Free Response - District Court of Colorado - Colorado

Case 1:04-cr-00103-REB

Document 976

Filed 01/22/2007

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IN THE UNITED STATES DISTRICT COURT F0R THE DISTRICT OF COLORADO Criminal Case No. 04-CR-103-RB UNITED STATES OF AMERICA, Plaintiff, v. 2. GEORGE ALAN WEED Defendant. ________________________________________________________________________ DEFENDANT WEED'S REPLY TO GOVERNMENT'S RESPONSE AND OBJECTION TO DEFENDANT WEED'S PROFFER OF EXPERT WITNESS TESTIMONY ________________________________________________________________________ On 20 October 2006, Defendant George Alan Weed, through counsel, filed a Proffer of Expert Witness Testimony ("Proffer"). The Proffer concerned the proposed expert testimony of Darrell Dunham on the question whether "The Reserve Foundation Trust Certificate[s]" ("RFT Certificates") prepared by Mr. Weed in the fall of 1999 contained material misrepresentations of fact or law. In a pleading filed on 20 December 2006, the Government stated a number of objections to the admission at trial of Mr. Dunham's testimony. Defendant Weed replies, seriatim, to each of these objections. 1. Expertise ­ The Government asserts, under Federal Rule of Evidence 702, that Mr. Dunham is not qualified "by knowledge, skill, experience, training, or education" to offer the expert opinion set forth in the Proffer. A review of Mr. Dunham's credentials,

Case 1:04-cr-00103-REB

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however, establishes the contrary. Mr. Dunham is both an attorney and a law professor. He has been practicing law for 29 years. He also was a law professor for 31 years. His curriculum vitae states that "he enjoyed a national reputation as a scholar in commercial law", that he "has extensive experience with commercial law", and that his law practice "concentrates in the area of business litigation." Given this professional and academic background, Defendant Weed respectfully submits that Mr. Dunham is more than qualified to provide an expert opinion regarding a business trust document, a commercial contract of insurance related to that trust document, and whether Mr. Weed mischaracterized the legal status of either, when he issued the RFT Certificates. 2. Focus of Expert Opinion ­ The Government next argues that Mr. Dunham's proposed expert testimony should be excluded because it is not relevant and because it does not address the propounded question of whether the RFT Certificates contained material mis-representations of fact or law. Neither of these objections withstands scrutiny. As the Court is well aware, Mr. Weed stands accused of participating in a massive investment fraud scheme allegedly perpetrated upon scores of individuals, who placed their money in various entities such as the Reserve Foundation Trust, all the while believing that their money was safe and that they could expect extraordinary returns on their investments. The Government contends that part of Mr. Weed's role in the fraud conspiracy was to mislead prospective investors about the nature and existence of insurance relative to the investors' money. As such, it is certainly relevant to the

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question of Mr. Weed's guilt or innocence whether he in fact made material misrepresentations about insurance coverage when he issued the RFT Certificates. The essence of those Certificates is that they advise any given investor that the investor's individual deposit is insured. The adjudicative question then ineluctably flowing from these Certificates is whether what Weed stated about insurance on the investors' deposits was materially factually and legally correct. That question is the very one upon which Mr. Dunham proposes to opine at trial; accordingly, his testimony is certainly relevant under Fed. R. Evid. 401. The Government's claim that Mr. Dunham's proffered opinion does not answer the question is also inaccurate. Again, did Defendant Weed make a material misrepresentation in the RFT Certificates when he advised investors that their deposits were insured? Mr. Dunham responds, in the penultimate paragraph of his opinion, that "[t]he economic realities of the transaction are such that each deposit is covered by the insurance policy and the bond." Ergo, Mr. Weed's statement in the Certificate that the investor's deposit was insured was materially correct. 3. Basis for Expert Opinion ­ The Government also objects to the admissibility of Mr. Dunham's testimony putatively because it is based, in part, on the assumption "that the investment soured [,] and the funds disappeared under conditions such that St. Paul would be liable on its policy if The Reserve Foundation Trust were to bring suit." The Government labels this assumption as "simply false", but the Government's assessment is based upon dubious premises. In fact, Mr. Dunham's assumption about St. Paul's liability appears to be right on.

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As the Government concedes, there was a commercial crime policy in effect that insured against losses caused by "employee dishonesty." The Government affirms that the losses suffered by the RFT were caused by dishonesty (i.e., theft), but claims that, for example, Leon Harte, one of the alleged thieves, was not an employee of the Trust and therefore his behavior was not covered by the policy. The Government opines that Clifford Pitt, the trustee, was the only person named as an employee of the trust in the application for the commercial crime policy. This hypothesis is not supported by the relevant document. A review of the somewhat blurry application, Government's Exhibit D, shows that Mr. Pitt's name does not appear in the document at all, although Mr. Weed did state to the St. Paul, in his facsimile cover sheet, that Mr. Pitt would be the trustee. By contrast, the name of Mr. Harte is listed in the application itself. His name is given in response to the now only partially legible inquiries from St. Paul, "Is a complete inventory made with physical check of [illegible] . . . If yes, by whom and how often?" As such, the St. Paul certainly was aware of Mr. Harte's association with the Trust, and, it seems quite reasonable that Mr. Harte, and not Mr. Pitt, was the initial, sole employee of the Trust indicated in the application. This assumption is buttressed by the declarations section of the commercial crime policy itself (attached hereto as Exhibit 1) which indicates that generally the trustee (in this case Pitt) is not within the definition of "Employee" under the policy (p. 5, § C(1) highlighted portion [sic. "of" should be "or"]). Therefore, the most plausible explanation is that Harte, who was out raising capital for the Trust from investors, was an employee of the Trust, and, thus, any theft committed by

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him would have been insured against by the St. Paul commercial crime policy. As such, Mr. Dunham's assumption about St. Paul's liability under the policy seems well founded. The Government also objects to Mr. Dunham's reliance upon his conversation with Samuel Commissiong to form Dunham's opinion. As noted in Dunham's written opinion, Mr. Commissiong is a practicing member of the Bar in St. Vincent and the Grenadines. It certainly is appropriate for Mr. Dunham to have consulted with a legal professional in the jurisdiction whose law is at issue in the matter about which Mr. Dunham was forming an opinion and planning to testify about. 1 Finally, the Government objects to Mr. Dunham's legal analysis, specifically to his recitation to the Restatement (Second) of Trusts. The Government believes that Mr. Dunham has opined "that the Restatement (Second) of Trusts provides guidance in the interpretation of insurance law in St. Vincent and the Grenadines." In fact, however, Mr. Dunham has not put forward this position. The only point of law from St. Vincent and the Grenadines upon which Mr. Dunham's opinion rests is that the investors had a right to replace the trustee under the laws of that jurisdiction. Once the investors successfully had a new trustee in place, that trustee, to quote Mr. Dunham, "could bring suit against St. Paul in a forum in the United States that ha[d] jurisdiction and venue." (emphasis added). In such a suit, brought in a U.S. court, section 282 of the Restatement (Second) of Trusts, would be a perfectly appropriate and persuasive, legal authority to reply upon. Indeed, Mr. Dunham's proffered opinion letter cites state cases from several different jurisdictions where the courts in fact utilized section 282 of the Restatement to guide their decisions.
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An expert witness, of course, may rely upon hearsay in reaching his conclusion(s). United States v. Sowards, 339 F.2d 401, 402 (10th Cir. 1964), appeal after remand, 370 F.2d 87 (10th Cir. 1966); United States v. Featherston, 325 F.2d 539, 545 (10th Cir. 1963).

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Accordingly, Mr. Dunham's legal analysis (i.e., his "method" under Fed. R. Evid. 702(2)), is perfectly reasonable and reliable. Ultimately, it seems that the Government takes issue with Dunham's qualifications and analyses because he has come to a conclusion that is at odds with the Government's theory of the case. This obviously is no basis for excluding Mr. Dunham's testimony. If the Government wishes to quibble with the quality of Mr. Dunham's expert opinion, the Government may do so at trial through cross examination. However, the factors affecting the weight to be given an expert's opinion do not render the expert's testimony inadmissible. Phelps Dodge v. Atchison T.& S.F. Ry. Co., 400 F.2d 20, 24 (10th Cir. 1968). With expert witnesses, "the weight and credibility of their testimony [is] . . . essentially a matter to be decided by the trier of the ultimate fact." Equity Oil Co v. National Fire Ins. Co. of Hartford, 247 F.2d 393, 395 (10th Cir. 1957). Therefore, the Government's objections to Defendant Weed's Proffer of Expert Witness Testimony should be denied, and Mr. Dunham should be permitted to testify at trial on the proffered matters. Dated this 22nd day of January, 2007. Respectfully submitted,

s/Thomas E. Goodreid Thomas E. Goodreid 1801 Broadway, Suite 1100 Denver, CO 80202 Telephone: (303) 292-0110 Fax: (303) 292-0522 E-Mail: [email protected] Attorney for Defendant George Alan Weed

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Case 1:04-cr-00103-REB

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CERTIFICATE OF SERVICE I certify that on 22 January 2007, I electronically filed the foregoing DEFENDANT WEED'S REPLY TO GOVERNMENT'S RESPONSE AND OBJECTION TO DEFENDANT WEED'S PROFFER OF EXPERT WITNESS TESTIMONY with the Clerk of Court using the CM/ECF system, which will send notification of such filing to the following e-mail addresses: [email protected] (Thomas J. Hammond) [email protected] (Richard Stuckey) [email protected] (Mathew T. Kirsch) [email protected] (Declan Joseph O'Donnell) [email protected] Mitchell Baker [email protected] (Peter R. Bornstein) [email protected] (Ronald Gainor) [email protected] (Richard Kornfeld) [email protected] (Wyatt B. Angelo)

s/Thomas E. Goodreid Thomas E. Goodreid 1801 Broadway, Suite 1100 Denver, CO 80202 Telephone: (303) 292-0110 Fax: (303) 292-0522 E-Mail: [email protected] Attorney for Defendant George Alan Weed

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