Free Response in Opposition - District Court of Colorado - Colorado

Case 1:04-cr-00103-REB

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO

Criminal Case. No 04-cr-00103-REB-01 UNITED STATES OF AMERICA Plaintiff, v. 1. NORMAN SCHMIDT, Defendant. _____________________________________________________________________ GOVERNMENT'S RESPONSE TO DEFENDANT SCHMIDT'S MOTION FOR MISTRIAL _____________________________________________________________________ The Government, by Wyatt Angelo and Matthew T. Kirsch, the undersigned Assistant United States Attorneys, hereby requests that defendant Schmidt's MOTION FOR MISTRIAL [#1121] be denied for the reasons set forth below: 1. Commencing at the beginning of the case in 2004, the government has provided as voluntary discovery reports of all witness interviews conducted as part of the investigation and has supplemented that discovery with redacted pre-trial interviews of witnesses containing additional co-conspirator statements with potential for being offered for the truth of the matter asserted. The original Indictment, the successor iterations thereof, and the GOVERNMENT'S JAMES PROFFER [#290] (¶¶ 8-53), also contain detailed descriptions of the kinds of false statements which were made as a part of the charged conspiracy and scheme to defraud. It is these statements with which defendant Schmidt now

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complains he is being "ambushed." 2. Schmidt asserts that his right to a fair trial has been compromised by the introduction of co-conspirator statements not identified in the government's James Proffer or the supplements thereto and bases his claim for relief on his assumption that the government would ". . . limit its attempts to admit conspirator statements to those which had been approved by the Court. . . " Motion [#1161], ¶ 5. The government, however, noted in its proffer that, "the government may attempt to offer at trial additional statements, not currently in the government's possession or of which the government is not currently aware, which may be discovered in the course of trial preparation." JAMES PROFFER, p. 1. 2. Schmidt's motion recognizes no distinction between conspirator statements offered for the truth pursuant to Fed. R. Evid. 801 (d)(2)(E) and those offered for other purposes. Again, the GOVERNMENT'S JAMES PROFFER noted that it might seek the admission of other statements at trial on the basis of differing evidentiary hypotheses. JAMES PROFFER, ¶¶ 55, 56. This possibility was specifically recognized by the Court in its ORDER RE: JAMES PROFFER [# 441], at page one, footnote 2. 3. Responding to the defendant's motion is difficult because he fails to identify the specific item of evidence or statement to which the motion is directed. That said, statements made by Rebecca Taylor to investor witnesses and about which defendant Schmidt appears to complain were not offered for the truth but as representations of salesmen to show the effect of the representations on the perceiver. These statements were properly admitted on this theory and as

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statements of salesmen or solicitors describing the scheme to defraud. United States v. Krohn, 573 F.2d 1382, 1386 (10th Cir. 1978); McCormick on Evidence, § 249, fn 4 (5th ed. 2005). 4. Similarly, the majority of, if not all of the statements from the other coconspirators identified in the motion were not offered for the truth of the matter, but for other purposes. None of these statements were therefore subject to the Court's requirements for specific disclosure for James purposes, nor was there any requirement for pre-trial disclosure of specific statements which the government intended to offer at trial pursuant to a theory of agency under Fed. R. Evid 801(d)(2)(D). Some statements, however, are clearly admissible pursuant to Rule 801(d)(2)(D) based on the totality of the evidence. For instance, those statements made by defendants Smith and Lewis to Wendy Delaney (when offered for the truth) pursuant Rule 801(d)(2)(D), are clearly proper. The evidence in support of the agency relationship between Schmidt, Smith, and Lewis includes: Schmidt's relationship to the Reserve Foundation, LLC, Smitty's Investments and Capital Holdings (Exs. 12001,12005); Schmidt's sales presentation concerning the Capital Holdings program in Aspen to the Northwest Group, including Michael Smith and John Schlabach (see Goulet testimony); the seminars conducted by Smith at the Capital Holdings offices in Denver and referenced by Linden Markham and Valdemar Bough, and Ms. Markham's meeting with Schmidt at his offices to sign her contract after having been solicited by Lewis. 5. While defendant Schmidt admits that the record is sufficient to support the

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finding of an agency relationship between Mr. Schmidt, the companies and other defendants, MOTION FOR MISTRIAL, ¶ 14, he argues that there is no evidence to support a finding that an agency relationship existed between Schmidt, the LLCs, and Lewis and Smith (Motion, ¶ 13). This is an attempt to place form over substance and cannot be part of the analysis in a fraud case where the LLCs are essentially a tool of the fraud and an alter ego of Schmidt's. Nor is a formalized contract of employment required to establish the sufficiency of an agency relationship for the purposes of admitting statements for the truth of the matter asserted under 801(d)(2)(D). 6. Moreover, and contrary to Schmidt's assertion, the James Proffer contains a disclosure of statements offered for the truth and made in furtherance of the conspiracy by co-conspirators to Gary Bell (Log # 98) and Wendy Delaney (Log # 144). 7. The assertion that the admission of these statements implicate the Confrontation Clause is similarly without foundation. Statements made to investors are clearly not "testimonial" under any recognized test. The circumstances of the statements do not implicate interrogation to establish or prove past events, and it is reasonable to assume that those declarants making the untruthful statements did not foresee that they would be used to prosecute them at the time they were made. United States v. Townley, 472 F. 3d 1267, 1272 (10th Cir. 2007), (citing United States v. Summers, 414 F. 3d 1287, 1298(10th Cir. 2005). The admission of these statements does not violate the Confrontation Clause. 8. Finally, the Court has repeatedly provided the jury with limiting instructions

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concerning the purposes for which the jury can consider the statements in question. Juries are presumed to follow such instructions. THEREFORE, the government respectfully requests that defendant Schmidt's MOTION FOR MISTRIAL [#1121] be denied. Respectfully submitted this 18th day of April, 2007. TROY A. EID United States Attorney

s/Matthew T. Kirsch Matthew T. Kirsch Wyatt B. Angelo Assistant United States Attorneys 1225 17th Street, Suite 700 Denver, CO 80202 Phone: (303) 454-0100 Fax: (303) 454-0402 email: [email protected] [email protected]

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CERTIFICATE OF SERVICE (CM/ECF) I hereby certify on this 18th day of April, 2007, I electronically filed the foregoing GOVERNMENT'S RESPONSE TO DEFENDANT SCHMIDT'S MOTION FOR MISTRIAL 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]

Richard N. Stuckey, Esq. [email protected] Thomas Goodreid, Esq. [email protected] Ronald Gainor, Esq. [email protected] s/Matthew T. Kirsch Matthew T. Kirsch Assistant United States Attorney 1225 17th Street, Suite 700 Denver, CO 80202 Phone: (303) 454-0100 Fax: (303) 454-0402 email: [email protected]