Free Motion for Miscellaneous Relief - District Court of Arizona - Arizona

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PAUL K. CHARLTON United States Attorney District of Arizona RACHEL C. HERNANDEZ Arizona State Bar No. 016543 GARY M. RESTAINO Arizona State Bar No. 017450 Assistant U.S. Attorneys Two Renaissance Square 40 N. Central Avenue, Suite 1200 Phoenix, Arizona 85004-4408 [email protected] [email protected] Telephone: (602) 514-7500

UNITED STATES DISTRICT COURT DISTRICT OF ARIZONA United States of America CR04-0820-PHX-FJM Plaintiff, v. Harvey L. Sloniker Jr., Tye Sloniker, GOVERNMENT'S MOTION TO ADMIT EVIDENCE PURSUANT TO RULE 404(b), FEDERAL RULES OF EVIDENCE

Defendants. The United States of America, by and through counsel undersigned and pursuant to Rule 404(b) of the Federal Rules of Evidence, requests that this Court allow it to introduce evidence of defendants' other acts during the trial of this case. Defendants Harvey Sloniker and Tye Sloniker are charged with Conspiracy to commit Mail and Wire Fraud, and Mail Fraud and Wire Fraud among other charges. Evidence, in the form of witness testimony and exhibits, will establish defendants' participation in a telemarketing scheme to defraud consumer victims by obtaining money from them by false and fraudulent pretenses, representations, promises, and the concealment of material facts. In addition to this evidence, the Government will also seek to introduce extrinsic evidence that the defendants engaged in other similar fraudulent activity from

approximately June, 1998 to November, 1998. This evidence is admissible to demonstrate 28 1

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1 defendants' motive, opportunity, intent, preparation, plan, knowledge, and absence of mistake. 2 This Motion is more fully supported by the following Memorandum of Points and Authorities. 3 4 5 6 7 8 9 10 11 I. 12 PAUL K. CHARLTON United States Attorney District of Arizona s/ Rachel C. Hernandez RACHEL C. HERNANDEZ GARY M. RESTAINO Assistant United States Attorneys MEMORANDUM OF POINTS AND AUTHORITIES Relevant Legal and Factual Background Rule 404(b) of the Federal Rules of Evidence is a rule "of inclusion" in that it renders Respectfully Submitted this 30th day of November, 2005,

13 evidence of other acts by a defendant admissible whenever that evidence is relevant to an issue 14 other than the defendant's criminal propensity. United States v. Chea, 231 F.3d 531, 534 (9th 15 Cir. 2000), quoting United States v. Mehrmanesh, 689 F.2d 822, 830 (9th Cir. 1982). Although 16 the rule precludes the admission of evidence of other crimes, wrongs or acts of the defendant if 17 the evidence is offered solely to prove the defendant's character, such evidence is admissible for 18 other purposes, including to prove intent, knowledge and absence of mistake or accident. The 19 Court has wide discretion in deciding whether to admit the evidence, and the test for 20 admissibility is one of relevance. United States v. Johnson, 132 F.3d 1279, 1282 (9th Cir. 1997), 21 citing Huddleston v. United States, 485 U.S. 681, 687-88, 108 S. Ct. 1496, 1499-1500 (1988). 22 Prior act evidence is probative of something other than criminal character and therefore

23 admissible when it: 24 25 26 27 28 (1) tends to prove a material point in issue in the present case; (2) is not too remote in time; (3) is proven with sufficient evidence; and (4) if admitted to prove intent, is similar to the offense charged. 2

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1 United States v. Beckman, 298 F.3d 788, 794 (9th Cir. 2002), citing United States v. Murillo, 255 2 F.3d 1169, 1175 (9th Cir. 2001). If the evidence meets this relevance test under Rule 404(b), it 3 should be admitted unless its prejudicial impact substantially outweighs its probative value. 4 Johnson, 132 F.3d at 1282, citing United States v. Boise, 916 F.2d 497, 502-03 (9th Cir. 1990). 5 This case involves, among other things, a scheme to defraud consumers and to obtain

6 money in excess of $5,000,000.00 by means of false and fraudulent pretenses, representations 7 and promises. Consumers were falsely misled into believing that they would receive a major 8 credit card in exchange for a payment in excess of $200.00. The indictment alleges that the 9 conspiracy was carried out from August, 2001 to July, 2002. In order to carry out this scheme, 10 defendants wrote scripts to be used by telephone sales representatives (TSRs). The scripts set 11 forth numerous misrepresentations that were critical to the success of the scheme. Chief among 12 those misrepresentations was that the consumer would receive a major credit card, when in fact 13 they did not. The misleading scripts were crucial to defendants' success in carrying out the 14 scheme. To complete their scheme, defendants utilized an ACH processor who electronically 15 charges customers bank accounts and deposits the money into defendants' bank accounts. In 16 order to maintain a relationship with the ACH processor, defendants were required to provide 17 the processor with the script that was being used to sell the product. Defendants sent a "clean" 18 script that did not contain misrepresentations, while using the misleading script to sell the 19 product. 20 The extrinsic evidence the government seeks to introduce relates to defendants' activities

21 between July, 1998 and November, 1998 when they sold a similar telemarketing program for a 22 merchant named Source One. When selling a credit card protection service for Source One, 23 defendants utilized two sets of scripts. One set was provided by Source One and included 24 accurate information, including a clear recitation of the price of the product and the fact that the 25 consumer would be charged the full amount up front . The second set of scripts were created 26 by defendants and used by the TSRs to more easily make sales because that script contained 27 misleading statements regarding the total cost and when that amount would be withdrawn from 28 3

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1 the customer's account. During this time period, Source One was able to remotely monitor the 2 sales calls being made by the TSRs to ensure that their script was being followed. Jason Guertin, 3 a former employee and manager at defendants' company, will testify that defendants set up a 4 system whereby individuals at defendants' company were able to determine when a TSR was 5 being monitored by Source One. The individual would hear a series of beeps in their headset. 6 The individual at the company would then alert the TSR who was being monitored and provide 7 him or her with the Source One script. That script would only be used by the particular TSR 8 during the specific monitoring period of that TSR. 9 II. 10 11 Legal Analysis A. The evidence of defendant's prior acts meets the requirements of Rule 404(b). The evidence of defendants' prior use of fraudulent and misleading scripts meets the four-

12 part test of Rule 404(b) for admissibility. The first criterion, that the other acts tend to prove a 13 material element of the act with which the defendant is currently charged, is clearly satisfied. 14 The manner in which defendants Harvey and Tye Sloniker used the clean and fraudulent scripts 15 shows, for example, their motive and intent to defraud consumers in order to obtain money. 16 Defendants' use of both clean and misleading scripts proves, on all fours, to be consistent in 17 proving a material element of the acts with which the defendant is currently charged. 18 The second Rule 404(b) criterion also is satisfied. The Ninth Circuit has not identified

19 a particular number of years beyond which past conduct becomes too remote. Johnson, 132 F.3d 20 at 1283. Depending upon the theory of admissibility and the similarity of the acts, even remote 21 acts may be extremely probative. Id. (admitting evidence of act 13 years prior to conduct 22 charged); United States v. Spillone, 879 F.2d 514, 519 (9th Cir. 1989) (admitting evidence of 23 conviction more than 10 years old). The other acts at issue here occurred in 1998, just three 24 years prior to the acts alleged in the indictment, and thus cannot be considered too remote. 25 Defendants' participation in the other events will be illustrated with sufficient evidence

26 satisfying the third Rule 404(b) criterion. "[S]imilar act evidence is relevant . . . if the jury can 27 reasonably conclude that the act occurred and that the defendant was the actor." Huddleston, 28 4

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1 485 U.S. at 689, 108 S. Ct. at 1500. The testimony of a single witness can satisfy Rule 404(b)'s 2 "low-threshold test of sufficient evidence." United States v. Dhingra, 371 F.3d 557, 566 (9th Cir. 3 2004). The Government will offer evidence, in the form of Jason Guertin's testimony, of 4 defendants' prior use of misleading scripts and the switching of scripts for monitoring purposes. 5 From this evidence, the jury can reasonably find, by a preponderance of the evidence, that these 6 acts occurred. See Huddleston, 485 U.S. at 689, 108 S. Ct. at 1500. The final Rule 404(b) 7 criterion, that if the prior acts are being offered to show intent, the past conduct and the conduct 8 charged must be sufficiently similar, also is satisfied. The defendants' past conduct need not be 9 identical to the conduct charged, but need only be similar enough to be probative of intent. See 10 United States v. DeSalvo, 41 F.3d 505, 509-10 (9th Cir. 1994). Here the defendants' other acts 11 are virtually identical to the conduct charged - both the charged and uncharged conduct involved 12 the deception of consumers to encourage them to purchase a product and the deception of a third 13 party with whom defendants had a business relationship. In both instances this deception was 14 accomplished by the use of clean and misleading scripts. There are only two differences 15 between the charged and uncharged conduct. In the charged case the product was a purported 16 major credit card and in the uncharged case the product was credit card protection. Secondly, 17 in the charged case defendants were the merchants and in the uncharged conduct, defendants 18 were selling for an outside merchant. 1/ 19 20 B. The evidence of defendants' prior acts is admissible under Rule 403. As demonstrated above, evidence of defendants' prior acts meets the Rule 404(b) test for

21 relevance. This evidence therefore should be admitted unless its probative value is outweighed 22 by its prejudicial impact on defendants. Johnson, 132 F.3d at 1282. In this case, there is no 23 danger of unfair prejudice to defendants from admitting the evidence of these prior acts. First, 24 the acts themselves are not of such a nature as to inflame the jury. The Ninth Circuit has 25 admitted evidence that is much more inflammatory. See, e.g., United States v. Hadley, 918 F.2d 26 27 As a result, defendants had no need to monitor during the charged offense because they were not dependent on a merchant demanding truthful representations. 28 5
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1 848, 850 (9th Cir. 1990) (sexual molestation of minors); United States v. Lewis, 837 F.2d 415, 2 418 (9th Cir. 1988) (child abuse). Moreover, any possible prejudicial impact of this evidence can 3 be lessened by a limiting instruction by the Court. See United States v. Romero, 282 F.3d 683, 4 688, n. 1 (9th Cir. 2002) (finding instruction adequately protected defendant against any undue 5 prejudice from admission of evidence pursuant to Rule 404(b)); United States v. Hinostroza, 297 6 F.3d 924, 928 (9th Cir. 2002) (same). 7 The Ninth Circuit has held similar evidence admissible in United States v. Kenny, 645

8 F.2d 1323, 1336 (9th Cir. 1981). In Kenny, the defendants were charged with and convicted of 9 conspiracy, fraudulent government contracting activities, bribery, and tax evasion. Kenny, 645 10 F.2d at 1327. The government presented evidence (in the form of out-of-court statements by 11 some of the co-defendants) of a fraudulent factoring scheme. Id. at 1331. On appeal, the 12 defendants, "specifically objected to the admission of so-called `factoring' evidence...on the 13 grounds that the evidence was both irrelevant to the charges in the indictment and prejudicial." 14 Id. at 1336. The Ninth Circuit rejected this argument, reasoning that, "The evidence was 15 relevant to the conspiracy charge, however, in showing Kenny's motive for arranging the false 16 transactions, and was properly admitted." Id. 17 In this case, the similarity of defendants' prior acts to the conduct with which they have

18 been charged makes these acts highly probative, and there is no danger of unfair prejudice to 19 either defendant. Any prejudice to other defendants joined in this action may be mitigated by 20 limiting instructions to compartmentalize the evidence. Like the court in Kenny, this Court 21 similarly should allow the United States to introduce evidence of defendants' prior use of 22 fraudulent and misleading scripts. 23 III. 24 Conclusion For all of the reasons set forth above, the United States respectfully requests that the

25 Court allow the government to present the evidence described. 26 Excludable delay under 18 U.S.C. Section 3161(h) is not expected to occur as a result of

27 this motion. 28 6

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1 2 3 4 5 s/ Rachel C. Hernandez 6 7 8 9 10 11 CERTIFICATE OF SERVICE RACHEL. C. HERNANDEZ GARY M. RESTAINO Assistant U.S. Attorneys PAUL K. CHARLTON United States Attorney District of Arizona Respectfully submitted this 30th day of November, 2005.

I hereby certify that on this date, I electronically transmitted the attached document to the Clerk's Office using the CM/ECF System for filing and transmittal of a Notice of Electronic 12 Filing to the following CM/ECF registrants: Bruce Blumberg, Jeanette Alvarado, Ivan Mathew, Tom Hoidal, Greg Parzych and Michael Bresnehan. 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 7

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