Cca Selected 1997 Documents

(Rev 8-29-85)

FBI TRANSMIT VIA: IX] Teletype Facsimile AIRTEL

PRECEDENCE: hnmediale

o IZJ o

o o

CLASSIFICATION: TOPSECRET SECRET CONFIDENTIAL UNCLASEFTO IXI UNCLAS

o o o o

Priority Routine

Date

FRANCISC~~3255)

FM FBI SAN

1/14/97

(P)

TO LEGAT LONDON/PRIOR TY/

I

LEGAT PARIS/PRIORITY/! DIRECTOR FBI/ROUTINE/ BT UNCLAS CITE:

//3790//

PASS:

FBIHQ.- IRU I, ROOM 7458.

SUBJECT:

CONNIE CHIP ARMSTRONG, JR;

1

, -

FORMERLY DBA, HAMILTON-TAFT COMPANY, FBW (D), MF, ITSP, 00: SAN FRANCISCO. THE ABOVE CAPTIONED SUBJECTS ARE CURRENTLY IN TRIAL IN SAN FRANCISCO FOR THE FRAUDULENT DIVERSION OF OVER $50 MILLION OF HAMILTON TAFT CLIENT FUNDS DURING A 1989 AND ENDING EARLY 1991.

i

f4f

eJ tJ{

...J0

.

Approved:

~~

Time Received:

7

BEGINNING IN

THE SUBJECTS BASICALLY TOOK OUT

SIGNATURE LOANS FOR THESE FUNDS.

,,/

PERI~D

UPLOADED ACS DATE ()""->oJ-;$.....',-1

THESE LOANS ARE NOT PROPERLY tiEAIlCHED·'3ERlAUZED~-'::nt,J'-

'TV ~

INDEXED

-

9.....7 .:--___

Or.gmal liIenam . TeJprep filename:

F''''D

-::n/,- J

U.£.

0:.!:'

-,

-

- -

lJO {vJ 0 I <j

',' _ ~.'

fJD1/J.01 I.L-

I01b /utl ISN: C'9-0 7 FOX DATE & TIME O~ ACCE~ANCE: N _Jd.0 0/7~'=------'jT-7-i./-7-·:t=.-.-J....-CC-A1

MRI/JULIAN DATE:

.'9~,j)-~r

- C)3z.56 - /31

APAGE 2 196D-SF-93255 SECURED.

I

UNCLAS

THE UNITED STATES ATTORNEYS OFFICE BELIEVES THAT THE

I

DEFENSE .-----.1.,,

I

-----

THE UNITED STATES ATTORNEY IN SAN FRANCISCO UNDERSTANDS, AS PART OF THE DEFENSE, THESE SUBJECTS MAY CLAIM

I

bS

DOCUMENTS GATHERED DURING THIS INVESTIGATION INDICATE THAT ASSOCIATED LENDERS FINANCIAL CORPORATION IS ASSOCIATED WITH A

L...

IPARIS,

FRANCE,

75007". CORRESPONDENCE DATED 12/12/90 DISCUSSING A PROPOSED $100 MILLION LOAN BETWEEN THE CAPTIONED SUBJECTS ANDI~ AND

I

IHAS

BEEN DISCOVERED.

THIS CORRESPONDENCE

ALSO MENTIONS A SAUDI ARABIA CITIZEN BY THE NAME OF

~

~

I

_

1

IMAY BE THE PERSON NEGOTIATING THIS LOAN FOR THE

CAPTIONED SUBJECTS.

_

'PAGE 3 196D-SF-93255

UNCLAS

LEAD(S) : LEGAT LONDON AT LONDON, ENGLAND:

CONDUCT LOGICAL INVESTIGATION

INTO THE BACKGROUND AND BUSINESS PRACTICES OF ASSOCIATED

1BOWATER

LENDERS FINANCIAL CORPORATION AND 1 13TH FLOOR, 1 EDINBURGH GATE, LOND.

HOUSE,

DETERMINE IF THIS IS A

LEGITIMATE BANKING OR FINANCIAL INSTITUTION.

CONTACT LOCAL

LAW ENFORCEMENT SOURCES REGARDING CIVIL AND/OR CRIMINAL COMPLAINTS OR CONVICTIONS OF THIS LONDON COMPANY.

IF

POSSIBLE, DETERMINE IF THIS BUSINESS HAS $100 MILLION OF ASSETS. PLEASE FORWARD ALL PERTINENT INFORMATION TO SAN FRANCISCO, SQUAD 20, SA WILL HATCHER.

THIS INFORMATION IS

NEEDED WITHIN THE NEXT TWO WEEKS IN ORDER TO BE OF ASSISTANCE WITH THE ONGOING TRIAL. LEGAT PARIS PARIS, FRANCE:

CONDUCT LOGICAL INVESTIGATION INTO ~

THE BACKGROUND AND BUSINESS PRACTICES OFI PARIS, FRANCE 75007.

~~D~E:T:E:RM-:I-N-E--I:F~I~_=_=_=_=_=_=_~_-_-_-_-_-_~_ IHAS

ATTEMPT TO

ACCESS TO $100 MILLION IN

b7C

'PAGE 4 196D-SF-93255 FINANCIAL RESOURCES.

UNCLAS CONTACT LOCAL LAW ENFORCEMENT SOURCES

REGARDING THE CRIMINAL HISTORY

OFI

bie:

PLEASE FORWARD ALL PERTINENT INFORMATION TO SAN FRANCISCO, SQUAD 20, SA WILL HATCHER.

THIS INFORMATION IS

NEEDED WITHIN THE NEXT TWO WEEKS IN ORDER TO BE OF ASSISTANCE WITH THE ONGOING TRIAL. BT

_ _ _ _ _-=~,........,=""....,.,.,..,.",...."......IPARIS,F RANCE 2 ATTEMPT TO DETERMINE IF ASSOCIATE LENDERS FINANCIAL CORP. IS A LEGITIMATE BANKING AND/OR FINANCIAL INSTITUTION 3 ATTEMPT TO DETERMINE IF THERE (IRE ANy 91VIL AND/OR CRIMINAL COMPLAINTS OR CONVICTIONS REGARDINGL JOR ASSOCIATED b·lr: LENDERS. 4 IF POSSIBLE, DETERMINE IF THIS BUSINESS WOULD HAVE HAD $100 MILLION IN ASSETS PLEASE BE ADVISED THAT ANY INFORMATION OBTAINED WILL HAVE TO BE IN A FORMAT SUITABLE FOR UTILIZATION DURING THE TRIAL TO COUNTER THE SUBJECTS CLAIMS IF YOU HAVE ANY QUESTIONS REGARDING THE ENCLOSED b' INFORMATION OR THIS REQUEST PLEASE CONTACT ME AT 230-4030 USING OUR REFERENCE NUMBER 196D-SF-93255 THIS INFORMATION IS NEEDED BY 27 JAN 97 IN ORDER TO BE OF ASSISTANCE WITH THE ONGOING TRIAL. THANK YOU IN ADVANCE FOR ANY ASSISTANCE WHICH YOU MAY BE ABLE TO PROVIDE REGARDING THIS MATTER AND FOR GIVING IT PRIORITY HANDLING

ThiS document contains neither recommendations nor conclUSions of the FBI It IS the property of the FBI and IS loaned to your agency, It and ItS contents are not to be dlstnbuted outside your agency Any further dissemination requires wntten approval from the FBI Sent

SUBJECT:

iP ARMSTRONG, JR; 11..

CONNIE

L.

_

FORMERLY DBA, HAMILTON-TAFT COMPANY, FBW (D), MF, ITSP, 00: SAN FRANCISCO. THE ABOVE CAPTIONED SUBJECTS ARE CURRENTLY IN TRIAL IN SAN FRANCISCO FOR THE FRAUDULENT DIVERSION OF OVER $50 MILLION OF HAMILTON TAFT CLIENT FUNDS DURING A PERIOD BEGINNING IN 1989 AND ENDING EARLY 1991.

THE SUBJECTS BASICALLY TOOK OUT

SIGNATURE LOANS FOR THESE FUNDS. SECURED.

THESE LOANS ARE NOT PROPERLY

THE UNITED STATES ATTORNEYS OFFICE BELIEVES THAT THE

DEFENSE WILL CLAIM TO HAVE

COLLATE~LIZED

THESE PRIVATE LOANS

THROUGH UNVERIFIABLE OVERSEAS FINANCIER. THE UNITED STATES ATTORNEY IN SAN FRANCISCO UNDERSTANDS, a~VE

AS PART OF THE DEFENSE, THESE SUBJECTS MAY CLAIM TO ARRANGED A LOAN THROUGH A 11.-

1AT

"ASSOCIATED

LENDERS FINANCIAL CORPORATION, BOWATER HOUSE, 13TH FLOOR, 1 EDINBURGH GATl?, LONDON, SW1X7LT, ENGLAND, 589-9600". DOCUMENTS GATHERED DURING THIS INVESTIGATION INDICATE THAT ASSOCIATED LENDERS FINANCIAL CORPORATION IS ASSOCIATED WITH A

--

..JI

PARIS, FRANCE,

75007" .

CORRESPONDENCE DATED 12/12/90 DISCUSSING A PROPOSED $100 MILLION LOAN BETWEEN THE CAPTIONED SUBJECTS AND

1

1HAS

BEEN DISCOVERED.

ANDI

__

THIS CORRESPONDENCE

ALSO MENTIONS A SAUDI ARABIA CITIZEN BY THE NAME OF

I

_ _ _ _ _ _ _~~Y BE THE PERSON NEGOTIATING THIS LOAN FOR THE CAPTIONED SUBJECTS . ..,..,.,~-,.

,

bi:::

~

ROUTING SLIP

DATE:

3/;;5/77

TO'~~ f~ FILE NO: I9b A - sF- ;1-jd-S-:;-

FROM: RE

SUBJECT'~ CY~rrl.J.

As your

off~ce

is 00

~n

this case, the attached

or~ginal

documents are belng forwarded to you.

Thank you. Legat

Par~s

'J

/ q~)( 93CJ5r=·/4 SEAIr:HED

.. ' -

Sf.RJAlJ"';:::=-'.p IHOF.XEO -~FILEO

_

_I :

ifi1?2

APR 09 1997

RFPUBLIQUE

FRANC,\ISE

MINISTERE DE L'INTERIEUR

DIRECTION GENERALE DE LA. POLICE NATIONALE

LE DlRECTEUR CENTRAL DE LA POLICE JUDICIA IRE CHEFB.CN. FRANCE

DIRECTION CENTRALE DE LA. POLICE JUDICIAIRE ORGANISATION INTERNATIONALE DE POLICE CRIMINELLE

MONSIEUR L 'A TTIICHE LEGAL DE L'AMI1ASSADE DES ET.~ TS-UNIS D'JLVERIQUE 58 HIS RUE DE LA HOETlE 75008 PARIS

B. CN. FRANCE

PNIDCPJ/AEFl8.1INCBlMB/97/131/366 PARIS, LE 13 FE/'RlER 1997

SUIte il votre coumer reference 196 D - SF -93255 en date du 20/01197 concernant les nommes ARMSTRONG Connie et FOWLES Richard, j'at l'honneur de vous fatre savOlr que MonSieur Barb AL ZUBAIR, 5 avenue Fredenc Le Play - 75007 PARIS est mconnu des archives de la ThrectlOn Centrale de la Pollce JudlClatre n a par contre ete trouve trace aux archtves de la Bngade Fmanclere de la DirectIOn Centrale de la Pollce JudlClatre de PARIS, d'un nomme HARD AL ZUHAIR Saleh Ali ne en 1938 il ALZOBAIR (ARABIE SAOUDITE), de natJonahte saoudlenne, anCien admlIustrateur et P D G de la SOCIete FlNEXHOTEL, 30 boulevard Haussmann it PARIS 8erne, placee en redressement Judlclatre Ie 15/04/87

POUR LE DffiECTEUR CENTRAL DE LA POLICE JUDICIAJRE LE DffiECTEUR CENTRAL ADJOINT. CHARGE DES N'FAffiES ECONOMlQUES ET FINANCIERES

"nol:'~~C: l:I1'1~T"1

C

[]I

ArC MeA'

1\,,,, I "
n

" nn

Fer? ;)-/

/917

(

•

•

FD-302 (REV 3-10-82)

(

- 1. -

FEDERAL BUREAU OF rNVESTIGATION

Date oC transcription

0

5/29/92

t~e ~ternoon

of April 28, 1992, Special Agent Jreceived a envelope from a company known as Wallace Sc ; war z and Company, certlfled publlC accounts, 10830 North Central Expressway, Suite 400, Dallas, Texas,r TbiS, envelope contained a memo dated May 17, 1990, from \ __ . to CHIP ARMSTRONG regarding "the Rem~ngton d~lemma I'"'.--.m~e~--­ envelope also contained a letter dated January 3, 1991, to Mr. CONNIE C. ARMSTRONG, Jr., Chairman of th( Board Kniattsbridge company, Inc., Dallas, Texas, announcingL . res~gnation from this company.

75::1,

b7C

I

Finally, this envelope contained a letter to Mr. CONNIE C. ARMSTRONG, Jr., on the letterhead of an entity known as Assoc~ated Lenders F~nancial Corporation, dated DecemJ:=j' 1990, which ~s three pages in length and lS signed by Coples of these documents are attached to an cohsldered a part of th~s ~nterview form.

10""lg8"OO 00

by

I

-"4'-'/-'2"'8"'/...;9=2

8t

San Franclsco, Californlo3'lIc H 196A-SF-93255 SUB

~'r"""--------~ '_/--=:g...;l

b7C

oote dlCtoted

5_/_1_3_/_9...;2

_

ThLS document contaIn.! neither recommcndal1ons nor conclUSIons of the FBI IllS the property of the FBI and 15 foaned to your Bgency, It llnd 1t, con ten U are not to be dIStrIbuted outslde your agency

c:3'I

I

(06/0111995)

FEDERAL BUREAU OF INVES11GAll0N Precedence: To:

Date:

IMMEDIATE Attn:

San Francisco

FrOD:

Dallas WCC5 Contact:

Approved By:

Title:

SA will Hatcher

Acting SSA Peter A. Galbraith,

(214) 922-7261

GALBRAITH PETER A

Drafted By: case ID I:

Ol/l7/l997

Irec 196A-SF-93255

(Pending)

CONNIE CHIP ARMSTRONG, JR.;

......

1~~===~ ,......,...!t'ORMERLY dba HAMILTON TAFT AND COMPANYVICTIM; FBW; MF

Synopsis: Items provided for trial of CONNIE "CHIP" ARMSTRONG as requested by. San Francisco Division. AdDinistrative: Re: 1/16/97 telcall to Acting SSA Peter A. Galbraith regarding CONNIE "CHIP" ARMSTRONG. Enclosures:

Enclosed for San Francisco is one audio tape.

Details: Dallas has submitted to San Francisco the following items which were requested. *Cassette tape, #25-(l of 2), File #l96B-DL-66524.

1

1

MICHAEL J. YAMAGUCHI United states Attorney

2 3 41 5

JOEL R. LEVIN C~ief, Criminal Division RONALD D. SMETANA Special Assistant U.S. Attorney GEORGE D. HARDY Assistant U.S. Attorney

6

7

450 Golden Gate Avenue San Francisco, CA 94102 Telephone: (415) 436-6851

II

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA

10

UNITED STATES OF AKBRlCA,

) ) ) ) ) )

11

Plaintiff, 12

v. CONNIE C. ARHSTRONG,

JR.,

Iilnd

No. OR 94-0276 CAL All!'lI!'IDAVIT Oll!' WILLARD L. HATCHER, JR. Illi SUPPORT

OF GQVBRmU!JIIT'S EX-PARTE SUBHXSSION

) )

14

RICHARD A.FOlllrLES,

15

Dllfondanta. ) ---------------)

)

16

17

I, Willard L. Hatcher, Jr., state that: I have been a Special Agent with the Federal Bureau of

18 19

Investigation ("FBI") for 6 years, and am currently the case

20

agent for the prosecution in United States v. Connie C.

21

Armstrong. Jr .. et al,

22

investigation of Hamilton Taft and Company since March of 1991.

23

Prior to his retirement on January 1, 1997, FBI special Agent

24

Patrick K. Murphy was the case agent.

25

26

2.

I have been involved with the

I first learned of the government's possession of

recorded conversations of Connie C. Armstrong, Jr., on the night AFFIDAVITOP WILLARD L HATCHIJIl, lR IN SUPPORT OF GOYllRNMENT'S EX-PARTE SUBMISSION

1

of January 12, 1997, after witness Terri Robins informed

2

Assistant United states Attorney George Hardy of their existence.

3

3.

I telephoned Patrick K. Murphy on January 13, 1997, and

4

asked his knowledge of such recordings.

5

he understood that Ms. Robins had made some recordings for the

6

government on an unrelated investigation.

7

did not know that Ms. Robins had ever recorded conversations with

8

Armstrong. 4.

Mr. Murphy stated that

Mr. Murphy stated he

Mr. Murphy and I knew of the existence of the Dallas

10

FBI's investigation of Armstrong's activity at Comp-U-Check.

11

understood that this investigation related to conduct that

12

occurred well after the bankruptcy of Hamilton Taft.

13

knowledge this investigation was unrelated to Hamilton Taft

14

except for the common involvement of Armstrong.

15

5.

We

To our

Since January 12, 1997, I have contacted Special Agent

16

Peter A. Galbraith, the Dallas FBI case agent for the Comp-U-

17

Check investigation, and requested all taped conversations with

18

Armstrong.

19

special Agent Galbraith has assured me that these constitute all

20

of the tape recordings of Armstrong in the possession of the

21

Dallas FBI.

22

6.

I have received thirty-six (36) audio tapes and

In addition, Special Agent Galbraith provided to me

23

copies of 302 reports prepared relating to the tapes and

24

documents provided to the Dallas FBI by Terri Robins.

25

me that all of the reports and documents have also been forwarded

26

to San Francisco. AFFIDAVIT OF WILLAIlD L HATCIlEll, JR IN SUPPORT OF GOVERNMENT'S SUBMISSION

EX~PAR.TE

2

He assured

1

7.

Agent Galbraith expressed concern about the disclosure

2

the tapes, reports and documents to Armstrong because the Comp-U-

3

Check investigation and other related investigations are on-going

4

and he is concerned that disclosure of the materials may

5

jeopardize these investigations.

6

the tapes, written materials and reports may have to be turned

7

over to Armstrong, but requested that the materials be

a

scrutinized carefully and that those ultimately turned over be

9

limited to those necessary to protect Armstrong's rights without

10 11

He understood that certain of

harming the investigations. 8.

Agent Galbraith said that all of the conversations were

12

recorded and documents were received in late 1993 and early 1994,

13

SUbsequent to the Hamilton Taft bankruptcy and before the

14

indictment of Armstrong.

15

9.

After review of the tapes and documents by myself,

16

Special Agent Laura Nielson, Assistant United States Attorney

17

George Hardy and special Assistant United states Attorney Ronald

18

Smetana, we determined that Hamilton Taft is mentioned in five

19

(5) tapes; copies of the relevant portions of those tapes have

20

been reproduced for review by the Court for a determination of

21

whether they should be turned Over to Armstrong.

22

there is one document, a "novella" about Hamilton Taft, that has

23

statements attributed to Armstrong; since I do not know its

24

authorship, that document has been copied for the Court's review.

25 26

10.

In addition,

All of the reports, tapes and documents received from

the Dallas FBI are being made available for the Court's AFFIDAvrrOF wn.LARD L HATCHER, JR IN SUPPORT OF GOVEIlNMIlNl"S !lX-FARTE SUBMISSION

3

in camera

1

review.

2

I declare under penalty of perjury that the foregoing is

3

Executed

4

true and correct.

5

Francisco, California.

Ii

7 8

COUNTY OF SAN FRANCISCO

) )

STATE OF CALIFORNIA

)

9

SS.

10

Sworn to and subscribed in my presence on January 24, 1997,

11

12 13

in San Francisco, California.

~z •

15

16

@,. co:":~=73

e.eeeeceee.eeeJ ,~.. ' ,

d"

0

•

.. '

1 i~om:':r:::u~eW: Notory N:>IIc - Co1IlomlrJ

!

Son FrancIDCO CounIV

0

My Commission Expires on

,OJ; :

i.\" ""'\ ie,' . cli.' \

17 18

20 21 22 23 24 2S

26 AFFIDAVIT OF WILLAIID L HATCHER, JR IN SUPPORT OF GOVERNMENT'S EX-PART!! SUBMLSSION

4

[CYll

196A-SF-93255 WLH/wlh On Fr~day February 20, 1997 the prosecution made ~t's f~nal arguments and rested it's case. The case is to the Jury at this tlme (2/21/97). b7C copy oJ: The defense has made motlon 16 violation based upon the lack these undercover record~ngs from pertinent tapes were produced to of 1997.

b7D

by AUSA file

for mistrlal for an alleged rule of government's productl0n of Dallas FBI. The redacted both defense counsels ln January

,

fD.3S0~' S-B-Sll {m .ooc.ato PAQe I'UlrTW:I 01

n-o.... ~t City Me (MourH Ctopng

In

11.!Ile I

I

$pac" BOb..... '

r---------~========-----------JlrTIn ~S-;;;~OniCle

0 S F BuSlness wner IGuilty of Big Swindle II

lI..

I He bilked $55 million from clients

,San Francisco,Ca.

1::::.~:,j~~-SF-93255 $yon,,".n.

CHIP ARNSTRONG,DBA:HA.MILTON I TAFT AND CO.

,,"'c.

Durmg the three·month trial,

By Ken Hoover

Jncexll1;

prosecutors alleged tbat Armstrong diverted $166 mullon di-

Chronicle BrqJJ"Wrlter

San FranClSCO

A former Texas firefighter rectly to hunself, usmg the cash to who transformed hImself vIrtually fmance an extravagant hfestyle. overmght mto a hlgh·flymg tycoon For $6 5 million, he purchased a was

convIcted

yesterday

on

l,7QO..acre Texas ranch With expen~

charges he swmdled $55 million slve horses, one of the biggest from a San Francisco payroll tax show rings in Texas and a lake. He threw flamboyant parties that fea-

fIrm

Conme "ChIp" Armstrong Jr. tured well-known entertamers was convIcted on 21 counts of and laVIshed glllfrIends WIth furs, fraud by a San FrancIsco federal court Jury 10 hIS management of HamIlton Taft & Co, a hrm he

Jewels and European trIpS Accordmg to a bankruptcy

~rated

and employees, Includmg hiS par-

court report, he made $296,000 m wrested control of m 1989 and op. gIfts and loans to frIends, relatIves for two years

A cexlefendant, RIchard A ents, fIancee, eX-Wife and a woman Fowles, the company presIdent, Identified III court records as MISS was convIcted on SIX counts of aId-

Texas

mg and abettmg Armstrong in his He made $004,000 m polItical contrIbutIOns, mostly to Republischeme to defraud. Even Ihough HamIlton Taft cans, and gave $361,000 to charIty was In fmanclal trouble when He spht hIS tlme between DalArmstrong took over, It managed las and a leased sUIte at the Mark $4 bIllIOn a year m payroll taxes Hopkms hotel. traveling by hmouand boasted a blue-chIp clientele. sme, chartered Jet or hiS own heliAmong lhe fmns defrauded by copter, accordmg to the account HamIlton Taft were Federal Ex- gIven m courl by prosecutors Ronpress, whIch lost about $30 mllllon, ald Smelana and George Hardy Scott Paper, whIch lost $10 mIllIon, The scheme began unravehng Stanford UmverSity HospItal, III March 1991 when a HamIlton whIch lost $3 5 milhon, and the Taft controller, Steven Saladof, Chromcle Publtshmg CO,

WhICh

h1st about $1 null on

SEARCHED ,ERIALWD

lfJDrXE'!!O=..---l

;;;1/ jI) FILfO _.L''-l-'---_+

MAR ,.. '1 0 '0,'"' 1.5j{

-, ' ~,

,.-/

• O· , p

r/

,/

(

~

-,

wrote to chents, mformmg them Each quarter thereafter, Ham· that theIr money was beIng used IItan Taft had to raise an ever·m· for purposes other than taxes. ' creasmg sum of money to pay chM Armstrong, a former college ents' taxes, penalties and the can· football player, contended that he tmumg diversIOns of cash acted In good faIth III trymg to Durmg 1990, the amount of chsave a company that was 10 trouble ents' funds illverted rose from $19 4 mllhon 10 the ftrst quarter to when he took It over HIS attorney, Chester Brown, $57 mIllion In the fourth quarter said Armstrong aggressively sohc· Ited new chents to brmg the com., When the fIrm was forced IOta pany out of Its deflc,t and mvested bankruptcy 10 March 1991, the def· m blgh·nsk, hIgh-return ventures lelt had nsen to $85 mullon hke a ,hoppmg center and 011 and U S, DlstflCt JUdge Wilham gas leases Legge sent sentencmg for May 2 In 1988, Armstrong dIscovered that Hamilton Taft offICIals had dl· verted to themselves $14 mlll10n 10 clIents' payroll taxes Armstrong purchased several hundred dollars 10 company stock, then fIled a shareholder" lawsmt, allegmg fraud and mIsmanagement In a

settlement, the owners gave Armstrong the company. Prosecutors said Armstrong be. gan dlVertmg funds from HamIl· I ton Taft almost from the moment ' he took control He covered up multImllllon dollar dIVerSIOns by fll1ng false statements With the In· ternal Revenue Service Wlthm several months. the IRS discovered dIScrepancies In the clients' tax payments and sent tbem hfallure to pay notlces ll that requrred them to pay back taxes and penaltIes Hamilton Taft off,clals ex· plamed away the diScrepancies to angry clients as bankmg problems or, in some cases, as a computer failure aClSmg from the Lama Pn· cta (earthquake The company promISed to pay the hack taxes and penalt.es

' leu n IIIIlty guI of ::-

:

1"''''"'' Cl<>on; In 900aI _I I Prosecutors saidAimstrong oau I siphoned 01{ $55 million for hiIn'\ self and had used some of it to buy a 1.700-acre ranch near Dallas. three l\ll[\l~ boxes at T"""" Stadium, tlJqJ
Home

A-4 S.F• Examiner San Franeiseo,Ca.

no.

ticket items. TheY asid he bad kept customera m the dark by using new chents' money to pay old clients' tax bills, ~_ _ Legge, during a 1993 hearing, described the company as Us Ponzi

Ud

ayron company kP . ept milli'ons

scbame from start to finish."

Clients eventually learned thet tax penalties bacaUBe m .~~ Itheir money had not been forwardI WIA ed to the government on time. ;;AllSOClI;;;;;;;;:;;:;;;-""'''''';;;;;;B8~:------ Among mBJor clients, Federal Ex~~~~==press wound up Ioeing more than The head of a now-bankrupt $30 million. Scott Paper more then payroll service company baa been $10 million, StanfofJ1 U"ivemity convicted in San Francillco of HOBpitel more than $3.6 million pocketing nnIliODB of dollars that: and Chronicla Publiabing Co. more v?re supposed to he used to pay than $1 million, BBid U.S. Attorney Jients'taxes. Michael Yamegt,lchi ArmBtrang's attorney, CheBter Brawn, said Armstrong bad taken over a mllDey-\oeing company end vieted by a federal court j~ bf n- tried to make it work, and biid 21 felony charges, all rclated ro never intended to defraud clients. ?",ud The company's former pres- '~e BBld he would probably appeal.

I

2-27-97

Iloto £cmxm:

!they owed

payments

'

ldent, Richard Fowles of Orem Utah: was convicted of six ~ The JUlY deliberated for three days before returning the verdicts

'

~

...

eta,,:

,L

--

SWnll:!lng 01lIc0

San Franc~sco

'~J/~6Ii--::f-

WedneBdeY. Armstrong fuces as much an 10 years in prieon under federal !lentencing guidelines,

AaaiBtsnt

U.s

Attorney George Hardy said. Sen: fencing is scheduled for May 2 bafore U.s. District Judge Cbarlea

Legge. Hamilton Taft pro<:BllllBd payroll taxes for more then 250 clients and wan suppooed to tum over the money to the federal end stuts governments. The company bad a deficit of $18 million when Armstrong a firefighter in a small town n:",.. DaIlaa, gained control in 1989 after liImg a atocltbolder lawBuit. The deficit bad grown to $86 million vben a federal judge shut down the company two yeerB later.

~EARCHED

_V.::::-· ,INDEXED

,EflIALlZfO~FILED -.::rr.~_~~-"o-_I

MAR 10 199;1 FBI..=: SAN FAA

/

:7//'

'C:Jr-

" '0

(OJ/16!l99l-l)

fFEDERAL BUREAU OfF INVESTIGATION

Precedence: To:

ROUTINE

Date:

San FranC1SCO

From:

Attn:

San FranCISCO Squad 14A Contact: SA Lavra Nlclson,

6iy~. Approved,/'f

B 1""'157"'------

Drafted By:

Case ID #: Title:

I

BULKY

ext 2556

Nlelson Laura In 196D-81'-93255

(Closed)

CONNIE CHIP ARMSTRONG

I

of(

b7C:

,

Formerly dba, HAMILTON-TAFT COI"iPANY, 1'BW (D), MF, ITSP OO'S['

Synops~s:

DISposltIon of EVIdence

Details: The case 16 s~lll pendIng appea~ ac eVIdence must be maIntaIned at least G montlls date of thlS EC as per the ADSA

++

UPLOADED ACS DATE

04/07/1999

_",;1.lrti:2.~,-_ ... ...:.1.,../.2..1. ... '1 ...9..c... f :

tIme The 1 year from ::.he

ellIS ~o

196D-SF-93255 LN:ln~ 1

On 4/13/1997, SA Laura Nielson is complying with a request from AUSA George Hardy to turn over numerous cassette tapes from a wire worn by a wltness lTI the Hamilton Taft trlal.

The Wlre

was for a case out of the Dallas office, SA Peter Galbraith was the case agent. The defense lawyers ~n the Hamilton Taft trial are request~ng the tapes and ~t ~s understood by all parties involved that there is no special master appointed to review the tapes. It was decided by AUSA George Hardy and Special Assistant I lnot to appoint a spec~a1 master to review the tapes, SAPeter Galbraith and FBI Legal Advisor I lagreed that it is not necessary. Based on the above recommendations, SA Laura N~elson and SA W~ll Hatcher are prov~d~ng all of the tapes to George Hardy, who w~ll ~n turn deliver them to the Ham~lton Taft defense team.

hi:"

LAW OFFICES OF

CHESTER L BROWN 2 }

4 5

2<150 Broadway, Suite 550 Santa Monica, CA 90404 (3 10) } 15-6315

SOLOl'vfOl\ WOLLACK }88 Market Street, Suite 1080 San Francisco, CA94111-5J!5 Telephone: (415) 788-9000

6 Attorneys for Defendant 7

CO,,-;-"1E AR:\·rSTROKG, JR.

8 9 10

UNITED STA.TES DISTRICT COURT

11

FOR THE NORTHER,"'l DISTRICT OF CALIFOR,VIA

12

13

Ul'i1TED STATES OF A1VfERICA

14

) ) CR 94-0276 CAL

Plaintiff,

)

) POfNTS A..'lD Al;THORITIES I'K S(JPPORT OF MOTION FOR :t';HV TRIAL

\'$.

I

15 16

CONNIE AR..'v1STRONG, JR. and RICHARD A FOWLES,

17

Defendants.

)

I

18 19

------------)

20

21

I INTRODUCTION

22

Federal Rule of Criminal Procedure}} states that the court may, within its discretion, grant a new

23

trial to a defendant "if required in the interest of justice." While Rule J} does not offer any specific ~

24

examples, courts have granted new trials based on: failure to give a theory of the defense instruction "

25

{Um'ied St:zies v. VJ'caria, 12 F.3d 195 (11th Cir. 1994)}; erroneous jurj instructions {United S!.:m:s'~

26

Buffa/ana, 727 F.2d 50 (2d Cil. 1984»): failure of the government to nuke timely production of:

27

exculpatory evidence {Kyles v. Whit/ey, 115 S.Ct 1555 (1995); or other errors oflaw

28

APR-28-1397

18:15

<-li5 398 3817

I

i

1

By this motion, ./vir Armstrong moves for a new trial on the following grounds: (1) the

2

government's mid-trial production of exculpatory materials (in the form of the Terri Robins t"pes)

3

prejudiced Mr. Annstrong's ability to prepare for trial and to put on a defense; (2) the cour; e"ed in

4

failing to give the jury a theory of the defense instruction on behalf ofr-fr. A.rmstrong; (3) clr.er errors

5

eflaw regarding the admissibility or inadrr~ssibility of panicular evidence or testimony were :mte";al ar:d

6

prejudicial; and (4)

7

It is !vir. Armstrong's position that, even if anyone of these rulings may not have been sufficient

g

"'a.",,,.,t a new trial, the cumulative effect of ,uch ad':erse rulings severely impacl.~d his abi:ir)'

9

a fair fight against these criminal charges..'

th~

court erred by allowing the jury to view transcript,; of Dora DUM'S testir:1or.y

le>

IC'

1:10um

10

II ARmn\irE'l'{I

11 12 13

A

LATE DISCLOSURE OF BRA DYMATERIAT, --

14

1.

15

Terri Lee Robins was !\1r. Annstrong's long-time personal assistam at his Dallas-based business,

16

Dresdner Enterprises (which Later be--.ame The Remington Companies, Inc.). By all appearances a trus;ed

17

employee, }'-ls. Robins, in fact, had an enormous a.xe to grind aga.'nst lv1r. Armstrong. In 1991, when Mr. I

18

Armstrong's entities were shut down and placed into involuntary Chapter 11 bankruptcy, Ms. Robins I

19

gave numerous interviews to the FBI -- her vitriol noticeably increasing with each and every interview.

20

On April 2, 1993, Ms. Robins testifted before the grand jury in Mr. Armstrong's case; the grand jury

21

ultimately indicted!\1r Armstrong on June 27.,1994.

22

In October, 1992, with Hamilton Tfu'1. mired in involuntary bankruptcy and an ongoing criminal

23

investigation against !\1r. Armstrong in full swing, Mr. Armstrong acquired a controlliog interest in

24

Comp-U-Check, a publicly traded Detroit-based company which provides check guarantee and bad check

25

collection services to retailers. When Ms. Robins came to work for Comp-U-Check, !\1r. Annstrong

26

!l.\sumed she did so out ofcominuing loyalty to him. Unbeknownst to him, and until recently to defense

I?~fense.

27

ma~y

hav~

counsel is mindful of the fact that of these issue,; been pre'iiou;[y litlgated U1 this case, but does Wish to re-emphaslZe certam pOints -- both tor this court s reconsideration and to clarify any ambiguities on the record

2S

, I;

II APP'-28-1997

18:15

2 415 398 3817

(:<.03

I

II

1

counsel as welJ, Ms. Robins was actually on the payroll of the United States government at that time and:

2

would be handsomely compensated in exchange for her production of some 70 hours of undercover

3

recordings. The recordings consist of conversations between herself and Mr. Armstrong. which teek

4

place between December 7, 1993 and March 3, 199; at]l.1r Armstrong's Dallas oflice. !l.ir. Arm,trong

5

was then under innStigation by the Dallas office oflhe FBI, in connection with his owners:up ofCo:np-

6

U-Check. Unaware of Robins role in the Comp-L'-Check in'Jestigltion. AUSAs Smetana and Hardy

7 S

intended to call Ms. Robins as

9

preparatlon with Ms. Robins on the night before her scheduled testimony, Robins revealed to them for

10

I

?

government witr-ess or. January ]}. 19,97

Howe·:e:. d:Jring ,i-.eir

the first time her involvement in the government's investigation and, more specifically, her taping of

11

conversations berween herself and Mr. Armstrong. Upon learning this new information, AUSAs Smetana

12

and Hardy notified defense counsel about the tapes and did not call Robins as a witness A few days later. the goverrunent produced to defense counsel the five Annstrong-Robins tapes, which they deemed

14

to be rekvam to the defense ofthis case, The prosecutors turned the remaining thirty-one tapes over to

IS

t.his court, for an in cam.:ra inspection and a fur:ther determination of what to do. Though this coun

16

understa.~dably chose

17

tapes. However, the court reser/ed for a fJture date a decision about ho\.,. and when the defense rrJght

18

review those tapes in the midst of tria!.

not to re-,;ew sixty hours of tapes, it did rule that the defense

wa5

entitled to those

During the week ofJanlm)' 27, 1997, defense counsel asked for a thirty-day cominuar,ce of th~

19

20

trial, so that the defense could review the Robins tapes and determine their possible use dup.ng tria!. This ;

21

court declined to grant such a continuance, instead opting to have a special master appointed -- of the

i

22

defense counsel's choosing - who could personally review the tapes and make a preliminary

i

23

determination of relevance. Unfortunately, defense counsel was then in the midst of preparing a defense:

24

and was unable to lind anyone who was both willing and able to. immediately set aside his practice and

I

25

devote the necessary time to the project. Since the trial ended, defense counsel has received and

I

26

reviewed the tapes and now requests a new trial.

'

,

,

i

!

27

2S I'

II

APR-28-1997

18:16

415 398 3817

p,n-I

1

2.

2

Defense initially cQntends that Mr. Armstrong was prejudiced by this CQurt' s decisiQn nQt tQ gram

J

a '.hirty-day CQminuance tQ perTT'jt his attorneys tQ revicw the Rcbins tape,. The mid-trial receipt of the

4

RQbins tapes was nQt Qnly a majQr event, but alsQ a significant distraction tQ defense counsel Even if :

5

the

6

beheve tQ be the case), defense counsel still had a moral and prQfessiQnal duty to listen to them and me!.:e :

tap~s

Eailure tQ Grant CQntinuance -

themselves turned Qut tQ have nQ evidentiary value whatsoever (which the defense does not

this determinatiQn fQr lhemselves. However, at the time counsel reeei',ed the tapes,

th~y

were in thc

8

midst of preparing Mr. Ai,nstrong's defense -- an enormQUS, ful1-timt ta,k Under such circ"mst~~ces,

9

there was no way tha: counsel could put aside seventy hours to lister, 10 the Robins tapes --leI alone, '

10

I1

make additional time to dissect the tapes and determine their possible use, at trial. The cQncept of retaining a special master tQ review the tapes proved unworkable. If MI.

I ! I

13

I then it might truly have been feasible to find someone who was not only familiar with the case, but who I

14

could immediately devote ten Qr twelve hours a day to the tape project Mr. ArmStrong, of course, did 1

15

not have such a luxury,'

12

Armmong had enjoyed the benefit of a Simpson-esque team of lavvyers, law students, and paralegals,

I

I

16

A continuance shQuld have been granted so that defense counsel could review the tapes, properly

17

analyze them, and, ifnecessary, use those tapes at trial While a thirty-day, mid-trial continuance would

18

have been an unusual step, it was not Mr. Armstrong's fault that the government produced the Robins

19

tapes at such a late stage. Even if the tapes ultimately proved useless, a continuance would have

20

prevented the continuing distraction that permeated the remainder of the trial, making it even more

21

difficult for defense counsel to adequately defend Mr, Armstrong, prepare his defense, and prepare Mr.

22

Armstrong himself for testimony.

23

24 25

26 27 28

,

Defense cQunsel did CQntact Mike Murray and Ga..-nck Lew, who had been previously appointed to represent Mr. il.rmstrong in this case and, thus, were at least familiar with the case's facts. However. Mr. Lew was too busy with orher projects at the time while !vir. lVlurray, though expres2ing a willingness to help, was c:nderstandably daunted by both I the enorrruty and the immediacy of the projec!. I

415 398 3817

.J.

Late DisdQ3!!n: of Brac(yMateriaJ --

The prosecutor has a duty to disclose all evidence favorable to t~e defendant which is "material

2

either to guilt or punishment." B,ady

4

provided it is likely to "play an important role in uncovering admissible evidence, aiding witness

5

preparation, corroborating testimony, or assisting impeachment or rebu~:al" United States ". Llo.vd. 991

6

F .ld 348, 351 (D. C. Cir. 1993) (cit:Jtions omitted). Ti;nely disdos~re of Brady material requires the

7

government to produce such material "in

8

Ud 39, 44 (1933).

Y.

lvfarylend, 373 US. S3,

S~

J

tim~

(196])

Evidence is rnateri,!

for its effective U$e at tria!" Um"ted S!:JIes v. Hi.ggs, 71 J

9

The Terri Robins tapes constitute exculpatory evidence in several different ways One such way,

10

of course, is by the sheer absence of incu]pawrystatements by Mr. Arm5~ro~g. Indeed, if1v1r. Armstrong

II

truly harbored the specific intent to deceive and chear Ham.i1ron Tart' s clients, it is rather shocking that

12

he never made

13

hours of recorded conversations in which Robins was actively atlempti~5 to elicit admissions. L1 fact.

14

from time to time Robins a=ally expresses, on the tapes, her own frustration aboul her inability to oorain

15

any damning evidence against Mr. Armstrong. Throughout the trial cf this matter, defwse counsel

16

repeatedly elicited from the government's own witnesses an ackno',';!eCgment that Mr. Armstrong had

17

never expressed an)1hing other than an intent to make Hamilton Taft's c!lents whole. It Just may be that

18

the Robins tapes would have provided the fmal piece of evidence necesmy to hammer this point home

19

to jurors. Had they heard seventy hours of tapes, in which a governmer.l agent unsuccessfully seeks to

20

elicit a conression from Mr. Armstrong, perhaps the jurors would have come to believe that lvlr.

21

Armstrong really did have an honestly held conviction that be had done nothing wrong. .

any statements which would even imply this to be the case, despite more than sevenf)'

22

Moreover, if the absence of inculpatory evidence was not sufficient to convince the jurj, they

23

could h:we heard 1v1r. Armstrong himself say that he had done nothing ".illegal, immoral, or unethica1.'·

24 Mr. Armstrong indeed makes this statement, duting the recorded conversations with Robins. At first 25

blush, ]vir. Armstrong's after-the fact proclamation of innocence may s~m of little significance

26

court. However, at the time these tapes were recorded, Mr. ArmstrorlB was completely unaware that

to

this.

1erri Robins was actually a government informant. In Mr. Armstrong's eyes, Ms. Robins remained, as ~ways. a trust~d and 10yl1 employee who had stayed until the end at Rer:-.:ogtnn.

2S

a"" who. ~ven ?f;~:' a':

I.

APR-~:-19g7

18:17

415 398 3817

p.c.6

1

of the problems which he had undergone, had continued to work for him at Camp-V-Check In this

2

context,},ok Armstrong's profession of innocence represents far more than a denial. It represents a ,

3

firmly held belief, made to a trusted employee ",it.1 whom he felt he could be entirely honest In a specific!

4

intent case such as this one, a belief in the innocence of one's venture negates the "intent to defraud"

5

element and, thus, constitutes a defense to the criminal charges

,

6

The Robins tapes are also significant in that they provide a revealing look into the marmer in

7

which "'k Am,strong conducts bUSIness. It is clear from the tapes that Mr.."vmstrong demands

8

orgar.izaticn, scrupulou3 attention to detail, and a strong work ethic. Furthermore, at one pair" on tho'

9

tapes, :'vIr. Armstrong expresse3 outrage at the exorbitant cost of a printer to be purchased for Co'mp-U"con-artist." A ccr,-

10

Check. These traits show someone who is a serious businessman and not merely

11

artist would certainly not waste his time working hard, being organized, and price shoP?ing. This court should grant a new trial

12 13

so that the defense may

3

I

properly bring the RobinS-Armstrong

I

I

tapes before the jury, wruch it did not have an opportunity to do during the first trial.

14

B.

15

FAILURE TO GIVE CHARGE REGARDING THEORY OF DEFENSE -"A defendant is entitled to an instruction concerning his theory of the case ltlt IS supported by ;

16

and has some foundation in the evic'.enc~:' United States v. Escobar De Brigb~ 742 F.2d 1196, 1198

17

]a;\V

18

(9th CiI. 1984) (emph3Sisin original). Furthermore, in performing this analysis, the coun is required to

19

view all evidence "in the light most favorable to the defendant." United Stales v. Parker, 566 F.2d 1304,

20

1305 (5th CiI.),

21

supported by the evidence it is reversible per se for a court to refuse to give a theory of defense

22

instruction. Uaited States

23

811 F.2d 495, 4% (9th Cir. 1987); United StiJtes v. Escobar De Bn'gh~ supra, at 1201. Furthermore,

24

the quantum of evidence necessary to support a theory of the defense instruction is small. Even if the

25

evidence is "weak, insufficient, inconsistent, or of doubtful credibility," the instruction is still required

26

provided there is some evidence to support it. United St:ltes v. SoteJo-Mu.ri110, supra, at 178.

em denied,

F.

435 V.S. 956 (1978). Where a defendant's theory is legally sound and

SoieJo-Mu:riJ.lo, 887 F.2d 176, 1n (9th eir. 1989); United SUltes v. Mann,

27

There are, of course, limitations on this principle. A theory of the defense instruction must be

23

submitted "in the form of a statement of appropriate principles of law," rather than merely "a r.ar",:ive

., APR-28-1997

18:17

415 398 3817

P.07

I

recitation of(the defendant's] version of the facts." United Slates Y. Nevitt, 563 F.2d 406, 409 (9th Cif. 2

1977),

em.

deaied, 444 U.S. 847 (1979). Nor does the court have "to accept a proposed instruction

3 which is manifestly intwded to influence the jury

"Uailed Srales v,

Fe1J~r-Guliem:z. 940 F.2d 1200, \

1211 (9th Cir 1991). Rather, the instruction should simply "set fo"h the defendant's theory oftne case

I,

5 I on a fairly abstract level" Ibid Before the trial in this matter began, tv!r. Armstrong proposed the following pretrial jury

7

instruc~ion:

With respect to the fi.:nds paid to Hamilton Taft by the client companies, with the exception of two clients who arranged to have their payments kept in separate accounts, the funds paid to Hamilton Taft beca.:ne the property of Hamilton Ta.11 and could be commingled by Hamilton Ta.'t, treated by Hamilton Taft as its own assets, used to pay Hamilton Taft's operating expenses, and invested by Hamilton Taft for its own benefit. Hamilton Taft did not hold the funds in trust as your employer might hold your withholding taxes. In other words, Hamilton Taft was entitled to the us.: of the funds until the taxes were due to be paid, pursuant to the terms of the contract. 13 14

At the hearing on this matter, this court declined to issue any pre-trial instruction to the jury about the

15

character ofHarnilton Taft funds. At the close of trial, counsel for Mr. Armstrong again moved for trjs

16

identical instruction to be given as a theory of the defense instruction. Trjs

17

request.

COUrt

denied the defendwt' s

The instruction proposed by 1I>ir. Armstrong was not pulled out of thin air, but was lifted directly

I% 19

from the Ninth Circuit's language in In Re Hamilton Taft & Co., 53 F.3d 2%5, 2'3% (9th Cir. 1995),

20

,
21

also mirror; the language of the Restatement (Seccnd) of Trusts § 2%3 (\ 959) and Section :083 of Austin

22

'oV. Scolt & William Fratcher's treatise, The Law ofImst; (4th ed. 1989). It is, by the Ninth Circuit's

23

own fmding, an accurate and generalize.d summation of law, and not merely a narration of Mr

24

Armstrong's factual "spin" on the case.

25

Nonetheless, if this court believed Mr. Armstrong's instruction to be unduly designed to influence

26

th.ejury, the court was, of course, free to amend the instruction accordingly. For example, it might have

27

prefaced t.'1e instruction by tellinB the jury that the following instruction is merely Mr. Armstrong's theofY

23

of the case It also might have told the jury that. although Hamilton Taft did not hold funds in t:u.st, they i

"

APR-28-1997

18:18

415 398 3817

P.DB

b~yond

1

could still convict Mr. Armstrong (at least on certain counts) ifthey found

2

that

j

Hamilton Taft invested its funds However, rather than giving even ;\ qualified instruction, this cour:

4

declined to give any theory of the defense instruction, even though ]vir. Armstrong did present evidence

5

that, ir; his ,iew, Ho.milton Tail did not hold funds in trust. This failure was particularly damaging to

6

Armstrong bccausc the proposcd instr..lction, if believed by the jury, would have required an acquittal as

7

to certain counts of the indictmem -- in particular, counts seven thrOugh founeen, which charged Mr.

S

A:mstrong withthe improper "diversion" of fJnds. If Ha...ilton Tal: ,eally did hold legal title to the

9

monies deposited by clients, clearly the company could not have "diverted" its own funds

10

'In actuality, the instruction proposed by Mr. Annstrong would have served two

h~

made, or directed others to make,

affirmativ~

a reasonable doubt

misrepresentations about the man..'ler in wrjch

dis~inct,

:vir

but

1]

equally important purposes. First, as alre
12

Annstrong's theory of the defense -- in other words, l>1r. Armstrong's explanation for why he believed

13

he could spend Hamilton Taft monies as he did. But in addition to layi:lg out Mr. Armstrong's defense,

14

the instruction would also have removed ii'om the domain of the jury a key questior, of Ia\\' concerning

15

the character of the funds held by Hamilton Taft. After a three month trial and numerous pre-trial

16

motions, it is not now necessary to retrace the long procedural histol)' that Ultimately culminated at the

17

Ninth Circuit Court of Appeal. Suffice it to say that the Ninth Circuit's decision -- that Hamilton Taft

18

did not hold monies in truSt -- not only brought closure to this exceedingly subtle issue, but also

19

confirmed what this court itseIfhad already de[ennined in its February, 1993 opinion - that [he character

20

of funds is a legal issue, and not a factual one. Yet Mr. Annstrong was forced to mount his entire

21

defense in this case by reiterating these subtle and esoteric legal arguments to lay jurors, 'Lru,jLngt

22

!Jnlike leaving a defendant's Fourth Amendmer.t suppression motion in the hands of the jury. Ifai1j1hing,

23

the defendant whose suppre:lsion issue is left to the jury might be in better shape than 1'vfr. Armstrong,

24

since lay jurors might at least have some general familiarity v·rith constitutional concepts, '."'h~reas they,

25

are very unlikely to understand the obscure legal nuances that lie at the heart of this case.

26

Ths court has broad discretion to grant a new trial where it believes it necessary to do so in the :

27

interest ofjustice It has previously been held that an improper instruction or a failure to give a defense

28

theorj instmction may be sufficient grounds \0 warrant a new trial. See Uniled Stales v BllffJ/3no, 727

APR-28-199~

18:18

P.O·j

"

1

F.2d 50 (2nd Cir 1984); Uni!d S!.Ji!::; v. Vic;;.;.'ia, 12 FJd 195 (11th Cir. 1994). Howevcr, this coun

2

need not find that it cOlnmittcd legal error L" order ,0 giant a new trial. In VicBIia, the trial jud"c stopped

3 4

I

short of finding that his failure to giv~

3.

def-er1se lh:of}' i~5truction \va.sltga! error. However, the jUdge

nonetheless granted a new trial, based on jljs feelir.g L'12.t. ··cr. r:f1e~t;on arid reading over the in5truc:ions, th~t (heorj dhis defense."

5

I thi;)].: that the Coun should have instructed the Jury on

6

appe:l!, the Ele-"er,th Circuit found it urJlccessary to determine the correctness or incorrectness of the triai

7

CO\;rt's irjtial ref~salto give a defense instruction. Inste~d, the COUI1 upheld the trial judge's decisior.,

8

fmdlng that Rule '33's Hinte;est of justice" bnguar:e. ('is not limir.!!.d to cas'es where the district court

lcJ., at 198. On

concludes that its prior ruling, upon which it bases the new trial, was legally erroneous." Ibid. The deblor-crcditor!t.rust dispme has been an ongoing theme throughout the beginning of trjs case

Even before the criminal case began. 1vlr. Armstrong always viev·..ed the ch:.racter of H3.;nilton

12

Taft's funds as absolutely centra! to understanding his conduct in this case. It is not necessary for t!'js

13

court to now have a sudden change of heaI1 aho\;t the correctness or incorrectness. of !vir. Armstrong' 5

14

assertion, in order to grant a new trial. Rather, this COurl should giant a new trial in the interest of

15

justice, so that

16

been instructed as to exactly what that defense is. Mr. i\rmstrong did not have this chance during the

Mr. Al111strong will truly have the opportunity to put on his ddense to ajury who has

fmt trial.

19

C.

EvIDENT) i\RY ERRORS SteveD Solodoff --

20

1.

21

Among the 21 counts for which 11;. Armstrong was convicted were three counts of wire f"aud

22

(counts 19 through 21) stemming from his March 12, 199\ letter (attached as Exhibit A)J, sent to

23

numerous Hamilton Taft clients by way offacsimiIe transfer. Mr. Armstrong prepared the M~rch 12

24

letter in response to allegations aired by former Hamilton Taft controller, Steven Solodoff, that Mr.

25

Annstrong was steilir.g client monies and might be preparing to flee the country. The letter refers to Mr.

26 27

Exhibit A., !vir. Armstrong's March 12, 1991 letter to Advo System, was the subject of count 19 of the indictment. During trial, the government introduced numerous identical letter;, including the letter> at issue in counts 20 and 21. which Mr Armstrong sent to other Hamilton Taft clients on the same dale.

28

RPR-28-1'3'37

18: 19

415 398 3817

P, 10

1

Solodoff as

1

circumstances that would suppor: termination for cause" and assures clients that, "Viithcut excepticn,

3

all such charges made by this former employ~e are false."

4

"3

disgruntled former employee, who was permitted to r:osign four weeks ago under

At uia1, the defense called

M:r. Solodoff as a hostile witr.e:,s and attempted to cross-exa:rine rum

5

about. (I) the grounds for his tennmation from Hamilton Taft; and (1) his avaricious motives for m:lking

6

these allegations about Mr. Armstrong However, defense counsel was not perr.jt:ed to queslior.1vlr '

7

Solodoff on these subjects. Defense counsel was also cut short in his effort to e::cit testimony f,om

I

government witn::ssJ Jerry Kleinberg, as well a:; from tvir AJ7nstrong him5elf, rega;c;;1g the grOl..:nd::; for . Mr. Solodoffs terrnination.' Defense counsel understands and apprcciatcs this court's position tb: the issue

I

U1

M...r. :

,

Armstrong's case is the truth or falsity of the gfaP.d jury's allegations, and not the tn!\~ or falsity of Steve I Solodoffs allegations. However, there is certainly an area of overlap between the two, especially since

I

the grand jury's indictment charges Mr. Armstrong with three counts that are directly rdated to his I 14

aliegediy false denial of the Solodoff alleg~tions. in a criminal case such as this or.e, which involves

15

serious felony allegations, Ivir. Armstrong should have been given wide latitude to prove the falsity of !

161 these three charges. 17

In,tead, he was prohibited from developing enyevidence about the truth of tr,t

March 11, 1991 letter (and, by implication, the falsity of the SolodoffaUegations and the allegations in

I

i

i

1B counts 19 through 21) 19

By charging V.I. Armstrong with fraud based on the t.1arch 12 letter, the goycmmcnt put at issue

20

every single tlSSertion made in that letter. The indictment did not allege that only certain portions of the

21

letter constituted fraud, while other portions were true. It simply stated that the transmissLon of the

22

letter, as a whole, was an act offraud. Mr. Armstrong de,erved an opportunity to respond, which he did!

23

not get The end result was that the jury saw a letter from M-. Armstrong which claimed, among other

14

things, that Solodoffhad been terminated for cause -- a claim which Mr. Armstrong was never pennitted

25

to prove true. Without any evidence to show that Solodoff

26

conclusion which the jury could have possibly reached was that this assertion by Mr. Armstrong

Wl!S,

in fact, tenninated for cause, the only \V:iS

27

28

HPR-28-19~7

Had he been permitted. I\olr. Armstrong would have teslified that Solvdoff was tcrmine.:ed . for on-the-job cocaine use.

18~13

4'i5 2!"::l85di7

P.11

false. Under such circulTl5taIlces. it Wa.) only natural that the jury would have found ]vir. Armstrong guilty 2

on counts 19 through 21

J

Besides demonstrating the truth of the March 12 letter, evidence about !v1I. Solodoffs druov use

4

is also relevant for the insight it p.ovides into his state of rnind at the time he went public "ith his

5

I illeg~tions agJinst Mr

Armstrong Tr.e fzct is. Mr. Armstrong wzs brought down by an individual who

6

was not exactly level-headed and ra::onal, but by someone who .egulariy pumped j-js body full of

7

eh~:nJea\s.

8

Solodo!h liar (b?sed on the limited d:)rmation which he had at that tim~). At a rrjnimum, SolodoF.s

9

drug use would have shown the Jury why Mr. Armstrong might have reasonably b~\ieved that Solcdoff

10

!vir..J\rmstrong was cha,ged with three separate crimes for domg nQtrjng more than calling

was a liar; quite arguably, it would have also shown that Solodon was a liar.

11

Conversely, when lv1r. Solodoff made sweeping allegations about Mr Armstrong's conduct at

12

Hamilton Taft, Mr. Armstrong was foreclosed from exploring any impure motives which may have

13

prompted these allegations. Unbeknov,l1st to the jury, at almos: the same time that Steven Solodoff was

14

telling Hamilton Taft clienLs about !'vir. Armstrong's alleged theft, he was also filing a multi-mill'lon dollar

15

qui tam action in federal court. It is axiomatic that a witness' fmancial motive is a permissible area of

16

impeachment and cross-examination. 1rjs is particularly critical where that witness'. prior statements ,

17

form the cornerstone of the criminal charges - which, at a minimum, was the case for counts 19 through

18

21. Surely, the existence of the multi-million dollar lawsuit made it at least somewhat more likely that

19

the substance of Solodoffs allegatior.s was false, as claimed by lv1r. Armstrong in his March 11,1991

20

letter.

21

Mr. Armstrong should have been permitted to develop these areas of cross-examination and

22

should have been permitted to present e'/idence through other witnesses, including himself; to show that

23

his March 12, 1991 leller was true, or that he believed it was true, at the time he wrote it.

24 Keith Voigts

25

2.

26

Keith Voigts was a former partner for Big Eight accounting firm, KPMG Peat Marwick, who

27

worked closely with Mr Annstrong throughout the two years that he owned Hamilton Taft. On October

28

29, 1992, in the midst of the involuntary bankruptcy proceedings against Hamilton Taft, Voigts filed a

_J'

I\ 415 398 3817

95>;

P.12

1

Declaration on Mr. Armstrong's behalf (attached as Exhibit B). In the Declaration, Voigts describ~d,

2

ur.der penalty of perjury, how he adyiscd and assisted Mr. Armstrong in rJs operations of HilmiIton Taft,

J

and hew he endorsed Mr. Annstrong's pla.~ ofusin3 HaJr..iJton Tal: cash Dow to grow his Texas business'

4

and to inorease his holdings. A5 a direct result ofVoigts , Declaration, bankruptcy trustee Fred Wyle fJed

5

I suit

6

Isubrdtted to a deposition, after having received a let:er of immunity from AUSA Eb LuckeJ, who was \

7

working closely with Wyie at the time. The suit eventually settled with the self-insured Peat Marwick

8

paying SI7.S million out of its own pocket.

9

against Voigts, as well as Peat Marwick. During the pre-tria! phase of this civil suit, Ycig-:,

On November 12, 1996, Mr. AfTl1strong issued a

subpo~na

to

Keit~

Voigts. through YO:gis'

10

attorney, George Niespolo. Voigts responded by informing defense counsel that, if called 1':) lestify at

II

trial, he would assert his Fifth Amendment privilege not to do so. AUSAs Hardy and Smetar,a also

12

L-Idic~ted

13

nature of Voigts' testimony, defense counsel filed a motion with this coun: seeking to compel VoiS's'

14

testimony as a defense \vimess, under a grent of court-ordered immurilY..AJtematively, Mr. Armstrc"g

15

asked tM court to adrnit Mr. Voigt$' October 29, 1992 Declaration imo evidence as a statement ageins:

16

interest, under Federal Rule of Evidence 804(b)(3)' This cour! declined to take the unusual step of

17

granting court-ordered immunity and found that the Declaration, as a whole, was primarily

18

lmd not a statement agoiIb'1 interest. Thus, the court refused to admit Voigts' Declaration into

that they would not agree to grant ?'vir. Voigts immunity to

test~ry

at trial. Given the cr.Jcial

self-servL~g evide.~ce

19

While court-ordered irrununity is a somewhat unusual step, it was warranted in the instant case.

20

Mr. Armstrong has ulways controded that, in rtlIUling Hamilton Taft, he relied on the advice of lawyers

21

at Godwin, Carlton & Maxwell and eccount:ritts at KPMG Peat Malwick. In fact, in his Declaration,

22

Voigts admits this to be true, and further admits that he endorsed Mr..A..rmstrong's strategy ofusir.g

23

Hamilton Taft cash flow to invest in under-valued assets. Had he been available to testify, Voigts'

24

testimony would have been abrolutely critical to the Mr. Armstrong, since reliance on experts is a

2S 26

Under Rule 804(b)(3), the hearsay statement of an unavailable witness may be admitted into evidence if that statement "was at the time of its making so far contrary to tr.c declarant's pecuniary or proprietary interest, or so rar tended to subject the declarant to civil or criminal liability, or to render invalid a claim by the declarant against another, that a reasonable person in the decla.'
27 28

J2 APR-28-1997

18:20

415 3'38 3817

'34:-;

F'.13

i

recogruzed defense to fraud chrrrges, which negates a specific intent to defraud. Other than Mt Pe~t

2

Armstrong himself, it is difficult to imilgine a more important defense witness than a long-tirne

3

Mal"'1ck parmer who had already admitted having condoned Ivlr. Armstrong's conduct at HalT'jlton Taft.

I

,I More significantly, the government had previously agreed to give 1\1r. Voigts immunity when it !

4

I

5 I seried their purposes to do so Thus, what the governmer.l was able to do was to elicit testimony from ,I I

6

Voigts which helped the bankruptcy trustee in his eEort to recover monies for the estate. yet suppres; !

7

testimony which rrjght tum around

E

the f~et-finding process and should have been cured tmough court-ordered immunity FOf1unately, 'It still i

9

can be - at a new trial of this matter.

,

~nd

help !vir. Armstrcr,g at his cri:nina! trial. This is a cister-ior: of

i

At a minimum, this court should have adlT'jtted inio evidence the October 29, 1992 Declaration

10 II

of Keith Voigts Defense counsel maintains that Voigts' Declaration, when considered in context, cannot \

12

be understood as anything other than a knowing statement against his own interest. While this court may

13

be right that there is a self-serving flavor to the Declaration, it is only in the sense that Voigts did not

14

believe that either he or Mr. Armstrong had done anything wrong. However, Voigts' bel.efthat he had

15

done nothing wrong does not preclude a finding that hi. statement was knowingly contrary to his

16

interests. A statement can be self-serving while. at the sarne time, exposing the declarar.t to civil or

17

criminal liability. Such is precisely the case with Voigts' Declaration.

I

I

18

If Voigts had acted out of pure self-interest, he would have never given any Declaration in the

19

first place, since he had not yet been personally sued at the time of the Declaration. The primary motive

20

behind his Declaration was not to exonerate himself, but to help Mr. Armstrong at a time when Mr.

21

Armstrong was being sued by the trustee and being investigated for criminal charges..To help !vir.

22

Armstrong, Voigts stepped up and admitted his own role in, and approval of, Armstrong's conduct at

23

Hamilton Taft. The Declaration, as a Whole, essentially says that Voigts condoned Mr. Armstrong's

24 25

conduct, but that neither he nOr Armstrong had done anything wrong, in Voigts' opinion. ~ Regardless of whether Voigts believes he has acted properly or improperly, the key point for Rule

26

804(b)(3) is that his acknowledged complicity in Mr. Armstrong's conduct came at a time when lYrs.

27

Armstrong was being sued civilly and investigated criminally. As a certified public accountant and long-

28

time partner at Peat Marwick, Voigts was certainly no fool and obviously recognized the perils of giving

1' .J

HPR-28-1997

18:21

415 3'38 3817

P.l~

I

jl I

I

1

such a Declaration on lYlr. Armstrong's behalf. It is this very peril which gives Voigts' Declaration the

!

2

indicia of reliability ncccssary to any hearsay exception. Voigts did not hay.:: to speak up on behalf of the

I

3

troubled Mr. Armstrong; the fact that he did so indicates a strong probability of honesty. It SimPlY!

41

doesn't make sense thot Voigts would risk civil, criminal, ar.d professional exposure by lying to protect :

51

Mr. Armstrong Such is the ve,r'j reason behind Rule S04(b)(3)'s hearsay exception. Voig:s' Declaration'

6

should have come into evidence.

7

s

3.

9

During the time that he ovmed Hamilton Taft, lYIr. Armstrong had an almost daily ritual, in which;

Exnibit 1802 --

I

10

he would use a Dictaphone to record his stream of consciousness thoughts, feelings, and impressions

11

about his various bu;iness ventures, and about recent events in general These tape recorded notes would ;

12

then be transcribed by one oft-fr Armstrong's persoilal assistants -- .either Terri Robins (at Dresdner)

I

13

or Christina Mistretta (at Ha:nilton Taft).

!

,

Exhibit! 802 (attached hereto as Exhibit C) is s seven-page transcription of Mr. A"mstrong's July :

14

I

15

J9, 1989 notes -- made just before HalT'jjton Taft held client ta..x deposits for the ftrst time. During tria!,

16

the defense sought to introduce the document through the testimony of Christina Mistretta who \

17

transcribed the notes, and later through ?vIr. Armstrong himself This coun held the doclllIlent to be

18

inadmissible hearsay, and not within Federal Rule of Evidence B03(3)'s "state of mind exception," as

19

defense counsel contended.

20

Federal Rule 803(3) creates a hearsay exception for:

"A statement of the declarant's then existing state of mind, emotion, sensation, or physical condition (such as intent, plan, motive, design, mental feeling, pain, and bodily health), but not including a s:atement of memory or beuefto prove the fact remembered or believed ...

21

22 23 24

This rule has particular significance in a case, such as this one, which is primarily about the defendant's

25

intent.

26

workings DfMr. Armstrong's mind, the actual stalonents made by:tvir. Annstrong take on a tremendous

27

amount of importance, serving as a window, through which the jury can look into .Mr. Annstrong's mind.

28

Exhibit 1802 was the singular document in this entire case which would have allowed the jury a direct

Since neither the government nor the defense can present direct evidence about the inner

14 RPR-28-19S?

18:22

I

I

1 look at Mr Armstrong's thoughts and impressions on the day that he first decided to hold client tax \

~

\1

j

I

deposits' During the trial of this maner, the government accused Mr !l;mstrong of lying to virt'cal!y ,

4 i everjane around him, including his attorneys, his accountants, his employees, and his clients,

Exl-~bil

5

I 1801, however, constinltes ;Vir. Armstrong's personal notes. which would be transcribed and then stored

6

in a lo:ked drawer or cabinet, for no one's viewing e:tcept Mr. Annstrong's. Thus, when !vir. Armstrong

7

prepared these notes, he had no motive to mislead anyone; the notes truly refleci his then existing Slate.

8

ofr.~nd,

9

contemporaneous notes from July 19, 1989 indicate: (1) thaI, even before he held checks. Mr. Armmor,g .

10

always intended to repay clients' taxes, along with any penalties and interest ("we have the responsibility ,

II

to pay the payroll taxes on the due date; if we do not pay those payroll taxes on the due date, we have ,, ,

12

to pay the penalty and imerest"); (2) that he believed (whether realistically or not) lhat Hamilton Ta..'t

13

would be able to make up the misscd ta.-.; deposilS, plus penalties and interest ("We do not have a problem

14

"1th it at this time; we have our lines of credit in place; we have our collateral in place, our closing bid

and his genuinely held beliefs about the future of Hamilton Taft SpecifIcally, Mr. Armstrong's

i

15 happened on Gulflex as of July 18th. Dresdner Enterprises has the financial stability and Hamihor. Taft

i

16

also has a positive balance sheet."); and (3) that !'.1r. Armstrong did not believe he had done aClything

i

17

illegal, irnrnoral, or unethical by holding checks ("as far as a legal positior" it was legal, as far as a moral \

18

and eWcal, it will be moral and e'.rucally right when we pay the interest and penalty.").' . ,

i

19

\vpj]e it is true that Mr, lumstrong took the witness stand and laid the jury much of what he said

20

in his July, 1989 notes, his testimony was not an adequate substitute for the notes themselves. Quite

21

obviously, Mr. Armstrong's contemporaneous, stream of consciousness statements, made for 'no one's

22

viewing but his own, provide far greater insight into his then-existing intent than his after·the·fact

23

proclamation ofinnocene<:, made to a jury which has been empaneled for the speeific purpose of decidi"g

24

his guilt or innocence. The July, 1989 notes were offered not for their truth but for the light they shed

25

on lYfr. Annstrong's state of mind at the time he committed the acts which are at issue in this case. The

26 27 28

•

This court, of course, was frec to redact portions of Mr. Armstrong's notes which it deemed to be outside the scope of the defendant's then-existing state of mind. Quoted portions can be found in the final paragraph on ?age seven of the attached exhibil 15 415 398 3817

P.1E.

.1

jury, of course, would be free to give these notes whatever weight they wished -- including none at all,

2

if they felt it appropriate. However, because the notes were not admitted into

J

got an opportunity to view thcm at all.

e\~dence,

the jU'f never

4

5 D

DORA DJ INN TRANSCRIPTS --

6

Dora Dunn was a sales

repr~sentatiye

at Hamilton Taft who testified as a Wltncss in the \

I

7

government's case in chid' Though she had very little contact with Mr. Armstrong durir,g her time ot

8

Hamilton Taft and had little tD say abDut him during her interview with thc FBI, she grew suddenly \

9

loquacious when asked about him at tria1. Dunn testified that Hamilton Taft sales representative made

10

affirmative misrepresentations to clients, telling them that their monies would be invested solely in safe,

11

overnight, federally-backed instruments, when in fact, this was not true. Perh3ps more significantly,

12

Dunn also testified that ·Mr. Armstrong told his sales representatives that the company was in great

13

financial shape as a result of his takeover, and that prospective clier,ts should be made aware ofHami\ton

14

Taft's new-found profitability. Though numerous other sales representatives testified at trial-- Fred

15

Holloway, Boone Armstrong, John Estes, and Ed Briscoe -- none corrobDrated this panicular testimony.

16

On Thursday, February 20, 1997, the jury in this case began deliberatiDns. The jury remained oUt

17

until Tuesday, February 25, when defense counsel learned that the jury had requested and received

18

transcripts DfDora Dunn's testimony. CDunsel prDmptly asked the court to reCDnvene and, upDn dDing

19

so, defense counsel objected to thc jury's receipt of transcripts and asked the court to declare a rrjstrial.

20

This court denied the motion and discharged the parties.

21

About an hour later, court reconvened again after the jury indicated that it had reached

OJ.

verdict.

22

At this time, defense counsel renewed its motion for mistrial, relying on the case of United Slares v.

23

Hemandez, 27 F.3d 1403, 1408 (9th Cir. 1994), which found reversible error in the jury's receipt of

24

transcripts, without any preceding cautionary instruction. Instead of declaring a mistrial, this CDurt issucd

25

an after-the-fact insuuction, indicating to the jurors that: (1) the Dunn transcript cannot serve as a

26

substitutc for their memory or their assessment ofDunn's credibility, but was merely tD be used as an aid;

27 28

Dunn was thc last witness tD testify before the Christmas recess and was still Dn the stand when court ended on December 19, 1996. Dunn resumed and completed her testimony on January 6, 1997, when court re-convened after the holidays 16 415 398 3817

e.17

I

1

(2) they should weigh all the evidence and not focus on any particular portion of the trial; (3) they should

21

not give undue weight to Dunn's testimony, but should consider it in conjunction ·"..ith all the other

J

j

4

e'.~de:l.::e.

This COUI1 then asked :~c j:';;-j to

re,:~~v:ne

the ne."(t day and to recons:de: tr.eir verdict in

li~~t

of the additional instruction The ne;et day. the court re-instructed the jury and discharged the;n for

5 further deliberations. The jury retumed with their guilty verdict approximately an hour later. 6

In Hem:JJ1dez, the Ninth Circuit reversed a felony conviction after the trial court provided cenain

7

transcripts tD the jUli without illst admonishing them "to weigh all the evidence" and without instructioQ

S "that the transcript was not authoritative." ld., a1 1409

At the hearing on trjs matter, Ihis

COUrt

9 \ diSlmguished the instanl case from }j=lJJJd~z, largely because the transcript in He.'7l2.11dez contained the 10

testimony of one of only two testifying officers -- obviously a key ",itness in the govemmc;n\'s case.

1i

Conversely, in Mr. Armstrong's case, Dora Dunn was just one of approximately forty go,emmer,t

12

witnesses to testifY during trial. While the court's obsen..ation is true, Mr. Armstrong submits that this

13

provides even greater teasan for declaring a mistrial in the instant case. One aftr.e pri",ary Gangers in

14

furnishing transcripts to jurors is that the jury might attach "ndue weight to the testioc!':y c f that

15

parucular ,,~tr,ess, while ignoring the testir:tcny of other witnesses. This danger is even more profound

16

in a case with numerous witnesses, since the testimony of anyone witness constitutes but a small

17

percentage of the government's entire <:a-<e. Iflvlr. Armstrong is to be convicted, this court should make

18

sure that the conviction is based on all of the government's evidence., rather than just one particub

19

witness.

:0

While this court did issue a" instruction, it came at a time when the jury had already reached thei

21

verdict. A verdict reached after three days of intense deliberations is not going to be lightly cast asid

22

and, sure enough, the jury's renewed deliberations lasted barely more than an hour -- indicating that n

23

serious cOll5ideratian was given to changing the verdict. Rather than reconvening the jury at a time whe

24

they rJ!.d already made up their mind, this court should have granted a mistrial at that point.

25

26 27 28

17 APR-28-1997

18:24

415 398 3817

P.1S

III. CONCLUSION

1

For the reasons herein set out, Mr. Armstrong requests, pursuant to Federal Rule of Criminal

2 3

Procedure 33, that this court grant a new trial in the above-entitled malter.

4

DATED: April 28, 1997

5

Respectfully SUbmitted,

6

CHESTER 1. BROWN

7 8

9

10 11

12 13

14 15 16 l?

18 19

20 21 22 23 24 25

26 27 28

APR-28-1997

18:24

18

415 398 3817

94%

P.1S

196D-SFr 93255

~N In!}

M1

On Y 9, 19:7, SA I,allra Nielson took 5 tapes to Special Asslstant , _ a Deputy Attorney General for the b7C: State of Californla and prosecutor In the Hamllton Taft Trial. The 5 tapes consist of all pertinent conversations from a wire worn in an unrelated case for the Dallas offlce, by a potentlal witness for the Hamilton Taft trial. These copies were made for the judge in the trial and were returned to SA Laura Nielson

J

after the trial was over. D W i l l return tapes once he is

L;7C

flnlshed reviewing them. Tapes

#4 #5

12/07/93 12/09/93

#13

01/26/94

#17 #25

01/31/94 02/24/94

" /C,l,r?· ~

<:\':>-Z'· ::>

'-'-'

.

1'50

fmd

nrrp:IICreQl[Caro.wesuaW.com/UnQlOeraUILWI

Kes~lt

Westlaw: Home

About

Account Info

Contact Us

Off

Help

P In re Hamilton Taft & Co. 114 F.3d 991 C.A.9 (Cal.),1997. lun 11, 1997 114 F.3d 991, 30 Bankr.Ct.Dec. 1236, Bankr. L. Rep. P 77,405,97 Cal. Daily Op. Servo 4410, 97 Daily Journal D.A.R. 7369 Briefs and Other Related Documents

United States Court of Appeals, Ninth Circuit. In re HAMILTON TAFT & COMPANY, Debtor. Frederick S. WYLE, Trustee of Hamilton Taft & Company, Plaintiff-Appellant, V.

HOWARD, WElL, LABOUISSE, FREIDRICHS INC.; Howard Weil Financial Corporation; Legg Mason Inc., Defendants-Appellees. No. 95-17058. Ar9ued and Submitted Nov. 8, 1996. Decided June 11, 1997. Chapter 11 trustee sought to avoid reverse repurchase transaction between stockbroker and debtor. Stockbroker moved for summary judgment. The United States Bankruptcy Court for the Northern District of California, Thomas E. Carlson, Chief Judge, .. 176 B.R. 895.... granted motion. Trustee appealed. The District Court, !lIston, J., 196 B.R. 532, affirmed. Trustee appealed. The Court of Appeals, William A. Norris, Circuit Judge, held that: (1) provision preventing trustee from avoiding prepetition settlement payment made by or to stockbroker governed prepetition reverse repurchase transaction between debtor and stockbroker; (2) stockbroker's payment to third party, pursuant to reverse repurchase agreement, was settlement payment; and (3) trustee could not invoke fraud exception to provision barring avoidance of prepetition settlement payments involving stockbrokers. 1«7 ,,=,,<. Affirmed. West Headnotes

ill KeyCite

this headnote

51 Bankruptcy 51 V The Estate 51 V(H) Avoidance Rights 51V(H)1 In General 51k2701 k. Avoidance Rights and Limits Thereon, in General. Most Cited Cases Provision preventing trustee from avoiding prepetition settlement payment made by or to stockbroker governed prepetition reverse repurchase transaction between Chapter 11 debtor and stockbroker, notwithstanding trustee's contention that proVision was superseded with regard to repurchase agreements by provision barring trustee from avoiding prepetition settiement payment made by or to repo participant in connection with repurchase agreement; provision governing transfers involving repo participants was intended to address repurchase agreements not already covered by provision governing transfers involving stockbrokers. Bankr.Code, 11 U.S.CA. § 546(e. f).

ill KeyCite

this headnote

51 Bankruptcy 51V The Estate

lof4

9/14/2006 10:55 AM

Fmd Result

llLl!-'.lfI..iII;;Ull\.,aJ

u. Wl;;;:,uavv .... VIlIl .LlilUIU,",lULllL. n

51V(H) Avoidance Rights 51 V(H)l In General 51k2701 k. Avoidance Rights and Limits Thereon, in General. Most Cited Cases Treasury bill transfer between Chapter 11 debtor and stockbroker pursuant to reverse repurchase agreement was settlement payment within meaning of statute barring trustee from avoiding prepetition settlement payment made by or to stockbroker, despite trustee's claim that transaction was not settled between debtor and stockbroker due to stockbroker's paying third party for stockbroker's repurchase of treasury bill; funds were transferred to third party at debtor's direction and fulfilled stockbroker's obligation under agreement. Bankr.Code, 11 U.S.CA. § 546(e). illl<eyCite this headnote 51 Bankru ptcy 51V The Estate 51V(H) Avoidance Rights 51V(H)1 In General 51k2701 k. Avoidance Rights and Limits Thereon, in General. Most Cited Cases Trustee could not invoke fraud exception to provision barring avoidance of prepetition settlement payments involving stockbrokers, so as to avoid reverse repurchase transaction between stockbroker and Chapter 11 debtor; exception applied to fraudulent transfers completed within one year of filing, and reverse repurchase transaction occurred more than two years before debtor's filing. Bankr.Code, 11 U.S.CA. §§ 546(e), 548(a)(1). *991 L.J. Chl'is Martiniak, Feldman, Waldman & Kline, San Francisco, CA, for plaintiff-appellant. Robert L. Eisenbach III, Cooley, Godward, Castro, Huddleson & Tatum, San Francisco, CA, and Thomas 1<. Potter, III, Jones, Walker, Waechter, Poitevent, Carrere, & Denegre, New Orleans, LA, for defendants-appellees. Jeffrey L. Schwaltz, Hahn & Hessen, New York City, for amicus. Appeal from the United States District Court for the Northern District of California; *992 Susan !liston, District Judge, Presiding. D.C. No. CV-95-01612 SI. Before: NORRIS and KOZINSKI, Circuit Judges, and MOLLOY,

[FI~*l

District Judge.

FN* Honorable Donald W. Molloy, District Judge from the District of Montana, sitting by designation.

WILUAM A. NORRIS, Circuit Judge. In late 1987, MaxPharma, Incorporated had an option to buy Hamilton Taft & Company's stock from its then-owner, Connecticut General Corporation ("CIGNA"). MaxPharma was unabie to arrange financing for the stock purchase using stock as collateral, but Howard Weil Financial Corporation offered to finance the stock purchase using a reverse repurchase (or "repo") of a treasury bill (the "T-bill"), and the parties agreed to finance the stock purchase that way. Pursuant to that agreement, Hamilton Taft wired $5,000,000 to Howard Weil on January,28, 1..2ll.B.. The next day, Howard Weil used $4,900,000 of the $5,000,000 in Hamilton Taft's account to purchase for Hamilton Taft a 90-day T-bill, having a face value of $5,000,000, which was immediately sold back to Howard Weil for $4,100,000 based on a reverse repo agreement under which Hamilton Taft would repurchase the T-bill in 90 days for the sale price plus interest. Finally, also on January ~,.l,2,!ill, Howard Weil wired $4,100,000 directly to MaxPharma, at the request of Hamilton Taft, so MaxPharma could purchase Hamilton Taft's stock from CIGNA. After Hamilton Taft went into bankruptcy in 1991, Hamilton Taft's trustee sought to avoid the 1988 reverse repurchase transaction between Hamilton Taft and Howard Weil. The bankruptcy court granted Howard Weil's motion for summary judgment on the ground that § 546(e) of the Bankruptcy Code, 11 U.S.C § 546CE,).. bars the trustee from avoiding the transfer of securities made by a stockbroker pursuant to a reverse repurchase agreement.J£~i11 The district court affirmed for the reasons stated In the bankruptcy court's opinion, and so do we. FN1. The text of § 546(e) reads, in pertinent part: "the trustee may not avoid a transfer that is a ... settlement payment ... made by or to a ... stockbroker ... that is made before the commencement of the case .... " 11 USC § 546(e).

20f4

9/14/2006 10:55 AM

1

rinG KeSUll

I

ill The

trustee's principal argument on appeal is that § 546(f), and not § 546(e), controls this case because Congress intended § 546(f) to supersede § 546(e) with respect to repurchase agreements. See 11 U.S.c. § 546(f) ..lfI'g} Howard Weil responds that § 546(f) supplements, but does not supersede, §. 546(e), even though § 546(f) mentions repurchase agreements and § 546(e) does not. See id. § 546(e). FN2. Section 546(f) provides in pertinent part that "the trustee may not avoid a transfer that is a ... settlement payment ... made by or to a repo participant, in connection with a repurchase agreement and that is made before the commencement of the case.... " 11 U.S.C. § 546(f). A "repo participant" is "an entity that, on any day during the period beginning 90 days before the filing of the petition, has an outstanding repurchase agreement with the debtor." 11 U.S.c. § 101(46). It is undisputed that Howard Weil's last transaction with Hamilton Taft ended over two years prior to Hamilton Taft's bankruptcy petition, and so Howard Weil does not qualify as a "repo participant. II

After reviewing both the statutory language and the legislative history, the bankruptcy court held that ". section 546(f) was intended to address Repo transactions not already covered by section 546(e) rather than to narrow the application of 546..(e)." .176 B.R. at 900... In particular, the bankruptcy court noted that "Section 546(f) protects additional participants in certain Repo transactions" who would not have been protected under the terms of § 546(e). Id. at 900. As a result, the bankruptcy court held that "a defendant that qualifies under 546(e) as a stockbroker [as Howard Wei I does here] need not qualify under section 546(f) as a repo participant." Id. We agree with the bankruptcy court. In addition to the statutory language, the legisiative history shows that § 546(f) was merely intended to augment § 546(e), not to supersede it by controlling repurchase agreements exclusively. The Senate Report states that § 546(f) was "not intended to affect the status of repos involving securities or involving *993 commodities as securities contracts and their consequent eligibility for similar treatment under other provisions of the code, such as the provisions giving protection to stockbrokers.... " S.Rep. No. 65, 98th Cong., 1st Sess. 45, 49 (1983). Instead, Congress enacted §. 546(f) to govern repurchase transactions that involved categories of participants not named in § 546(e): "the proposed amendments are intended to afford participants in the repo market the same treatment with respect to the stay and avoidance provisions of the Code that Public Law 97-222 [codified at § 546(e) ] explicitly provided stockbrokers .... " Id. Indeed, our Bankruptcy Appellate Panel has already said that "the enactment of section 546(f) and its legislative history provides a further indication that section 546(e) was intended to apply to payments made in repo transactions." Jonas v. Farmer Bros. Co. (In re Comark). 145 B.R. 47, 52-53 (9th Cir.BAP1992). We hold, therefore, that § 546(e) covers the transaction at issue in this case. l! ill The trustee argues next that even if § 546(e) does cover the reverse repurchase transaction between Hamilton Taft and Howard Weil, the trustee is not barred from avoiding the T-bill transfer under § 546(e) because the transfer was not a "settlement payment." Section 546(e) prohibits trustee avoidance of settlement payments to stockbrokers that are made at any time before the commencement of bankruptcy .I,,<J actions. 11 U.S.C. § 546(e). The trustee claims that Howard Weil's payment of $4,100,000 to MaxPharma )p'1" for Howard Weil's repurchase of the T-bill from Hamilton Taft was not a "settlement payment" within the I meaning of § 546(e) because the transaction did not complete a bilateral exchange between Howard Weil and Hamilton Taft. Put more simply, the trustee argues that Howard Weil failed to settle the transaction between Howard Weil and Hamilton Taft because Howard Weil wired the $4,100,000 to MaxPharma, rather than to Hamilton Taft. The bankru tc court called this ar ument "frivolous" because" i t is undisputed that the funds were traosferred to MaxPharma at the direction 0 [Hamilton Taft]. In directing payment of the sale proceeds to MaxPharma, [Hamilton Taft] exerted dominion over the funds and used them for its own purposes." .176 B.R. at 900... Indeed, the bankruptcy court noted that, from Howard Weil's perspective, payment to MaxPharma was equivalent to p1l.\1ment to Hamilto..o..Igft.ilDJtiuJ£iJle1JJ:f_qward Weil's obligation under..!be reverse rep~ agreement. • ld•. In addition, the bankruptcy court noted that we have broadly construed the term "settlement payment" to "+include[ ] a transfer of securities that completes a securities transaction." 176 B.R.at 899. (quoting Jonas v. Resolution Trust Corp. (In re Comark), 971 F.2d 322, 326 (9th Cir.1992)). As the bankruptcy court recognized, there can be no question, then, that the T-bill transferred pursuant to the reverse repo agreement was a settiement payment within the meaning of §.

30f4

9/14/2006 10:55 AM

tma KeSu!t

546(e). In fact, to hold otherwise "..would eviscerate section 546(e) and frustrate Congress's intent in enacting it, by leaving the broker open to suit for doing nothing more than handling a securities transaction for the debtor." 176 B.R. at B99.... Again we agree with the bankruptcy court. III ill Finally, the trustee argues that his claim should be exempt from § 546(e)'s reach because the tra'nsfer at issue was fraudulent. But the bankruptcy court correctiy recognized that the ethical nature of the transaction is Irrelevant to our determination of the legal issues involved ...176 B.R. at 901.... Section 546(e) explicitly excepts fraudulent transfers that are completed within one year of the filing of the bankruptcy petition. [FN3] Because *994 the reverse repo transaction at issue here was completed over two years before the filing of Hamilton Taft's bankruptcy petition, the trustee cannot invoke the fraud exception to § 546(e). FN3. Section 546(e) provides that a trustee may not avoid the type of settlement payment at issue here "except under section 548(a)(1) of this title." 11 U.S.C. § 546(e). Section 548(a)(1) provides that [t]he trustee may avoid any transfer of an interest of the debtor in property, or any obligation incurred by the debtor, that was made or incurred on or within one year before the date of the filing of the petition, if the debtor voluntarily or involuntarily (1) made such transfer or incurred such obligation with actual intent to hinder, delay, or defraud any entity to which the debtor was or became, on or after the date that such transfer was made or such obligation was incurred, indebted. 11 U.S.c. § 548(a)(1).

The summary judgment in favor of Howard Weil is AFFIRMED. C.A.9 (Cal.),1997. In re Hamilton Taft & Co. 114 F.3d 991, 30 Bankr.Ct.Dec. 1236, Bankr. L. Rep. P 77,405, 97 Cal. Daily Op. Servo 4410, 97 Daily Journal D.A.R. 7369 Briefs and Other Related Documents (Back to top) • 1996 WL 33489912 (Appellate Brief) Reply Brief of Appellant Frederick S. Wyle, Trustee of Hamilton Taft & Company (Apr. 05, 1996)

• 1996 WL 33489913 (Appellate Brief) Original Brief of Defendant-Appellee Howard, Weil, Labouisse, Friendrichs, Inc. (Mar. 21, 1996) • 1996 WL 33489911 (Appellate Brief) Opening Brief of Appellant Frederick S. Wyle, Trustee of Hamilton Taft & Company (Feb. 20, 1996) END OF DOCUMENT

(C) 2006 Thomson/West. No Claim to Orig. U.S. Govt. Works.

THOiVISON

*

WEST

40f4

9/14/200610:55 AM

.. AD f458 (Rev B/96) Sl1eet 1 - Judgment

In

a Cnmmal C.. "'~

. ;: : :;========~=nt=tc=b=~=ta=tc=z :mtztrtct (lCourtC-Fi LED Northern District of California U. S. District Court SEP X5 1997 JUDGMENT IN A CRIMINAL

UNITED STATES OF AMERICA

v CONNIE C. ARMSTRONG, .TR.

~u~DDr.YTA%'r-cKrNG

NORTHERN OISTAt

"

OURT

(For Offenses Committed On or After Novembu 1~1j §8~TlIFORNIA Case Number

3:94CR00276-001

Chester Brown, Esq. & Sol Wollack, Esq

THE DEFENDANT:

LJ

Derend
pleaded gUilty to count(s)

o

pleaded nolo contendere to count(s)

[.XJ

was found gUilty on count(s) after a plea of not gUilty

whIch was accepted by the court

Title & Section

1,2,3, £I, 5, 6, 7, 8, 9,10, ] 1,12.13,14.15, J6, 17, 18, 19, 20 & 21

Date Offense Count Concluded Number(s)

Nature of Offense

18 U.S.c. § 2314

Stolen Property

0210111991

1-3.15-18

18 U.S.C § 1343

\Vlre Fnmd

03/12/1991

4-14,19-21

The defendant IS sentenced as provided In pages 2 through to the Sentencing Reform Act of 1984

c:::

o

7

of thiS Judgment The sentence

IS

Imposed pursuant

The defendant has been found not gUIlty on count(s) Count(s)

(Is)(are) dismissed on tile motion of the Unlled States

IT IS FURTHER ORDERED that the defendant shall notify the United States Attorney for thiS district Within 30 days of any change of name, reSIdence, or mailing address untIl all fines, restItution, costs, and special assessments-lmposed by thiS Judgment are fully paid Defendant's Soc Sec No Defendant's Date of Birth

460-96-6682

-=0-=6/-=0-=9/c:1-=9-=54-:----~~ .~~-~-_

Defendant's USM No

08/29/1997 Oalll or Irl1po~'tI(ln of Judgmnnl

..

00000-000

Defendant's ReSidence Address

4843 Slony Ford

~-~---

Dallas,

TX,

75252

CHARLES A LEGGE U.S. District JUdge

..

Namll 0. T,tla of Juoj":1l11 Officar

Defendant's Mailing Address

_

... _..

_--

4843 Stony Ford

"')allas,

TX

75252

--~.

Dalll

'i)

(q"j. uOCumem l'{U.

0G(!) . ENTERED IN CRIMINAL DOCKET

""

Olstnct Court

Cllmlnai case Procosslng

,

,

'. AD 2458 (Rev 8196) Sheet 2 • lmpnsonment

DEFENDANT

CONNIE C. ARMSTRONG, JR.

CASE NUMBER

3'94CR00276-001

IMPRI$ONMENT The defendant IS hereby committed to the custody of the United States Bureau of Pnsons to be Impnsoned for a total term of 108 month(sl _

: .J

The court makes the following recommendations to the Bureau of Pnsons

I.J

The defendant IS remanded to the custody of the United States Marshal

D

The defendant shall surrender to the United States Marshal for this district

I2J

LJ

at

[J

as notified by the United States Marshal

a m/p m

on

The defendant shall surrender for service of sentence at the Institution designated by the Bureau of Pnsons before 2 P m on

as notified by the United States Marshal as notified by the Probation or Pretnal Services Office

RETURN I have executed this Judgment as follows

Defend.ant delivered on at

to _ _ , With a certified copy of this Judgment

UNITED STATES MARSHAL

By Deputy U S Marthal

AD 2458 (Rev 6/96) Sheet 3 ~ SupervIsed Release

====== DEFENDANT

CONNIE C. ARMSTRONG, JR.

CASE NUMBER

3:94CR00276-0UI

/ .. -

-_.~-----_

JUdgment.'page~~=.3_~. of

L

SUPERVISED RELEASE Upon release from ImpriSOnment, the defendant shall be on supervised release for a term of

3

year(s)

The defendant shall report to the probation office In the dlstnct to which the defendant IS released within 72 hours of release from the custody of the Bureau of Prisons

The defendant shall not commit another federal, state, or local cnme The defendant shall not Illegally possess a controlled substance

For offenses committed on or after Sepfember 13, 1994 The defendant shall refrain from any unlawful use of a controlled substance The defendant shall submit to one drug test Within 15 days of release from Impnsonment and at least two penodlc drug tests thereafter, as dlfected by the probation officer

U

IZJ

The above drug testing condition IS suspended based on the court's determination that the defendant poses a low nsk of future substance abuse (Check, If applicable)

The defendant shall not possess a firearm as defined In 18 USC § 921 (Check, If applicable)

If thIS Judgment Imposes a fine or a restItution oblIgatIOn, It shall be a condItIon of supervIsed release that the defendant pay any such fine or restitution that remains unpaid at the commencement of the term of supervised release In accordance With the Schedule of Payments set forth In the Cnmlnal Monetary Penalties sheet of thiS Judgment The defendant shall comply With the standard conditions that have been adopted by thiS court (set forth below) defendant shall also comply With the additional conditions on the attached page (If indicated below) See Spccml

COndl(IlJIIS

of SupervISIon - Page

The

4

STANDARD CONDITIONS OF SUPERVISION 1) the defendant shall not leave the Judicial dlstnct Without the permiSSion of the court or probation officer, 2) the defendant shall report to the probation officer and shall submit a truthful and complete wntten report Within the first five days of each month, 3) the defendant shall answer truthfully all InqUines by the probation officer and follow the Instructions of the probation officer,

4) the defendant shall support hiS or her dependents and meet other family responSibilities, 5) the defendant shall work regularly at a lawful occupation unless excused by the probation officer for schooling, training, or other acceptable reasons, 6) the defendant shall notify the probation officer ten days pnor to any change In reSidence or employment, 7) the defendant shall refrain from excessive use of alcohol, 8) the defendant shall not frequent places where controlled substances are Illegally sold, used, distributed, or administered, 9) the defendant shall not associate With any persons engaged In CfImlnal actiVity, and s"all not associate With any person conVicted of a felony unless granted permission to do so by tile probation officer, 10) the defendant shall permit a probation officer to VISit him or her at any time at home or elsewhere and shall permit confiscation of any contraband observed In plain view of the probation officer, 11) the defendant shall nobfy the probation officer Within seventy-two hours of being arrested or questioned by a law enforcement officer, 12) the defendant shall not enter onto any agreement to act as an Informer or a speclat agent of a law enforcement agency Without thepenmlsslon of the court, 13) as directed by the probatIOn officer, the defendant shall notify tIllld parties of flsks that may be occasioned by the defendanrs cnmlnal record or personal hlstOly or characteflsbcs, and shall penmlt the probatron officer to make such notifications and to confirm the defendant's compliance With such notification reqUirement

AO 2408 (Rev 8/96) Sheet 3· SupervISed Release

JUdgment-Page

fFENDANT CASE NUMBER

4

of

7

CONNIE C. ARMSTRONG, .JR. 3.94CR00276-001

SPECIAL CONDITIONS OF SUPERVISION 1. The defendant shall pay restltutlon, smgly or jOintly, m the sum ofS62,750,OOO,

3S

dIrected b,Y the U S ProbatIOn Officer.

2. Th~ defendant shall make available to the probation officer any requested financial information, upon request of the probatioll officer.

AO 2.l158 (Rev Bl96) Sheet 5, Part A ~ Cnmmal Monelar

iEFENDANT CASE NUMBER

'5

. . _----_.=.====

JUdgmenf.Page

5

of __

L

CONNIE C. ARMSTRONG, JR. 3:94CR00276·001

CRIMINAL MONETARY PENALTIES The defendant shall pay the following total criminal monetary penalties In accordance with the schedule of payments set forth on Sheet 5, Part B Assessment Restitution Totals'

$

1,050.00

$

$

[ ] If applicable, restitution amount ordered pursuant to plea agreement

62,750,000.00

$

FINE The above fine Includes costs of Incarceration and/or supervision In the amount of $___ _

_

._

The defendant shall pay Interest on any fine of more than $2,500, unless the fine IS paid In full before the fifteen til day after the date of Judgment, pursuant to 18 USC § 3612(f) All of the payment options on Sheet 5, Part B may be subject to penalbes for default and delinquency pursuant to 18 USC § 3612(g) The court determined that the defendant does not have the ability to pay Interest and It IS ordered that

o

The Interest requirement IS waived

[ ] The Interest requirement IS modified as follows

RESTITUTION

n

o

The determination of reslitutlon IS deferred until Will be entered after such a determlnalion

An Amended Judgment In a Criminal Case

The defendant shall make restitution to the follOWing payees In the amounts listed below If the defendant makes a partial payment, each payee shall receive an approXimately proportIonal payment unless

speCified otherwise In the pnorlty order or percentage payment column below • Total Amount of Loss

Name of Payee

~

$

PriOrity Order Amount of or Percentage Restitution Ordered of Payment

$---

• Findings for the total amount of losses are reqUired under Chapters 109A, 110, 110A, and 113A of Title 18 for offenses commrtted on or after September 13, 1994 but before April 23, 1996

AD 21458 (Rev B/S6) Sheet 5, Part 8 - Cnmlnat MonetaI"' -

EFENDANT CASE NUMBER

~s

-=======

--_.

CONNIE C. ARMSTRONG, JR 3:94CR00276-001

SCHEDULE OF PAYMENTS Payments shall be applied In the following order (1) assessment, (2) restitution, (3) fine pnnclpal, (4) cost of prosecution, (5) Interest, (6) penalties Payment of the total fine and other criminal monetary penalties shall be due as follows A

r;;<J

In full Immediately, or

B

0

$

C

D

E

o o D

.__ . _ ... Immediately, balance due (In accordance with C, D, or E), or

not later than

_~~

,or

In Installments to commence _ day(s) after the date of thiS judgment In the event the entire amount of criminal monetary penalties Imposed IS not paid prior to the commencement of superviSion, the U S probation officer shall pursue collection of the amount due, and shall request the court to establish a payment schedule If appropnate, or In (e 9 equal, weel,ly, monthly, quarterly) Installments of $ over a period of - ----year(s) to commence day(s) after thedate of thiS judgment

The defendant WIll receive credIt for all payments previously made toward any crlmmal monetary penalties Imposed

Special Instruclions regarding the payment of CfImlnal monetary penalties The defendant shall make restitutIOn, JOllltly and severally WIth his co-defendant RIchard Fowles. as directed by the probatIOn oflice.

IZ1 JOI"6;:~~ ~~;;''ii:: (including Defendant Number) CR 94-0276 CAL

JOint and Several

Defendant Name

Amount

Rldmrd Fowles

562,750,000 00

[J

The defendant shall pay the cost of prosecution

o

The defendant shall forfeit the defendant's Interest ,n the follOWing property to the United States

Unless the court has expressly ordered otherwise In the speCial instructions above, If thiS judgment Imposes a penod of unpnsonment payment of Criminal monetary penallies shall be due dUring the period of Imprisonment All Criminal monetary ~nalty payments, except those payments made through the Bureau of Prisons' Inmate FinanCial Responsibility Program are be made as directed by the court, the probation officer, or the United States attorney

AD 2458 (RelJ B/96l Sheet S ~ Stalemenl of Reasons

Judgmenl·Page

)EFENDANT

CONNIE C. ARMSTRONG, JR.

CASE NUMBER

3.94CR00276-00I

7

of

7

STATEMENT OF REASONS The court adopts the factual findings and gUideline applicatIOn m the presentence report

OR

o

The court adopts the factual findmgs and gUideline application In the presentence report except (see attachment, If necessal)')

Guideline Range Determmed by the Court: Total Offense Level

31

Cnmlnal Hlstol)' Categol)' Impnsonment Range

108-135

Supervised Release Range to S

Fine Range $.

L::j

Fine waIved or below the gUIdeline range because of Inability to pay

Total Amount of Restitution $ .__62,?~O,OOO 00 Restitution IS not ordered because the complication and prolongation of the sentencing process resultmg from the fashiOning of a restitution order outweighs the need to prOVide restitution to any Victims, pursuant to 18 USC § 3663(d)

u

For offenses committed on or after September 13, 1994 but before Apnl23, 1996 that req""e the total amount of loss to be stated, pursuant to Chapters 109A, 110, 110A, and 113A of Title 18, restitution IS not ordered because the economIc cIrcumstances of the defel1dant do not allow for the payment of any amount of a

restitution order, and do not allow for the payment of any or some portion of a restitution order m the forseeable future under any reasonable schedule of payments Partial restitution IS ordered for the follOWing reason(s)

D

The sentence IS Within the gUideline range, that range does not exceed 24 months, and the court finds no reason to depart from the sentence called for by the application of the gUidelmes

lZ<[

The sentence IS Within the gUideline range, that range exceeds 24 months, and the sentence IS Imposed for the follOWing reason(s)

OR

, L ~ ' f ...ti!- ~ T..Q,... ~

1-

o

f-

-e.

'1-

1 0 8 ~ ---

o<--,L

",/J

~

..ee- A-.-- /f:-- ~ ~ G

.A:. .,,"

~ --'- ~ OR

The sentence departs from the gUldelme range

D

o

upon mobon of the government, as a result of defendant's substantial assistance for the followmg speCific reason(s)

~- ~.

f

f

FindLaw I For Legal Professionals J For Corporate Counsell For Law Students Welcome Nancy Berryll Edit Your Profilel Log Out My current location: Dallas, TX I Change Location

Findlaw

Fcrlegal Professionals ------ i - - - - - - - - , Home Practice Areas 1

II

Cases & Codes ll~~~~~llClEll!

!I

Federal Law

State Law

e

• View enhanced case on Westlaw

Case Summaries Search

Clicl, for Printable version

Marke~-;~~';~;"-'l

U.S. Code

~ Email this case

r- Research a Lawyer

Newsletters

VISA

• KeyCite this case on Westlaw

http://Iaws.findlaw.com/9th/9616768.html

u.s. 9th Circuit Court of Appeals ATLAS HOTELS, INC. v USA

9616768 ATLAS HOTELS, INC.; BW/IP

INTERNATIONAL; C&R CLOTHIERS, INC.; CALIFORNIA PACIFIC MEDICAL CENTER; CHRONICAL PUBLISHING COMPANY; CLARIS CORPORATION; ENSR CORPORATION; FIRST CAPITAL

LIFE INSURANCE COMPANY; KEMPER SECURITIES, INC.; NATIONAL DATA

No. 96-16768

CORPORATION; SPRINGFIELD D.C. No. SUGAR & PRODUCTS, INC.;

CV-95-01029-JLQ STANFORD HEALTH SERVICES; SUN OPINION MICROSYSTEMS, INC.; SUNBELT BEVERAGE CORPORATION; WILLIAM MARSH RICE UNIVERSITY,

Plaintiffs-Appellants, v. UNITED STATES OF AMERICA,

Defendant-Appellee.

Appeal from the United States District Court for the Northern District of California Justin L. Quackenbush, District Judge, Presiding Argued and Submitted October 8, 1997--San Francisco, California

1 of 4

9/16/20066:27 PM

FindLaw for Legal ProtesslOnalS - Lase Law, reaeral ana

~mle

I'\.eso...

Filed April 6, 1998 Before: Mary M. Schroeder, Robert R. Beezer, and Melvin Brunetti, Circuit Judges. Opinion by Judge Brunetti SUMMARY

COUNSEL

Tommy A. Conner, San Francisco, California, for the plaintiffs-appellants. Pamela C. Berry, Tax Division, Department of Justice, Washington, D.C., for the defendant-appellee.

OPINION

BRUNETTI, Circuit Judge: Appellants, Sunbelt Beverage Corporation and other companies that had contracted with Hamilton Taft and Company to perform payroll tax services, appeal the district court's grant of summary judgment for the United States ilL the appellants' action seeking a refund oflat~p~ymen~ penalties and interest paid by Hamilton TaIt~"t-he' fnfernal~Revenue~rVIce pursuant to 26 U.S.c. s 6656. The district court found that appellants lacked standing to sue for refund as they did not pay the penalties, did not have a financial interest in the funds used 'to pay the penalties, and did not have a valid assignment of Hamilton Taft's rights under the Assignment of Claims Act, 31 U.S.C. S 3727. We have jurisdiction, 28 U.S.C. S 1291, and affirm. Facts Appellants individually entered into written agreements with Hamilton Taft for the provision of payroll tax services. Per the agreement, Hamilton Taft was to timely deposit payroll taxes with the IRS and file any necessary payroll tax returns. Each appellant provided Hamilton Taft with the necessary information and sufficient funds for Hamilton Taft to timely pay its clients' payroll tax liabilities. Hamilton Taft received fees for specific services and the "float" on the money that its clients paid to it in advance of the dates on which the amounts were required to be sent to the taxing authorities. In reality, during 1989 and 1990, Hamilton Taft's owner, Connie Armstrong, Jr., and a select group of his associates (collectively referred to as "the conspirators " by the district court) improperly diverted millions of dollars of payroll tax deposits to other companies owned by the conspirators. As a result, payments to the IRS were not timely made by Hamilton Taft. Hamilton Taft did eventually make the original payments owed to the IRS, and the resulting late payment penalties, by using subsequently deposited funds of other clients from the commingled client fund. In early 1991, the conspiracy was eventually exposed by a former Hamilton Taft controller. Following discovery of the conspiracy, creditors of Hamil-

20f4

9/16/2006 6:27 PM

ton Taft filed an involuntary bankruptcy petition under Chapter 11. Appellants filed claims against Hamilton Taft for refund of amounts tendered for payment of payroll taxes that remained outstanding for the first quarter of 1991. Each appellant received approximately sixty-seven percent of its claim. During bankruptcy proceedings, Hamilton Taft purportedly assigned to each appellant its right to a refund of the penalties Hamilton Taft paid for that appellant's failure to make a timely deposit of payroll taxes. Subsequently, each appellant filed suit against the United States seeking a refund of penalties paid to the IRS by Hamilton Taft. These suits were consolidated by the district court. Summary judgment was granted for the United States and this appeal followed. Analysis We review the district court's grant of summary judgment de novo. T.W. Elec. Serv., Inc. v. Pacific Elec. Contractors Ass'n, 809 F.2d 626, 629 (9th Cir. 1987). Accordingly, we view the evidence in the light most favorable to the nonmoving party to determine whether there are any genuine issues of material fact and whether the district court applied the relevant substantive law. Tzung v. State Farm Fire & Casualty Co., 873 F.2d 1338, 1339-40 (9th Cir. 1989). Upon de novo review, we find that the district court properly granted summary jUdgment for the United States. Appellants argue that they have standing to sue for a refund because, individually, each is the "person who made the overpayment" as required under 31 U.S.C. S 6402(a). Appellants' argument is not supported by the record. [1] It is undisputed that Hamilton Taft paid the penalties at issue. Moreover, standing under S 6402(a) is premised upon the claimant having a "financial interest in the litigation." See Bruce v. United States, 759 F.2d 755, 759 (9th Cir. 1985). Where the claimant is under no obligation to repay the party who paid the penalties, we have held that the claimant does not have a financial interest in the litigation. Id. Here, the agreements between appellants and Hamilton Taft provided that the appellants were not obligated to reimburse Hamilton Taft for penalties paid due to Hamilton Taft's negligence. [2] Appellants alternatively argued that they have standing to sue because of Hamilton Taft's purported assignment of their rights to the appellants. Hamilton Taft's purported assignment is void against the United States for failure to comply with the requirements of the Assignment of Claims Act. The Assignment of Claims Act requires that for the assignment of a claim against the United States to be valid, at the time of assignment, the claim must be allowed, the amount of the claim decided, and a warrant for payment must have issued. 31 U.S.C. S 3727. None of these requirements were met here. [3] Accordingly, appellants lack standing to sue for a refund. The district court properly granted summary jUdgment for the United States. AFFIRMED. the end Sponsored Links

Online Paralegal Services: Proxilaw takes care of your document preparation and filing chores. Incorporation, living trusts, LLCs, divorce & more.

30f4

9116120066:27 PM