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 MEMORANDUM RE: NEW TRIAL BASED ON NEWLY DISCOVERED EVIDENCE

12 Neil Rusty Bond,
Defendant.

The defendant submits the attached memorandum for consideration of granting

15 a new trial based upon newly discovered evidence, pursuant to Rule 33(b)(1) Fed. R. 16 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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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 infomation, including bu 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 defendant's tax return 16 information should 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, did many things. After this Court signed the order for funds, discard first 25 met with defense counsel and the defendant on October 29, 2005, and reviewed 26 materials and obtained the tax return exhibits for 1997-99 that had been used a trial. 27 28 2

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

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

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

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Mr. Gard reviewed the transcripts of testimony by the government's expert

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

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

22 newly discovered evidence, a defendant must satisfy a five-part test: "(1) the evidence 23 must be newly discovered; (2) the failure to discover the evidence sooner must not be 24 the result of a lack of diligence on the defendant's part; (3) the evidence must be 25 material to the issues at trial; (4) the evidence must be neither cumulative nor merely 26 impeaching; and (5) the evidence must indicate that a new trial would probably result 27 28 4

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1 in acquittal." United States v. Harrington, 410 F.3d 598, 601 (9 th Cir. 2005) (citing 2 United States v. Kulczyk, 931 F.2d 542, 548 (9th Cir.1991)). 3
However, when evidence is held by the prosecution team without disclosure to

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

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

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

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

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With the newly found tax returns for 2000 and 2001, and the IRP documents,

2 Mr. Gard was able to evaluate and determine the defendant's eligibility for benefits, 3 and how the defendant qualified for benefits throughout the period in the indictment. 4 (Attachment E.) These would result in a reasonable probability for a different result, 5 and justify a new trial. 6 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 grant a new trial. RESPECTFULLY SUBMITTED this 27 th day of January 2006.

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