Brief Of The United States

No. IN

THE

UNITED FOR

UNITED

STATES

OF

97-10392

STATES THE

COURT

NINTH

OF

APPEALS

CIRCUIT

AMERICA,

Plaintiff._Appellee, v. t _

CONNIE

ARMSTRONG,

JR., I

Defendant_Appellant.

APPELLEE'S

FOR

BRIEF

APPEAL FROM THE UNITED STATES DISTRICT COURT THE NORTHERN DISTRICT OF CALIFORNIA DISTRICT COURT NO. CR-94-276-CAL

ROBERT United Northern J.

S. MUELLER, IXI states Attorney District of California

DOUGLAS

WILSON

Chief,

Appellate

GEORGE

D.

Assistant RONALD

Section

HARDY United

Do

Special

States

Attormey

SMET_NA

Assistant

U.S.

450

Golden

San

Francisco,

Telephone: Attorneys for UNITED STATES

Gate

Attorney Ave.

CA (415)

94102 436-7183

Plaintiff-Appellee OF AMERICA

No. IN

THE

UNITED FOR

UNITED

STATES

OF

97-10392

STATES THE

COURT

NINTH

OF

APPEALS

CIRCUIT

AMERICA,

Plaintiff-Appellee, v. CONNIE

ARMSTRONG,

JR.,

Defendant-Appellant.

APPELLEE'S

FOR

BRIEF

APPEAL FROM THE UNITED STATES DISTRICT COURT THE NORTHERN DISTRICT OF CALIFORNIA DISTRICT COURT NO. CR-94-276-CAL

ROBERT

S.

United Northern

States Attorney District of

J.

DOUGLAS

MUELLER,

Appellate

GEORGE

D.

Assistant

Section

HARDY United

D.

Special

States

Attorney

SMETANA

Assistant 450

California

WILSON

Chief,

RONALD

III

Golden

U.S. Gate

Attorney Ave.

San Francisco, CA 94102 Telephone: (415) 436-7183 Attorneys for UNITED STATES

Plaintiff-Appellee OF AMERICA

TABLE

ISSUES

PRESENTED

OF

•

,o.Q.,,,,,ooo

JURISDICTION BAIL

1

Io..,.o.ooo

STATUS

. OF

PROCEEDINGS

STATEMENT

OF

FACTS

A.

An

Overview

B.

Armstrong's

C.

The His OF

THE

.2

,aot..o

STATEMENT

SUMMARY

CONTENT8

,...,oooo.o2

...................

2

...................

4

...........

4

Operation

Information Victims ARGUMENT

of

Armstrong

Hamilton

Taft

Withheld .............

•

From 20

.

22

ARGUMENT I.

24 THE EVIDENCE CONVICTIONS

WAS SUFFICIENT .................

B.

The Government Established Doubt that Armstrong Engaged to Defraud .................

•

o

CI

The

Beyond in a

Armstrong contract

fraudulently with Hamilton

Armstrong

engaged

in

Established Armstrong Commerce

Standard

of

Review

..........

funds

from 25

induced clients Taft ....... a

cover-up Beyond

Transported .....

THE DISTRICT COURT DID NOT ABUSE REFUSING TO ADMIT INTO EVIDENCE THAT DID NOT MEET THE REQUIREMENTS EVIDENCE 804(b) (3) ......

a Reasonable Scheme 24

improperly diverted Taft .............

Government

ARMSTRONG'S

Review

Armstrong Hamilton

Doubt that in Interstate

A.

SUPPORT

24

Standard

2

of

TO

A.

i•

II.

6

A

to 27

..... a

28

Reasonable

Stolen

Property

ITS DISCRETION BY HEARSAY DECLARATIOIN OF FEDERAL RULE _

30

OF 33 34

B. III.

IV.

Discussion

A.

Standard

B.

Discussion

of Review

..............

42

..................

43

THE TRIAL COURT'S EX PARTE CONTACTWITH THE JURY DOES NOT PROVIDE A BASIS FOR REVERSAL .......... 49 A.

The Court's

B.

The Law of the Case Precludes the Impact of the Court's Ex Jury

Ex Parte

Contact

with

the Jury

CERTIFICATE

55

The Not

Submission of the Transcript Error .................

Any Was

Error in Harmless

OF

COMPLIANCE

of with

of

D.

CASE

Contact

53

Standard

RELATED

49

Reconsideration Parte

Review

..............

Communicating ...............

to

with

the

Jury

Was

Jury

Ex .

Parte . 60 63

................... WITH

the

56

...................... OF

.

...............

C.

E.

NOTICE

34

THE DISTRICT COURTAPPROPRIATELYREJECTED ARMSTRONG'S PROPOSED"THEORY OF THE DEFENSE" INSTRUCTION 41

the

CONCLUSION

.

CIRCUIT

64 RULE

32(e)

65

TABLE

OF

AUTHORITIES

CASES Delaware

v.

Van

Arsdall,

475

U.S.

673

(1986)

.......

In re Hamilton Taft, vacated as moot, 68

53 F.3d 285 (9th Cir. 1995), F.3d 337 (9th Cir. 1995) .......

Jackson

443

Masoner cert.

v.

Virqinia,

v. Thurman, denie_______dd, 510

996 U.S.

U.S.

307

F.2d 1028

United (9th

States v. Cir. 1997)

Amlani, Iii .............

United (9th

States v. Cir. 1998)

Barraqan-Davis, 133 ..............

United (9th

States v. Cir. 1979)

Beecroft, 608 F.2d ................

United (9th

States v. Cir. 1985)

Binder, 769 F.2d ...................

United cert.

States denied,

v. Bohonus, 447 U.S.

F.2d (1980)

United (9th

States v. Cir. 1998)

Cuddy,

United (9th

States v. Cir. 1996)

Collicott, 92 ................

United (9th

States v. Cir. 1995)

Contreras, 63 F.3d ..................

United (9th

States v. Cir. 1994)

Felix-Rodriquez,

United cert.

States denied,

147

24 Cir.), ........

59

705 54

628 928

42-48

(1979)

1003 (9th (1993) F.3d

34

F.3d

1287 61

753 30 595 56, 1167 (9th .....

Cir.), 3O

F.3d iiii ............ F.3d

58

53,

54

973 34 852 24 22

F.3d

964 57

v. Frazin, 479 U.S.

United (9th

States v. Cir. 1979)

Freedson,

United (9th

States v. Cir. 1998)

Garibay,

780 844

F.2d (1986)

608

F.2d

1461

(9th

Cir.), 6O

739 59

143

F.3d

534 •

iii

•

•

•

•

34

United (9th

States Cir.

v. 1987)

Goode,

814

F.2d

1353

.....................

24

United cert.

States v. Green, denie______dd, 474 U.S.

745 925

F.2d 1205 (9th Cir. (1985) ..........

United cert.

States v. Heath, denie_____d, 507 U.S.

970 1004

F.2d 1397 (5th Cir.), (1993) ..........

United cert.

States denied,

United cert.

States v. Hernandez, denie______d,118 S. Ct.

227

States

96

United (9th United cert.

Cir.

v. Hernandez, 115 S. Ct.

v.

27 1147 105

Hubbard,

1996)

States denied,

F.3d 1403 (1995) F.3d (1997)

F.3d

Lothian, 976 F.2d .................

United (9th

States v. Cir. 1991)

Lujan, 936 F.2d ....................

States v. Montgomery, denie______d,119 S. Ct.

States

United cert.

States v. Ortland, denie______d,118 S. Ct.

United

States

United (5th

Cir. States Cir.

v. 1997) v.

267

Morales, (en banc)

United

(9th

v.

1994), . 51,

56-57

(9th Cir.), ...........

24

24

v. Knapp, 120 F.3d 928 118 S. Ct. 417 (1997)

States v. Cir. 1997)

Cir.

32

1223

States v. Cir. 1992)

United (9th

30

.............

United (9th

United cert.

1330

(9th

1984)

Olano,

Paquio,

108

507

114

Cir.), 43

1257 61

406 58

150 F.3d (1998)

983

(9th Cir.), ......

725

34

(1994)

F.3d 539 (1997) F.3d

59

(9th Cir.), ............

Poole,

557

F.2d

37,

States v. Rasheed, denie______d,454 U.S.

663 1157

United cert.

States v. Rincon, denie_____dd, 513 U.S.

28 1029

40

531

...............

United cert.

34

928

....................

1977)

58

F.3d 1031 ........

U.S.

109 141

(9th

F.2d (1981)

843 (9th Cir.), ..........

F.3d 921 (gth (1994) .

iv

32

Cir.), • ......

5

56

United (9th

States v. Cir. 1989)

United

States

(9th

Cir.

United (9th

Sacco, 869 F.2d 499 ......................

v.

Sarno,

73

F.3d

Slauqhter, 891 F.2d ...............

States v. Throckmorton, denie_____d, 519 U.S. 1132

United

States Cir.

STATUTES

v.

Warren,

25

1994)

691

39

87 F.3d (1997) F.3d

1069 (gth ........

Cir.

1996), 56

890

.................

States v. Zarate-Martinez, denie___d, 119 S. Ct. 123

AND

43

.............

United cert.

United cert.

1470

1985)

States v. Cir. 1989)

(9th

56

43

133 (1998)

F.3d

1194

(9th

Cir.) 54

RULES

ii

U.S.C.

§

547(b)

18

U.S.C.

§

1343

•

18

U.S.C.

S

2314

............

18

U.S.C.

§

3231

28

U.S.C.

§

1291 P.

......

•

•

•

•

•

•

•

.............

•

•

•

•

•

•

•

•

•

Fed.

R.

App.

Fed.

R.

Crim.

P.

Fed.

R.

Evid.

804(b)

•

-

•

•

•

•

•

3

2, •

.........

•

45

•

•

•

•

•

•

•

•

3

•

2

.............

2

4(b) 43

. (3)

........... ............

55 •

23 ,

35-41

No. 97-10392 IN THE UNITED STATES COURTOF APPEAL FOR THE NINTH CIRCUIT UNITED STATES OF AMERICA, Plaintiff-Appellee, V.

CONNIE

ARMSTRONG

JR.,

Defendant-Appellant.

BRIEF

OF

ISSUES

I.

Whether

in

II.

a

there

scheme

Whether

III.

Whether

the

defraud

was

court

as

given

evidence

alleged

sufficient

had

erred

against

accountant

PRESENTED

sufficient

transported

declaration

IV.

to

there

Armstrong

was

APPELLEE

penal

during

against

the

defendant.

Whether

the

court

defense

instruction.

erred

in

the

evidence

been

in

that

Armstrong

indictment.

that

the

fraudulently

refusing

interest

a

bankruptcy

by

failing

to

the

funds

obtained.

admit

as

a

declaration

adversary

to

give

engaged

a

of

proceeding

theory

of

an

V.

Whether the

the

jury

district

court's

were harmless

ex parte

communications

with

error. JURISDICTION

The

district

criminal

case

jurisdiction

entered

361.

8,

court

pursuant

The

to

and

Fed.

R.

Armstrong

is

jurisdiction

18

28

U.S.C.

filed

App.

on

BAIL

STATUS

at

liberty,

June

Francisco,

a

OF

by

to

_ As Excerpts Appellant's

causing

defraud

used of

in

of

CR

district

1997.

appeal

court

ER

on

24-30;

September

362.

having

grand

returned

a

signed

Richard

travel

in

in

violation

this

brief:

Record;

"CR"

Opening

Brief;

to

A.

jury

a

$250,000

Fowles,

_ER" the and

U.S.C.

refers

Clerk's "RT"

in

to

§

to

counts

Docket the

to

2314;

tHe

San

indictment

Jr.,

commerce

18

in

count

Armstrong,

interstate

of

sitting

twenty-one

Connie

co-defendant

with

5,

has

PROCEEDINGS

federal

defendant-appellant

abetted

scheme

1994,

California,

charging

three

27,

The

Court

bond.

STATEMENT

On

31;

federal

This

1291.

notice

ER

this

3231.

September

4(b);

currently

recognizance

§

timely

P.

over

§

U.S.C.

sentence

defendant

1997.

personal

to

pursuant

judgment

I

had

aided

one

and

through

execute

in

a

counts

defendant's Sheet;

reporter's

"AOB

to

transcript.

CR

four

through

fraud

fourteen

in violation

eighteen

with

and nineteen

of

§ 1343; and in

interstate

transportation

to fraudulently

obtained

ER 1-23;

The charges

Taft

CR I.

& Company, Inc.

February

trial 26,

on all

two, 29,

A. Legge,

to be followed

24-30,

related

fifteen

of

Taft"),

1997,

sentenced

by three $1,050,

five,

the

Armstrong

court,

and ran through

26,

1997,

and fifteen.

CR 315.

the Honorable

release,

and to pay restitution

the jury

(CR 316) and

to 108 months

of supervised

service ER i-i0.

counts ten

§ 2314.

of Hamilton

tax

California.

nine,

district

years

traceable

18 U.S.C.

a payroll

On February

wire

through

to the Operation

twenty-one

four,

with

of securities

in violation

CR 239-318.

guilty

On August

of

counts

in San Francisco,

1997.

Fowles on counts

assessment

twenty-one

commenced on December 3, 1996,

found Armstrong

Charles

funds

("Hamilton

company headquartered Jury

through

of

imprisonment, a penalty

$62,750,000.

ER

CR 360. 2

2 Fowles was sentenced to 30 months imprisonment and ordered to pay restitution of $62,750,000. His appeal (docket number 97-10513) raised the issues of the trial court's ex parte communication of

Dora

counsel was i.

with

Dunn's or

affirmed

the

testimony

providing on

June

jury to

and

the

submission

the

jury

without

cautionary 2,

1999;

opinion

the

transcript

consulting

instructions. the

of

Fowles' is

attached

with conviction as

Addendum

STATEMENT

A.

A_

companies

Hamilton

Taft

been

taxes.

of

In

his

had

taxing

It

514.

funds

checks

of

year

checks

completed

the

period

but

then

checks

of

had

its

only

$5.8

Taft

_pulling"

holding

some

been

of

them

the

at

4

from

into

509-510.

in

tax

payments

the

time

of

RT

515.

appointed

Hamilton

to

preparing

RT

that

tax

(taking

Taft

Taft

various

hand.

discovered

Hamilton

billion

Shortly

pay

on

its

the

was

while

to

it

involuntary

RT

checks

At

cleared.

Wyle

million

Wyle

had

$3-4

S.

clients

when

513-514.

employer

that

513.

years

from

forced

Fred

accountants,

Hamilton

and

was

bankruptcy.

from

of

agencies

determined

million

help

and

clients;

Wyle

number

income

taxing

in

it

its

payroll

RT

processed

to

Taft

large

their

RT

authorities)

its

appointment

a

taxing

Hamilton

trustee

$91

derived

the

paying

Armstrong.

(employee

to

assisted

entities.

for

RT

authorities,

With

existence

annually

some

collected

taxing

Taft

1991,

Taft's

local

Hamilton

March

that

and

by

the

Hamilton

in

payment

by

company

1989

until

bankruptcy

and

of

client

for

receipt

service

collecting,

March

1990,

collected

after

had

in

investment

a

calculating,

state

in

payroll

was

federal,

acquired

height

two

Taft

by

to

was

FACTS

Overview

Hamilton

taxes

OF

519.

over

payment

the

rather

than

a

depositing

them)

authorities.

to

RT

cover

were

the

not

million

from

some

525.

so

Taft's

grew

operating

losses

transfer

Texas

to

purchase

a

to

multi-million

of

3

an

For

large

pay

the

of

RT

529.

for

enhance

v. Rasheed, 663 F.2d 454 U.S. 1157 (1981).

of

client

of

there

was

from

including

result

in

of

was

Taft

to

referred

Dresdner

were

estate

luxury

the

tax

Hamilton

with

helicopter,

524-

shortfall

late

real

lifestyle

a

a

funds

RT

however,

to

for

of

3

collectively

transferred

taxes

takeover,

a

shortfall,

funds

taxes

for

pulled

incoming

scheme.

as

be

checks

Armstrong's

(hereinafter

ranch,

843,

while

the

1990,

Ponzi

payments

Armstrong's

definition

a

to

when

quarter,

ownership

Funds

RT

of

delinquent

as

time

Armstrong

airplane.

the

penalty

Most

dollar

the

to

had

incurred

Each

that

companies

assets

and

lease

and

.

520.

Armstrong's

the

"Dresdner")

wells,

during

526-529.

as

RT

taxing

checks

quarter

operating

at

to

penalties

last

determined

RT

Armstrong's

was

payment

more

the

the

used

accounts

shortfall

pay

by

Taft

further

by

and

were

timely

quarter,

withheld.

Hamilton

payments.

making

Each

that

clients

Hamilton

caused

520.

were

Wyle

not

shortfall

paid,

$57

others;

and

the

and

used

oil

purchase

cars,

to

and

of

the

532-548.

of 849

a

Ponzi

and

fn.

scheme, 1

(9th

see Cir.),

United cert.

States denied,

Accountant ownership

Hamilton

$14 million RT

3330,

RT

3362.

accrued

More

to

lost

more

Express

1941,

$85

$10.4

than

Armstrong

personally

political

and

a

criminal

defense

for

personal

expenditures

for

B.

$528

Christmas

On

January

in

the

to

of

$1.4

RT

1989,

(RT

acquire

3767-3768.

for

Operation

bank

$1.7

$217,642

1,

was

spent

million

of

time

in

in

a

Dresdner

Exs.

on

behalf

of

ranch,

$735,000

for

helicopter,

party,

and

$98,392

for

furs

1946-1948.

his

fireman

spare

financial

6

a

clients

Federal

or

his

million.

Taft

was

3365);

by

and

Hamilton

Taft

by

July

Exs.

$9

3315-3321;

including

Hamilton

Armstrong

to

$965,000,

for

Fourth

million

Of

823,

the

a

$8

from

for

million

3343-3360;

companies

At

RT

in

taxes

million

of

operations.

million

Hamilton

Paper.

contributions

presents.

Armstrong's

Dresdner

3754,

cars,

$8.5

of

$30.4

$9.2

its

transferred

million

more than

delinquent

3331.

Scott

retainer,

$352,000

was

RT

including

charitable

than

for

including

$16.5

of

obligations

Dresdner.

by

cost

more

agencies

Armstrong's

and spent

the

paid

million

million

during

profitable

penalty

million

More

that

cover

tax

$55.1

and

to

Taft

to

than

than

1945.

funds

unpaid)

Armstrong

and

was not

interest

(but

3363.

determined

Hamilton

and

Taft

Taft

of client

penalties

had

Lee Baly

was

in

time

Texas

he

distress.

unable

was

RT

to

pay

with

using

3710,

its

employees

taxes

(RT

(RT

824,

4974),

shareholder's

in

1989

Carlton

&

derivative

Taft,

to

its

money

by

time

of

receipt

Taft

was

Maxpharma

settled

the

Armstrong.

In

RT

July

corporate

1298.

by

client

funds

1989,

to

on

29,

March

overnight

were

point,

1989,

Hamilton

had

negative

of

alleged

but

loaning

Hamilton

because

$14

in

million

Ex.

a

161.

bankrupt,

Hamilton

had

the

obligations

Taft

giving

earned

from

that

1031-1034;

Hamilton

Taft

Taft

investments

its

RT

of

Hamilton

complaint

due,

by

firm

Hamilton

on

by

law

owner

secure

declare

payroll

shareholder's

verified

in

Taft

intended

a

the

companies.

they

Taft

shortfall

of

to

$14

3291-3295.

Armstrong

and

department

from

bring

defaulting

Hamilton

and

Dallas

Maxpharma,

payments

of

the

The

employee

4778.

against

acquisition

1034-1043,

Paille's

liquid,

1025-1029.

that

controller

payments

behalf

affiliated

suit

At

million.

RT

looted

owners

RT

to

its

(id.)

retained

his

tax

on

loans

("GCM")

jeopardy

to

on

$511,000.

on

until

in

funds

its

of

putting

had

client

While

its

now

delinquent

defaulted

Maxwell

action

prior

was

Armstrong

Maxpharma.

that

tax

had

equity

Early

Godwin,

4316),

clients;

investment

appointed

Fowles

was

he

its

Jim

president.

responsible

wouldplace

vehicles

7

Paille

for

those

until

the

Hamilton

RT

1286-1287,

the

collection

funds

into

funds

were

Taft's

of

needed

to cover

checks

In July of client

funds

realized

that

because

Several

days later

Armstrong

Dresdner

for

and he told

showing

had RT

done

clients

a

In

tax

short

1989,

of

Taft

idea

got

its

was again

Paille's

clients.

short

checks

_positive

RT 1333-

of funds;

in

transferred

To make funds

of withholding

told

days Paille lacked

need $4-5 million

Armstrong

to

available

tax payment

totaling

Paflle

approximately

not

verification"

to hold

the

(receipts

had

been

made)

and

clients

and

other

Hamilton

for

million

be

$7

1358.

At

Armstrong's

checks

of

in

Paille

funds

another

participated

Hamilton

to hold

deposit

from

that

payment

Within

for

that

to

keep

what

Taft

they

employees.

1363.

August

million

Paille

who

secret

1340-1345,

1298.

RT 1338.

the

RT 1340.

their

RT 1294,

he would

came up with

of

claimed

Paille

said

of $3 million

He later

transfer

an investment.

$4.2 million. checks

of the

RT 1290-1293.

the transfer

to make tax payments

addition

checks,

ordered

the money.

funds

Armstrong

the payment of taxes.

to Dresdner.

stole

sufficient

for

1989, Armstrong

predecessor

1335.

written

discovered

tax

more

that

conferences

payments,

transferred

direction

Paille

$25

that

million.

with

Armstrong

8

Hamilton

and

Taft

Armstrong

to

Dresdner.

and

Fowles

RT

and

was

ordered

RT

1349,

withheld

1349-1356.

Fowles

$ii

tax

Paille

where

they

discussed

how

disclosed

that

Hamilton

Armstrong

told

Paille

Hamilton

Taft's

discovered

left

be

cattle

RT

Armstrong

in

2253-2256.

would

discover

would

result

abate

Hamilton

end

Taft

of

was

IRS

paying

the

upset

after

he

and

RT

withheld

when

RT

1367-1375.

checks

the

learned

for

discovered

taxes.

checks.

Dallas

had

2257.

with

auditors

1390-1391.

that

Armstrong's

Paille

client

funds

purchase

of

Hamilton

Taft's

vice

president

first

learned

from

Fowles

but

client

been

taxes

in

never

payroll

prepared

and

to

Hamilton

reflecting

returns

were

false

because

because

the

funds

taken

that

a

full

all

by

tax

of

Armstrong

9

a

the

taxes

were

when

to

RT

for

its

taxes.

could

not

like

the

this

IRS

that

clients.

try

of

a

since

"story."

payment

RT

business

withheld

returns

and

something

Taft's

of

paid.

about

Maitless

them

filed

of

been

been

tax

concerned

had

telling

not

payroll

taxes

suggested

by

had

heard

was

notification

penalties

the

before

Armstrong

that

October

not

uncleared

had

Armstrong

the

the

discuss

and

that

and

in

2258-2262.

to

1989,

October

RT

was

became

April

years

happening.

not

until

1393-1394.

Maitless

of

Taft

to

Maitless

in

be

shortly

transferred

operations

would

the

Taft

Joseph

the

of

ranch.

number

it

auditors

some

Hamilton

would

to

long

RT

get

the

IRS

2262.

clients

at

These

not

returned

be

not

tO

paid

Hamilton

Taft

December

1989,

ask

to

them

Hamilton

of

to

the

stop

filing

Fowles

asked

intercept

falsely

caused

by

effect

were

January

clients.

taxes

tell

the

for

sent

February

to

current

1990

for

the

before

and

clients

Hamilton

Taft

Taft

had

payments

In

Armstrong

said

was

and

helped

that

any

use

pay

a

using

and

to

the

were

to

that

2284-2286.

million

of

In

client

from

with

prior

Maitless

told

the

strategy

delinquencies

Taft

out

conceal

a

delinquencies

Hamilton

to

clients

devise

attorneys

IRS

authorized

Taft's

RT

meeting

his

went

Letters

$20

In

the

they

notices

clients.

to

with

Hamilton

2282-2284.

to

2263-2268.

Armstrong

of

2275-2282)

RT

he

notices

delinquency

2301-2302.

way

intervene

some

problem.

tax

RT

of

trouble

IRS

Hamilton

non-payments.

for

739-747,

to

2273-2274.

of

(RT

banking

1990,

RT

issuance

of

RT

Maitless

taxes

IRS's

a

deadline.

delinquency

delinquent

non-payment

funds

the

Taft's

payment

to

by

in

him

client

he

was

in

funds.

RT

2300-2301.

Stephen

1989

as

took

over

checks

hold

quarter

a

Lau

systems

the

were

checks

began

manager.

position

being

of

withheld

quarterly

because

working

of

for

RT

cash

(RT

1792.

In

manager,

Taft

January

September

1990,

after

aware

1805-1806);

it

necessary

and

amount

transferred

I0

he

in

became

thereafter,

funds

Hamilton

the

out

to

was

went

Dresdner

that

up

and

Lau

tax

to

each

penalties

accruing

directed

an

Lau

unknown

million

RT

to

1816,

and

marketing

and

bids

to

RT

Hamilton

funds

was

was

and

being

being

disclosed

As

funds

were

Ed

Briscoe

as

responsibility

reported

weekly

recruit

sell

new

Briscoe

bring

to

Taft's

that

timely

sought

in

RT

payment

Hamilton

would

to

taxing

Taft

October

1990,

$3.3

1990.

to

Armstrong

vice

president

II

generate

of

that

client

something

him

He

Taft

charged

that

him

Armstrong

with

1994-1996.

trained

of

his

clients

invested

RT

statements

by

the

Briscoe

apprized

prospective

financial

reviewing

to

Hamilton

RT

authorities.

of

3094-3095.

and

safely

for

company,

from

kept

in

president

learned

the

RT

2013.

be

in

became

clients.

2001,

(net)

literature

first

manager

and

services

funds

she

new

1990,

marry

she

clients.

Armstrong

clients.

Hamilton

emphasizing

until

to

June

responsibility

finance

sales

in

Taft's

transferred

its

Dresdner

together

When

to

being

to

with

1990

to

February

Hamilton

3086.

withheld

to

million

putting

September

Armstrong

million

engaged

as

1824-1825.

1866-1867.

relations

not

hired

was

3082,

in

$16

1859,

hired

clients

3077,

$5.5

and

1855,

RT

million

1990,

1990

client

Taft

were

$9.8

Grambling

1990

taxes.

May

1823,

Christine

sales.

in

September

1821,

made

late

transfer

amount

in

January

on

efforts

staff

to

to

by

Hamilton

Taft

2006-2010.

to

share

with

potential

clients,

looking

was

at

his

unaware

the

(RT

Dresdner

for

of

Taft's

of

1990,

Id.;

to

and

Exs.

flowing

in

RT

that

new

into

directed

Exs.

did

were

to

only

576,

1135.

When

Dora

In

for

RT

in

her

paid

put

1845.

letters

short

to

term

checks

when

funds

due.

12

used

the

to

sale

the

and

in

keep

Fowles

RT

training

client

1845-1849;

president.

she

learned

overnight

2108-2117.

order

cash

that

was

tax

withheld.

1990,

Fowles

were

August

letters

to

to

funds

for

stating

safe,

letters

being

August

RT

its

sent

on

to

investments.

in

were

client

were

send

Taft

until

send

March

be

representative

client

Taft

to

how

only

In

Briscoe

impact

from

Taft

1998.

like

2028.

about

to

be

purchase

adverse

falsely

Hamilton

sales

taxes

Lau

Hamilton

joined

Taft

and

told

would

funds

was

would

that

other

Dunn

used

sent

funds

company.

placed

2105-2106.

Hamilton

clients

send

client

an

Taft

letters,

disclose

RT

2020-2021,

Hamilton

Fowles

the

Lau

investments

not

had

RT

that

572-575.

bring

funds

stated

or

have

The

it

Hamilton

responsibilities

of

1840-1844.

falsely

payments

would

at

that

investments

Lau's

clients

RT

known

services.

Steve

prospective

used.

it

he

saying

statement.

problems

had

term

ranch

One

financial

long

refused

financial

1999);

Armstrong's

Hamilton

Armstrong

personal

of

bankruptcy

but

Armstrong

told

her that

Hamilton

Taft

was in great

would be making more aggressive

financial

investments

shape and

withclient

funds.

RT 2128-2132. In late Fowles

that

problem, robbing

Peter

of

that

Hamilton

company

and

explained,

want

to

Fred

an

that

secure,

materials

Dunn

Taft

told

Dunn

money

was

executive.

Taft

overnight

and

Fowles

hired

invested

by

client

provided

leave

made.

From

Taft

his

to

13

2511.

clients

Beam

was

RT

be

named

been

RT

2185.

"the

purchased

Armstrong

was

2194.

he

"out

Fowles

did

not

2190.

in

February

training

in

R.R.

held.

because

RT

funds

RT

had

leave".

Hamilton

2508.

investments.

to

not

he

it

Jim

should

thought

got

could

that

RT

contracts

because

"I've

he

ranch

company,

would help

know it,

also

was a .we were

the

in]

2171.

were

Armstrong's

2190.

up

the

checks

built"

RT

2146,

there

in

[she brought

RT

their

that

that

Hamilton

was a hole

back.

held

from

Dunn ".

were

Holloway

account

told

Though Dunn did not

however,

give

because

RT 2170.

funds.

control"

Fowles

business

clients;

told

checks

That there

Donnelley

Dunn's

Fowles

ranch

with

checks

of 1990, Dunn learned

was holding

to pay Paul.

the hole."

another

Taft

fall

RT 2142-2143.

the R.R.

Donnelley

of

Hamilton

no money.

and that fill

summer or early

he

1989

as

learned

government-backed,

Hamilton

emphasized

Taft

sales

timely

and

accurate

deposit

2513,

2516,

Scott

Paper,

Scott

funds

approved

of

2520,

tax

2524.

to

of

their

overnight

the

to

Commercial

Credit

insisted

to

all

funds

interest-bearing

Commercial

to

such

addendum

on

behalf

separate

account

Hamilton

clients

that

liquid

time

2178;

of

an

was

an

to

account

RT

Hamilton

the

Taft.

RT

ever

opened.

Taft's

other

sales

representatives

Hamilton

Taft

would

hold

collection

Armstrong

earn

RT

its

until

RT

RT

tax

client

3898)

and

14

deposited

Taft

in

in

authorized

signed

2779.

Estes

the

No

also

funds

Boone

from

payments

that

such

3184.

2110-2112;

income

be

and

2749,

or

2741.

Hamilton

contract,

tell

brought

contract

Fowles

to

bills

RT

Taft

by

2748-2749.

to

Estes

Estes

the

of

3097-3098.

treasury

to

opened

Hamilton

(Dunn

RT

client.

addendum

remitted

addendum

of

would

Boone

on

a

clients,

Armstrong

2740-2741.

as

RT

investments

John

in

2735,

his

2543-2544.

Scott.

placed

Taft

name.

investments

3907-3908),

RT

bank

Credit's

agree

be

Hamilton

of

Taft's

RT

with

deadlines.

one

representative

would

investments.

that

with

Hamilton

contract

funds

Credit

an

contract

sales

Commercial

required

statutory

securities.

instructed

that

before

limited

government

Armstrong

other

The

specifically

execution

clients

payments

would

tax

made

pay

RT

funds

(Dunn

taxes

on

their

secure,

Armstrong

holding

were

in

told

RT

time

3897,

from

the

2138,

(Dunn

RT 2120,

2136,

During

2177;

Boone Armstrong

Armstrong's

ownership

number of new clients. believed

that

All

Hamilton

Hamilton

entered

Taft

into

would

term

instruments

and pay their

2382

[R.R.

Donnelley],

2477-2483

[Scott

[Kendall],

2797-2801

Express]. Taft

were assured

RT 2387,

that

2484-2485,

As the money flowed Dresdner

offices,

and the

with

annual

889.

With

money

series

of

in

a

an

861-863,

883-888,

contrary

to

interest

staff

taxes

Credit],

and

obtained

money

excavating

the

in

2948-2951.

advice

his

life.

of

brother's

of

Hamilton

his

and

-2584-2585

[Federal

with

Hamilton

had been timely

changed at

Dresdner

moved to

at Turtle

than

Taft

such

a

things

as

$2

Creek in

strip

restaurant.

million.

advisors,

such

as

the

RT

RT

invested

shopping

RT

several

Coffea.

(RT 834-835)

Armstrong

made

15

and

2693-2699

Armstrong

company,

safe,

RT 2373-

40 employees

more

ventures

company,

Taft

furnished,

overhead

losing

checked

they

2833-2834.

personal

from

when due.

payments

of Hamilton

lavishly

in

2819-2823

of their

2704-2706, out

funds

[Advo Systems],

grew to more than

salaries

centers,

an

all

and in Armstrong's

"magnificent" Dallas

their

a

because

[Jim Beam Brands],

2648-2651

[Commercial

recruited

agreements

Whenever any of the companies

they

made.

Paper],

Taft

invest

short

2631-2635

RT 3877).

848-851,

investments

purchase

851-852,

of

2984-

2985,

3114.

Armstrong

approximately

1990

and

$2

million

ultimately

In

Stadium

length

gave

on

Europe,

and

maintained

(RT

in

on

other

a

successive

his

$35,000

three

suite

at

Mark

4978)

and

and

down

deposit

to

Hopkins

a

closing

for

the

to

Royce

and

and

islands,

3111,

3526,

3548.

$120,000

limousines

at

He

made

condominium

in

Aspen,

transaction

(but

condominium).

He

per

3534-3535.

the

of

Texas

Rolls

fiances

chauffeured

on

at

pendant,

for

May

three-quarter

Carribean

Hotel

RT

payments

purchased

ring,

2913-2914,

had

a

a

girlfriends,

Dallas.

without

furniture

took

boxes

wardrobe,

in

contrary

and

engagement

RT

the

Francisco

Jaguars

a

Taft

drilling

purchased

planes

locations.

$I00,000

forfeited

and

oil

two

using

Hamilton

875-879.

diamond

chartered

2969,4500,

San

a

fields

RT

$42,000,

2906-2912);

trips

wildcat

advisors.

fiance

and

oil

from

3532-3533);

his

coat

(RT

friends

the

Armstrong

872-873,

sable

ready

name

(RT

earrings

year

his

own

2919);

risky,

from

his

two

transferred

did

recommendations

(RT

purchased

RT

the

three

then

kept

4977-

4978.

Armstrong

of

1990.

purchased

Dresdner

856,

933,

....

"

4885-4887),

RT

3080.

his

executives

but

Armstrong

ranch

for

advised

"

. he

against

was

subsequently

16

$6.5

like

million

in

the

purchase

a-kid

added

February

a

(RT

with

a

new

show

arena

toy

to

the

ranch

Fourth

at

of

Strait,

July

and

859-860,

2922,

a

involving

worry.

buy

spending

2955,

his

varying

own

felt

was

leading.

RT

suggested

cutting

RT

By

darkening.

met

with

2946,

866,

of

1991

Barry

Armstrong

that

for

Morgan,

documented

the

2962,

month

he

that

he

a

the

told

provided

him

company's

advisors

31,

also

to

and

Dresdner

financial

with

Dresdner

do

4915-4921.

Taft

1990,

was

(RT

refused

economic

The

he

the

4476-4477,

chief

"Don't

that

to

Armstrong

Dresdner's

not

inappropriate

"entitled"

Hamilton

his

"] .

him

was

RT

[Christie:

....

His

used

matter

5386

over

17

had

so.

[Rosen:

ranch

3009-3011,

did

personal

1226

RT

an

either

staffing;

October

had

never

was

a

Brooks.

but

5078.

2966-3005.

ending

Garth

profit

was

4483,

and

the

with

lifestyle

cloud

regularly

2956-2957,

buy

he

2954,

the

George

advisors

and

883-890,

January

was

statements

salaries

by

used."],

his

Armstrong

entertainment

[Hargis],

to

that

held

it

Armstrong's

and

a

weren't

but

he

at

868

money

He

claimed

that

RT

funds

times

lifestyle

either.

or

3345,3551.

party

advisors

ranch

excessively

3012),

statement

assured

Taft

_used

At

Eve

ranch

Taft.

Hamilton

with

Armstrong

the

the

RT

500

Year's

resell

Hamilton

Armstrong

million.

for

New

He

to

$i

3540-3541.

to

money

of

barbeque

4901-4903.

own

RT

cost

had

opportunity

869,

a

officer,

financial

deterioration.

financial

showed

a

negative million

shareholder's in

Hamilton

16 months.

Taft

for

A

in

quarter

late

of

Express

1991

the

new

In

Mike

it

January

Hargis

meeting

1991

(RT

at

be

old

$7.8

and

Hamilton

Taft;

their

tax

payments

funds

from

those

who

had

recently,

891-892,

said

personal

fortune

obtained

delinquent

who

3020-3021.

Armstrong

Armstrong

or

was

from

there

to

RT

was

RT

problems

Taft

to

taxes.

RT

because

and

were

3022-3023.

18

under

of

resigned

to

take

checks

notices).

RT

expressed

concern,

liquidate

his

Morgan

his

a

clients

not

their

penalty

would

to

which

had

insufficient

Morgan

2952),

careful

3022.

all

of

while

decide

meeting

he

in

president,

(RT

(being

the

on

764-770.

received

in

quarter

Dresdner's

them

the

million

million,

Morgan

recently

$27

first

complained,

those

the

of

penalties

the

the

$1.3

withheld

dishonest

Hamilton

in

wanted

were

pay

being

taxes.

had

owed

a loss

effect

escalating

summoned

recently

When

if

law

into

For

million.

he

have

go

rapidly

controller,

would

held

to

withheld

Armstrong

839),

had experienced

4145-4146.

payments

would

itself

mean

3776,

the

of $9

At the end of 1990 Dresdner

scheduled

would

under

and a loss

RT 3015.

law

763,

tax

penalty

law

tax

1991

RT

$11.8 million

(which

the year). the

payments.

Federal

the

change

of

RT 3006.

$68 million

$17.5 million

second

equity

knew

assets

that

had

been

to

pay

the

as

did

Hargis

(who

learned

for

withheld).

RT

the

$30

million

he

for

the

interest

for

$15

million

and

its

served

obligations.

RT

With

$1.4

million

heliport Gulfstream

months

G-4

for

4967-4971)

4197)

at

;

the

discovered

tell

at

a

he

; paid

and

to

what

clients

as

of

add

1991

that

3004,

RT

for

Armstrong

to

by

not

one

even

Taft

The

oil

enough

tract

income

4040-4041.

A

real

parcels

estate

4041-4042.

another

to

second

And

$23.8

of

for

larger

Hamilton

happening

Armstrong

him

5419-5432)

more

a

purchased

shuttle

4967,

sought

a

with

Hamilton

bond

the

ranch

million

of

5239-5243.

(RT cost

being

inadequate.

secured

was

million.

expanding

was

there

collateral

$735,000

explored

March

$i

ranch

were

to

was

was

RT

4960-4962

which

ranch

In

to

the

wells

and

pending

(RT

at

oil

4943-4948

disaster

taxes

back

collateral

bond.

than

client

bonds

collateralized

less

cattle

the

the

was

for

issued

the

million,

on

that

3023.

had

for

$i

pay

time

borrowed,

bond

purchased

894,

Armstrong

money

purchased

first

891,

Although

for

the

than

a

and

;

$1.38

his

criminal

the

master

Taft

to

controller

client

had

19

funds

embezzled

to

19 for

six

(RT

retainer

foot

RT

$I00

(RT

main

house

4908-4912.

Steve

and

the

passenger

assistant

square

bedroom.

a

million

defense

13,000

for

guests

leased

stewardess/traveling

a

helicopter

Solodoff

held

million

a

meeting

from

Hamilton

Taft,

obligations,

that

and

4075-4085.

Taft

clients

Solodoff's

charges

was

on

"run

appointed

C.

him:

safe

could

funds;

its

not

that

he

caused

taxes

1171-1181,

Armstrong

Hamilton

failure

of

breach

to

not

to

be

Taft's

invest

with

fiduciary

could

them

sued,

old

tax

RT

all

that

all

days

and

had

and

of

there

Wyle

was

4827.

At

the

opinion

highly

liquid,

reasonable

duty;

and

time

prepared

which

said

short

prudence

risky

2O

attorneys

paid

Hamilton

in

for

due;

that

Taft

used

their

Taft

to

Hamilton

funds

by

that

term

could

investments

to

if

1064-1069,

his

GCM

short

liability

of

at

when

Taft

criminal

1049-1055,

Victims

used

Hamilton

RT

owners

be

deficit

loan

civil

be

to

how

the

His

his

only

clients

not

legal

in

to

Within

Taft

paid.

prior

invested

of

should

a

pay

scheme.

letter

From

Hamilton

disclose

faced

saw

a

was

Withheld

taxes

to

he

also

Ponzi

2461-2466.

Taft

funds

that

4790,

a

informing

RT

over

that

3666,

running

to

3196-3197.

client

he

used

sending

Hamilton

took

that

and

be

false.

Armstrong

should

being

3197-3200)

misrepresent

clients;

should

by

investments;

others;

for

responded

RT

that

were

was

bank,"

Armstrong

advised

he

the

funds

Armstrong

were

Information

When

tax

(RT

trustee.

The

term,

that

Armstrong

Hamilton

a

new

he

1149,

takeover

Pettit

&

client

Martin

funds

investments;

result

could

in

be

claims

subject

to

claims

Armstrong

the

paying

legality

to

former

Armstrong

were

not

from

was

same

time

terminated

Bruner

in-house

that

Hamilton

that

limited

4836-4839)

their

loan

how

and

funds

Patrigo

Hamilton

to

funds

was

not

Taft.

clients

Patrigo

RT

that

4847-4848.

in

and

criminal

21

hired

William

that

he

were

learned

denied

the

Patrigo

Armstrong

created

a

funds

unfettered

charges.

payments

When

1227.

Hamilton

RT

being

that

trust

(RT

use

Taft

improper

a

funds

RT

client

by

Armstrong's

GCM.

clients

that

sued

about

advised

GCM

Hamilton

at

invest

said

tax

and

expected

companies

result

aware

its

from

Armstrong

Patrigo

could

never

by

1210-1220.

with

with

4834.

that

supported

and

the

was

alleged

his

checks

funds

4800-4804)

4810.

as

4792-4796,

Armstrong

Taft

affiliated

could

RT

well

about

Armstrong

were

1220,

RT

4846.

1206,

who

Dresdner,

Hamilton

RT

GCM

Bruner,

contracts

that

ask

relationship

counsel.

Taft's

funds.

client

left

not

when

Taft.

his

holding

transferring

and

(RT

(as

was

1990

profitable

GCM

Taft

did

was

Bob

happening

from

1144,

of

Hamilton

this

he

RT

January

counsel,

that

his

and

that

transferred

as

time,

in

4782-4785.

Hamilton

checks.

in-house

After

that

on

Dresdner

companies

RT

withheld

holding

learned

Taft

fact

taxes

of

first

fraud.

intentionally

accountants)

not

of

of

could

use

not

of

4840-4842.

withheld

Armstrong

at

intended

do

to

so,

but

to

Armstrong

resigned

take

from

the

board

July

not

be

able

the

payments

to

of

Dresdner

in

selective

legal

1989

forward

Armstrong

make

the

payments

due

He

account,

obligations

other

than

sales

about

his

applied

Even

to

when

blamed

was

checks

the

afraid

payment

to

if

of

government

the

payments.

(RT

4849),

of

word

new

a

got

Taft

ones.

presented

RT

for

would

be

about

other

out

what

RT

lose

4755,

OF

used

did

not

4813,

staff

term

for

tell

were

RT

letters

to

being

4743.

clients

Armstrong

happening

with

clients

and

that

Armstrong

4819.

evidence

his

personal

client

existing

checks.

short

not

4856-4858.

was

when

ARGUMENT

sufficient

22

sales

clients.

back,

RT

hold

a

for

some

mistake.

would

were

funds

held

about

his

into

would

clients

to

He

from

of

its

what

went

tax

Taft

forced

4524-4526.

I_dd.

4832-4833.

of

funds

to

appeared

Hamilton

all

not

Patrigo

Armstrong

knew

client

obligations

and

advice.

those

RT

tax

because

payments

SUMMARY

The

make

initially

taxes.

on

Hamilton

recruit

Armstrong

intentionally

non-payment

checks

unable

were

that

most

use

tax

advised

concerned

current

overdue

it

funds

and

that

that

not

all

investment

or

tax

and

was

because

investments

and

advice

4985.

staff

he

that

were

clients

payments

assets

not

From

told

liquidate

only

4752,

future

did

interested

RT

withhold

tax

be

intended

to defraud

proved

that

payments time,

Hamilton

Armstrong

or to pay the

Taft

used the

the

funds

wrongfully

proved

that

Hamilton interstate

tax funds taxes

converted

and

Taft

to make

to pay taxes

for

personal

on

expenses

of others. sufficient

and

caused

clients

obtained

taken

fraudulently

then

The government

promising

transportation

Armstrong

Taft

Hamilton

presented

interstate

clients.

by falsely

delinquent

The government caused

induced

to Hamilton

and then

Taft's

evidence of

securities

by

fraud.

induced

those

that

traceable

The

client

funds

to

be

Armstrong to

government

to

pay

placed

funds

to

in

commerce.

The

court

Voigts

offered

against

penal

properly

by

excluded

Armstrong

interest

the

because

under

sworn

it

Rule

Statement

was

804(b)

not

(3),

a

of

Keith

declaration

Federal

Rules

of

theory

of

Evidence.

The

court

properly

defense

instruction.

did

accurately

not

given

contact

error

with

harmless

The

state

presented

Armstrong

refused

the

jury

in

the

give

instruction

argue

was

appeal

faith

that

the

erroneous

the

23

not

legally

defense.

good

of

Armstrong's

was

Armstrong's

Armstrong's

cannot

to

The

correct

and

instructions

defense.

trial

because

court's

th_s

co-defendant,

ex-parte

Court

Fowles.

found

any

In

any

event,

any error

was harmless

beyond a reasonable

doubt.

ARGUMENT

I.

THE

EVIDENCE

WAS

SUFFICIENT

TO

SUPPORT

ARMSTRONG'S

CONVICTIONS

A.

Standard

Evidence

the

crime

105

F.3d

(1997);

1995)

beyond

reviewing

Cir.

citing

v.

of

reasonable

Hubbard,

96

v.

Goode,

S.

F.3d

814

227

(9th

Cir.

1979)).

provlnce

of

Hernandez,

Ct.

857

_The

of

witnesses,

draw

States

852,

any

elements

v.

118

307

exclusive

reviewing

prosecution,

States

F.3d

U.S.

if,

essential

denied,

443

credibility

and

the

63

the

the

United

cert.

Virqinia,

the

to

found

doubt.

respect

States

The

Government

That

Armstrong

this

have

Contreras,

v.

conviction

favorable

Cir.),

v.

a

the

fact

resolve

inferences

from

proven

1223,

(9th

Cir.

F.2d

1226

1353,

1355

(9th

1987).

B.

the

(9th

must

United

most

could

conflicts,

United

support

reasonable

determine

evidentiary

facts."

a

Jackson

court

to

fact

States

(citing

to

light

1332

United

finder

the

of

1330,

Review

sufficient

in

trier

the

1996)

is

evidence

rational

of

victims

conclusion

Armstrong

contends

in

Established

Beyond

Engaged

that

this

case

by

cobbling

were

In

the

A

A

Scheme

government

defrauded.

together

24

AOB

disparate

Reasonable To

Doubt

Defraud

failed

to

prove

21.

He

reaches

facts

to

his

that

liking

while

ignoring

ignoring

the

those

appropriate

i.

pointing

to

standard

Armstrong

of

improperly

his

guilt,

thereby

review.

diverted

funds

from

Hamilton

Taft

Armstrong

there

was

n__ooproof

contends

that

restricted

24.

To

the

that

thus

he

taxes

to

1171-1181,

3666,

which

said

that

short

term

investments,

prudence

risky

and

could

his

Taft's

limited

how

and

funds.

that RT

The

the

attorneys

short

term,

with

(RT

to

could

invest

expected

themselves

did

25

not

duty,

fraud

him

a

funds

unfettered

use

allow

term

long

liquid,

reasonable

created

client

1149,

opinion

highly

with

of

that

1065,

in

23-

investments

4846.

contracts

GCM

legal

advised

clients

AOB

fiduciary

claims

Patrigo,

its

of

not

at

Martin

invest

that

wished.

safe

invested

breach

was

1049-1056,

&

to

of

he

his

failure

subject

never

however

be

trial,

Armstrong

funds

Pettit

should

at

diverted

client

due

counsel,

Taft

clients

for

claims

contracts

Hamilton

by

had

be

in-house

told

when

that

in

of

them

paid

he

were

use

used

funds

result

investments

Hamilton

4839)

4827);

could

4785);

be

client

use

was

be

adduced

funds

could

only

had

"facts"

client

he

could

on

Taft's

contrary,

funds

that

based

Hamilton

and

client

and

claims,

(RT

and

4782-

that

trust

that

(RT

4836-

of

their

investments,

but

payments

when

2649-2650,

be

the

due

by

the

taxes

Bank

Taft.

Taft

had

lacked

to

disclose

the

problem.

make

long

his

to

actual

rejected

use

his

(RT

3361)

AOB

3362);

terms

of

funds

2483,

to

2632,

make

would

remitted

2699);

current

which

meant

of

overdraft

an

(AOB

24-25),

transferring

Once

to

problem

RT

were

time

funds

and

payments

there

was

no

out

Armstrong

taxes

and

withhold

1336-1341.

he

investments

to

this

before

of

made

a

the

that

Hamilton

conscious

rather

Armstrong

_fill

at

Hamilton

realized

taxes

While

undermines

yet

funds

pay

account

than

contends

hole"

contention

(AOB

and

the

he

25),

jury

story.

Finally,

funds.

the

they

problems

funds

conceal

2584-2592,

the

2834),

1333-1335.

decision

2477-2482,

the

money

the

investments.

begun

sufficient

make

that

cancellation

his

would

expected

2379-2382,

term

for

1294-1297,

from

2798,

the

Taft

2378-2386,

enough

lonq

Chicago

Armstrong

RT

chose

(RT

blames

of

happened

due

2697-2699,

Armstrong

the

only

only

for

RT

clients

Taft

advanced

available

Hamilton

e._.,

the

were

e.____q_.,RT

money

(see,

Hamilton

clients

(see,

that

2693-2697);

used

until

stated

Armstrong

25.

he

including

contends

Armstrong's

spent

$8.4

$445,000

there

salary

million

lust

from

for

for

26

is

no

all

personal

cars,

jewelry

evidence

sources

expenses

and

he

diverted

was

$459,000

(RT

furs.

3350-

RT

3354,

3359.

Armstrong

the warnings

of his

spent

attorneys,

aware of Hamilton

Taft's

the

tax

change in the

checks,

he

personal

client

funds

2.

deteriorating

by

his

own

he

claims

that

contract

with

Hamilton

Taft.

Hamilton

Taft

promised

it

he

contracts

due

and

(RT

the

Taft

only

due.

RT

contracted

due.

RT

would

pay

stated

that

2378-2386,

2379-2382,

with

not

more

condition

ability

and

to "roll"

irresponsibly

for

Hamilton

He

time

is

pay

some

his

Taft

reduced

time.

the

2632,

Taft

was

on

it

tim_e,

the

not

be

he

when

really

Yet,

the

payments

used

by

the

taxes

would

agreed

to

when

2693-2697),

until

They

fiction

that

27-28.

would

contract

anyone

arguing

make

remitted

had

from

2649-2650,

2699.

2590-2591,

to

would

funds

were

to

fact

AOB

2584-2592,

they

clients

induce

taxes

Taft

that

he

induced

fraudulently

Hamilton

Hamilton

argues

though

separating

would

taxes

2483,

2376-2378,

Armstrong

did

expected

the

and advisors;

diverted

difficulty

2477-2482,

clients

from

has

the

despite

benefit.

again

meant

even

Armstrong fraudulently with Hamilton Taft

he

oblivion

financial

clearly

Armstrong

when

into

would end his

spending

Armstrong

to

Taft

accountants

law that

responded

benefit.

Hamilton

not

to

Hamilton

were

have

pay

taxes

2396-2397.

not

aware

27

that

clients

were

being

when

told

payment

would

received

weekly

managers

and

is

not

knew

to

make

copies

be

forced

to

concerned

There

hold

also

Armstrong

his

direct

Paper

that

(RT

2391.

Hamilton

Credit

which

segregated

3097-3098);

Taft

aware

the

funds

into

were

of

to

a

promises

them.

engaged

claims

in

that

28

to

that

it

would

not

RT

(RT

to

4524-4526.

clients:

contract

be

with

RT

clients

or

2387-

Commercial

no

4868.

these

with

commingled

2797-2810);

Hamilton

a

able

was

a

3317-3318,

made

with

be

commingled.

Clearly

contract

into

contract

RT

not

misled

funds

accounts

created.

the

he

clients.

enter

were

Armstrong

and

Armstrong

to

contention

would

but

told

their

segregated

Armstrong

Armstrong

allow

that

clients

he

Taft's

Moreover,

4985),

staff

that

Hamilton

Taft

its

that

In

documents,

it.

of

Taft

entered

induced

3.

4752,

not

disregarded

fraudulently

Finally

would

accounts

intentionally

(RT

Hamilton

required

certainly

all

sales

of

Hamilton

for

evidence

authorized

withheld

was

what

and

that

29-30.

each

rejected

forward

checks

A0B

from

jury

payments

about

was

Scott

tax

due.

contracts

the

1989

when

reports

of

and

July

the

made

status

credible

from

be

Armstrong

clients

were

and

knowingly,

Taft.

cover-up

there

was

no

cover-up,

that

he

"did

nothing

contrary,

to conceal

Armstrong

He concealed tell

not

concealed

the withheld

a "story"

would

to the

do his

was happening

that

that

new

obligations,

tax

and

that

Armstrong

"[w]ithout

exception,

employee

are

Wyle

Baly

and

accurate.

to

that

ordinary

4 inaccurate notified

was

Armstrong

is

and

tax

had

this

As

were

up

was

Armstrong.

by

showing

what

filed

to

tax

(AOB

31);

RT

that

former

the

testimony

existence

deceive

States

they RT

of

persons

v.

receivednotice

delinquent.

29

Hamilton

of

remarkably

the

United

clients

were

by

claims

calculated

been

who

tell

scheme.

saying

added.

comprehension."

payments

old

Ponzi

letter

to

from

pay

a

made

emphasis

proven

that

to

discovered

meeting

million

to

a

charges

covering

a

running

Solodoff's

claims

returns that

58,

held

used

with

"reasonably

prudence

being

such

Solodoff

$i00

responded

one

defraud

embezzled

was

revealed,

only

and

Armstrong

ER

those

want to disclose

instructive.

funds

were

all

false."

The

Intent

scheme

client

funds

4075-4085.

is

had

he proposed

and threatened

did not

step.

customers.

incident

Armstrong

To the

at every

employees,

and he fired

losing

to

from

Armstrong

to avoid

what was happening

Taft,

IRS,

AOB 31. 4

what he was doing

checks

bidding;

The Solodoff

clients

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1257,

its

the

1267

the

to

harmless

States

v.

to

Had

have

would

analysis,

jury

task.

might

answers

Frazin

the

devised

were

been

the

scheme.

have

been

these

the

counsel

the

the

questions

beyond

any

possible

Barraqan-Devis,

133

1998).

communication

transcript

F.2d

have

instructions

direct

of

case,

request

in

to

have

Cir.

time

some

the

forth

not

See

at

976

to

completion

ex

and

and

route.

instructions

redacted

jury

would

scheme,

Lothian,

In

aiding

question

scheme

from

5533-5537.

regarding

the

need

court's

1289-1290

ex

have

remarks

5529-5533;

jury's

onlydifferent

Armstrong.

last

RT

message

Fowles

to

See

the

factors

toward

the

--

he

introductory

appropriate

the

and

to

not

the

question

referring

safe,

consulted,

same.

sending

By

the

instructions

Assuming

need

United

effect

short

answer

intent.

took

been

short

if

Cir.

jury

second

sufficient

Applying

the

jury's

Fowles

requisite

court

the

the

"no,"

the

instructions.

to

abetting,

(gth

for

occurred

for

to

61

the

the

when

testimony

jury.

Had

the

of

court

Dora

counsel

Dunn

been

by

notified

have

there

are

received

the

instruction

instead

been

refused

any

Whichever

would

of

have

contrary

insignificant

3)

the

the

jury

reasons, was

court

the

the

the

evidence

compared

to

ultimately

be

presumed

this

erroneous

real

of

Armstrong's

gave

to

testimony

stringent

have

2)

of

ex-parte

communication,

harmless.

62

jury'.s

in

other

this

to

guilt

Dunn's

request

unlikely.)

argument

limiting

followed.

have

limiting

result

no

would

limiting

highly

is

jury

would

the

the

overwhelming;

the

the

appears

happened,

the

transcript

rejected

latter

the

with

with

have

There

was

but

the

together

have

exhibits

did

court,

(This

same.

possibilities:

it

would

might

must

the

jury

reread.

I)

as

by

court

the

given:

and

to

these

been

witnesses

given

read

or

realistic

transcript

later

instruction,

and

three

the

from

other

testimony

witnesses;

instructions

For

case

all

like

was

and

that

these

the

others,

CONCLUSION

For

sentence

Dated:

all

of

the

108

_?_/

reasons

months

/_

stated

should

above,

be

Armstrong's

conviction

affirmed.

Respectfully

submitted,

ROBERT

S.

United Northern

States Attorney District of

J.

MUELLER,

DOUGLAS

III

California

WILSON

Chief,

Appellate

GEORGE

D.

Assistant

Section

HARDY United

States

Attorney

SM T A Special

Assistant United

Attorneys UNITED

63

States

for STATES

Attorney

Plaintiff-Appellee OF

AMERICA

and

NOTICE The

affirmed

this

Court.

C.A.

No.

any

other

the

instant

conviction

on

of

June

2,

caption

97-10513,

NDCA

cases

pending

RELATED

co-defendant

1999,

The

OF

in

was

No.

an

Richard

unpublished

United

CR

before

CASE

States

94-0276-CAL.

this

Court

A.

Fowles

opinion

v.

was

issued

Richard

I

which

am

A.

not

are

related

Dated: SMETANA Assistant

64

U.S.

Fowles,

aware

appeal.

Special

by

Attorney

of

to

CERTIFICATE

I

(except

typeface

in

certify

as

of

that

ten

Rule

Dated:

_//!

by

brief

Rule

characters

with

32

COMPLIANCE

this

permitted

compliance

Circuit

OF

the

CIRCUIT

contains

32(c)),

per

14,000

(e) (2) (ii)

WITH

inch,

word

RULE

32(e)

double-spaced

which

and

maximum

uses

contains

length

lines

monospaced

13,472

as

specified

.

/_ Special

Assistant

65

U.S.

words,

Attorney

in

CERTIFICATE United

States v. Connie Armstrong, Case No. 97-10392 (NDCA)

The undersigned Attorney

hereby

for the Northern

competent

to serve

papers.

APPELLEE'S

BRIEF,

at his address

as follows:

certifies

District

OF SERVICE

CR-94-0276-CAL

that she is an employee

of California

The undersigned

to be served

further

certifies

A. N1CKERSON,

454 Las Gallinas Avenue, San Rafael, California 1 declare Executed

under

penalty

of perjury

the 1 lth day of August,

of the Office

of the United States

and is a person of such age and discretion

this date by regular

DAVID

Jr.

that the foregoing

that she is causing

United

States

Suite 183 94903 is true and correct. California.

Attorney's

two copies

mail the counsel

Esq.

1999, at San Francisco,

United

States

Office

to be of the

of record

ADDENDUM

1

FILED *Corrected June 4, 1999 NOT FOR PUBLICATION

JUN 02 1999 CATHY A. CATTERSON, CLERK U.S. COURT OF APPEALS

UNITED

STATES

COURT

FOR THE NINTH

UNITED

STATES

OF APPEALS

CIRCUIT

OF AMERICA,

No. 97-10513

Plaintiff-Appellee,

D.C. No. CR-94-00276-2-CAL

V.

MEMORANDUM

RICHARD

I

FOWLES, Defendant-Appellant.

Appeal from the United States District Court for the Northem District of California Charles Argued

Before:

SNEED, Richard

States District

A. Legge,

Judge,

Presiding

and Submitted May 10, 1999" San Francisco, Califomia

MICHEL

A. Fowles

District

2 and THOMAS,

("appellant")

Court for the Northern

appeals District

Circuit

Judges.

from his conviction of California,

in the United

the Honorable

Charles

i This disposition is not appropriate for publication and may not be cited to or by the courts of this circuit except as may be provided by 9th Cir. R. 36-3. Honorable designation.

Paul R. Michel,

United

States

Circuit Judge

for the Federal

Circuit,

sitting

by

A. Legge,

Presiding,

Armstrong pretenses

on six counts

("co-defendant") under

18 U.S.C.

court committed

reversible

trial transcript

in a scheme

§§ 1343, 2314 (1998). error by permitting

that he was not present

to 28 U.S.C.

first argues

provided

a portion

disagree.

Once deliberations

testimony

to be unduly

(gth Cir. 1985).

against evidence, United

money

argues

contends

Connie

C.

by false

that the district

a portion

of the

that it was reversible

ex parte with the jury.

Finally,

appellant

6, 1997, and that it was reversible

in his absence.

We have jurisdiction

pursuant

§ 1291 and affirm.

Appellant

rereading

and obtain

the jury to reread

at trial on January

court to proceed

co-defendant

Appellant

He further

court to communicate

error for the district

and abetting

to defi'aud

during jury deliberations.

error for the district argues

of aiding

that the district

of the trial transcript

it during

deliberation,

the defendant,

whether

the jury

reversible

error when it

its deliberations.

We

court must not allow particular

See United

this Court

the importance

and the manner

to the jury during

begin, the district

emphasized.

To determine

court committed

States v. Binder, unduly

emphasized

looks to "the quantum

of the [reread]

in which the [testimony]

testimony

testimony

by

of other evidence in relation

was [presented

States v. Sacco, 869 F.2d 499, 502 (9th Cir. 1989).

769 F.2d 595,600

to other

to the jury]."

In this case, there was no undue emphasis. First, there was an overwhelming amount

of evidence

some thirty witnesses

witnesses testified

provided

specifically

furnished

jury ensured

evidence

and permitted

exhibits.

scheme.

Second,

emphasis.

the testimony

from United counsel

to review

on the testimony

next contends

The Constitution, Procedure

every stage of the trial."

furnished

that the district

a criminal

See, e_&.., Rogers

Before

issued precautionary

it corrected sending

v. United

(9th Cir. 1991),

deliberations.

his right to be present Rule of

the right to be present States,

the

instructions

Court cases and Federal

defendant

to the

In sum, there was

to the jury during court violated

of

court initially

to the jury,

for inaccuracies.

a long line of Supreme

43 guarantee

the transcript

936 F.2d 406, 411-12

the transcript

the

the outcome

the district

instructions

court twice

States v. Lujan,

although

of other witnesses.

provided

Although

or give precautionary

the district

while others

it did not determine

corroborated

called

Numerous

intent,

and sent the jury back to reach a f'mal verdict.

emphasis

Appellant

Criminal

of the general

in which the district court ultimately

jury back to re-deliberate, taken verbatim

its case, the government

fraudulent

to the jury was important,

failed to notify the parties

at trial.

as to appellant's

that there was no undue

its own mistake

In proving

more than a hundred

For the most part, it merely

Third, the manner

no undue

appellant.

and offered

circumstantial

testimony the case.

against

"at

422 U.S. 35, 39, 95 S.

Ct. 2091, 2095,

45 L. Ed. 2d 1 (1975).

violated his constitutional when it proceeded it engaged

Appellant

contends.that

the district

court

and Rule 43 right to be present on two occasions;

in his absence

first,

during trial on January 6, 1997, and second,

in ex parte communications

with the jury during deliberations.

when

We reject

both contentions. First, there is no support courtroom

on January 6, 1997.

proceedings

because

transportation

appellant

problem.

atter appellant's

counsel

during trial or in a post-trial

of claim").

and a witness

appellant's

were delayed

motion.

the start of the

apparently

by a public

for both sides recall appellant's

United

States

only

Although

counsel

1485, 84 L. Ed. 2d 486 (1985)

"although

Nor does appellant

appellant's

object to the proceedings

See generally

where defendant

motions,

presence,

Nor did counsel

U.S. 522, 528, 105 S. Ct. 1482,

make any post-trial

On that day, the judge postponed

assured the court that appellant was ready.

was absent.

43 fights were waived

assertion that he was absent from the

The judge stated that the court was ready to proceed

court did not note expressly that appellant

for appellant's

the

did not state at any time

v. Gagnon, 470

(holding

that Rule

did not object at time of proceedings

or

post-trial hearings

this sort

refute the govemment's presence.

may otten resolve

assertion

For these reasons,

appellant was present on January 6, 1997. 4

that trial counsel

we conclude

that

Second, although the district court erred when it communicated ex parte with the jury, that error was harmless. Violations of Rule 43 are subject to a harmless error analysis under Federal Rule of Criminal Procedure 52(a).. See Rogers v. United

States, 422 U.S. 35, 39-40, 95 S. Ct. 2091, 2095, 45 L. Ed. 2d 1 (1975)

(citation

omitted).

demonstrate,

see United

1996), "beyond the verdict

In order to show harmless States v. Throckmorton,

a reasonable

obtained."

Cir. 1986) (citing

States v. Frazin,

v. California,

did not affect the verdict.

communications

nor the manner

to appellant.

To repeat,

For the foregoing

in which

the evidence reasons,

(9th Cir.

of did not contribute

780 F.2d 1461,

1469-70

to

(9th

386 U.S. 18, 24, 87 S. Ct. 824, 828, 17 L.

In this case, the government

communications

must

87 F.3d 1069, 1072-73

doubt that the error complained

See United

Chapman

Ed. 2d 705 (1967)).

error, the government

Neither

demonstrated the content

that the ex parte of the

they were made resulted

against

we affh-m.

him was overwhelming.

in any prejudice

ADDENDUM

2

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