Free Motion for Miscellaneous Relief - District Court of Arizona - Arizona

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STEPHEN C. KUNKLE Attorney at Law 111 West Monroe, Suite 1212 Phoenix, AZ 85003 AZ State Bar # 016239 Tel: 602.266.6900 Fax: 602.266.1369 ATTORNEY FOR DEFENDANT Dennis Poseley UNITED STATES DISTRICT COURT DISTRICT OF ARIZONA

) Case No.: CR03-344-1204-PHX-MHM ) ) MOTION FOR BAIL PENDING Plaintiff, ) APPEAL ) vs. ) ) DENNIS POSELEY et al, ) ) Defendant ) COMES NOW the defendant, DENNIS POSELEY, by and through UNITED STATES OF AMERICA, undersigned counsel, and respectfully moves this Honorable Court for an Order, pursuant to Fed. R. Crim. P. 46(c), for release pending appeal. This motion sets forth the factual circumstances and legal positions below.

RESPECTFULLY SUBMITTED Dated this 23rd day of June, 2006 By: [s] Stephen C. Kunkle Stephen C. Kunkle Attorney for Defendant Dennis Poseley

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FACTS The present case against Mr. Poseley, and the remaining co-defendants, started years ago when the Government commenced its investigation into IFC, after agents became aware of IFC when attending a Global Prosperity seminar. The salient point insofar as this motion's time frame is concerned, is the search warrant executed in February 2001 at the IFC offices in Tempe, AZ. After the execution of the search warrant at IFC and at the home of Dennis Poseley and Patricia Ensign, the nature of the federal investigation and the ensuing charges were plainly obvious. Simply put, it was a matter of time until the Government sought charges and a trial could occur. After the search warrant, Mr. Poseley hired an attorney. He did not flee the jurisdiction, he did not make any effort to re-locate to another country or pursue anything indicative of flight. He did not threaten or intimidate anyone associated with the ongoing investigation. In fact, Mr. Poseley remained in the United States to fight doggedly this case. Before charges were presented to the grand jury, Mr. Poseley retained counsel (Steve Silver) for the purpose of contesting the charges against him. During that process, much like he has during the nearly two year period undersigned counsel has represented him, Mr. Poseley was attentive to the details of the investigation while retaining Mr. Silver's services. In fact, during that time frame, Mr. Poseley met with the first Government attorney, Ted Groves, as pretrial discovery related documents reveal. Throughout the intervening two year period, Mr. Poseley never made any effort to flee. 1 He is certainly no threat of

Mr. Poseley and his wife, Patricia Ensign, moved briefly to Colorado, as the pre-sentence report notes, but returned to Arizona when the formal accusatory proceedings occurred.

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danger (nor does could the Government argue that he is). There is simply no evidence that Mr. Poseley is either a danger or a flight risk. In April 2003, Mr. Poseley was arrested following the issuance of the first indictment in this case. Thereafter, despite a brief detention period pending formal detention hearings, Mr. Poseley has remained free under the supervision of the pretrial services agency and has fought the case against him. 2 Throughout the course of this case, Mr. Poseley has had several attorneys (appointed through the auspices of CJA). The Government has changed lawyers (Mr. Groves to Mr. Wzalek and Mr. Odulio). The co-defendants have received change of counsel appointments. Mr. Poseley has remained steady, here in Arizona, awaiting the outcome of the jury's verdict and now, sentencing. Since 2003, Mr. Poseley has diligently attended numerous court hearings concerning various proceedings, which this Court is well aware. In addition, he has attended several status conference proceedings where he was under no obligation to attend. During the trial, Mr. Poseley was present each and every session. His behavior during all of the court proceedings has been beyond reproach. He has never engaged in contumacious behavior, nor has he caused this Court pause as to his whereabouts or timeliness in getting to court. Since his release on pre-trial services, Mr. Poseley has been an exemplary supervisee. In 2005, after the trial in this case, Mr. Poseley sought a modification of his terms and conditions of release, which would have allowed him to travel outof-state for business purposes. The employment did not come to fruition, but nonetheless, this court recognized in December 2005 that Mr. Poseley presented no

2

The Court, as a condition of release, also imposed a $5,000.00 bond.

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danger to anyone, and that he was not a flight risk that prevented him from being allowed to travel and work. In short, while under pre-trial supervision, Mr. Poseley has complied with their conditions, checking in telephonically when required, or being available for appointments at his home, if necessary. Since the inception of the formal charges in April 2003, Mr. Poseley has managed to maintain his employment. From the time of the indictment, through the trial, Mr. Poseley worked for ChoiceOne Mortgage. Upon his conviction in September 2005, he was unable to continue to work for Choice One and has since endeavored to work as much as he can, pending sentencing. Throughout the course of the proceedings, and even back to the time of the search warrant, Mr. Poseley has worked and continued to support his wife, Ms. Ensign. If allowed to be released pending appeal, Mr. Poseley will continue to work and assist his wife with their daily struggle to continue living. Recently, Mr. Guillermo Pena, the probation officer assigned to write the pre-sentence report, also visited the Poseley home. He found nothing unusual and in essence, verified that Mr. Poseley's residence was not some ramshackle hut, ready to be packed in a moment's notice. If Mr. Poseley were granted bail pending the outcome of his appeal, he would remain in Arizona and continue with his employment and support his wife Patty Ensign. Furthermore, as the pre-sentence report indicates, Mr. Poseley is essentially broke. Since his conviction, when he lost regular employment, he has borrowed money for simple living expenses. Mr. Poseley has a negative monthly cash flow of nearly $500.00 since he has no income at this time. Thus, even if he were to

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flee, the issue of how far he would make it or where he could go, with no money, makes any flight plan a useless gesture. During the pendency of his appeal, which is not being undertaken with delay in mind, but the singular purpose of Mr. Poseley's desire for vindication, he will, as he has to date, to abide by the continued terms and conditions of pre-trial services. In short, if Mr. Poseley had any intentions of fleeing the jurisdiction of this court, he could have done so long ago. He has chosen to remain and fight his case, as he will continue to do while it is on appeal. Last, as this Court is aware, the process of perfecting an appeal could take upwards of two years, or more. First, the preparation of the record in this case ­ over three years of hearings and trial, plus the remaining issues involving sentencing, could require transcript preparation for several months. Second, it is likely that a new attorney will be appointed to represent Mr. Poseley (for a variety of reasons, including his continued indigence, the opportunity for new counsel to take a fresh look at matters and for there to be no issues regarding conflicts). That new attorney will need some additional time to familiarize themselves with the file and discovery retained by counsel (almost 9 banker's boxes and growing with the almost monthly submissions of newly found discovery from the Government). Third, even if the appellate brief is filed, the Ninth Circuit has taken upwards of nine months to schedule and hear oral arguments and then, perhaps longer to lodge its decision. In summary, a three year process for completing an appeal is not out of the ordinary for a case that took two years before trial started, that took four months to complete the trial and then had multiple hearings to resolve sentencing matters.

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Mr. Poseley is facing a maximum of 60 months on the conspiracy count. The remaining misdemeanor counts each have a one year maximum. The presentence report tentatively indicates that Mr. Poseley is facing 118 months in prison, because of `grouping' concepts that apparently "mandate" a consecutive sentence. The defendant submits that the push for a maximum, consecutive sentence is misguided, as the advisory guidelines, counting only one form of loss as put forth by the Government for its sentencing position, fails to take into account the reality of the convictions and the case against Mr. Poseley. The defendant submits that a substantially lesser sentence, with concurrent sentences on the misdemeanor counts running concurrent with the conspiracy count reflects the purposes of 18 U.S.C. §3553. Thus, should Mr. Poseley remain incarcerated during his appeal process, there is the distinct possibility that he could serve more than half the sentence when the appeal is decided in his favor, since his appeal will present several issues, that could result in reversal, an order for new trial or a substantially reduced sentence. Moreover, should this court blindly follow the Government's sentencing position, the figures set forth in the Government's three methodologies will lead to an excessive sentence that may result in the defendant having served nearly all of the prison time before his appeal is resolved favorably.

LAW A defendant who stands convicted of a crime and who is sentenced to a term of imprisonment must demonstrate that he is not likely to flee or pose a danger to another person or the community. The burden is on the defendant to demonstrate

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by clear and convincing evidence that he meets both tests set forth above, if they are to be free on bail pending appeal. 18 U.S.C. §1343(b)(1)(A). Second, a defendant must also show that appeal is not for the purposes of delay and raises a substantial question of law or fact likely to result in reversal, an order for a new trial, a sentence that does not include a prison term or a reduced sentence that would be less than the total time the defendant has already served, plus the expected duration of the appeals process. 18 U.S.C. §1343(b)(1)(B). The statute essentially requires a four step process, which each step to be satisfied before progressing to the next step: 1. The court must determine whether the defendant is likely to flee or pose a danger to others: 2. The court must decide whether the appeal is filed solely for the purpose of delay; 3. The court must determine whether the appeal raises a substantial question; 4. Last, the court must determine that if the appeal was decided in the defendant's favor, whether it would result in reversal or a new trial. See e.g. United States v. Handy, 761 F.2d 1279 (9th Cir. 1983). The issue of what is a substantial question is varied, and depends on the circuit court's particular elaboration of the test it employs.
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In Handy, the Ninth

Circuit defined its definition as one that is "fairly debatable" or an issue that could be decided either way. Handy at 1283.

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There is a split among the Circuit Court of Appeals concerning how to define a "substantial question."

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Here, there is no issue that Mr. Poseley is not a danger to another person or the community. That has never been a contention advanced by the Government. Nor is Mr. Poseley a flight risk. At the time of his arrest in April 2003, the Government moved for detention. Ultimately, Mr. Poseley was released under the supervision of pre-trial services with a nominal bond of $5,000.00. Since his release, Mr. Poseley has demonstrated his compliance with the requirements imposed upon him, making numerous court appearances, attending trial daily and punctually, reporting when required and when he has had to re-locate. Moreover, Mr. Poseley has been determined, since the date of the search warrant (over five years ago) to litigate the case against him. He has no money and no means to flee and most importantly, no desire to flee. In short, since the execution of the search warrant over five years ago, Mr. Poseley has not fled or attempted to flee and has followed the orders of the court. Thus, the issue of what is a substantial question of law or fact, and whether that issue would result in a reversal or new trial or reduced prison sentence remains. The defendant need not convince the district court judge that its own rulings would result in reversal. The question presented may be substantial even if the judge hearing the application for bail would affirm the ruling on appeal. A substantial question is one that is not frivolous and that poses issues "debatable among jurists of reason." Handy at 1285. Here, in Mr. Poseley's case, one appellate question (among other appellate issues ­ the following is not intended as an exhaustive list) that will be presented upon appeal involves the deception employed throughout the testimony of several witnesses, the prosecution's withholding of the witnesses' audit information during their testimony and this court's subsequent refusal to order the production of the

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witnesses' (or their agents') statements to the IRS emanating from the civil audit process that was only disclosed halfway through the trial. Furthermore, these issues are subsumed within umbrella of prosecutorial misconduct, since during the testimony of the first three witnesses (the Porters and Mr. Melling) the prosecutors sat stone faced and silent, hoping that their witnesses' deception was not unearthed. The prosecutors, who were aware of the audit each witness had undergone, sat silently while the witnesses testified, while the witnesses unleashed vitriolic comments about the defendants (whom they blamed for their predicament) and while the witnesses testified in essence that they had been duped, when in fact they had previously been audited and were mostly transferring their anger to the defendants and not the IRS. In short, at one time the Porters and Mr. Melling, at least, were familiar with and liked the defendants on a social level. The Porters had actively promoted the IFC concepts at their own business, hosting a seminar. Only later, after having been worked over by the IRS like stewing chickens with the meat falling off the bone, did they blame the defendants for their monetary losses as a result of the audit process. Had the jury been allowed the opportunity to assess each witnesses' credibility in light of the audit, had each question and answer been fully explored with that backdrop, the jury would have been weighing the credibility of the witnesses with that new found hatred, that conversion of sorts, in mind. This court is certainly familiar with the allegations herein, since they were the subject a motion for mistrial. The curative measures taken by the court (which only deflected possible Brady/Giglio concerns) did not defuse the overall impact of the witnesses' testifying under false premises. The appellate issues associated with

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this substantial question concern the falsity (meaning deceptive nature) of the witnesses' testimony and the Government's failure to produce the statements of the witnesses and the materials held by the IRS civil division concerning the audit process. And, of course, each of these issues is contained within the rubric of the prosecutorial misconduct that accompanied the whole sordid process as it occurred. During the trial, four different witnesses paraded to the witness stand while the Government withheld the fact that the witnesses had been audited, and failed to disclose the witnesses' (or their agents') statements to the IRS which occurred during the audit process. The record speaks for itself, and this court's ruling, that the witnesses did not lie, is one substantial question upon which reasonable jurists could easily differ. To recite but one example, taken from this court's own ruling, the witness was directly asked about being approached by the Government at any time concerning his travails with his tax planning. The witness answered categorically no, when in fact, the truth was much different. A fair reading of the transcript illuminates the argument that the witness almost knew not to answer anything that would reveal an audit. 4 The defendant's substantial question is quite simple: each of the witnesses, during their direct and cross-examination, was allowed to answer questions in a vacuum, as if no audit existed, as if the IRS had never done anything to them and as if their conversion (from liking the defendants to hating them) solely came about

The fact that the Porters and Mr. Melling craftily answered questions and skated around certain direct questions could indicate that each witness was instructed not to mention any audit process. However, this is not to suggest that the Government engaged in any coaching. In fact, each witness was represented by counsel, who could have instructed their respective clients, erroneously, that any information about their personal audit information was off limits.

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from their own epiphany regarding tax laws. 5 The defendant submits that the rigors of the IRS audit process, and writing checks to satisfy the IRS, converted these same witnesses to defendant haters, and their posture on the stand to innocent lambs being led by the defendant. Moreover, during that same audit process, the witnesses, through their lawyers or accountants, asserted tax positions or their ignorance, which was belied by their earlier actions when they associated with Dennis Poseley and the other codefendants. In other words, if the witnesses at one time believed what IFC was promoting, sometime, somewhere, something caused them to change their beliefs. Being called to testify during a hot summer in Phoenix may have angered the witnesses, but more likely, the IRS audit process changed their hearts and minds. This illusion of anger at the defendants, without the ability to cross-examine the witnesses on their statements to the IRS civil division in the respective witness' audit, made the deception that much greater. The illusion of witnesses testifying as if they were blaming the defendants, while the prosecutor withheld Brady/Giglio material, warranted a mistrial. Deliberate deception of a judge and jury is "inconsistent with the rudimentary demands of justice." Mooney v. Holohan, 294 U.S. 103, 112, 55 S.Ct. 340, 79 L.Ed. 791 (1935). It certainly warrants a reversal and in this instance, the substantial question presented is one which could lead a reasonable jurist to differ from this court's prior ruling and order a new trial. The rule regarding prosecutorial misconduct and the requirement that the prosecutor correct false and misleading testimony is a long standing one. Alcorta
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In fact, at one point in Dr. Porter's testimony, he mentioned that he was subjected to a line of tax audits by the City of Virginia Beach, the State of Virginia and so on, conspicuously leaving out the federal government when asked.

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v. Texas, 355 U.S. 28 (1957); Pyle v. Kansas, 317 U.S. 213 (1942). See also Hayes v. Brown, 399 F.3d 972 (9th Cir. 2005). Here, reasonable jurists can, and may likely disagree, with this court's earlier ruling and require a reversal for allowing four different witnesses to testify deceptively before the jury. Moreover, the defendant's Sixth Amendment rights to confront the witnesses with their bias, by using their statements and assertions in the audit process was thwarted by the lack of discovery and the trial judge's failure to require that the Government disclose the audit records before continuing any cross-examination. United States v. Blanco, 392 F.3d 382 (9th Cir. 2004). The standard for a substantial question is met, even though this court may believe that the rulings made during trial would be affirmed on appeal since reasonable jurists could differ on the issue. Another appellate issue will certainly concern sentencing. At the time of this writing, the Government has only introduced its tax loss methodologies, backed up by its selective disclosures of records. IRS Special Agent Klepper has testified about his understanding of the bare records submitted by the Government to support its position regarding tax loss. A review of the records (disclosed in late March 2006, after the Government withheld them for months following the verdict) reveals that many of the recited instances of people not filing tax returns has no correlation to their purchase of IFC trusts. The Government's position on tax loss can be reduced to its simplest level: the taxpayers bought a trust, stopped filing tax returns and thus the defendant is to blame.

When asked about the federal government, Dr. Porter stated he had never heard from the federal government. This was not true.

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The reality is very different. In the defendants' initial examination of the Government's materials, the discovery was made that many of the taxpayers had not filed even before they had purchased IFC trust materials. Another instance revealed a taxpayer who had died and not filed; surely the Government's all encompassing net ensnaring the defendants with a widely cast causation cannot have led this taxpayer not to file from the grave. In many other cases, the alleged tax loss is inflated grossly, since the Government is taking one year out of context (perhaps when the taxpayer had a major gain from the stock market or the sale of an asset) and extrapolating it forward into later years. And, here again, the issue of reliability in sentencing is undercut where the Government failed to disclose all of the records pertaining to the taxpayers so that the defendants could demonstrate that the figures are artificially high for selected years, or that there were other reasons (independent of IFC) which caused the taxpayers not to file returns, which has been found with numerous of the selected taxpayers put forth by the Government. The methodologies proposed by the Government to date are all equally flawed. To the extent that the sentencing court takes into consideration the now advisory guidelines, the reviewing court has an equal duty, upon appeal, to make certain that the district judge has correctly consulted the relevant guidelines and made the appropriate sentence, consistent with 18 U.S.C. §3553(a). See e.g. United States v. Mix, 442 F.3d 1191 (9th Cir. 2006) and United States v. Cantrell, 433 F.3d 1269 (9th Cir,. 2006). That duty of the appellate court will certainly be invoked, in an appeal taken by Mr. Poseley, because the sentencing, without benefit of timely and full

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disclosure, and premised upon flawed assumptions of causation regarding actual loss, will not be without error. Last, the inclusion of information herein concerning appellate issues is not to imply that this is an exhaustive list. Simply, the issues presented here are substantial questions that are debatable among reasonable jurists as to the outcome. It is not for this court to decide if its previous rulings were wrong, or even if the rulings during trial will be affirmed on appeal. The issues set forth herein reveal the potential for an outcome that could lead to a new trial or reversal, since the kind of deception the prosecutors allowed to transpire cannot stand if it under girds a conviction. Deceptive testimony allowed to stand by a prosecutor has historically been a basis for reversal in numerous Supreme Court precedents (Mooney, Napue and Alcorta) and this Circuit's recent rulings (Hayes v. Brown). Moreover, the failure to produce statements of the same witnesses concerning their audits, which were in the possession of the Government, and which would have revealed the witnesses' sources of their bias, is also grounds for reversal. (Blanco) Last, the issues surrounding sentencing are certainly going to be appealed, as the Government's positions regarding tax loss are not supported by the evidence. Moreover, the assertion that the defendant should receive a consecutive sentence because of grouping is not supported by the facts of this case, nor is any sentence in excess of one year necessary to comport with the purposes of sentencing. WHEREFORE, based upon the foregoing, the defendant respectfully requests that he be granted bail pending appeal in the above-captioned case. In the event that this court denies this application, the defendant respectfully prays that this court grant Mr. Poseley time to self-surrender to any institution so that during

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that interim period, the defendant, through undersigned counsel, can re-urge this application in the appellate court, pursuant to Fed. R. App. P. 9(a).

RESPECTFULLY SUBMITTED Dated this 23rd day of June, 2006 By: [s] Stephen C. Kunkle Stephen C. Kunkle Attorney for Defendant

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I hereby certify that on June 23, 2006, I electronically transmitted the attached document to the Clerk's Office using the CM/ECF system for filing and transmittal of Notice of Electronic Filing to the following CM/ECF registrants: Mark Odulio and Larry Wzalek Trial Attorneys, Department of Justice Tax Division c/o U.S. Attorney's Office Two Renaissance Square 40 N. Central Ave., Suite 1200 Phoenix, AZ 85004 Mr. Greg Robinson 6040 North 7th Street Phoenix, AZ 85014 Attorney for Rachel McIlhinney Alex Gonzalez 1811 South Alma School Road, Suite 230 Mesa, AZ 85210 Attorney for Patricia Ensign Greg Parzych 1811 South Alma School Road, Suite 230 Mesa, AZ 85210 Attorney for Keith Priest Rena Glitsos 45 West Jefferson, Suite 512 Phoenix, AZ 85003 Attorney for David Trespas

_/s/

Stephen C, Kunkle ______________________

Stephen C. Kunkle Attorney for Defendant Poseley

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