Free Response to Motion - District Court of Colorado - Colorado

Case 1:04-cr-00103-REB

Document 661

Filed 02/14/2006

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO

Criminal Action No 04-cr-00103-REB UNITED STATES OF AMERICA Plaintiff, v. 1. NORMAN SCHMIDT, 2. GEORGE ALAN WEED, 3. PETER A.W. MOSS, 4. CHARLES LEWIS, 5. JANNICE McLAIN SCHMIDT, 6. MICHAEL SMITH, 7. GEORGE BEROS, Defendants. _____________________________________________________________________ GOVERNMENT'S RESPONSE TO DEFENDANT CHARLES LEWIS' MOTION TO SEVER (joined by defendants Jannice McLain Schmidt and George Beros) _____________________________________________________________________ The Government, by Wyatt Angelo and Matthew T. Kirsch, the undersigned Assistant United States Attorneys, respectfully requests that Defendant Lewis' Motion to Sever [Doc. # 653] be denied and as grounds therefore states as follows: THE DEFENDANTS HAVE MADE NO SHOWING OF PREJUDICE 1. The challenged securities fraud counts are properly joined under Rule 8(b) of the Federal Rules of Criminal Procedure. 2. The defendant carries the burden of establishing unlawful prejudice sufficient to support a motion for severance under Rule 14 of the Federal Rules of Criminal Procedure. United States v. Price, 265 F.3d 1097, 1105 (10th Cir. 2001) cert.

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denied, 535 U.S. 1099 (2002). The moving defendants are required to show prejudice so strong that severance is the only remedy. Zafiro v. United States, 506 U.S. 534, 538-539 (1993). Even upon a showing of prejudice, a trial court should first try to fashion another form of relief. Id. A measure less drastic than a separate trial, such as a limiting instruction, often will suffice to cure any potential risk of prejudice. Id. A severance should be granted only if there is a serious risk that a joint trial would compromise a specific trial right of a defendant or prevent the jury from making a reliable judgment about guilt or innocence. United States v. Morales, 108 F.3d 1213, 1219 (10th Cir. 1997), citing Zafiro, 506 U.S. at 539. 3. Defendants seek severance within the context of the balancing test for admissibility under Rule 403 of the Federal Rules of Evidence rather than under the more stringent test of Rule 14. The prejudice claimed is nothing more than a bare, unsupported assertion. The defendants have not made the strong showing required under Zafiro. THE DEFENDANTS' MOTION IS UNTIMELY 4. The allegations of securities fraud are not new to the Second Superseding Indictment. Specific allegations incorporating the previous convictions of defendants Schmidt and Lewis are found in the securities fraud counts of the two previous Indictments. [Doc. #s 1, 153.] 5. None of the moving defendants sought severance of the securities fraud allegations in the two previous indictments. The Court's Supplemental

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Scheduling Order granting leave to file motions for severance clearly contemplated that new motions to sever would be addressed to matters newly raised by the Second Superseding Indictment. (See Doc. # 584, n.1.) The defendants' motion does not fall within this category and is therefore untimely. THE MOTION TO SEVER EFFECTIVELY SEEKS RECONSIDERATION OF A PREVIOUS RULING 6. Defendant Lewis' objection to the inclusion of the fact of his theft conviction in the Second Superseding Indictment seeks, in effect, a reconsideration of the Court's Order re: Motions to Strike Paragraphs 29 Through 35 of the Superseding Indictment, which denied Lewis' Motion to Strike the same allegation as surplusage from the First Superseding Indictment [Doc. # 429, pp. 3-4]. That intention is made clear by Lewis' request for relief in the alternative to exclude the fact of both Schmidt's and Lewis' previous convictions. 7. Defendant Lewis (and those other defendants joining the motion) have failed to establish any of the three bases which would allow reconsideration of the Court's previous Order denying the motion to strike. See United States v. D'Armond, 80 F. Supp. 2nd 1157, 1170-1171 (D. Kan. 1999). THE RATIONALE OF THE COURT'S ORDER EXCLUDING "OTHER ACTS" EVIDENCE DOES NOT APPLY TO THE FACTS OF SCHMIDT'S OR LEWIS' CONVICTIONS 8. The defendants' effort to create conflict between the Court's Order re: Motions to Strike Paragraphs 29 Through 35 of the Superseding Indictment [Doc. # 429] and it's Order re: Government's Notice of Intent to Seek Admission of Extrinsic Evidence of "Other Acts" Pursuant to Fed. R. Evid. 404(b) [Doc. # 3

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439] is inapt. Defendant Lewis asserts that the latter Order excluded evidence of Lewis' conviction as well as evidence of the "other acts" which led thereto. The assertion is erroneous. In fact, the Order, as quoted by defendant Lewis, says that "the probative value of the evidence of these acts" is outweighed by the danger of unfair prejudice [Doc. # 439, p.4 (emphasis added)]. 10. The exclusion of the proffered "other acts" evidence relating to Guardian Financial which led to defendant Lewis' conviction was founded on the Court's: a) aversion to the consumption of time involved in a series of mini trials concerning the facts and circumstances related to each of the six acts described in the proffer; b) the potential for jury confusion; and, c) potential prejudice to other defendants who were not involved in the "other acts" proffered. (See id.) 11. Simple proof of the failure to disclose to investors the fact of the convictions of Schmidt and Lewis conviction is not time consumptive, does not require a minitrial, and is not likely to confuse the jury. Any potential prejudice from the fact of those convictions can be addressed by a cautionary instruction. Zafiro, 506 U.S. at 538-539. 12. In contrast to the "other acts" evidence rejected by the Court out of concerns for uninvolved defendants, the facts of the previous convictions of Schmidt and Lewis are material and admissible as to all defendants without fear of undue prejudice because they are all charged with securities fraud in the Second Superseding Indictment. See Doc. # 526, ¶ 16. 13. Ironically, the motion does not seek to sever the securities fraud counts against

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Lewis or Schmidt from those of the other defendants. Instead, the remedy sought would require a separate trial of the securities fraud counts involving all defendants and would include by necessity the evidence of both convictions. The alleged risk of prejudice to the other defendants would be identical in this separate trial. No purpose is therefore served by severance. CONCLUSION Defendant Lewis' Motion to Sever [Doc. # 653] should be denied. Defendants have not shown strong prejudice as required to justify severance. The motion is an abuse of the Court's allowance of the filing of new motions for the limited purpose of addressing new issues raised by the Second Superseding Indictment and is, in reality, an unsupported motion for reconsideration of the Court's previous ruling. Respectfully submitted this 14th day of February, 2006. WILLIAM J. LEONE United States Attorney District of Colorado s/Matthew T. Kirsch Matthew T. Kirsch Assistant United States Attorney 1225 17th Street, 7th Floor Denver, CO 80202 Phone: (303) 454-0100 Fax: (303) 454-0402 E-Mail address:[email protected] s/ Wyatt B. Angelo WYATT B. ANGELO Assistant U.S. Attorney 402 Rood Avenue, Suite 220 Grand Junction, CO 81501 Phone: 970 241-3843 Fax: (970) 248-3630 E-Mail: [email protected] 5

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CERTIFICATE OF SERVICE (CM/ECF) I hereby certify on this 14th day of February, 2006, I electronically filed the foregoing with the Clerk of the Court using the CM/ECF system which will send notification of such filing to the following e-mail addresses: Peter Bornstein, Esq. [email protected] Thomas Hammond, Esq. [email protected] Declan J. O'Donnell, Esq. [email protected] Ronald Gainor, Esq. [email protected] Daniel T. Smith, Esq. [email protected] Thomas Goodreid, Esq. [email protected] Robert Patrick Sticht, Esq. [email protected] Paul B. Daiker, Esq. [email protected]

s/Matthew T. Kirsch Matthew T. Kirsch Assistant United States Attorney 1225 17th Street, 7th Floor Denver, CO 80202 Phone: (303) 454-0100 Fax: (303) 454-0402 E-Mail address:[email protected]

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