Free Memorandum - District Court of Arizona - Arizona

1 TIMOTHY C. HOLTZEN 2 245 W. Roosevelt St. 3 Phoenix, Arizona 85003
State Bar No. 004723 (602) 254-4021 fax Attorney at Law

4 (602) 799-6336 5 Attorney for Defendant 6 7 8 9 United States of America, 10 11 13 14
v. Plaintiff, UNITED STATES DISTRICT COURT DISTRICT OF ARIZONA ) ) ) ) ) ) ) ) ) ) No. CR 03-0974-PHX-DGC AMENDED MEMORANDUM RE: NEW TRIAL BASED ON NEWLY DISCOVERED EVIDENCE

12 Neil Rusty Bond,
Defendant.

The defendant submits this Amended Memorandum, with corrections of clerical

15 errors in the mistakenly filed draft Memorandum, for consideration of granting a new 16 trial based upon newly discovered evidence, pursuant to Rule 33(b)(1) Fed. R. Crim. P. 17 18 19 20 21 22 23 24 25 26 27 28
Copy of the foregoing served this 27 th day of January 2006 by ECF filing to: Michelle Hamilton-Burns Assistant U.S. Attorney Two Renaissance Square 40 N. Central Avenue, Suite 1200 Phoenix, Arizona 85004-4408 and mailed to: Neil Rusty Bond Defendant

RESPECTFULLY SUBMITTED this 27 th of January 2006

/Timothy C. Holtzen Timothy C. Holtzen Attorney for Defendant

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1 2

MEMORANDUM This Court has continued the sentencing of this matter to March 1, 2006,

3 allowing the defendant to submit a memorandum regarding a request for a new trial 4 based upon newly discovered evidence. 5 Facts: 6 8
The defendant was convicted of two counts at a jury trial conducted on five and

7 one-half days between March 1, 2005, and March 11, 2005.
On March 8, 2005, during trial, the government obtained an order of the court

9 for the Internal Revenue Service "to disclose forthwith to the applicants all returns and 10 return information, including but not limited to, letters from the taxpayer to the IRS 11 dated April 4, 2001 and January 2, 2001, all Form 1040s, 1099s and associated 12 documents for tax years 1996 through 2001, inclusive" for "Neil Rusty Bond a.k.a. 13 Neil Rusty Fegrelius (sic)" and "Paradise Insurance Alliance," both with his 14 home/office address. The Assistant U.S. Attorney expressed doubt that the returns 15 could be produced but expected that "the transcript" of the defendant's tax return 16 information would be available. RT 3/8/06 11. In granting the order, the judge told the 17 prosecutors "So I will sign­ I will sign the order and wait to hear from you. And you 18 are, of course, to give Mr. Holtzen immediately a copy of all of the evidence you 19 obtain from IRS." RT 3/8/06 12. No IRS records received pursuant to that order were 20 disclosed to the defense during trial. 21
After trial but before the presentence report had been prepared, defense counsel

22 was granted the funds to obtain the services of a CPA, Mr. Gary Gard, to assist in 23 addressing sentencing issues regarding alleged loss and restitution. In preparation for 24 those issues, CPA Gard did many things. After this Court signed the order for funds, 25 Mr. Gard first met with defense counsel and the defendant on October 29, 2005, 26 reviewed materials, and obtained the tax return exhibits for 1997-99 that had been used 27 28 2

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1 at trial. Thereafter, he went to the Internal Revenue Service with a power of attorney 2 from Mr. Bond to obtain "transcripts," which include a "150 posting" that shows a 3 record of the taxpayer's account, including tax liability, tax filings, any estimated taxes 4 paid, amount paid, any extensions granted, any date returns were filed, and if there 5 were any refunds back to the taxpayer. Since the year 1996 was included in the 6 indictment and no 1996 tax return was in the records or in the trial exhibits, he 7 requested a copy of that one. He compared information and saw that the amounts the 8 government had claimed as gross incomes were similar or the same as those claimed 9 by the defendant as gross income before subtraction of business expenses and 10 calculation of net income. Mr. Gard looked for the net income figures which were 11 reported to the Social Security Administration. Mr. Gard learned that none of the years 12 had been questioned or audited by the Internal Revenue Service, there were no 13 adjustments made, and, therefore, the calculations of net income were presumptively 14 correct. 15
Meanwhile, defense counsel requested copies of anything the government

16 received in response to the court order of March 8, 2005. On November 18, 2005, the 17 government provided 48 pages described as "some transcripts relating to your client's 18 credit account and Information Returns Processing (IRP) files that were not useful or 19 relevant." (Attachment A). 20
Mr. Gard went to the Social Security Administration and discussed with a

21 representative the issue of residual income, or repeat payments after one year, for 22 insurance agents, which is not countable income for disability purposes. Mr. Gard 23 reviewed documents and looked at court exhibits and commission statements to 24 determine if there were decreases in the percentage of commission representing 25 residual payments. Mr. Gard's own experience with health insurance is that there is no 26 further contact with the policy salesperson. Instead, questions or issues from a 27 28 3

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1 policyholder are handled directly with the company. 2
Mr. Gard reviewed the transcripts of testimony by the government's expert

3 witness, Mr. David Rodriguez, a CPA, lawyer, and certified fraud examiner. He then 4 reviewed the IRP documents provided by IRS and found some huge differences, with 5 respect to 2000 and 2001 between the records of total compensation reported by the 6 companies as required by title 26 U.S.C. § 6041(a), and the amounts of compensation 7 offered by the government as the gross income to the defendant from those companies. 8 The IRP documents provided by the government related to tax years 1998 ­2001 and 9 included a summary sheet for each year with that information, reflecting the total 10 amount of compensation paid to the defendant. 11
Mr. Gard found that the defendant's tax returns for 2000 and 2001 had not been

12 filed because business records had been stolen from the defendants home and 13 subsequent records were taken during the execution of the search warrant in this case. 14 Mr. Gard, with his specific background with IRS, was aware that there is an accurate 15 way to determine the information necessary for tax returns from data provided to IRS 16 and historical data, and such tax returns could be used to determine the net income of 17 the defendant for those years. Gary F. Klein, an enrolled agent (authorized to represent 18 people before the Internal Revenue Service), was then able to prepare the calculations 19 of net income and tax returns for, and with, the defendant for the tax years of 2000 and 20 2001, and file them. Those were not available until January 4, 2006, three weeks ago. 21 The Law 22
The general rule is that, to prevail on a Rule 33 motion for a new trial based on

23 newly discovered evidence, a defendant must satisfy a five-part test: "(1) the evidence 24 must be newly discovered; (2) the failure to discover the evidence sooner must not be 25 the result of a lack of diligence on the defendant's part; (3) the evidence must be 26 material to the issues at trial; (4) the evidence must be neither cumulative nor merely 27 28 4

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1 impeaching; and (5) the evidence must indicate that a new trial would probably result 2 in acquittal." United States v. Harrington, 410 F.3d 598, 601 (9 th Cir. 2005) (citing 3 United States v. Kulczyk, 931 F.2d 542, 548 (9th Cir.1991)). 4
However, when evidence is held by the prosecution team without disclosure to

5 the defense, there are somewhat different standards. See, e.g., United States v. Miller, 6 411 F.2d 825 (2nd Cir. 1969)(Where prosecutor fails to discharge duty to disclose 7 evidence to defense and defense does not discover evidence until after trial, test of 8 whether defendant is entitled to new trial is not whether courts are convinced of 9 correctness of jury's guilty verdict despite the evidence, but whether there is significant 10 chance that the new evidence, developed by skilled counsel, could have induced 11 reasonable doubt in minds of enough jurors to avoid a conviction); reaffirmed in 12 United States v. Pfingst, 490 F.2d 262, 277 (2 Cir. 1973). 13
In Brady v. Maryland, 373 U.S. 83, 87 (1963), the Court held that "the

14 suppression by the prosecution of evidence favorable to an accused upon request 15 violates due process where the evidence is material either to guilt or punishment." 16 Impeachment evidence, as well as exculpatory evidence, falls within the Brady rule. 17 United States v. Bagley, 473 U.S. 667, 676 (1985); United States v. Endicott, 869 F.2d 18 452 (1989). The Government's failure to disclose information that might have been 19 helpful in conducting cross-examination amounts to a constitutional violation if it 20 deprives the defendant of a fair trial. Constitutional error occurs, and a conviction must 21 be reversed, only if evidence is material in the sense that its suppression undermines 22 confidence in the outcome of trial. Evidence withheld by government is "material," as 23 would require reversal of conviction, only if there is reasonable probability that, had 24 evidence been disclosed to defense, the result of proceeding would have been different. 25 A "reasonable probability" is a probability sufficient to undermine confidence in the 26 outcome. Bagley, 473 U.S. at 682. "If the standard applied to the usual motion for a 27 28 5

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1 new trial based on newly discovered evidence were the same when the evidence was in 2 the State's possession as when it was found in a neutral source, there would be no 3 special significance to the prosecutor's obligation to serve the cause of justice." United 4 States v. Agurs, 427 U.S. 97, 111-112 (1976). 5 Application 6
There was newly discovered evidence in the IRP documents disclosed to the

7 defense and tax returns for 2000 and 2001 that was not a failure to discover the 8 evidence sooner because of a lack of diligence on the defendant's part. In reviewing the 9 efforts of the defendant in this case, defense counsel reviewed materials concerning the 10 defense diligence. In preparation for this case, on December 14, 2004, the defendant 11 made a written request at IRS for his tax returns for 1988 through 2002. (Attachment 12 B). Approximately one month later, on January 13, 2005, the IRS prepared their 13 response to defendant's request by supplying computer printouts described as W-2s 14 and 1099s, rather than the defendant's tax returns that would have included the 15 reduction of gross income to net income. The computer printouts were referred to as 16 transcripts. (Attachment B, excerpts.) The printouts accompanying the letter to the 17 defendant were, as counsel now knows from the assistance of Mr. Gard, IRP 18 documents, but missing the most important pages that IRS gave to the government. 19 The government's pages included a final sheet, which is the summary sheet, for each 20 tax year. (Attachment A, excerpts of summary pages.) It is far more significant because 21 it represents that it contains the total of all compensations reported to the IRS for the 22 year, and not just some or random statements. Those totals are the figures that Mr. 23 Gard was able to use to confirm that Mr. Bond had reported accurately the gross 24 income, later reduced to net income, and showed the huge difference from those 25 figures submitted by the government CPA, Mr. Rodriguez. The differences are 26 evidence of inaccuracy throughout the government's case. They are differences that 27 28 6

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1 would have alerted a proper investigation that something is wrong with their evidence. 2
With the newly found tax returns for 2000 and 2001, and the IRP documents,

3 Mr. Gard was able to evaluate and determine the defendant's eligibility for benefits, 4 and how the defendant qualified for benefits throughout the period in the indictment. 5 (Attachment E.) These would result in a reasonable probability for a different result, 6 and justify a new trial. 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 7
/Timothy C. Holtzen Timothy C. Holtzen Attorney for Defendant CONCLUSION Based on the foregoing, the defendant moves this Court to Grant a new trial. RESPECTFULLY SUBMITTED this 27 th day of January 2006.

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