Free Motion to Preclude - 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 Judge Robert E. Blackburn Criminal Action No. 04-cr-00103-REB UNITED STATES OF AMERICA, Plaintiff, v. 5. JANNICE McLAIN-SCHMIDT, et al., Defendants.

MEMORANDUM IN SUPPORT OF DEFENDANT McLAIN SCHMIDT'S MOTION TO PRECLUDE BREACH OF THE PLEA AGREEMENT ________________________________________________________________________

Defendant, Jannice McLain Schmidt, by her counsel, submits the following Memorandum in Support of her Oral Motion to Preclude the Government From Breach of the Plea Agreement as follows: ISSUE: The Government may not offer evidence outside of the Stipulated Facts found in the Plea Agreement at this sentencing hearing as to do so would be a breach of the Plea Agreement and contrary to law. The Stipulation of Factual Basis and Facts Relevant to Sentencing found in the Plea Agreement sets forth all of the relevant conduct. As stated in paragraph 17 of the Plea Agreement: "all relevant conduct is accounted for" in the Plea Agreement. Unlike Mr. Beros' Plea Agreement which includes an admission that he "employed the scheme to defraud described in

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the Second superseding Indictment," Ms. McLain Schmidt's Plea Agreement does not state any facts that prove she participated in a conspiracy prior to the spring of 2003. "To prove a conspiracy the Government must show that two or more persons agreed to violate the law, that the defendant knew at least the essential objectives of the conspiracy, that the defendant knowingly and voluntarily became part of it and that the alleged coconspirators were interdependent." USA v. Evans, 970 F.2d 663, 668 (10th Cir. 1992). Mere association with conspirators does not support a conspiracy. United States v. Jones, 44 F.3d 860, 865 (10th cir. 1995). Finally, a conviction for conspiracy cannot be supported if the evidence is no more than "piling inference on top of inference." At paragraph 13 of the Plea Agreement, the Government stipulated to what the government's evidence would be. Those stipulated facts indicate that on one occasion Ms. McLain Schmidt failed to tell Warren Peterson that Mr. Lewis had a prior conviction. The stipulated facts also state that on March 21, 2003, Ms. McLain Schmidt and Mr. Norman Schmidt offered a security to Mr. Seigneur for Rocky Mountain Sports Promotions, LLC, without telling Mr. Seigneur that Charles Lewis had a felony conviction, that

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the investment would not be used to trade "MTN's," and that Smitty's bank account had been seized by the government. Paragraph 13 states that Ms. McLain Schmidt did not become aware that investor's funds were not being deposited into non-depleting accounts, were not being used for the purposes represented to investors and that no trading in "MTNs " had taken place, until the Spring of 2003. It was on these facts that Ms. McLain Schmidt agreed to plead guilty. The Government's obligations under a Plea Agreement are governed by general principles of contract law. United States v. Vandam, 493 F.3d 1194, 1199 (10th Cir. 2007). A court must look to the express language of the Plea Agreement and to the defendant's reasonable understanding of this promise at the time of the entry of the guilty plea. Id. (emphasis added). Ambiguities in the Plea Agreement are to be construed against the Government. Id. (emphasis added). When the government obtains a guilty plea based on a promise, the promise must be fulfilled to maintain the integrity of the plea. United States v. Hand, 913 F.2d 854, 856 (10th Cir. 1990). The Government is not allowed to "resort to a rigidly literal construction of the language of the plea agreement," and the court may not "condone the Government accomplishing through indirect means what it promised not to do directly." United States v.

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Shorteeth, 887 F.2d 253, 256 (10th Cir. 1989). When a plea rests on a promise or agreement of a prosecutor, such that it is part of the inducement or consideration, the promise must be fulfilled." Vandam, supra. (quoting Santobello v. New York, 404 U.S. 257, 262 (1971). In United States v. Smith, 469 F.3d 1335 (10th Cir. 2006), the Plea Agreement stated: "[T]he information that is known to the parties on the date that this agreement is executed, the positions they expect to take at sentencing with respect to the United States Sentencing Guidelines will include" that: (1) the offense occurred before April 30, 2003; (2) the offense involved a commercial sex act and the use of coercion; (3) the victim's age was between 12 and 16 years; and (4) the defendant should receive a 2 level downward adjustment for acceptance of responsibility." Id. at 1338. The defendant argued that the government breached the Plea Agreement because it was implied that it would "not argue for other sentence enhancing factors, or at least that such an inference should be drawn because that was his reasonable expectation from the agreement. Id. The Tenth Circuit agreed with the defendant. Id. In Smith, the Plea Agreement allowed the government to take a different position, in the event new facts developed. Id. Even though no new facts had developed, the government, in response to the District Court's request, advised the Court of additional facts to support sentencing

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enhancements under the Guidelines. Id. The Government argued that this was acceptable because it was only precluded from making arguments that conflicted with the express provisions of the plea agreement. Id. at n. 1. (emphasis added) But, the Tenth Circuit disagreed, stating that the plea agreement must be construed consistently with the defendant's understanding of the terms of the agreement. Id. As in Smith, the Government may not resort to a rigidly literal reading of the Plea Agreement to allow it to go beyond the stipulated facts found in the Plea Agreement. Here, Ms. McLain Schmidt stipulated to specific facts in her Plea Agreement. Those facts support, at best, the fact that she joined the conspiracy in the Spring of 2003. This is the only reading of the Plea Agreement to which Ms. McLain Schmidt can be held. By producing evidence of actions taken by Ms. McLain Schmidt prior to her joining the conspiracy and outside of the Plea Agreement's Statement of Facts, the Government breaches the Plea Agreement. If the Government intends to argue that the plea of guilty to the first count of the Information allows the Government to bring in evidence to which Ms. McLain Schmidt did not agree in her Plea Agreement, the Government resorts to reliance on a "rigidly literal construction of the language of the agreement," which is not allowed. See Santobello, 404 U.S. at 262. Moreover, the Government may

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not complain that the Plea Agreement is ambiguous, due to the language at paragraph 11, since ambiguity inures to the benefit of Ms. McLain Schmidt, not the Government. See Vandam, supra at 1199. Finally, under the Government's own policy statements, the Government attorneys should be precluded from arguing for sentencing enhancements outside the facts as stated in the Plea Agreement. The United States Attorney's Manual, which sets forth the policy for Department of Justice criminal attorneys, requires prosecutors to set forth all relevant conduct in a plea agreement: 9-16.300 Plea Agreements--Federal Rule of Criminal Procedure 11(e): Federal Rule of Criminal procedure 11(e) recognizes and codifies the concept of plea agreements. Plea agreements should honestly reflect the totality and seriousness of the defendant's conduct, and any departure to which the prosecutor is agreeing, and must be accomplished through appropriate Sentencing Guideline provisions. The Department's policy is to stipulate only to facts that accurately represent the defendant's conduct. (emphasis added). The Department of Justice Criminal Resource Manual gives further direction to the prosecutor: Relationship to Criminal Conduct. The charge or charges to which a defendant pleads guilty should be consistent with the defendant's criminal conduct, both in nature and in scope. Except in unusual circumstances, this charge will be the most serious one, as defined in USAM 9-27.300. . . . In regard to the seriousness of the offense, the guilty plea should assure that the
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public record of conviction provides an adequate indication of the defendant's conduct. Criminal Resource Manual § 9-27.430 Selecting Plea Agreement Charges B.1. (emphasis added). If the Government wanted Ms. McLain Schmidt to be held responsible for the entire conspiracy as it was charged in the Indictments, it was incumbent upon it to bargain for inclusion of those facts in the Plea Agreement. Ms. McLain Schmidt did not advise this Court at any time that she agreed to plead guilty to the ponzi scheme as identified in the Indictments. More importantly, she did not stipulate that she joined the conspiracy as early as January of 2002, as the Government is attempting to argue in this hearing. For the above reasons, the Government should be precluded from offering any evidence outside of the Plea Agreements in support of sentencing enhancements. DATED this 3d day of February, 2008.
Respectfully submitted,

s/ Paula M. Ray 1801 Broadway, Suite 1100 Denver, CO 80202-3839 Telephone: 303.292.0110 Email: [email protected]

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CERTIFICE OF SERVICE I hereby certify that on this 3d day of February, 2008, 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] Matthew T. Kirsch, Esq. [email protected] I have sent a copy via U.S. mail, postage prepaid to: Caryl Ricca Senior U.S. Probation Officer United States Probation Office 1929 Stout Street, Suite C-120 Denver, CO 80294-5424 Richard N. Stuckey, Esq. [email protected] Thomas Goodreid, Esq. [email protected] Ronald Gainor, Esq. [email protected]

s/ Paula M. Ray

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