Free Response - District Court of Arizona - Arizona

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PAUL K. CHARLTON United States Attorney District of Arizona Michelle R. Hamilton-Burns Assistant U.S. Attorney Arizona State Bar No. 010269 Two Renaissance Square 40 North Central Avenue, Suite 1200 Phoenix, Arizona 85004-4408 Telephone (602) 514-7500 [email protected]

UNITED STATES DISTRICT COURT DISTRICT OF ARIZONA United States of America,

9 Plaintiff, 10 v. 11 Neil Rusty Bond, 12 Defendant. 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

No. CR 03-0974-PHX-DGC RESPONSE TO DEFENDANT'S MEMORANDUM RE: NEW TRIAL BASED ON NEWLY DISCOVERED EVIDENCE

The United States of America, by and through its attorney, the United States Attorney for the District of Arizona, responds herein to defendant's Amended Memorandum Re: New Trial Based on Newly Discovered Evidence, filed on January 28, 2006. This response is based upon Fed. R. Crim. P. 33(b)(1) and the following Memorandum of Points and Authorities. It is expected that excludable delay under Title 18, United States Code, Section 3161(h)(1)(F) will occur as a result of this motion or an order based thereon. Respectfully submitted this 9 th day of February, 2006. PAUL K. CHARLTON United States Attorney District of Arizona /s Michelle Hamilton-Burns Michelle R. Hamilton-Burns Assistant U.S. Attorney

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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 26 27 28 FACTS:

MEMORANDUM OF POINTS AND AUTHORITIES

Defendant was convicted by a jury on March 11, 2005 of one count of Theft of Government Property and one count of Social Security Fraud. At the beginning of trial, the judge gave the jury panel a brief summary of the charges in the indictment (Trial Transcript, hereinafter "TT," 3/1/05, p 40). At the conclusion of the trial, the instructions on the offenses as submitted by the parties and approved by the judge were read to the jury. The elements of the offenses were read in the final instructions to the jury as follows: Theft of Government Property: (1)the defendant stole money or property of value with the intention of depriving the owner of the use or benefit of the money or property; (2) the money or property belonged to the United States: and (3) the value of the money or property was more than $1,000.00 Social Security Fraud: (1) the defendant had knowledge of an event affecting his right to receive or to continue to receive social security disability insurance benefit payments; (2) the defendant knowingly concealed or failed to disclose this event to the Social Security Administration; (3) the defendant concealed or failed to disclose this event to the Social Security Administration with the intent to fraudulently secure payment of social security income benefits in an amount greater than was due him, or when no payment to him was due him or when no payment to him was authorized. (TT, 3/11/05, pgs 48-50) The government presented two witnesses at trial pertinent to the issues raised by the defendant in his Memorandum: Barbara Jackson and David Rodriguez. Barbara Jackson testified as an employee of the Social Security Administration and explained eligibility rules relating to the receipt of social security disability benefits. David Rodriguez was a summary witness who prepared exhibits representing the total income received by defendant during the years in question. Defendant and his daughter became entitled to social security disability benefits in 1991. 2

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A recipient is required to report his return to work, whether it is for wages or self-employment. (TT, 3/1/05, p 142) A disabled person may not be entitled to benefits if he or she is able to perform at a substantial gainful activity level. (TT, 3/2/05, p 71) Residual income from insurance would be counted toward substantial gainful activity. (Id. p 72) If a person is selfemployed, his/her activities and their value to the business must be considered to determine whether he or she has engaged in substantial gainful activity. (Exhibit A, attached hereto) It wasn't until after July of 1997, when an anonymous caller tipped off Social Security that defendant was working, that the defendant reported any work activity. On May 28, 1998 when a social security representative contacted the defendant, he reported that he only worked 2 hours a week and could only attend one appointment. (Trial Exhibit 16: TT, 3/2/05, pgs 25-29) In response to a subsequent request from Social Security, in June 1998, he submitted work activity reports, that indicated his income and hours worked as follows (TT, 3/2/05, p 39-40): January to June, 1998: net profit $150/month......work hours less than 40/month In a symptom questionnaire submitted by defendant on July 20, 1998, defendant indicated that he couldn't "do more than one appointment each week or every other week." (Trial Exhibit 21: TT, 3/2/05, pgs 61-63) In a work activity report defendant submitted in 2001, again at the request of Social Security, he indicated his income and hours worked, for the same period above, as follows (TT, 3/2/05, p 44): January to June, 1998: net profit $600-$650/month Barbara Jackson testified that if Social Security had received the latter report in 1998, it would have concluded that defendant's 6 month trial work period had been used and requested more information from defendant. (TT, 3/2/05, p 49) Along with the January-June 1998 work activity report submitted by defendant at the request of Social Security in 2001 (TT, 3/2/05, p 49-51), defendant submitted work activity reports for July-December 1998, and January-December 1999. Based upon this incomplete and untimely disclosure of defendant, Social Security requested that defendant verify his selfemployment earnings and report work activity for the years 1996-2001. Defendant did not 3

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respond. Social Security then used the information previously provided in determining that defendant was ineligible for benefits for the months he had performed substantial gainful activity, January 1996 to December 1999. (Trial Exhibit 30: TT, 3/2/05, pgs 67-68) The total overpayment was determined to be $67,149.50 for defendant and $33,728.00 representing the amount of corresponding overpayment to his daughter Raquel. (Trial Exhibit 50) The remainder of the government's case focused on proof of income to the defendant from 1996 through 2001. David Rodriguez summarized the following documents relating to defendant's income: insurance company check receipts (Trial Exhibit 38) found in defendant's home during a search warrant: insurance company (the same companies) checks to defendant received in response to a government trial subpoena (Trial Exhibits 60-75), and copies of defendant's 1997-1999 form 1040 income tax returns, found during the search warrant. The difference between the totals of the income from insurance companies as represented by the checks received in response to a subpoena and the insurance company check receipts found in defendant's home during the search warrant was insignificant. (TT, 3/9/05, pgs 13-14) Most importantly, the income evidence seized from defendant's home was corroborated by the subpoenaed records from the payer source. (Trial Exhibits 85 and 86) The checks to defendant from the insurance companies totaled the following (Trial Exhibit 86): 1997: $16,255.96 1998: $30,388.71 1999: $43,257.71 2000: $38,110.25 2001: $41,473.04 The income reported by defendant on his tax returns was as follows (Trial Exhibits 7779): 1997: $15,620.00 1998: $32,878.00 1999: $33,546.00 4

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In the 1997-1999 tax returns defendant also reported on his Schedule C, business expenses, mileage driven of over 16,000 to 25,000 business miles and between $720.00 to $1,861.00 in long distance charges. (TT, 3/8/05 p 169, to 3/9/06 p 11) In a letter defendant authored in 1997, he indicated he had thousands of insurance clients. (Trial Exhibit 97) In year 2000, defendant reported in an Immigration and Naturalization Document that he earned $32,878. (Trial Exhibit 52) Evidence was submitted at trial that the defendant also engaged in other work activity during the relevant time period: private investigator (Trial Exhibit 35): salesman for a product he developed, SuperNatural Products. (Trial Exhibit 37, 42, 51) On March 8, day 3 of the trial (a Tuesday), a discussion was had concerning two letters, provided to the government as defense exhibits just the Friday before, that the defendant supposedly sent the IRS to clarify mistakes he'd made on his tax returns. The government requested that the court issue an order to IRS for records to confirm whether or not these letters were actually sent and whether or not any amended returns were filed by defendant. (TT 3/8/05, pgs 10-12) The court granted the request and indicated that the government should provide defendant with a copy of what was received. On March 8 th or 9 th the government received materials from IRS, described as computer printouts of taxpayer 1099 income and a summary sheet. (Exhibit B, attached hereto) Given the short time frame, these were all the records that could be obtained. The government determined that the records were not the impeachment material it had hoped to obtain, and were not otherwise relevant. (Exhibit C, attached hereto) Through oversight on the government's part, a copy was not provided to defendant until a request was made by defendant after trial. (Attachment A to defendant's Memorandum) Defendant concedes in his Memorandum, that he had received these same 1099 records prior to trial from the IRS, but did not receive the "summary sheet." (Defendant's

Memorandum, p 6) A close examination of the records received reveals that the total nonemployee compensation reported on the summary sheets is, with the exception of 1999, an exact summary of all of the 1099 income reports provided. (Exhibit D, attached hereto). In the exception year, 1999, the summary sheet reports approximately $500.00 less than the total off 5

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of the 1099 forms. The difference then, between the summary reports of income, and the total income established by the certified commissions checks at trial (the subpoenaed insurance checks) is attributed to one insurance company, Medical Savings Insurance Company. (Exhibit D) It is apparent that the company did not 1099 the defendant all of the payments it made to him in years 1999-2001. It is also apparent that the defendant was aware of this discrepancy before trial. If Medical Savings Insurance Company had indicated all of the money paid defendant in those years on Form 1099, the IRP summaries would essentially match the certified commissions checks totals. LAW: Because defendant was aware before trial that the amount of money Medical Savings Insurance Company reported on Form 1099 for years 1999-2001 was different from the amount of commission checks paid to defendant it is not newly discovered evidence pursuant to Fed. R. Crim.Pr. 33(b)(1). The Ninth Circuit has held that for a defendant in a criminal case to

successfully move for a new trial based upon newly discovered evidence, he must meet a fiveprong test The first test is whether or not the evidence is newly discovered. The other requirements are that the failure to discover the evidence at the time of trial was not due to the defendant's lack of diligence; that the evidence is material to the issues at trial; that it is neither cumulative nor impeaching; and that (it) indicates that a new trial would probably result in an acquittal. See, United States v. Waggoner, 339 F.3d 915, 919 (9 th Cir. 2003). The test is "difficult to meet," particularly because the element of whether the new evidence would lead to acquittal is speculative. United States v. Steel, 759 F.2d 706, 713 (9 th Cir. 1885). Evidence simply going to the impeachment of a witness called at the first trial is not sufficient. United States v. Kulczyk, 931 F.2d 542, 549 (9 th Cir. 1991). The defendant fails the first part of the test: even if the evidence were newly discovered the availability of the evidence prior to trial would not change the result. The evidence does not significantly undermine the fact that defendant received the income from the insurance companies as summarized in trial exhibits 85 and 86. The fact that one of the companies 6

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reported a different amount on defendant's 1099 does not undermine the best evidence of defendant's income: that is, the checks he received and cashed. The evidence also does not shed any light on the income defendant received from other sources, or the defendant's chronic failure to comply with the minimal reporting requirements. CONCLUSION: Because of defendant's knowing concealment of income and substantial gainful activity as far back as 1996, and his deceptive and false reporting of income and substantial gainful activity in 1998 and 2001, the jury convicted him as charged. Social Security concluded that defendant became ineligible to receive social security benefits in September of 1996, and the evidence at trial supported this conclusion. The evidence in controversy is not newly discovered, and even if it was, would not have made a difference in the trial outcome. His motion for new trial is without merit and should be denied.. Respectfully submitted this 9 th day of February, 2006. PAUL K. CHARLTON United States Attorney District of Arizona /s Michelle Hamilton-Burns Michelle R. Hamilton-Burns Assistant U.S. Attorney

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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 26 27 28 CERTIFICATE OF SERVICE I hereby certify that on this 9th day of February 2006, I electronically transmitted the attached document to the Clerk's Office using the CM/ECF system for filing and transmittal of a Notice of Electronic Filing to the following CM/ECF registrants: Timothy C. Holtzen [email protected]

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