Free Response to Motion - District Court of Colorado - Colorado

Case 1:04-cr-00103-REB

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO

Criminal Case 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, and 7. GEORGE BEROS, Defendants. _____________________________________________________________________ GOVERNMENT'S RESPONSE TO DEFENDANT JANNICE SCHMIDT'S MOTION TO DISMISS COUNTS 1, 3-9, 16, 17, AND 20-29 OF SECOND SUPERSEDING INDICTMENT _____________________________________________________________________ The United States (the government), by Wyatt Angelo and Matthew T. Kirsch, the undersigned Assistant United States Attorneys, respectfully requests that the Court deny Defendant Jannice Schmidt's Motion to Dismiss Counts 1, 3-9, 16, 17, and 20-29 of the Second Superseding Indictment [Doc. # 604] for the reasons that follow: 1. Defendant Jannice Schmidt argues that the conspiracy, mail fraud, wire, fraud, and securities fraud counts in which she is named in the Second Superseding Indictment should be dismissed because they are duplicitous. A duplicitous charge is one that charges a defendant with "two or more separate offenses in the same count." United States v. Trammell, 133 F.3d 1343, 1354 (10th Cir.

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1998). Defendant Schmidt argues that the counts in question are duplicitous because they charge conduct relating to two separate conspiracies and schemes to defraud. This argument is not supported by the facts and should be rejected for that reason. Furthermore, even if the counts in question were duplicitous, the requested remedy of dismissal would not be appropriate. The Second Superseding Indictment Charges a Single Conspiracy and Scheme to Defraud 2. The facts proffered by the government to date establish a single conspiracy and a single scheme to defraud. The primary factor in determining whether a single conspiracy exists is whether the charged participants were interdependent, that is, the activities of each "constituted essential and integral steps toward the realization of a common, illicit goal." United States v. Hanzlicek, 187 F.3d 1228, 1232 (10th Cir. 1999). It is generally "sufficient for purposes of a singleconspiracy finding that a conspirator knowingly participated with a core conspirator in achieving a common objective with knowledge of the larger venture." United States v. Daily, 921 F.2d 994, 1008 (10th Cir. 1991), overruled on other grounds by United States v. Gaudin, 515 U.S. 506 (1995); see also United States v. Berger, 224 F.3d 107, 114-15 (2d Cir. 2000) (finding single conspiracy where fraudulent schemes led by same core group of leaders, shared common participants, and were mutually interdependent). To prove a single conspiracy, the government does not have to establish that a conspirator knows all other conspirators, United States v. Evans, 970 F.2d 663, 669-70

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(10th Cir. 1992), nor that a conspirator knew of or participated in every aspect of the conspiracy, United States v. Eads, 191 F.3d 1206, 1210 (10th Cir. 1999). Similarly, neither lapses of time nor changes in membership necessarily convert a single conspiracy into multiple conspiracies. United States v. Roberts, 14 F.3d 502, 511 (10th Cir. 1993). 3. The government has already proffered additional facts concerning the extended time frame and additional entities charged as being a part of the conspiracy and scheme to defraud in paragraphs 1-8 of its First Supplement to James Proffer [Doc. # 592], which is incorporated here. These facts establish that, throughout the conspiracy charged in the Second Superseding Indictment, the defendants were interdependent in their pursuit of the single, common goal of persuading investors to part with their money based on false representations concerning a fraudulent high-yield investment program. Although Cliff Seigneur may have thought at some point that his investment had something to do with stock car promotions, he originally signed a contract with Smitty's Investments and never had a clear idea about how the investment would work. (First Supp. James Proffer, ¶¶ 3-4.) Other investors, such as Carol Hall (another previous investor through Smitty's Investments), received promotional materials which explained the investment program in terms very similar to those used when it had previously be offered through other entities. (Id., ¶ 6.) Finally, all of the investors' money received after March 7, 2003, was deposited into the same Rocky Mountain Sport Promotions account, controlled by the Schmidts. (Id., ¶ 2.) The

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fact that the conduct charged in Counts 7-9 took place after defendants Norman Schmidt and Charles Lewis were in jail proves the interdependence of the conspirators; defendant Jannice Schmidt had to send out the false monthly disbursement statements and lulling interest payments charged in those counts in an attempt to retain the investors's money for use by the other conspirators and prevent law enforcement's discovery of their additional activities after the search warrants were executed on March 7, 2003. 4. Defendant Schmidt's reliance on Michael Huffman's testimony to establish the existence of a separate conspiracy and scheme to defraud is misplaced. It is apparent from the proffered evidence that Mr. Huffman, who did not invest in any of the purported programs, was used by the conspirators as a dupe. The fact that he was not told that the Rocky Mountain Sports Promotions, LLC account would be used to receive money from investors who thought they were making high-yield investments helps prove Mr. Huffman's status as a dupe, but it sheds no light on what representations were made to the victims of the charged crimes. 5. The defendant's suggestion that the government's position must be that the defendants, after having been charged and either jailed or released on bond pending trial on the original indictment, "joined a new conspiracy and/or scheme to defraud without any allegation that they knew of its existence," makes no sense. This suggestion assumes the truth of the defendant's argument that the later conduct was part of a separate conspiracy or scheme. The government's position is simply that the original conspiracy continued past the date of the defendants' arrest on the original indictment, that some of the defendants 4

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continued committing acts in furtherance of that conspiracy, and that none of the charged defendants ever withdrew from the conspiracy. See Gov't's Response to Defendant Lewis' Motion to Dismiss Counts 7, 8, & 9 of Second Superseding Indictment [Doc. # 624]. 6. The proffer before the Court is, at a minimum, sufficient to allow the charges in question to be submitted to the jury on the basis that the allegations related to a single conspiracy and single scheme to defraud. This is especially true when considering that the Tenth Circuit and other federal appellate courts have found sufficient evidence to sustain post-trial convictions based on single conspiracy charges in cases with similar facts, see Hanzlicek, 187 F.3d at 1232-33; Daily, 921 F.2d at 1007-009; United States v. Bollin, 264 F.3d 391, 405-06 (4th Cir. 2001), decisions made at a more demanding standard of proof than that required here. Dismissal Is Not the Correct Remedy for Duplicity 7. Even if the defendant's suggestion that the counts of the Second Superseding Indictment in question are duplicitous were true, dismissal of those counts is not the correct remedy. The Tenth Circuit has repeatedly noted that the usual appropriate remedy for a duplicitous count which has not been submitted to a jury is to require the government to elect the upon which charge contained in that count it will rely. Trammell, 133 F.3d at 1354-55; United States v. Bowline, 593 F.2d 944, 947 (10th Cir. 1979). Leading commentators agree that election is the appropriate remedy for a count determined to be duplicitous prior to its

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submission to a jury. 1A Charles Alan Wright, Federal Practice & Procedure § 145 (5th ed. 2005); 24 Moore's Federal Practice § 608.04[5] (3d ed. 1998, 2005 Supp.). If the Court rules that the counts in question are duplicitous, it should require the government to elect upon which conspiracy and/or scheme to defraud it will proceed to prosecute the defendants rather than dismissing those counts altogether. 8. The defendant's final suggestion, that the return of the Second Superseding Indictment impermissibly created a Hobson's choice concerning their exercise of their Fifth Amendment rights, appears to be novel and is made without reference to any legal authority. The Fifth Amendment prevents defendants from forcibly incriminating themselves, but it does not insulate them from all collateral consequences of availing themselves of that protection. Several examples illustrate this point. First, to demonstrate withdrawal from a conspiracy, a conspirator must make an affirmative statement of disavowal, see United States v. Record, 873 F.2d 1363, 1369 (10th Cir. 1989), one which will undoubtedly be incriminating as to the conspirator's past conduct. Second, at trial, defendants are often forced to make a strategic decision about whether to gain the Fifth Amendment's benefits in exchange for losing their ability to rebut the government's charges with their own testimony. The defendants in this case are faced with the same type of strategic decision, but their quandary is by no means unconstitutional.

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Respectfully submitted this 18th day of January, 2006, WILLIAM J. LEONE United States Attorney

s/ Matthew T. Kirsch MATTHEW T. KIRSCH WYATT ANGELO Assistant U.S. Attorneys 1225 17th Street, 7th Floor Denver, CO 80202 Phone: (303) 454-0100 Fax: (303) 454-0402 E-Mail: [email protected]

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CERTIFICATE OF SERVICE (CM/ECF) I hereby certify on this 18th day of January, 2006, I electronically filed the foregoing GOVERNMENT'S RESPONSE TO DEFENDANT JANNICE SCHMIDT'S MOTION TO DISMISS COUNTS 1, 3-9, 16, 17, AND 20-29 OF SECOND SUPERSEDING INDICTMENT 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: [email protected]

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