never met him.

years.

Case 1:04-cr-00103-REB

Document 1593

Filed 06/17/2008

Page 23 of 247

3710

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

Q A Q A Q A Q

Darren McGee - Cross How do you spell Cheryl's first name? C-H-E-R-Y-L. It's not C-A-R-O-L, Carol? Pardon? It's not Carol, it's Cheryl? Cheryl. Okay. MR. STUCKEY:

Do you know?

That's all I have, your Honor.

Thank

you. THE COURT: You are welcome. Cross-examination on

behalf of Mr. Lewis by Mr. Gainor. MR. GAINOR: THE COURT: Thank you, your Honor. You are welcome. CROSS-EXAMINATION BY MR. GAINOR: Q A Q Mr. McGee, good morning. Good morning. Your dealings with Jan occurred pretty much in 2003 and then

2004; would that be correct? A Q Pretty much. Okay. So your contract, Government's Exhibit 561, if we can

put that up, then go to the bottom half of perhaps the last page. Just trying to get that date down. Does it look like

either February or March? A That's March.

Case 1:04-cr-00103-REB

Document 1593

Filed 06/17/2008

Page 24 of 247

3711

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

Q

All right.

Darren McGee - Cross And then the last exhibit that you were shown, If you go to Does

566, is the letter supposedly prepared by Jan.

page 2 of that document where it's signed October of 2004. that jog your recollection. Look at the exhibit. A Q A Q Um-hm. End of 2004? Yeah.

And don't necessarily rely on me.

2004, sir?

Now, when you dealt with Jan, you had no contact with any

other individuals, male individuals, at that time who were talking to you or writing you about this investment, it was exclusively Jan? A The only person I spoke to was Jan. MR. GAINOR: THE COURT: Mr. Goodreid. MR. GOODREID: questions. THE COURT: You are welcome. Cross-examination on Thank you, your Honor, but I have no That's it. Thank you.

Cross-examination on behalf of Mr. Weed by

behalf of Mr. Schmidt by Mr. Hammond. MR. HAMMOND: THE COURT: Thank you, your Honor.

You are welcome. CROSS-EXAMINATION

BY MR. HAMMOND: Q Good morning, sir.

Case 1:04-cr-00103-REB

Document 1593

Filed 06/17/2008

Page 25 of 247

3712

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

Darren McGee - Cross Good morning. Since all this has happened, have you gotten anything back

from your investment? A Q No. You were asked a minute ago about speaking with Jan and no Do you recall that?

one else. A Q A Q A Q A Q A Q Yes.

Did you ever speak to anyone named Norman Schmidt? No. Before you invested your money, did you ever meet with Jan? No. Have you ever met with Jan? No. Would you know her if she walked in the door right now? No. I want to draw your attention to Exhibit 561. That's the

medium-term note placement program.

That's the one that, as you

look at page 1 and every page beyond that, it has your signature on there or your initials or signature? A Q Yes, it does. And the other side is blank. Did you ever get a copy of

that that was filled in? A Q No. And the last page, page 5, that's not signed by anyone

except yourself, right?

Case 1:04-cr-00103-REB

Document 1593

Filed 06/17/2008

Page 26 of 247

3713

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

Darren McGee - Cross That's correct. I notice you have an accent. You said earlier on in your Are you from

testimony that you spent six months in Australia? Australia? A Q A Q I am not. Where are you from? I am from Ireland. From Ireland.

In Ireland when you have a contract, do both

parties typically have to sign it? A Q Yes, they do. Okay. I would like you to take a quick look at Exhibit 563.

And that's the one that starts with the letter on the front of it. A Q 1. A Q No. And then when you go to page 2, it states that the agreement Do you know when this -- when you got this? I believe it was either in September that year, 2003. Because there is no date on there, is there? I am on page

is entered into right at the top line there on the first day of July of 2003. that? A Q That's correct. Did you call Jan at any time and ask her why she wanted you Are you saying you got it several months after

to sign a new contract? A I did not.

Case 1:04-cr-00103-REB

Document 1593

Filed 06/17/2008

Page 27 of 247

3714

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

Q

Darren McGee - Cross Did you notice that the new contract that starts on page 2

is not Smitty's but High Track Team? A Q Yes. Did you ask her at any time why you were signing a contract

with High Track Team? A I believe I did but I can't remember what our conversation

was. Q Okay. As you go to the bottom of that page, that page 2, it Do you see

does not have anyone's initials or any date on it. that? A Q Yes.

And there is actually no address up at the top, there is no

address for you, right? A Q There is not. Next page, and if you take a look at the entire page, there

is handwriting on the first paragraph under duties and responsibilities, right? A Q There is. But down at the bottom, again no one has initialed it, and

no one has signed, fair? A Q A Q A That's correct. Or on page 3 or 4 or 5; is that right? That's correct. Or page 6, right? That's right.

Case 1:04-cr-00103-REB

Document 1593

Filed 06/17/2008

Page 28 of 247

3715

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

Q

Darren McGee - Cross And then page 7 is the contract where there should be And dates?

signatures by everyone, right? A Q A Q A Q A Q That's correct.

And that's not signed either, is it? It's not. That's not signed by you. Did this come from me? This document? Yes. Okay. Jan faxed this to me. So you never signed it and she never signed it. Is Did this come from you?

Yes.

that fair? A Q That's correct. And then the addendum to the agreement, on the next page,

page 9, that appears to have your signature on that; is that right? A Q A Q A Q That's not my signature. That's not your signature? It's not. Do you know whose handwriting that is? I believe it's Jan. But that's because you had correspondence with the person

named Jan that you never met, right? A Well, she was calling me and telling me she was sending a I believe that should be her handwriting on the document. Would that be fair to

fax. Q

But you really don't know, right?

Case 1:04-cr-00103-REB

Document 1593

Filed 06/17/2008

Page 29 of 247

3716

Darren McGee - 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 say? A Q A Q That would be fair to say. And you didn't sign or date that addendum, right? No. And neither did Jan or anyone else for High Track Team,

right? A Q No. Did you ever know what the difference was or come to know Did

what the differ -- well, let's ask one question at a time.

you ever know what the difference was between Smitty's and High Track Team? A Q I did not. If I understand correctly, Exhibit 565 is an envelope that

contained a statement; is that correct? A Q That's correct. It would be fair to say that you personally recognized the

handwriting on that envelope; is that right? A Well, looking at Jan's signature, it looks like her

handwriting. Q A But again, you never saw her actually sign anything, right? No. But if you look at the last document, the first page,

the handwriting is pretty close, pretty similar. Q A Q But as I said, you never saw her sign it? Pardon? You never met her to see her sign anything, right?

Case 1:04-cr-00103-REB

Document 1593

Filed 06/17/2008

Page 30 of 247

3717

Darren McGee - 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 No. And that last document I believe is 566. That's the letter

that came back to you, I believe you said, as a result of your letter requesting money back? A Q Correct. In the documents that we have looked at, 560, 561, 563, 564,

565, and 566, I didn't see the request from you that you made in writing among all the other documents that you had. what happened to that? A Q A Q I mailed it back to Jan. Did you keep a copy of it for yourself? I did not. Now, 566 is the letter that is dated October 2nd, 2004. Do you see that? Do you know

That's that second page. A Q A Q I do.

Now, there is no signature there, right? No. At the bottom there is Jan on there, but there is no

signature, right? A Q Right. And the document that you had in the notebook, that was a It wasn't the actual letter that you got,

copy, was it not? right? A Q Pardon?

The actual paper that you had in the notebook there?

Case 1:04-cr-00103-REB

Document 1593

Filed 06/17/2008

Page 31 of 247

3718

Darren McGee - 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 Yes. That was a copy, right? Correct. I think it was toward the end of your direct examination you

said something about casino boat? A Q A Yes. What was that about? Um, I believe they were going to make an investment in some I spoke to Troy and Cheryl about it when I

kind of casino boat. was in Australia. Q A Q

So the information you got came from some other source? Yeah. As far as I can recall. Thank you.

As far as you can recall. MR. HAMMOND: THE COURT:

I have nothing further.

Redirect examination for the government

Mr. Kirsch. MR. KIRSCH: THE COURT: No. Thank you, your Honor.

May Mr. McGee be excused and released from

subpoena, if any, by the government? MR. KIRSCH: THE COURT: defendants? Hearing none, Mr. McGee, you are both excused and released from subpoena with our thanks. THE WITNESS: Thank you. Yes, your Honor. Any objection by any one or more of the

Case 1:04-cr-00103-REB

Document 1593

Filed 06/17/2008

Page 32 of 247

3719

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 please.

Darren McGee - Cross THE COURT: You are welcome. (The witness was excused.) THE COURT: next witness. MR. KIRSCH: Your Honor, before calling that witness, That Very well. The government may call its

the government would offer into evidence Exhibit 12012.

document is again being offered pursuant to Rule 902(4), your Honor. THE COURT: Thank you. Any objection by any one or more of the defendants? MR. HAMMOND: MR. GAINOR: THE COURT: MR. KIRSCH: MR. GAINOR: MR. HAMMOND: Thank you. THE COURT: Presuming first that counsel have now had a May I have a moment, your Honor? May I have a moment, your Honor? You may. 12012. No objection, your Honor. Mr. Schmidt has no objection as well. Thank you. Ma'am, if you will stand by for one moment,

reasonable opportunity to locate and review the exhibit being offered, and hearing no specific objections, then Government's Exhibit 12012 for identification admitted in evidence, with leave to publish. MR. KIRSCH: Thank you, your Honor. I would ask to

publish that document beginning with page 1, please.

Case 1:04-cr-00103-REB

Document 1593

Filed 06/17/2008

Page 33 of 247

3720

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 please.

Darren McGee - Cross THE COURT: Certainly. MR. KIRSCH: And then if we could publish page 2,

Your Honor, the government would now call Gina Silletto-Russo. THE COURT: Very well. Good morning, ma'am. If you

would please come forward to be sworn by the court.

To

accomplish that, if you will make your way forward to stand in this open area in front of my bench, please, and thank you. 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. (Gina Silletto-Russo was sworn.) THE WITNESS: THE COURT: witness stand. I do. Please be seated in that And thank you. And

And thank you.

And ma'am, again, good morning. Good morning.

THE WITNESS: THE COURT: in front of you.

As you testify, please use the microphone

To make it work as designed, you need to leave

a speaking distance of about right where you are, six to eight inches, please. Thank you.

Mr. Kirsch. MR. KIRSCH: THE COURT: Thank you, your Honor. You are welcome. DIRECT EXAMINATION

Case 1:04-cr-00103-REB

Document 1593

Filed 06/17/2008

Page 34 of 247

3721

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

Gina Silletto-Russo - Direct BY MR. KIRSCH: Q A Could you please state and also spell your name for us? Gina, G-I-N-A. Silletto, S-I-L-L-E-T-T-O. Russo,

R-U-S-S-O. Q A Q A Q And where do you work, ma'am? I work at the Federal Reserve Bank of New York. What's your position there? I am a senior payments analyst. And in connection with your duties at the Federal Reserve,

are you familiar with the role that the Federal Reserve plays in processing wire transfers? A Q Yes. What role does the Federal Reserve play in processing wire

transfers? A Um, the Federal Reserve Bank of New York operates the Fed

Wire Funds Service, and that is our electronic wire transfer system that banks, which are members of the Federal Reserve, use to transfer money between each other, and they can also use Fed Wire to transfer wire transfers for their customers to receiving parties. Q And in connection with the Fed Wire system, does the Federal

Reserve maintain a processing center to conduct those transactions? A Q Yes. Where is that located?

Case 1:04-cr-00103-REB

Document 1593

Filed 06/17/2008

Page 35 of 247

3722

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

Gina Silletto-Russo - Direct Fed Wire has three data processing centers.

The primary one

is in New Jersey, and we have two backup locations in Texas and in Virginia. Q And how is it that one of those processing centers would be

involved in connection with a wire transfer from a customer of one bank to a customer of another bank? A Well, what happens in a Fed Wire transaction is a customer

of the bank will request that their bank wire money to another party, and then the sending bank would initiate a Fed Wire transaction. That transaction is processed at our data processing center in New Jersey, and what happens during that transaction is Fed Wire verifies that the receiving bank and sending bank are indeed Fed Wire participants, and it does some other edits, and when it determines that both parties are indeed participants, it debits the sending bank's account for the money, and then it credits the receiving bank's account for the money, and sends the sending bank an acknowledgment to let them know the transaction was processed, and then the receiving bank gets an advice to inform them that they have received a payment, and all of this processing happens within seconds. Q And do you know the physical means of communication over

which these messages are transmitted? A All Fed Wire participants, they have a connection to the

Federal Reserve, so this connection is an electronic connection.

Case 1:04-cr-00103-REB

Document 1593

Filed 06/17/2008

Page 36 of 247

3723

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

Gina Silletto-Russo - Direct It's connected to our data centers in New Jersey, and then to the backup data centers as well. Q Are the messages transmitted by means of some type of wire

communication? A Q Yes. Prior to coming to court today, were you provided a copy of

an exhibit marked as Government's Exhibit 9040? A Q Yes. And prior to coming to court today, did you also execute a

declaration indicating that the records contained in 9040 were in fact records of the Federal Reserve Bank? A Yes. MR. KIRSCH: I would move to admit Government's Exhibit

9040 at this time, your Honor. THE COURT: Any objections not now of record by any one

or more of the defendants? Hearing none, Government's Exhibit 9040 for identification admitted in evidence, with leave to publish. MR. KIRSCH: THE COURT: MR. KIRSCH: that purpose? THE COURT: you. BY MR. KIRSCH: You may. Madam clerk, please. And thank Thank you, your Honor. You are welcome. Could I ask that the ELMO be activated for

Case 1:04-cr-00103-REB

Document 1593

Filed 06/17/2008

Page 37 of 247

3724

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

Q

Gina Silletto-Russo - Direct Ms. Silletto-Russo, I am putting on the screen now page 4 of Are you able to read that?

Government's Exhibit 9040. A Q Yes. On your screen there?

Can you -- I would like to ask you First

about some of the information that's contained in here. of all, does this page reflect a record of a single wire transaction? A

Um, actually, at the very top of the page where it says

originator to beneficiary information, and then there is the 6,000 in brackets, that's actually a continuation of another message. Q A Q A Q Okay. From this page. All right. Yes. But beginning with message disposition? So that would be excluded.

That's where the new message starts.

And from there to the bottom of this page is information

that pertains to a single transaction; is that right? A Q Yes. Okay. Can you tell us what is the information that is

contained by the entry acceptance time stamp? A Okay. That represents there is three data elements in that

field, so if you see the acceptance time stamp, the numbers in the middle of the page are just Fed Wire tags. we identify the different fields. Q These numbers? That's just how

Case 1:04-cr-00103-REB

Document 1593

Filed 06/17/2008

Page 38 of 247

3725

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

Yes.

Gina Silletto-Russo - Direct So the 1110 tag. The first element is the date, so

that would be August 1st. Q A This number? Yes. The next element is the time stamp in military time,

so that would be, um, 4:40 p.m. Q A Okay. And then the FT-O1 just means funds transfer application.

It's just identifying the Fed Wire funds transfer application. So what this field represents is when Fed Wire accepts the message from the sending bank for processing. Q A What about the next line, it looks like it says OMAD? OMAD stands for output message accountability data, and

basically this is the field that tells the sending bank and the receiving bank that the message was indeed successfully processed and the funds were debited and credited to the appropriate parties. Q And is there -- does that information either in that line or

another one indicate that in fact that this was a -- there was an actual transfer of funds accompanying this transaction? A Yes. Do you want me to go through each element in the

field, or -Q I think if you could just explain to us what information

there indicates that this was in fact a successful transfer. A Okay. Well, basically the existence of the OMAD proves that You know, the first element is the date,

it was processed.

Case 1:04-cr-00103-REB

Document 1593

Filed 06/17/2008

Page 39 of 247

3726

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

Gina Silletto-Russo - Direct August 1st of 2000. Q A That's here again? Yes. The next element is what we call an L term, a logical

terminal, that's just the end point that the message was sent to. So the receiving bank's end point. And then the next is

the sequence number of the message, meaning if, you know, this is the Fed Wire's 603rd message processed for the day. Q A Okay. And then the next, again, if you will see that it looks very

similar to -- it's exactly similar to what's in the acceptance time stamp. Q A Yes. And even though Fed Wire accepted the message at 4:40 in the

afternoon, all of the processing literally takes place in seconds, so it reflect the same time stamp. It doesn't go out

to seconds but it's 4:40 in the afternoon that it was processed. Q If we go down on the screen to amount, does that reflect the

amount that was involved in the transfer? A Q A Yes. It was 50,000.

And a couple of lines here about -- let's start with sender. That is the sending bank's ABA number, which is essentially We use the ABA

that's the sending bank's account at the Fed.

number, and then the name of the bank would be US Denver -- or US Bank, Colorado, Denver, I guess. Q Okay. How about the line that is says receiver, is that D-1

Case 1:04-cr-00103-REB

Document 1593

Filed 06/17/2008

Page 40 of 247

3727

Gina Silletto-Russo - 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 or DL? A Q A That's DI, meaning depository institution. Okay. So that's the receiving bank. That would be the Fed Wire

participant.

So in this case the sending bank and the receiving

banks are the actual Fed Wire participants so the first element is the ABA number and Bank One Denver is the name of the bank. Q If we jump down then to originator. What information would

that reflect? A So this reflects -- now, this is not actually a Fed Wire

participant. Q A Okay. This would be -- what it appears to be is that the first

element in the 5,000 tag, that's actually a D, and that stands for demand deposit account number. a checking account number. So we could assume that it's So it's the

And the originator.

account for Cynthia Lange, and that's -- I am not sure what POD means but maybe Paula Heller is also on the account, and then that's the address of the account holder. Q A Is the originator the person who sends the money? Yeah. The originator is -- so say it was Cynthia Lange, she

has an account, I guess, at US Bank Denver, the center's bank, so she was instructing her bank to wire money to the beneficiary, which is reflected in the 4200 tag. Q Okay.

Case 1:04-cr-00103-REB

Document 1593

Filed 06/17/2008

Page 41 of 247

3728

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

Gina Silletto-Russo - Direct So that is the -- so the beneficiary in that case would be

the Reserve Foundation, and that would be their checking account number, assuming, you know, that it was entered correctly. Fed Wire doesn't actually edit those particular fields. We The

carry the data but we don't, you know, we don't edit that. Q All right. So am I correct then that this record reflects

that the Federal Reserve -- one of the processing centers that you have described would have processed this transaction, despite the fact that it's being sent from one bank in Colorado to another bank in Colorado? A Yes. All the transactions have to go through the New Jersey

data center for processing. MR. KIRSCH: Thank you, ma'am. Those are all the

questions I have for this witness, your Honor. THE COURT: Mr. Stuckey. MR. STUCKEY: THE COURT: Thank you, your Honor. Cross-examination on behalf of Mr. Smith by

You are welcome. CROSS-EXAMINATION

BY MR. STUCKEY: Q A Q A Q Good morning, ma'am. Good morning. Welcome to Colorado. Thank you. The money doesn't go through either Texas or New Jersey or

Case 1:04-cr-00103-REB

Document 1593

Filed 06/17/2008

Page 42 of 247

3729

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

Gina Silletto-Russo - Cross Virginia, just the information, right? A Q Well, the transaction is processed through our data center. The information regarding the transaction. There is no

actual transfer credit and debits of monies to the Federal Reserve in one of your service centers in Texas, Virginia, or New Jersey? A Q A Well, that -The accompanying credit and debit back? The debits and credits are processed through our data center

in New Jersey. Q The information as to them, but the money doesn't actually

transfer. A Um, well, the sending bank and the receiving bank, they have

accounts at the Federal Reserve on the books of whatever reserve bank district that they are located in, and the exchange of money, though, does occur through that transaction. Q But as you testified here to Mr. Kirsch's -- in answer to

Mr. Kirsch's questions, when it's a bank in Colorado to another bank in Colorado, all but the one bank was the sending bank knows is they get a debit, and they debit that person's debit for that amount, and the other bank gets the credit, and on those accounts where the money is in those banks, that's where the action happens, right? A Well, the receiving bank then has to pass on the credit to

their customer.

Case 1:04-cr-00103-REB

Document 1593

Filed 06/17/2008

Page 43 of 247

3730

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

Q A

Gina Silletto-Russo - Cross Oh, of course. So, you know, Fed Wire, we are passing on the originator and We are just passing that through

the beneficiary information. our system.

But the sending bank's account is debited and the

receiving bank's account is credited, and that's what -- and that is what happens through the Federal Reserve. Q A And at the customer's bank then -The customer's bank then has to further credit the

receiving. Q And that's where it says on those wires for, I think the

abbreviation is, FFC or for the benefit of? A Q For further credit. For further credit of, and lists the account that gets

credited in that bank? A Right. MR. STUCKEY: THE COURT: Mr. Gainor. MR. GAINOR: THE COURT: Mr. Goodreid. MR. GOODREID: THE COURT: No. Thank you, your Honor. Cross-examination on No questions, your Honor. Cross-examination on behalf of Mr. Weed by Thank you.

Cross-examination on behalf of Mr. Lewis by

You are welcome.

behalf of Mr. Schmidt by Mr. Hammond. MR. HAMMOND: Thank you, your Honor.

Case 1:04-cr-00103-REB

Document 1593

Filed 06/17/2008

Page 44 of 247

3731

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

Gina Silletto-Russo - Cross THE COURT: You are welcome. CROSS-EXAMINATION BY MR. HAMMOND: Q A Q Good morning. Good morning. Could we pull up that exhibit that we just had. I guess we

can't, can we?

That's the same page, page 4 of that exhibit you

were just testifying about? A Q Yes. And what you said was that the -- I think I have got to make

sure that the sender DI has, when you go past that, past 3100, over where it says US Bank, is that company or Colorado? A Q It looks like maybe Denver, Colorado. Okay. But next to that, just to the left of that, that's

the ABA number? A Q Yes. And the ABA number is actually the number that identifies

the banking institution that it's coming from? A Q Correct. And each bank around the country has its own separate ABA

number, right? A Q Yes. So that's why when you see down at Bank One, just below

that, where it says sender DI, that's also got an ABA number, right?

Case 1:04-cr-00103-REB

Document 1593

Filed 06/17/2008

Page 45 of 247

3732

Gina Silletto-Russo - 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 Yes. Now, you know the information about the banks, right? About -- yes, the Fed Wire participants. From one number to the other number. The -- in terms of

personal knowledge, you know a lot about the banks and the institutions themselves; is that fair? A Q Yes. But you don't necessarily know or have personal knowledge

who the originator is or the beneficiary, right? A Q No. All you know is that entities or individuals have account

numbers at those banks, and that's where the bank is choosing to take the money out of or put the money into; is that fair? A Correct, yes. MR. HAMMOND: THE COURT: Mr. Kirsch. MR. KIRSCH: THE COURT: from subpoena? MR. KIRSCH: THE COURT: defendants? Hearing none, Ms. Silletto-Russo, you are excused and released from subpoena with our thanks. Yes, your Honor. Any objection by any one or more of the No. Thank you, your Honor. Thank you very much.

Redirect examination by the government,

May this witness be excused and released

Case 1:04-cr-00103-REB

Document 1593

Filed 06/17/2008

Page 46 of 247

3733

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

Gina Silletto-Russo - Cross THE WITNESS: Thank you. THE COURT: You are welcome.

(The witness was excused.) THE COURT: next witness. MR. KIRSCH: calls Wayne Stockley. THE COURT: Thank you. Good morning, sir. If you will Thank you, your Honor. The government Very well. The government may call its

come forward to be sworn by the court.

And to accomplish that,

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

And thank you.

May I have your attention in the courtroom. (Wayne Stockley was sworn.) THE WITNESS: THE COURT: witness stand. I do. And please be seated in that

Thank you.

And again, good morning, sir. Good morning.

THE WITNESS: THE COURT:

As you testify, please use the microphone

in front of you, leaving a speaking distance of about just where you are, about six to eight inches, please. Mr. Kirsch. MR. KIRSCH: THE COURT: Thank you, your Honor. You are welcome. Thank you.

Case 1:04-cr-00103-REB

Document 1593

Filed 06/17/2008

Page 47 of 247

3734

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. KIRSCH: Q A Q

Wayne Stockley - Direct DIRECT EXAMINATION

Sir, could you please state and also spell your name. Wayne Stockley. S-T-O-C-K-L-E-Y.

Sir, are you a Special Agent with the Internal Revenue

Service Criminal Investigation Division? A Q A Q I am. How long have you held that position? Approximately 19-and-a-half years. What sorts of cases have you done or what types of

investigations have you worked on over that period of time? A Money laundering investigations and tax investigations, and

other related financial kind of investigations. Q Prior to becoming a Special Agent with the IRS, did you have

a college degree? A Q A Q I did. In what? Business administration, with a concentration in accounting. And did you do any additional -- did you work at any other

career or field prior to joining the IRS? A I was the tax analyst at a cable television company for

approximately three years. Q Have you conducted activities in connection with the

investigation of this case? A I have.

Case 1:04-cr-00103-REB

Document 1593

Filed 06/17/2008

Page 48 of 247

3735

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

Q

Wayne Stockley - Direct What sorts of things have you done as -- in connection with

your work on this case? A I have reviewed documents and evidence obtained in the I have interviewed numerous witness and

investigation.

investors, and I have reviewed the reports of other agents that have interviewed witnesses and third parties. Q Did you have a role with respect to collecting bank records

in connection with this case? A Q A I did. What did you do in connection with that process? Prepared subpoena requests, submitted those to the banks,

retrieved records from the banks, and analyzed those records. Q And are you familiar with the process that was used to

analyze the bank records that you obtained using those methods you have just described? A Q Yes, I have. From approximately how many banks were such records

obtained? A Q A Um, 172 banks were ultimately -- or banks did you say? Yes. 172 accounts, and approximately 25 to 30 banks, in that

area. Q And once those records were obtained, what, if anything, was

done with them for the purposes of analysis? A Initially we did some reviews and analysis on those records.

Case 1:04-cr-00103-REB

Document 1593

Filed 06/17/2008

Page 49 of 247

3736

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

Wayne Stockley - Direct The second step, we sent those records to FBI Contract Data Input Center which input each and every item into a huge database. Q A And when you use the term "item", what do you mean? Source document. For example, a check, wire transfer,

deposit item, any backup document that affected the bank statement, affected the account. Q And what kinds of information from each of those items were

input into the database? A Q All the information on each item was input into a database. Do you know the total number of items that ended up in that

database? A Q It was about 15,500 -- over 15,500 items. And do you know whether there was any additional review

process that was performed after those items were initially entered into this database? A Yes. After this was -- all these items were entered into

the database, there was a retired FBI agent that reviewed each and every document that went into that for the accuracy of that database. Q And do you know what was done if during that review he

located any errors in the entries? A Well, he was -MR. BORNSTEIN: Objection, your Honor. Whether his

knowledge about whether somebody else made -- was able to

Case 1:04-cr-00103-REB

Document 1593

Filed 06/17/2008

Page 50 of 247

3737

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

Wayne Stockley - Direct determine any errors is not personal knowledge, and it's also knowledge of what somebody else is doing and their work product. THE COURT: MR. KIRSCH: Response. I believe the question was whether it was It was did he

designed to establish whether he had foundation. know. THE COURT:

The question starts, do you know.

Of

course that's in our business the thaumaturgical incantation for laying the foundation under Rule 602. There may be an objection

later but not to this foundational question. The objection is overruled. And, sir, you may answer Do

counsel's last question, if you recall it and can answer it. you recall his last question? THE WITNESS: MR. KIRSCH: BY MR. KIRSCH: Q Could you repeat the last question. Yes.

Do you know what steps were taken if the person performing

the review identified any errors? A If he identified any error, he would have corrected it or

had his individuals correct that. MR. BORNSTEIN: Objection, your Honor. He has not

stated his personal knowledge yet. THE COURT: He described a methodology which -- and he

certainly appeared to have personal knowledge of the methodology. So again the objection that you want is not yet to

Case 1:04-cr-00103-REB

Document 1593

Filed 06/17/2008

Page 51 of 247

3738

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

this question.

Wayne Stockley - Direct And the objection is for now overruled.

And you may proceed, Mr. Kirsch. MR. KIRSCH: BY MR. KIRSCH: Q After this input and review process that you have described Thank you, your Honor.

was completed, Special Agent Stockley, did you have access to the database? A Q I did. And did you have the ability to request that various queries

be performed on the database? A Q I did. And did you then have the ability to request -- to receive

the results of those queries? A Q A Q A Q Yes, I did. And did you also have access to the original records? Yes. The original bank records? Yes. Were you able then to be able to compare for yourself the

results of various queries to the actual original records? A Q Yes. Were you also involved in connection with this case with the

selection of various bank records that have been marked as exhibits? A I was.

Case 1:04-cr-00103-REB

Document 1593

Filed 06/17/2008

Page 52 of 247

3739

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

Q

Wayne Stockley - Direct And were there categories of accounts that you know were --

that made it onto the exhibit list? A Q A Q Yes, I am. Okay. What's the first of those categories?

The first category was reported non-depleting accounts. And how is it that an account was classified as a purported

non-depleting account? A Two different ways. One was an account that was -- that the A second way

initial investor deposited, it was deposited into.

was an account that had the same name of the purported high-yield investment program, and that would be the second way that it was classified as a non-depleting account. Q Okay. And you mentioned accounts into -- that these -- some

of these were accounts into which investor money was deposited. Did you have a process that you used to identify accounts -- to identify investors for that purpose? A Q A Yes. Okay. What was that process?

Well, the first process was the evidence collected during

the investigation from third parties, from potential investors, from search warrant documents, we reviewed those documents and identified investors that way. That would be the first way.

The second way we identified investors was it was an independent trustee appointed by the court in forfeiture action, in a separate forfeiture action, and that individual collected

Case 1:04-cr-00103-REB

Document 1593

Filed 06/17/2008

Page 53 of 247

3740

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

Wayne Stockley - Direct documents and made a determination whether particular individuals or groups of people were investors. So we used both of those different methods to identify investors into the high-yield investment program. Q All right. Was there a second category of accounts that

were selected for inclusion as exhibits in the trust? A Yes, there was. A second category would have been an

account in which the monies from a non-depleting or purported non-depleting account were then transferred into. Q A Q A Was there a third category of accounts? Yes, there was. What kind of accounts were those? That was an account that had a transfer of monies into the

purported non-depleting account. Q Are you also familiar with an exhibit marked as Government's

Exhibit 9040 containing records of wire transfers from the Federal Reserve? A Q Oh, yes, I am. And how is it that -- are you familiar with the contents of

that exhibit? A Q I am. And how is it that those -- how is it that the contents of

that exhibit relate to the charges in this case? A Many of those are actually the wire transfers that are the

basis -- that make up the wire transfer for the money laundering

Case 1:04-cr-00103-REB

Document 1593

Filed 06/17/2008

Page 54 of 247

3741

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 count. Q A Q Okay. Some of them. Do they also include wire transfers at issue in some of the

wire fraud counts? A Q That's correct. Do they also include wire transfers at issue in some of the

securities fraud counts? A That's correct. MR. KIRSCH: Your Honor, at this time I have a number I would begin

of records that I intend to offer into evidence.

by offering Government's Exhibit Nos. 9002 and 9003. THE COURT: 9002 and 9003. Any objections by any one

or more of the defendants, not now of record? MR. BORNSTEIN: THE COURT: One moment, if I could, your Honor.

Certainly. Your Honor, also request a moment.

MR. GOODREID: MR. KIRSCH:

And, your Honor, I will ask the court for I have these broken down by

a little bit of guidance here. bank.

I could do this in another fashion if the court believes

there is a more expeditious manner of me making this offer. MR. BORNSTEIN: Your Honor, on behalf of Mr. Schmidt,

he objects to the admission of Exhibits 9002 and 9003 on several grounds. He objects to them on hearsay grounds, he objects to

them on 401 and 402 grounds, and he renews his objection to the

Case 1:04-cr-00103-REB

Document 1593

Filed 06/17/2008

Page 55 of 247

3742

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

Wayne Stockley - Direct methodology that was used to give the defense an opportunity to examine such records in advance of this offer. THE COURT: Ladies and gentlemen, this, it occurs to

me, may take some time, and may or may not involve a discussion which should or should not occur outside your hearing or outside your presence altogether, implicating our Rule 103(c). Let's err on the side of safety and conservatism. therefore I am going to place you in a temporary state and status of recess. So I will ask you to remain in or near your jury deliberation suite. Please for now store your note-taking And

materials and, of course, be sensitive to the important rules that govern your conduct as jurors in the trial of this case. With those matters in place and as concerns you, ladies and gentlemen of the jury, you are in recess. All rise pending the exit of this jury. (Jury out at 9:55 a.m.) THE COURT: Thank you. And please be seated once again

as we proceed deliberately outside the presence and hearing of the jury. First, let me inquire, Mr. Bornstein, on behalf of Mr. Schmidt, had you finished and stated your objections? MR. BORNSTEIN: further. Well, I can certainly elaborate on them

I mean I made my brief objection, giving the court

notice of what it is about the objection, but the elaboration on

Case 1:04-cr-00103-REB

Document 1593

Filed 06/17/2008

Page 56 of 247

3743

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

Wayne Stockley - Direct the objection, I certainly could make it if the court allows me to. THE COURT: question. And I would. That was the thrust of my

So you may expatiate. Your Honor, Exhibits 9002 and 9003,

MR. BORNSTEIN:

according to the exhibit list that has been provided by the government, come from the New Frontier Bank. 9002, according to

the government's list, relates to an account, a Visa account, of Debbie A. Harte and Leon F. Harte, and 9003 relates to some other account of Leon F. Harte and Debbie Harte. Based on the record made at this point, we would, as I say, we would make, first of all, a hearsay objection to the extent that Leon Harte has been mentioned in the course of this trial, not everything Leon Harte did, not every banking transaction that he made, and not every act that he took was in furtherance of either, A, a conspiracy, B, a