Free Response to Motion - District Court of Colorado - Colorado

Case 1:04-cr-00103-REB

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Filed 01/18/2006

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO

Criminal Action No 04-cr-00103-REB UNITED STATES OF AMERICA Plaintiff, v. 1. NORMAN SCHMIDT, 2. GEORGE ALAN WEED, 3. PETER A.W. MOSS, 4. CHARLES LEWIS, 5. JANNICE McLAIN SCHMIDT, 6. MICHAEL SMITH, and 7. GEORGE BEROS, Defendants. _____________________________________________________________________ GOVERNMENT'S OBJECTION AND RESPONSE TO DEFENDANT NORMAN SCHMIDT'S MOTIONS TO DISMISS SECOND SUPERSEDING INDICTMENT (joined by Defendants Jannice McLain Schmidt, Charles Lewis, & George Beros) _____________________________________________________________________ The Government, by Wyatt Angelo and Matthew T. Kirsch, the undersigned Assistant United States Attorneys (the government), objects to the request for review of evidentiary sufficiency concerning the Second Superseding Indictment contained in Defendant Norman Schmidt's Motion and Supplement thereto [Docs. # 573, 610] and respectfully requests that the Motion be denied for the reasons set forth below. INTRODUCTION Defendant Norman Schmidt seeks dismissal of the Second Superseding Indictment predicated on a supposition that the indictment must have been the result of grand jury bias because the evidence considered by the grand jury could not have been

Case 1:04-cr-00103-REB

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sufficient to indict. The defendant seeks ". . . an evidentiary hearing at which to present additional evidence, grand jury transcripts, and argument . . . ," presumably to challenge the quantum and quality of the evidence presented in support of the indictment. The defendant has not made a showing sufficient to overcome the presumption of regularity in grand jury proceedings or to infer prejudice, and the request for a review of evidentiary sufficiency is improper. OBJECTION TO REQUEST OF EVIDENTIARY REVIEW 1. Defendant Schmidt essentially seeks a review by the Court of the sufficiency of the evidence presented to the grand jury as a predicate to seeking dismissal of the Second Superseding Indictment. The government hereby objects to a review by the Court beyond the four corners of the indictment based on the proscription against consideration of evidence outside the indictment, and as further set forth below. United States v. Hall, 20 F.3d 1084, 1087 (10th Cir. 1994). DISMISSAL OF INDICTMENT IS A DISFAVORED REMEDY 2. Dismissal of an indictment is disfavored and only proper in the most egregious of cases. Even where the defendant can show that an important right or privilege has been violated at the grand jury stage, dismissal is improper. United States v. Kingston, 971 F.2d 481, 491 (10th Cir. 1992). The remedy appears to be limited to situations where prosecutorial misconduct is so flagrant that there is a significant infringement on the grand jury's ability to exercise independent

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judgment. United States v. Buchanan, 787 F.2d 477,487(10th Cir. 1986). The defendant has made no allegations of impropriety rising to this level. PRESUMPTION OF REGULARITY IN GRAND JURY PROCEEDINGS 3. Absent a strong showing to the contrary, grand jury proceedings are accorded a presumption of regularity. United States v. R. Enters., Inc., 498 U.S. 292, 300301 (1991), United States v. Jones, 160 F.3d 641,645 (10th Cir. 1998). Defendant Schmidt asserts grand jury abuse and presupposes grand jury bias based on two assumptions: first, that there was insufficient evidence presented to support the indictment without a review of the grand jury transcripts from previous grand jury presentations, and; second, that the grand jury did not review those transcripts. 4. Even accepting defendant's description of events before the grand jury, providing grand jurors with an opportunity to read transcripts of evidence presented to a previous grand jury has a history of accepted usage in the District of Colorado. United States v. Turner, 620 F. Supp. 525, 530 (1985), aff'd 799 F.2d 627 (10th Cir. 1986). Moreover, the practice has found acceptance in at least one other Circuit. United States v. Flomenhoft, 714 F.2d 708, 711-712 (7th Cir. 1983). 5. Defendant's assertion of abuse and bias is unsupported by more than bare supposition. As such, it is insufficient to overcome the strong presumption of regularity. The Tenth Circuit has repeatedly rejected requests for dismissal of indictments and for investigation of grand jury bias supported by similar supposition. Gorin v. United States, 313 F.2d 641, 645 (10th Cir. 1963) (denial

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of dismissal of indictment based on supposition of grand jury bias from media publicity); United States v. Thomas, 632 F.2d 837, 846-847 (10th Cir. 1980) (denial of request for investigation of grand jury bias based on grand juror question concerning information in the media); United States v. Troutman, 814 F.2d 1428, 1444-1445 (10th Cir. 1987) (questions of grand jurors based on alleged prejudicial statements to media deemed conjecture as to bias of grand jury, motion to dismiss denied). 6. Defendant's lone assertion of fact to support of grand jury bias is based on testimony related to defendant Norman Schmidt's previous felony conviction (SUPPLEMENT TO MOTION TO DISMISS SECOND SUPERSEDING INDICTMENT, ¶ 14, [Doc. # 610]). This is also without merit. That fact, as well as the conviction of co-defendant Charles Lewis, are alleged in Securities Fraud counts within Second Superseding Indictment as part of the scheme to conceal these very real, material facts from investors. (See Second Superseding Indictment, Counts 18-28, ¶ 16 a.) 7. These convictions were not gratuitously presented. The government has previously disclosed the anticipated testimony of its expert witness on securities issues that failure to disclose such a conviction is a material omission. (See Government's Expert Witness Disclosure, Doc. # 442 with attachment). 8. The defendant infers that presentation of this information constituted prosecutorial misconduct leading to the prejudice of the grand jurors. Any such claim is unsubstantiated based on the material nature of the convictions to the

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securities fraud counts in the Second Superseding Indictment, and is insufficient to overcome the presumption of regularity attaching to grand jury proceedings. United States v. Rogers, 960 F.2d 1501, 1512 (10th Cir. 1992). 9. In short, the presumption of regularity of grand jury proceedings is not overcome by Defendant Schmidt's assumptions and suppositions. He has not made the strong showing of bias necessary to overcome that presumption. SUFFICIENCY OF EVIDENCE TO SUPPORT INDICTMENT 10. Although couched as an allegation of grand jury bias, the defendant's request for dismissal and Court review of the grand jury transcripts is logically construed as a request for a determination of the sufficiency of evidence to support the grand jury's finding of probable cause. The request is inappropriate. The validity of an indictment is not affected by a showing that the grand jury lacked sufficient evidence to make a finding of probable cause. Costello v. United States, 350 U.S. 359, 363-364 (1956), United States v. Jones, 160 F.3d. 641, 648 (10th Cir. 1998). CONCLUSION 11. Defendant Schmidt's assertion of grand jury bias is based on the bare supposition that the grand jury could not have considered sufficient evidence to make a finding of probable cause. His request for an investigation of bias by the Court and dismissal of the Second Superseding Indictment under these circumstances is inappropriate. The Government requests that Defendant Norman Schmidt's motion be denied.

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Respectfully submitted this 18th day of January, 2006, WILLIAM J. LEONE United States Attorney

s/ Wyatt Angelo WYATT ANGELO MATTHEW T. KIRSCH Assistant U.S. Attorneys 402 Rood Avenue, Suite 220 Grand Junction, CO 81501 Telephone: (970) 241-3843 Fax: (970) 248-3630 E-Mail: [email protected]

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CERTIFICATE OF SERVICE (CM/ECF) I hereby certify on this 18th day of January, 2006, I electronically filed the foregoing GOVERNMENT'S OBJECTION AND RESPONSE TO DEFENDANT NORMAN SCHMIDT'S MOTIONS TO DISMISS SECOND SUPERSEDING INDICTMENT with the Clerk of the Court using the CM/ECF system which will send notification of such filing to the following e-mail addresses: Peter Bornstein, Esq. [email protected] Thomas Hammond, Esq. [email protected] Declan J. O'Donnell, Esq. [email protected] Ronald Gainor, Esq. [email protected] Daniel T. Smith, Esq. [email protected] Thomas Goodreid, Esq. [email protected] Robert Patrick Sticht, Esq. [email protected] Paul B. Daiker, Esq. [email protected]

s/ Wyatt Angelo WYATT ANGELO MATTHEW T. KIRSCH Assistant U.S. Attorneys 402 Rood Avenue, Suite 220 Grand Junction, CO 81501 Telephone: (970) 241-3843 Fax: (970) 248-3630 E-Mail: [email protected]

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