Free Transcript - District Court of Colorado - Colorado

Case 1:04-cr-00103-REB

Document 1584

Filed 06/17/2008

Page 1 of 282

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 IX _______________________________________________________________ Proceedings before the HONORABLE ROBERT E. BLACKBURN, Judge, United States District Court for the District of Colorado, commencing at 8:45 a.m., on the 12th 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 1584

Filed 06/17/2008

Page 2 of 282

1393

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 1584

Filed 06/17/2008

Page 3 of 282

1394

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 camera.

P R O C E E D I N G S (Proceedings resumed at 8:45 a.m.) THE COURT: Thank you, and please be seated. To the

parties and their counsel, ladies and gentlemen, good morning. I can report with some satisfaction that we do have all sixteen jurors who are present and presumably prepared to proceed. We convene briefly but importantly outside the presence and hearing to entertain the court's ruling based on the issues raised at the close of trial yesterday afternoon. Thus, the matter before me now is defendant Weed's oral Motion to Produce the unredacted FBI interview notes of Linden Markham who is now testifying at trial. Defendant Weed's motion

is joined by defendants Schmidt, Lewis, and Smith. Although defendants did not make a prima facie showing that Giglio evidence was implicated in these documents, and expressed essentially nothing more than suspicion and concern pointing to, in one instance a perceived variance in the marshaling of such documents by the government, nevertheless in an abundance of caution, and essentially as a test case, I conducted an in camera review of the requested documents. Thus, I have reviewed the following documents in The relevant portions and excerpts of the attachments

to the government's March 13, 2007, correspondence to defense counsel, including Bates stamps 0315238 through 0315244, which

Case 1:04-cr-00103-REB

Document 1584

Filed 06/17/2008

Page 4 of 282

1395

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

excerpt is the FBI notes of the interview of Linden Markham as redacted by the government, which correspondence and attachments I have marked for the record as Court's Markham Exhibit 1. The unredacted FBI notes of the interview of Linden Markham, as described in paragraph 1 supra, which unredacted interview notes I have marked for the record as Court's Markham Exhibit 2. The unredacted FBI notes of the November 18, 2003, interview of Linden Markham, which unredacted interview notes I have marked for the record as Court's Markham Exhibit 3. And the unredacted notes of the, quote, witness preparation telephone interview on April 1, 2007, end quote, of Linden Lee Markham by Special Agent Wayne A. Stockley of the IRS, which unredacted interview notes I have marked for the record as court's Markham Exhibit 4. Also, I have reviewed the

record of the trial testimony of Linden Markham pro tanto. Based on my in camera review of court's Markham Exhibits 1, 2, 3, and 4, and based on my review of Ms. Markham's trial testimony pro tanto, I find and conclude as follows: One,

that none of the exhibits constitutes a statement as defined in the Jencks Act at 18 U.S.C. Section 3500(e); two, that none of the information which has been redacted in Court's Markham Exhibit 1 at Bates stamp 0315238 through 0315244 includes or implicates information or evidence that is favorable to any one or more of the defendants in the sense that it is favorably

Case 1:04-cr-00103-REB

Document 1584

Filed 06/17/2008

Page 5 of 282

1396

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

relevant to guilt, credibility, or punishment within the meaning of Brady v. Maryland, 405 U.S. 150, 1972 -- strike that. 373

U.S. 83, 1963. Giglio v. United States, 405 U.S. 150, 1972, or their progeny, including, for example, in the Tenth Circuit, Smith v. Secretary of New Mexico Department of Corrections, 50 F.3d 801 at 825, Tenth Circuit, 1995, citing other Tenth Circuit cases. And three, that any alleged or suspected inconsistency between that which I have reviewed and Ms. Markham's trial testimony implicates collateral matters only and is de minimus. Therefore, it is ordered that defendant Weed's oral Motion to Produce the unredacted FBI interview notes of Linden Markham, who is now testifying at trial, which motion is joined by defendants Schmidt, Lewis, and Smith, is denied. Done in open court effective forthwith. Madam clerk, if you will show the jury into the courtroom and jury box, please. THE COURTROOM DEPUTY: THE COURT: else happens. MR. KIRSCH: Your Honor, would you like us to go ahead Yes, your Honor.

And as quickly as possible before something

and get Ms. Markham back on the stand? THE COURT: If you would, please. Thank you.

(Jury in at 8:50 a.m.) THE COURT: All rise for the jury, please.

Case 1:04-cr-00103-REB

Document 1584

Filed 06/17/2008

Page 6 of 282

1397

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

(Linden Markham was recalled to the stand.) THE COURT: Thank you, and please be seated.

Ladies and gentlemen of the jury, good morning. THE JURY: THE COURT: Good morning. Ms. Antrillo in particular, how is your

ankle and foot this morning? THE JUROR: THE COURT: Better today, sir. Thank you. I am also going to add to the

list of rules, admonitions, and prohibitions that govern your conduct as trial jurors in this case, no contact sports, and you are to be particularly careful if you own a pet and exercise it. Enough said. Ms. Markham, good morning. THE WITNESS: THE COURT: Good morning.

Ma'am, I remind and admonish you that, of

course, you continue to testify during this trial under oath. And do you understand that? THE WITNESS: THE COURT: MR. ANGELO: THE COURT: Yes. Mr. Angelo.

Thank you.

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

BY MR. ANGELO: Q Ms. Markham, before we adjourned the last time, we were

looking at Government's Exhibit No. 220.

Case 1:04-cr-00103-REB

Document 1584

Filed 06/17/2008

Page 7 of 282

1398

Linden Markham - 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 Um-hm. And do you have that in front of you at this time? I do. Have you had an opportunity to take a look at the full

document? A Q A Yes. Can you tell us, please, what that is? It's the investment agreement that I signed with Smitty's

Investment. Q And can you us, please, where you were when you signed that

document? A Q A I was at Norm Schmidt's plastics factory. And do you see a signature for Mr. Schmidt on there? I see initials on various pages. Oh, yes. It's on page 5

of 5. Q Now, I note that signature is dated on a day following your

own signature? A Q Yes. Did you receive these documents following your visit to the

plastics factory or had you signed them before going? A I signed these -- I signed these at the factory on the 24th. I don't

As far as Mr. Schmidt's signature, I do not remember. know when he signed. Q A Okay. Yes. You did receive a signed copy back?

Case 1:04-cr-00103-REB

Document 1584

Filed 06/17/2008

Page 8 of 282

1399

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

Linden Markham - Direct And is this an accurate copy of the agreement you received

with the signature on it? A Q Yes. Let's take a look briefly at the attachments to the actual Do you see the document with wiring

agreement itself. instructions? A Q A Q A Yes.

Do you recognize that? Yes. And when did you get that? Well, this I received when I sent the wire. This was my

copy. Q And looking at the following pages concerning an investor

qualification summary? A Q A Q Um-hm. Do you recall that? Yes. And whose handwriting is that on the investor qualification

summary? A Q A Q A That's mine. And when did you complete that document? The 19th of March, 2002. And was that then sent to Smitty's or Mr. Schmidt? Yes. MR. ANGELO: Your Honor, at this time we move for the

Case 1:04-cr-00103-REB

Document 1584

Filed 06/17/2008

Page 9 of 282

1400

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

Linden Markham - Direct admission of Government's Exhibit No. 220. THE COURT: defendants? Hearing none, Government's Exhibit 220 admitted in evidence, with leave to publish. MR. ANGELO: request at this time. THE COURT: BY MR. ANGELO: Q If you would, please, Ms. Markham, turn to the second page Do you have that? You may. Thank you, your Honor. We would make that Any objection by any one or more of the

of Government's Exhibit No. 220. A Q I do.

Looking at paragraph 1B on that document which is denoted as Take a

a Cooperative Private Placement Agreement document. minute to read that to yourself. A Q I have completed my reading.

Was that consistent, the representations in that paragraph,

consistent with what you had been told prior to your investment? A Q 2? A Q Yes. Did you ask any questions about what the ICC rules and Yes. Now, looking at the third page there, at the top, paragraph

documentary credits were that are referred to there? A I did. Not at the time I signed this, but before that.

Case 1:04-cr-00103-REB

Document 1584

Filed 06/17/2008

Page 10 of 282

1401

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

Linden Markham - Direct Before that. Of whom did you make that inquiry? Chuck Lewis. And what did he tell you about that? He said that this was a document that governed international

financial transactions. Q Now, if you would, please, let's take a look at the wiring

instructions that were attached, which is after page 5 of the contract. A Q Um-hm. Um, can you tell us, please, from whom you received these

instructions? A Q I am sorry. Could you state that again?

Can you tell us, please, who gave you these wiring

instructions? A Someone from Smitty's. I don't remember if it was Norm or

Chuck. Q A Q A And can you tell us whose handwriting is on there? Mine. And can you tell us what that handwriting represents? This is the sheet that I presented to my bank when I made

the bank wire to Smitty's Investment. Q And looking up at the top right-hand corner of that

document, if you would, please, can you tell us what that is? A Well, it's my handwriting on a little post-it note, and I

believe that I needed to fax this to the headquarters for

Case 1:04-cr-00103-REB

Document 1584

Filed 06/17/2008

Page 11 of 282

1402

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

Linden Markham - Direct Security Service Federal Credit Union. Antonio, and that's a 210 area code. Q A Q

They are located in San

Was that where your wire transfer originated from? Yes. And is this essentially then your directions to your account

holder to wire the funds that are indicated there? A Q Yes. Now, following the time of your investment, did you begin to

do some independent research of your own concerning this investment and Smitty's? A Q A Yes, I did. Can you tell us, please, why? I was having some second thoughts, and I was having

misgivings because when I was asking some rather pointed questions I was getting some vague answers, and I was just uncomfortable. Internet. Q For what kinds of -- or under what kinds of topics, if you So I started doing some research on the

can tell us? A I looked under the Federal Trade Commission. I looked under Peter Moss. I looked under

medium-term notes. Lewis.

Charles Franklin

High-yield investment.

So I looked just about

everywhere I could think to look. Q A And did your research assuage any concerns that you had? No. It accelerated my concerns.

Case 1:04-cr-00103-REB

Document 1584

Filed 06/17/2008

Page 12 of 282

1403

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

Linden Markham - Direct And without specifically describing the information you

received, what about the research accelerated the concerns? A Well, there were warnings with the Federal Trade Commission

and some links to some other places warning about this type of investment, that it didn't exist. MR. BORNSTEIN: I am going to object, your Honor. Now

she is giving content from third-party sources which is hearsay. THE COURT: MR. ANGELO: THE COURT: sustained. MR. BORNSTEIN: THE COURT: Move to strike. Response. I agree, your Honor. And thus the objection for now is

The Motion to Strike is granted.

Ladies and gentlemen of the jury, you are instructed to disregard the last portion of the witness's narrative answer describing and recounting that which she viewed or read. That

is not evidence and may not be used or considered by you as such. Thank you. Mr. Angelo. BY MR. ANGELO: Q With respect to the other web sites that you were referred

to, were there other warnings at all that you saw? A Q A Regarding the investment? Yes. Yes.

Case 1:04-cr-00103-REB

Document 1584

Filed 06/17/2008

Page 13 of 282

1404

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 A

Linden Markham - Direct And were these particularly hard to find? No. You indicated you did some research on Mr. Lewis. I did. And did you discuss that research with Mr. Lewis? Yes. And can you tell us, please, what you discussed with him? I told him that I had found evidence of a felony conviction

on line. Q A And what was his response to you? He told me that the other person involved in the conviction

had been the prime mover and shaker in the fraud, and that he had received probation because he was deemed not to have had a significant part in it. Q A Okay. And that he had made restitution to the victims,

court-ordered restitution. Q Did you raise with Mr. Lewis your other concerns about what

you had found and the warnings on the Internet? A Q A I did. And what was his response to that? He said that he didn't understand how that could be, and

offered to get me some substantiation of the legitimacy of the investment that I was in. Q And did he indicate to you from what sources he was going to

Case 1:04-cr-00103-REB

Document 1584

Filed 06/17/2008

Page 14 of 282

1405

Linden Markham - 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 get that? A Q A Q No. Did he get it for you? No. Did you continue to discuss your concerns with Mr. Schmidt

or anybody else? A Q I did. From time to time. It was Mr. Lewis. I apologize. And was he --

I am sorry.

Mr. Lewis your main point in contact with respect to that? A Q Yes. And what was he telling you during those subsequent

conversations? MR. GAINOR: Objection. Time frame, your Honor. If we

could have some idea when these conversations occurred. MR. ANGELO: THE COURT: I can do that, your Honor. The objection is sustained.

Your rephrased and reconstituted question, please. MR. ANGELO: BY MR. ANGELO: Q Over how long a period of time after your investment did you Thank you.

discuss your concerns with Mr. Lewis? A I discovered the felony conviction in early April, discussed

it with him then, and -MR. GAINOR: Moves to strike. Objection, your Honor. Not responsive.

Case 1:04-cr-00103-REB

Document 1584

Filed 06/17/2008

Page 15 of 282

1406

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

Linden Markham - Direct THE COURT: Non-responsiveness is an objection reserved to the examiner. The real test becomes relevance, which it is. The Motion

The objection is noted but respectfully overruled. to Strike is likewise denied. BY MR. ANGELO: Q

And so did you discuss the conviction that you found fairly

close in time to the time that you discovered it of Mr. Lewis? MR. GAINOR: THE COURT: Objection. Overruled. Yes, I did. Within a few days. There Leading.

THE WITNESS:

were also subsequent discussions -MR. GAINOR: THE COURT: Rule 611(a)(1). Objection as to the narrative. Narrative is not objectionable per se under

However, I would note there was no pending

question to which to tether an answer. Your next question, Mr. Angelo. MR. ANGELO: BY MR. ANGELO: Q Tell us about the subsequent discussions, and if you can try Thank you, your Honor.

to pin down a time frame for us. A I had discussed with Mr. Lewis in April something I found on

the Internet regarding Peter Moss, who was ostensibly the trader on the account, and I found that he had been banned by the Australian Securities and Exchange Commission from engaging in --

Case 1:04-cr-00103-REB

Document 1584

Filed 06/17/2008

Page 16 of 282

1407

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

Linden Markham - Direct MR. GAINOR: Objection as to hearsay. about content. MR. ANGELO: on Mr. Lewis. THE COURT: This is non-hearsay.

She is talking

This is going to be offered for the effect

Again, this is a

verbal act by verbal conduct.

It's offered to show the effect

of the utterance on the hearer. Again, I cite to McCormick on Evidence, Section 249. BY MR. ANGELO: Q A And what was Mr. Lewis's reaction to that information? He offered to get me some evidence that Peter Moss had been

a director of the World Bank and not had the securities and exchange problem in Australia. Q A Q And did he do that? No, he did not. Did you yourself attempt to verify whether in fact Mr. Moss

had been a director of the World Bank? A Q I did. I contacted the World Bank by e-mail.

Were you able to confirm that he had been a director of that

bank? A Q I was not. Do you recall an invitation to go to a place called the

Redstone Castle? A I do, although my invitation was to attend a seminar at the

offices on 16th Street, not to go to the castle.

Case 1:04-cr-00103-REB

Document 1584

Filed 06/17/2008

Page 17 of 282

1408

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

Linden Markham - Direct And who extented that invitation to you? Chuck Lewis. And tell us, please, what the specific invitation was and

the contents of the seminar described to you by Mr. Lewis? A He was going to have someone there to discuss ways to

protect the profits from the investment from some excessive taxation. Q A Q A Q And did you attend that seminar? I did. Do you recall approximately when it was? May 15th of 2002. 12th, 15th, something in there.

And can you tell us, pleas, who was presenting this

information? A Q A Q A Michael Smith and Joe Schlabach. Do you know the name Michael Vallone? I do. And how do you know that name? That name had been mentioned to me by Chuck Lewis in a

conversation, and I started doing some research on the Internet. Q Okay. Was Mr. Vallone at the seminar that you have

described? A Q Yes. Now, if you could take a look now at Government's Exhibit 221, please.

No. 222 -- I am sorry.

Take a minute to look at that document, if you would,

Case 1:04-cr-00103-REB

Document 1584

Filed 06/17/2008

Page 18 of 282

1409

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

Linden Markham - Direct please, and the accompanying pages. A Q A Q A I have looked at it. Do you recognize that document? I do. And what is it? It's a fax from Chuck Lewis's office to me with a letter

from Alan Weed's insurance that was originally directed to Mr. Schmidt with copies of insurance certificates. Q A Q And had you requested that information? I had. And did you receive that information at or about the date

indicated on the fax cover sheet? A Yes. MR. ANGELO: Your Honor, at this time we move for the

admission of Government's Exhibit No. 221. THE COURT: defendants? Hearing none, Government's Exhibit 221 admitted in evidence, with leave to publish. MR. ANGELO: THE COURT: BY MR. ANGELO: Q Now, looking at the fax cover sheet, there is a reference in Please, your Honor. Thank you. Any objection by any one or more of the

the comments block that this is the document on Lloyd's of London. A note signed by Chuck. And who did you understand

Case 1:04-cr-00103-REB

Document 1584

Filed 06/17/2008

Page 19 of 282

1410

Linden Markham - 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 Chuck to be? A Q Chuck Lewis. And had you been discussing with Mr. Lewis the need to see

some proof concerning Lloyd's of London? A Q Yes. And looking at this letter that you received that's attached

to the cover sheet? A Q A Q A Q I am sorry. Do you see the letter that's attached to the cover sheet? Yes. Did this in fact satisfy your inquiry? It did. And did you in fact -- let's take a look at the handwriting Take a look at that. Can you identify the handwriting?

above. A Q

That's mine. And do you have the understanding today about why that

handwriting was placed on there? A Q A Yes. Why? I was trying to do some research on Mr. Weed and see if he

was properly licensed in the state of Illinois. Q A And were you able to confirm that? No. I also -- I also had some concerns because when I

looked at the certificates none of them were issued by Lloyd's of London, and the certificates were expired.

Case 1:04-cr-00103-REB

Document 1584

Filed 06/17/2008

Page 20 of 282

1411

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

Linden Markham - Direct And did you raise that issue with anybody? I did. With whom? I raised them with Chuck and also with Norm. Tell us about your discussion with Charles Lewis about that. Well, I asked him why Lloyd's of London was not mentioned on

the insurance certificates and why the certificates were expired and had expired already by the time he sent them to me. certificate in particular. And he said that the Lloyd's insurance was going to replace -- that these were the old certificates from the old insurance companies, and that the Lloyd's policy was going to replace this and would be much more comprehensive, and that those certificates would be coming to us shortly. Q And following the receipt of this fax, did you also discuss One

the insurance questions with Mr. Schmidt? A Q us. MR. BORNSTEIN: notice. Your Honor, objection to lack of Yes, I did. And can you tell us, please -- describe that discussion for

We were entitled to have notice of any statements made

by my client that would be offered in court, and we have lack of notice of this. MR. ANGELO: your Honor. These are not being offered for the truth,

Case 1:04-cr-00103-REB

Document 1584

Filed 06/17/2008

Page 21 of 282

1412

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

Linden Markham - Direct THE COURT: Reply. MR. BORNSTEIN: Um, the reason for its offering is

irrelevant to the fact that we are entitled by the rules to have notice of all statements made by my client that are intended to be offered in the course of the trial. THE COURT: defense, Mr. Angelo? MR. ANGELO: I believe it's in the defense discovery, Was this statement disclosed to the

your Honor, but I don't have that in front of me at this point and I don't want to make that representation without double-checking it. THE COURT: Very well. Is there other examination you

may conduct until this matter may be resolved? MR. ANGELO: THE COURT: BY MR. ANGELO: Q At some point did you also discuss this matter with Yes, sir. Then please proceed accordingly.

Mr. Weed? A Q A I did. And was that in person or by telephone? It was by telephone. I had two conversations with him,

actually. Q A Q About this specific issue? Yes. And describe the first conversation, if you would, please.

Case 1:04-cr-00103-REB

Document 1584

Filed 06/17/2008

Page 22 of 282

1413

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

Linden Markham - Direct I called the number on the Weed insurance letterhead and

talked with him, and he told me a little bit about the insurance. I asked about his license and about his credentials,

and he said he would be sending me some evidence of those things. things. Q A Q A Now, you said you had a second conversation with Mr. Weed. Um-hm. Describe that for us, please. It was in August of 2002. And I called him again to tell He was very pleasant. And I was never sent those

him that I hadn't received the documentation that he was going to send me, and was wondering why the individual certificates of insurance hadn't arrived, and he said that they were in the process of determining how much coverage each individual investor needed in addition to the master insurance policy, and that they would be forthcoming very soon. Q A Q Did you receive those? I did not. Now, during the course of your inquiry about the investment

following the execution of the contract, did you discuss with Mr. Lewis the need for an attorney's opinion letter? A Q A I did request that. And why did you request that? To give me an additional sense of legitimacy of the

investment.

Case 1:04-cr-00103-REB

Document 1584

Filed 06/17/2008

Page 23 of 282

1414

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

Linden Markham - Direct And did he indicate whether in fact such a letter existed? He said it was being worked on. And did you ultimately receive such a letter? I did. And when in relationship to when you had first requested it? I believe that it was in September of 2002. Afterwards. It was within a

month or so. Q A Q

And how did you first receive that document? By fax. Would you take a look, please, at Government's Exhibit No.

222 now. A Q A Q A I have it. Do you recognize what that is? Yes. And what is it? It's a transmission verification report for a fax that was

sent to me that was obviously addressed to Michael Vallone with Gary Herbert, the attorney's opinion on the insurance protection. Q And did you receive a full copy of the letter that's

depicted on the face sheet here? A Q I did. Would you take a look at Government's Exhibit No. 223,

please. A I have it.

Case 1:04-cr-00103-REB

Document 1584

Filed 06/17/2008

Page 24 of 282

1415

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

Linden Markham - Direct Do you recognize that Government's Exhibit No. 223? I do. What is it? This is the fax that was sent to me. Okay. And this is the fax that was attached to Government's

Exhibit No. 222? A I believe so. MR. ANGELO: Your Honor, at this time we move for the

admission of Government's Exhibit No. 222 and 223. THE COURT: defendants? MR. GAINOR: THE COURT: MR. GAINOR: from the podium? THE COURT: there. MR. GAINOR: THE COURT: I will raise my voice. Thank you. EXAMINATION BY MR. GAINOR: Q Ms. Markham, it's your testimony that Exhibit 222 was the You may as long as you may be heard from Brief voir dire if allowed by the court. Permitted but as to authenticity only. May I do it from the desk, your Honor, or Any objection by any one or more of the

fax verification sheet that included the first page of the Herbert letter? A I believe so.

Case 1:04-cr-00103-REB

Document 1584

Filed 06/17/2008

Page 25 of 282

1416

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

Linden Markham - Direct And is it your testimony that 223 is the actual letter that

came with that fax, or is that just a copy of that letter? A Q Well, the one in evidence here has to be a copy. Well, I meant was 223 in its exact form attached to 222?

Did you supply Exhibit 223 to the government? A Q A Q Yes. And 223 doesn't have any fax transmission numbers on it. Correct. When you received a fax, don't all of your pages get fax

transmission numbers? A Q A Q Usually they do. Okay. This one didn't have one?

I can't recollect. So you don't know if 223 was the actual document that was

attached that came over the fax? A Q I can't testify to that. Okay. And also the handwriting that is on 223, you don't You didn't see the person who wrote that?

know who wrote that? A Q A I do not.

You don't know when it was written? I believe that it was on there when I received this letter

from Mr. Lewis. Q A Q You believe. But you are not sure?

That's correct. And you are not sure whether in fact the letter in 223 was

Case 1:04-cr-00103-REB

Document 1584

Filed 06/17/2008

Page 26 of 282

1417

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

Linden Markham - Direct the actual letter attached to the fax on 222 exhibit? A Q A That's possible. Okay. I did not receive things by mail from Mr. Lewis's office

other than the monthly statements, so that's why I am saying it was faxed. Q And you already testified that typically every page would

have fax transmission numbers on it as well? A Q A No. When it came over your fax? Usually. MR. GAINOR: point, your Honor. THE COURT: MR. ANGELO: THE COURT: Response. It goes to weight, I believe, your Honor. No, it doesn't. You are offering this as Okay. I would object to 223 with that

the purported correspondence transmitted by facsimile transmission to this witness, and on voir dire examination, this witness cannot supply the information necessary to satisfy the foundational predicate under Rule 901(a), and thus for now the objection is sustained. BY MR. ANGELO: Q Ms. Markham, looking at Exhibit No. 223, if you would,

please, for a second? A Yes.

Case 1:04-cr-00103-REB

Document 1584

Filed 06/17/2008

Page 27 of 282

1418

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

Linden Markham - Direct Do you recognize the document with the handwriting? I do. From where? This is a copy of a letter that was sent to me in some

manner by Chuck Lewis in response -Q A I am sorry. -- in response to my request for the attorney's opinion

letter. Q A And did you discuss that request in person with Mr. Lewis? I did. MR. ANGELO: At this time, your Honor, we move for the

admission of Government's Exhibit 223. THE COURT: defendants? MR. GAINOR: Same objection from Mr. Lewis. And in Any objection by any one or more of the

addition, your Honor, no one can substantiate the handwriting on that letter as being from anyone in particular. And again, this

witness has testified as to the usual transmission of letters, and she already said she doesn't know how she got this on prior examination on voir dire. THE COURT: MR. ANGELO: weight at this point. Response. Your Honor, I do believe that goes to She has identified the letter, the

conversation that prompted the receipt of the letter. THE COURT: The objection based on lack of authenticity

Case 1:04-cr-00103-REB

Document 1584

Filed 06/17/2008

Page 28 of 282

1419

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

Linden Markham - Direct is respectfully overruled. The objection, which is cabined either in Rule 401 or 403 as to the extraneous, for now unidentified, handwriting that appears on pages 1 and 2 of Exhibit 223, is for now sustained until that unidentified handwriting is either identified and is made relevant, or until it is redacted. MR. ANGELO: BY MR. ANGELO: Q Ms. Markham, did you in fact have any basis to recognize the Thank you, your Honor.

handwriting that's on Government's Exhibit No. 223? A I can't testify to his handwriting as it is. I do remember

that I was told by Mr. Lewis that this was a confidential document. MR. GAINOR: Move to strike. THE COURT: Again, generally, and in this court Objection, your Honor, not responsive.

specifically, an objection based on non-responsiveness is reserved to the examiner. Again, the real inquiry, is the response relevant in some way. I find that it is. The objection is noted but

respectfully overruled. MR. ANGELO: BY MR. ANGELO: Q Tell us about that discussion with Mr. Lewis, if you would, Thank you, your Honor.

please.

Case 1:04-cr-00103-REB

Document 1584

Filed 06/17/2008

Page 29 of 282

1420

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

Linden Markham - Direct Regarding this letter? Regarding the confidentiality of the letter. He told me that this letter was a letter that had been given Not to

to people that were authorized to market the product. the investment owners.

And because I had asked him why it was And that's what he told

addressed to Mr. Vallone and not to me. me. Q A Q

That was the explanation for the confidentiality? Yes. Why don't you take a look, please, if you would at

Government's Exhibit No. 225. A Q A Q A I have it. Do you recognize that document? I do. And how do you recognize it? It was a letter that was sent to the investor/owners to give

us an update on the insurance coverage. Q A Q And how did you receive this document, if you recall? I believe that I received it by fax. And had you been forewarned or told that this letter would

be coming? A Q A Q I believe it was mentioned to me. And by whom? Mr. Lewis. And had you had discussions with him about Capital Holdings?

Case 1:04-cr-00103-REB

Document 1584

Filed 06/17/2008

Page 30 of 282

1421

Linden Markham - 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. Your original investment was with Smitty's? MR. GAINOR: THE COURT: BY MR. ANGELO: Q Did you discuss with Mr. Lewis why you were receiving Objection. Sustained. Leading.

correspondence on Capital Holdings stationery? A Yes. There had been a second LLC that was founded after I had been presented with

Smitty's, which was Capital Holdings.

an investment -- an amended agreement, which I didn't sign, so I stayed with Smitty's. But everything thereafter had come to me, And I knew

most of the documentation, under Capital Holdings. it to be basically the same company. Q A Q A Did you sign a new agreement? I did not. Were you asked to sign a new agreement? Yes.

But I was given an option to stay with the original

agreement. Q A And can you tell us, please, why you made that choice? Because the Capital Holdings agreement had a paragraph in

there where I was confirming that I was an accredited investor and I knew I was not, so I couldn't sign it. Q A And who did you make that statement to? Chuck Lewis. MR. ANGELO: Your Honor, at this time we move for the

Case 1:04-cr-00103-REB

Document 1584

Filed 06/17/2008

Page 31 of 282

1422

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

Linden Markham - Direct admission of Government's Exhibit No. 225. THE COURT: defendants? MR. BORNSTEIN: Honor. THE COURT: Limited to voir dire. EXAMINATION BY MR. BORNSTEIN: Q Ma'am, Exhibit 225 has a purported signature of Mr. Norm A voir dire question or two, your Any objection by any one or more of the

Schmidt; is that right? A Q Correct. Did you get an original letter or did you get only a faxed

letter? A Q I don't recall. Do you know if that is a stamp of his signature or an actual

signature? A Q A I wouldn't have any way of knowing that. Have you seen an actual signature of Mr. Schmidt? I believe his original signature was on the original

contract that I signed. Q Did you compare that original signature to this signature on

this exhibit? A No. MR. BORNSTEIN: Your Honor, I am going to object to the

fact that this document is being offered as a document that was

Case 1:04-cr-00103-REB

Document 1584

Filed 06/17/2008

Page 32 of 282

1423

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

Linden Markham - Direct signed by Mr. Schmidt. THE COURT: MR. ANGELO: Response. Your Honor, the exhibit that the witness

has referred to is Government's Exhibit No. 220, and on the fifth page thereof there is a signature of Mr. Schmidt. It's my

belief at this point, your Honor, the jury can look at those and make comparisons. THE COURT: I agree. The objection is noted but

respectfully overruled.

Government's Exhibit 225 for

identification admitted in evidence, but as the ring of those words are dissipating and evanescing, objection by any one or more of the other defendants? Very well. publish. MR. ANGELO: publish. THE COURT: Exhibit 222. First, Mr. Angelo, based on the colloquy among court and counsel, does the government persist in its offer of Government's Exhibit 222? MR. ANGELO: THE COURT: proceed. BY MR. ANGELO: We do not at this time, your Honor. Very well. Thank you. Then you may Let me digress to the government's offer of Thank you, your Honor. We would like to Since we began with Mr. Schmidt.

Then 225 is admitted, with leave to

Case 1:04-cr-00103-REB

Document 1584

Filed 06/17/2008

Page 33 of 282

1424

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

Linden Markham - Direct Ms. Markham, have you had an opportunity to look at

Government's Exhibit No. 225 at this point? A Q I have. There is a reference in the second paragraph to additional

costs being incurred due to the insurance protection? A Q A Q Yes. Did you have any discussions with anybody about that? Not to my recollection. Okay. The first paragraph references efforts being made to Upon seeing that particular

acquire insurance coverage.

reference, did you make any inquiries about what the status of the insurance was? A Q A I did. With who? I know that I asked Chuck Lewis, and I believe that I asked

Mr. Schmidt. Q And let's then talk about what Mr. Lewis told you in

response to your inquiry. A I had asked him for a copy of the master policy while we

were waiting for the individual copies, and he said that it would be coming shortly. Q A Q And did you receive one? I did not. Not to my recollection. And you

Let's take a look at Government's Exhibit No. 226.

may have to remove that from the sleeve.

Case 1:04-cr-00103-REB

Document 1584

Filed 06/17/2008

Page 34 of 282

1425

Linden Markham - 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 I have it. Can you take a look at the four pages that comprise the Five pages, excuse me.

exhibit, please. A Q A Yes.

Do you recognize what those are? Yes. Those are the monthly statements that came to me to

advise me of the status of the account. Q A Q The status of your account? My account, correct. Do they appear to accurately represent the amount of your

investments? A Yes. Other than the very first one that I received in

April. Q And what was the problem with the first one that you

received? A I hadn't been credited with three or four months of growth

in the investment that should have happened as of the date that I had signed. that. Q A Q A Q A And who did you make that request of? To Chuck, Chuck Lewis. And did that occur? Yes. And did you receive these statements on a regular basis? I did. So I asked them to please credit me back with

Case 1:04-cr-00103-REB

Document 1584

Filed 06/17/2008

Page 35 of 282

1426

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

Linden Markham - Direct And other than the error that you have noted, do they

accurately reflect what you understood to be the growth in your account? A Yes. MR. ANGELO: Your Honor, at this time we move the

admission of Government's Exhibit No. 226. THE COURT: defendants? MR. GAINOR: Yes, your Honor, on behalf Mr. Lewis. If Any objection by any one or more of the

I may briefly voir dire the witness. THE COURT: You may voir dire only. EXAMINATION BY MR. GAINOR: Q Ms. Markham, with regard to the exhibit, I have a five-page

exhibit you have in hard copy form or on the computer screen, I hope? A Q A Q Yes. These were either mailed to you or faxed to you? They were usually mailed to me. Okay. Well, some of them were faxed, too, right? Because

page 2 was faxed. the top of it. A Q A Yes.

It looks to be a fax transmission aspect at

Page 4 appears to be faxed as well? Yes.

Case 1:04-cr-00103-REB

Document 1584

Filed 06/17/2008

Page 36 of 282

1427

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

Linden Markham - Direct At the time you got these documents -- well, let me go to You were not in the Capital office at the time

this question.

or Smitty's office at the time these documents were prepared? In other words, you didn't see who prepared them? A Q A Q No, I didn't. You didn't see who typed them up? No. You don't know who was responsible on each one of these

pages for doing the math? A I was told that Jannice McLain was doing all of the

accounting and was responsible for the statements. Q A Q A Q A But you don't know if Jannice McLain prepared this or not? No. You don't know if Susan Veik prepared this or not? I do not. You don't know who prepared it? Correct. MR. GAINOR: admission. THE COURT: MR. GAINOR: And on what basis? The witness can't authenticate who created Based on that we would object to their

these documents, whether or not they were even made by any personnel over at Smitty's or Capital Holdings. THE COURT: MR. ANGELO: Response. Your Honor, under the totality of the

Case 1:04-cr-00103-REB

Document 1584

Filed 06/17/2008

Page 37 of 282

1428

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

Linden Markham - Direct evidence presented to this point, concerning the investment as well as the witness's identification of the corrections, and the growth of her account, as was agreed, as well as the initial deposit, the government believes that sufficient foundation has been laid for authenticity. THE COURT: As does the court. Thus, the objection

based on authenticity, implicating Rule 901(a), is respectfully overruled. Any objections by any one or more of the other defendants? MR. BORNSTEIN: THE COURT: If I may voir dire briefly, your Honor.

You may. EXAMINATION

BY MR. BORNSTEIN: Q A Q Ma'am, would you look at page 4 of this exhibit, please. Yes. Somebody has done a revised computation and revised numbers Do you see that?

on this exhibit. A A Q A Q Um-hm. Yes. Who did that? I did.

Based on what? THE COURT: That's cross-examination. Not voir dire

examination.

Case 1:04-cr-00103-REB

Document 1584

Filed 06/17/2008

Page 38 of 282

1429

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

Linden Markham - Direct MR. BORNSTEIN: Very well. THE COURT: Any objection by Mr. Schmidt? No, your Honor.

MR. BORNSTEIN: THE COURT:

Government's Exhibit 226 for identification

admitted in evidence, with leave to publish. MR. ANGELO: Thank you, your Honor. We would ask that

that be done at this time. BY MR. ANGELO: Q A Q Looking at the second page, Ms. Markham, of the exhibit? Yes. It has the name Summit Ventures at the top of the statement.

Did you have any understanding of what Summit Ventures was? A My understanding was that that was a -MR. BORNSTEIN: the understanding. MR. ANGELO: THE COURT: I am happy to provide that, your Honor. Very well. For now, to complete the Mr. Angelo. Objection, unless we have a source of

record, the objection is sustained. BY MR. ANGELO: Q A Q A

What was the source of your information? Mr. Lewis. And what did he tell you? He told me that he had decided to take offices in downtown

Denver and had a subsidiary company that he named Summit Ventures, LLC.

Case 1:04-cr-00103-REB

Document 1584

Filed 06/17/2008

Page 39 of 282

1430

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

Linden Markham - Direct Now let's take a look at Government's Exhibit No. 227, if

you would, please. A Q A Okay. I have it.

Can you tell us, please, what that is. This is a continuation of the monthly statements that I

received from Capital Holdings. Q A Q A Q A Q A And do you recognize the address at the top of the exhibit? Correct. How do you recognize that? It's the same address as Summit Ventures. And had you been to that location? I had. For what purpose? That was when the seminar was held in May with Mike Smith,

et al., it was held at those offices. Q Now, with respect to the computations on the pages, typed

computations on pages No. 1 through 10 of the exhibit? A Q Yes. Do those accurately reflect your initial investment as well

as your agreed, or at least understood, growth of that investment? A Q A Q Yes. And did you sign some of these? Yes, I did. And what was your purpose in signing them?

Case 1:04-cr-00103-REB

Document 1584

Filed 06/17/2008

Page 40 of 282

1431

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

Linden Markham - Direct When we originally started -- when I originally started

receiving these statements, I was asked to sign them and fax them back as a confirmation of receipt. Q A Q And did you do that? I did. Looking at the first page of Government's Exhibit No. 227, Do you recognize that?

there is a fax header up there. A Q A Q Yes, I do. How do you recognize this?

It was the home fax of my roommate. And the handwritten notations on the first page of the

exhibit, whose are those? A Do you mean the signature down at the bottom on the first

page? Q A Q A Q Yes. And the date and the amounts of the total placement.

That's my handwriting. And looking at page 3? The same. Those are mine. You recognize the handwriting

Let's take a look at page 4.

at the top and to the right of the typed figures? A Q A Q A I do not. Let's take a look at page 6. Those are mine. Okay. Page 7, please.

There is no signature there, and the zero under desired

Case 1:04-cr-00103-REB

Document 1584

Filed 06/17/2008

Page 41 of 282

1432

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

Linden Markham - Direct disbursement is not mine. Q A Q A Q Okay. And page 8.

That is not mine either. How about page 9? Those are mine. Now, attached to that statement is a piece of Do you recognize that?

correspondence. A Q A I do.

And where do you recognize that from? This was sent to me, and this one I do know that I received

by mail, from Mr. Lewis's office describing the insurance coverages on the custodial trust account. Q And were these the insurance coverages that you had been

discussing with Mr. Lewis? A Q Yes. And looking at page 13, if you would, please. I am sorry.

14, if you would. document? A Q A Q

Do you recognize the handwriting on that

That's my handwriting. And page 15. That's mine as well. Now, with respect to these statements, did you maintain a

copy of the statement that you had completed and faxed back in your own records? A I did.

Case 1:04-cr-00103-REB

Document 1584

Filed 06/17/2008

Page 42 of 282

1433

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

Linden Markham - Direct And did you maintain a copy of the statement that was sent

to you before completing it in your own handwriting and sending it back? A Yes. MR. ANGELO: Your Honor, at this time I move for the

admission of Government's Exhibit No. 227. THE COURT: defendants? MR. BORNSTEIN: Your Honor, Mr. Schmidt objects to Any objection by any one or more of the

pages 11 and 12 since this exhibit has been offered as statements, and pages 11 and 12 are not statements but something else, and it should be a separate exhibit remarked and offered as such. THE COURT: That being the objection, I exercise my It is overruled.

discretion under Rule 611(a)(1).

Objections by any of the other codefendants? MR. GAINOR: Yes, your Honor. Respectfully to pages 4,

7, and 8 as this witness has testified she does not recognize the handwriting on those pages. THE COURT: Important to the court is not necessarily

her failure to recognize the handwriting but the failure of counsel to inquire whether that was on the document which she received. Lacking that foundation, for now the objection, which goes to authenticity, is sustained.

Case 1:04-cr-00103-REB

Document 1584

Filed 06/17/2008

Page 43 of 282

1434

Linden Markham - 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 BY MR. ANGELO: Q Taking a subtle hint from the court, your Honor, if you

would take a look, Ms. Markham, at the handwriting on pages 4 -was that on the document when you received it? A Q A Q I don't recollect. Okay. What about on page 8?

I do not recollect. Okay. What about -- are you looking -- which part of the

page are you looking at? A I am looking at the ten percent up at the top, and then the

figures at the bottom, the 49483. MR. ANGELO: Your Honor, we will offer this exhibit

through another witness. THE COURT: BY MR. ANGELO: Q Now, after receiving the letter that you just described Very well. Thank you.

concerning insurance coverages? A Q Um-hm. Did you have any further discussions about those coverages

with anybody at Capital Holdings? A I did ask about the item mentioned on page 2. Each client

will receive their own certificate of insurance. Q A Q And who did you make that inquiry of? Mr. Lewis. And what specifically did you request?

Case 1:04-cr-00103-REB

Document 1584

Filed 06/17/2008

Page 44 of 282

1435

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

Linden Markham - Direct I wanted to know the time line on that. And what did he tell you? He said shortly. Did you undertake any efforts on your own behalf to confirm

the existence of the Lloyd's of London insurance? A Q I did. Were you able to confirm existence of insurance as

represented? A I was not. I contacted the Lloyd's America office, and I

contacted -- they forwarded my request on to the main office in London. Q Okay. Now, at the time that you invested, were you ever

told that your funds would be used for purposes other than represented in your contract? A Q No. Were you ever told that other persons associated with

Capital Holdings had criminal convictions other than Mr. Lewis? A Q A Q A Q A Q No. Would those have been important to you? Oh, yes. Did you sustain a loss of your investment? I did. Would you recognize Mr. Lewis if you saw him today? Yes. Is he in the courtroom?

Case 1:04-cr-00103-REB

Document 1584

Filed 06/17/2008

Page 45 of 282

1436

Linden Markham - 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 you. A Q He is. Can you point him out, please, and describe what he is

wearing for the court? A He is standing up right now. MR. ANGELO: Ask that the record reflect the

identification of Mr. Lewis, your Honor. THE COURT: BY MR. ANGELO: Q A Q A Q Would you recognize Mr. Schmidt if you saw him again? I would. And do you see him in the courtroom today? I do. Point him out, please, and describe for the court what he is The request is granted.

wearing. A He is seated right here with the blue shirt and the tan

jacket at the end of the table. MR. ANGELO: Ask the record reflect the identification

of Mr. Schmidt, your Honor. THE COURT: MR. ANGELO: The request is granted. Excuse me one second, your Honor.

Thank you, your Honor. THE COURT: Cross-examination of this witness on behalf

of Mr. Smith, by Mr. Stuckey. MR. STUCKEY: Your Honor, we have no questions. Thank

Case 1:04-cr-00103-REB

Document 1584

Filed 06/17/2008

Page 46 of 282

1437

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

Linden Markham - Direct THE COURT: Cross-examination on behalf of Mr. Lewis by Mr. Gainor. MR. GAINOR: THE COURT: Yes, your Honor. Thank you. If I may have a moment.

You may.

CROSS-EXAMINATION BY MR. GAINOR: Q A Q Ms. Markham, good morning. Good morning. I understand prior to taking the stand -- I guess it wasn't Completing your testimony

yesterday, it was the day before. today.

That you had the opportunity to talk with various Do you

members of law enforcement on several occasions? recollect that? A Q A Q Regarding this case? Yeah. Yes. All right. Regarding your investment.

You remember talking to an FBI agent back

November 18th, 2003, a Peter -- I may butcher his name but maybe you will recognize it. A Q A Q Yes. I remember. It's Yachmetz?

That was in Melbourne, Florida? Correct. Do you remember talking to a Securities and Exchange

Commission enforcement attorney by the name of Joanne Harris? A Yes.

Case 1:04-cr-00103-REB

Document 1584

Filed 06/17/2008

Page 47 of 282

1438

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

Linden Markham - Cross You remember having conversations with Mr. Angelo when he

flew to West Palm Beach to meet you at the Wells Fargo Bank in West Palm? A Q A Q Correct. And that was with Special Agent Hahn as well? Yes. And you also remember a witness preparation telephone call

again with Mr. Angelo and Mr. Stockley from the IRS that occurred on April 1st, '07? A Q Correct. Are there any prior meetings or telephonic conferences or

statements I missed between you and law enforcement, other than those four? A Q I do not remember any other conversations. Okay. Now, when you first started your testimony a couple

of days ago, and I just want to make sure that my notes are accurate, and I know you will correct me if I am wrong, you happened to have met Jannice McLain Schmidt and met her before you even met Chuck Lewis; is that correct? A Q Yes. That's correct.

And if I have my notes correct, you met Ms. McLain at the

Arvada church that both of you went to? A Q I did. And that would have been The Way, The Truth, and The Life,

that was the name of the church?

Case 1:04-cr-00103-REB

Document 1584

Filed 06/17/2008

Page 48 of 282

1439

Linden Markham - 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 Yes. And you knew Ms. McLain for some period of time before

meeting Mr. Lewis who was also a member of that church? A Q Yes. And Ms. McLain and Mr. Lewis were in that church prior to

you joining that church or going to that church for meetings or services, correct? A Q I believe so. Thank you. I started going there in October of 2001.

Um, you even told -- well, I mean when you met

Jannice McLain you liked her, you bonded with her, correct? A Q Yes. And you even told Joanne Harris, that Securities and

Exchange Commission lawyer, during her investigation, after the search warrants, after everything fell through, that you even, quote, told her that she still is a good lady. saying that to Ms. Harris? A Q I believed so at that time. Okay. Now, sometime after meeting Jannice McLain, you met Do you remember

Chuck Lewis again at the same church, and I think you testified it was during a church meeting, correct? A Q After a church meeting. After the message.

Do you remember telling Joanne Harris that you even dated

Chuck Lewis for a short time? A I did not date Mr. Lewis. I had dinner with him a couple of

times.

Case 1:04-cr-00103-REB

Document 1584

Filed 06/17/2008

Page 49 of 282

1440

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

Linden Markham - Cross So you never told Joanne Harris of the Securities and

Exchange Commission that you dated Charles Lewis for a short period of time? A She got that wrong? The dating desire I think was on

We didn't date Mr. Lewis.

his side. Q

But we did have dinner together. Did you ever tell Joanne

Let me ask you the question again.

Harris of the Securities and Exchange Commission that you had dated him for a short period of time, yes or no? A Q I do not recollect that language. Okay. Now, prior to taking the stand a couple of days ago,

when you had the four meetings with law enforcement, did they ever show you a copy of your statement to Joanne Harris of the Securities and Exchange Commission? A Q I don't remember. You don't remember if they showed you a copy of that

statement? A Q I don't remember. Did they -- do you remember them discussing that statement

with you? A Q I believe so. It was your testimony a couple of days ago that it was

around the end of 2001 that Mr. Lewis started to discuss the private placement with you; is that your testimony? A Q Yes. Do you remember telling the Securities and Exchange

Case 1:04-cr-00103-REB

Document 1584

Filed 06/17/2008

Page 50 of 282

1441

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

Linden Markham - Cross Commission lawyer that it was in 2002 that he first started discussing it, not 2001? A Q A Q A Q I don't remember. You don't remember that either? Correct. Okay. I don't remember the exact time frame.

So it could have been 2002?

It could have been. But you do remember that over time the conversations became

more specific and more detailed oriented with regard to the private placement? A Q Correct. You even at times had conversations with Ms. McLain about

the private placement as well? A Q I did. Were you aware that prior to your investment decision that

Charles Lewis and Jannice McLain invested at least $80,000 into the same program that you put your money into? A Q A Q A Q I didn't know that. Ms. McLain didn't tell you? Not to my recollection. In other words, she may have but you don't remember? Correct. Mr. Lewis may have told you that as well but you don't

remember? A Correct.

Case 1:04-cr-00103-REB

Document 1584

Filed 06/17/2008

Page 51 of 282

1442

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

Linden Markham - Cross Well, you remember the name Lewis, you remember the name Those are not strange names to you?

McLain, right? A Q Correct.

Do you recollect whether or not Lewis/McLain, they never

told you, either one, that they had a partnership L&M that invested money, or are you not sure if you remember? A Q A Q I remember that they had a car business together. So that you remember they were partners, to some extent? Yes. Do you remember the name L&M and Associates in connection

with that partnership? A Q I do. Okay. So you recognize that there was a partnership between

the two at one point? A Q A Q Yes. Did you know that they were dating at one point? Yes. And how did that make you feel after your dating A little angry, a

relationship didn't work out with Mr. Lewis? little upset? A Q A No. Not in the least.

So you were dating, then? I was not dating him. My understanding of the situation was

that that was a relationship that they had had in the recent past.

Case 1:04-cr-00103-REB

Document 1584

Filed 06/17/2008

Page 52 of 282

1443

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

Linden Markham - Cross So there was an intimate relationship and a business

partnership? A That was my understanding. It was never discussed very And at the time that we

openly.

It was more intimated to.

started discussing the investment, Ms. McLain was dating Norm Schmidt. Q So that relationship with Chuck Lewis had ended as far as

you know? A Q That was my understanding. I believe you told us a couple of days ago that Mr. Lewis

told you about the program to the extent that people were making money? A Q Yes. In it? And that he appeared to believe in this program, or

I guess you wouldn't have tuned into it any further, correct? A Q Correct. He also told you that the private placement was safe, and

you relied upon those statements, did you not? A Q I did. He told you that there was insurance and he believed in the

fact that there was insurance, as did you? A Q I can't attest to his belief. Well, you certainly didn't think he was swindling you at

that point or you wouldn't have tuned into the investment, right?

Case 1:04-cr-00103-REB

Document 1584

Filed 06/17/2008

Page 53 of 282

1444

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

Linden Markham - Cross That's correct. All right. So he appeared to believe in the investment or

the existence of insurance? MR. ANGELO: I will object, your Honor. He is asking

the witness to speculate about Mr. Lewis's state of mind at this point. THE COURT: He is asking for the appearances which

implicates lay opinion under Rule 701, the foundational predicate for which exists. The objection is respectfully overruled. What that means, ma'am, is this. You may answer

counsel's last question on my continuing two conditions, the first of which again is, do you remember his question? THE WITNESS: The question is did Mr. Lewis appear to

believe in the insurance and the soundness of the investment. THE COURT: And can you answer that of your personal

knowledge and observation? THE WITNESS: things, yes. BY MR. GAINOR: Q Thank you, Ms. Markham. Let's go, if we can, to Mr. Lewis appeared to believe in those

Government's Exhibit 221. believe -- well -THE COURT: MR. GAINOR:

That is an exhibit that's I

It is in evidence. Thank you, your Honor.

Case 1:04-cr-00103-REB

Document 1584

Filed 06/17/2008

Page 54 of 282

1445

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

Linden Markham - Cross THE COURT: You are welcome. BY MR. GAINOR: Q A Q You have had an opportunity to review that exhibit? Yes. Now, if we can go to page 2 of that and blow up the text. You testified, ma'am, that Mr. Lewis told you that there was going to be protections from Lloyd's of London? A Q Yes. And I would like to ask you to focus on the last sentence of

that letter. A Q Yes. Now, when you got that letter, if we can highlight it as You read it carefully?

well. A Q

Yes. That letter makes reference to the fact that each investor

will receive their own personal Lloyd's of London certificates? A Q Um-hm. Yes.

And when you received that letter, you also felt that there

was in your mind some assurance then as to the statements made by Mr. Lewis orally to you? A Q Yes. Okay. This letter also, if we can just go to the body of Is there

it, where the Roman numerals begin, and blow that up.

any way we could have different highlighting for the different Roman numerals, or it all has to be yellow?

Case 1:04-cr-00103-REB

Document 1584

Filed 06/17/2008

Page 55 of 282

1446

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

Linden Markham - Cross I would like you to focus in on that part of it, Ms. Markham, and that part of the letter discusses different forms of insurance? A Q A Q A Q Correct. Do you agree? Correct, yes. You read each one of those lines. I thought I understood it. Okay. Roman numeral I talks about SPIC. That's something You understood it?

that Mr. Lewis had talked to you before you got the letter -SIPC insurance? A Q Correct. You had no reason to believe that Mr. Lewis typed this

letter out himself? A Q No. You actually had conversations with a third party who

potentially authored this letter who answered some questions for you as well? A Q At a later date, I did. If we can go to the aspect of that exhibit -- I believe it's

pages 3 of Exhibit 221, and if we can focus in on the bottom left and blow that up, please. Now, Ms. Markham, you said that you reviewed both of these insurance certificates. you now. I just have one of them up for

But you note the address Smitty's on the bottom left

Case 1:04-cr-00103-REB

Document 1584

Filed 06/17/2008

Page 56 of 282

1447

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

Linden Markham - Cross of that first insurance document? A Q I do. Okay. Now, was that the insurance document that you said Or you thought was expired? I think that one of them was expired and one

was expired? A

I am not sure.

was not expired. Q Okay. And then with regard to page 4, if we can put that You also note that

up, and then focus in on the bottom left.

the address on that certificate is Smitty's, LLC? A Q Correct. And you noted that at or around the time that the documents

were faxed to you by Mr. Lewis? A Q Yes. And this was prior to any conversations with any third

parties who may have been responsible for sending Mr. Lewis that documentation? A Q Correct. You have no reason to believe that Mr. Lewis typed out these

insurance certificates on page 3 and page 4? A Q I have no reason to think that. And after you saw this letter followed by the insurance

certificates, did it satisfy you that they were insurance or did it raise further questions for you? A Q It raised further questions for me. Okay. And that's when you started also making phone calls

Case 1:04-cr-00103-REB

Document 1584

Filed 06/17/2008

Page 57 of 282

1448

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

Linden Markham - Cross to third parties outside of Mr. Lewis, apart from Mr. Lewis? A Q Yes. All right. Now, I understand from listening to your

testimony over the last couple of days, that going into this investment you had some basic contact with the investment landscape? A Q A little bit. A little bit. And you had worked with a financial planner

before? A Q A Q A Q A Q Briefly. And what is that financial planner's name? Russell Ketron. Okay. How long have you worked with Mr. Ketron for?

I worked with Mr. Ketron just a few months. Did you work with any financial planners