37

1 guess we can deal with it in that regard when it comes up.

2 THE COURT: I think one other comment, I am concerned

3 that you attach too much significance to this Ninth Circuit

4 decision which reversed my -- I'll call it my "tax decision. II

5 I think you should bear in mind and {houf} that that Ninth

6 Circuit decisions. I am talking about in re Hamilton Taft,

7 53Fed3rd285.
8 Now, the Ninth Circuit said I was wrong in precluding that
9 the money made by the client in the Hamilton Taft therefore

10 then became a trust under united states Internal Revenue Code,

11 the 501. So I was wrong. But I don/t think that answers the

12 question of there being a trust relationship between Hamilton

13 Taft and its clients because that was the 7501, the Internal
14 Revenue Code section dealing with the relationship between

15 Hamilton Taft and its holding funds vis-a-vis the IRS even
16 though they could mingle; and, therefore, those funds were not

17 a 7501 trust.

18 I don/t think that means that there could not have been a
19 trust relationship between the customers and Hamilton because I
20 can give you money -- say, "Mr. Hanson, I am trusting you, you

21 are my trustee. Okay, you take my money." For some reason you
22 don/t comply with some other statute of the IRS, the IRS comes

23 in and grabs the money. I don/t that affects the fact, or

24 upsets the fact, that you and I had a trust relationship. Or,
25 more particularly, in case a relationship where you owed me an
 38

1 obligation not to defraud me.

2 MR. HANSON: And in that maybe is something excluding

3 important we discuss now what Your Honor's idea of what the

4 scheme defraud would entail. {teut} {poegs} {tf} defendant

5 Fowles that the trust relationship, however that might be

6 defined, cannot form the basis of a charge under the relevant

7 statute here unless there were statements made by the

8 defendants to those individuals from whom they receive money

9 indicating that the money was going to be used, spent,

10 whatever, in a certain way.

11 THE COURT: You may well be right.

12 MR. HANSON: Well, I think, Your Honor, whether it

13 comes down to this, if somehow that is not the case, then I

14 think we do have a problem in terms of how the case will be

15 presented to the grand jury. If the government stands and says

16 there were no specific promises made by the defendant to the

17 individuals here as to what would be done with the money when

18 it was delivered. But, none the less, {hrpblgz} you may

19 presume that there was some kind of trust relationship which

20 prevented the defendant Armstrong from spending any of the

21 money that were put in the corporation coffers for parties.

22 THE COURT: I would not think that would constitute

23 the elements of the crime.

24 MR. HANSON: I agree.

25 THE COURT: But if come in and say that Armstrong or

 39

1 Fowles went to who was it {tped} and stated "{upb} {euf} and if

2 you put your payroll money with me and I will take your

3 payroll, I will pay your taxes promptly and on time. II Now

4 that, of course, could be a breach of contract.
5 On the other hand, if there was never intent to perform in

6 a {tkpweupgb} that could be criminal fraud. I think that is

7 what the government is trying to prove.

8 MR. HANSON: So the question becomes, if the

9 government says -- and it would be argument -- let's say in

10 opening, that use the terms {tke} {sregs} let/s use the

11 {tkpafrpl} which was used by government counsel a few minutes

12 ago about the {shreupbg} {aeug} as he put it, I am not so sure

13 I understand now the relevance of what such evidence would

14 show, {aur} absent some greater explanation by the government

15 that our clients were under some affirmative obligation not to

16 spend money which they received in a fashion such as some

17 corporate party, and if there was a genuine "trust obligation"

18 that might be broad enough to say: Well, you couldn't spend it

19 on a corporate party; then we are going to run into problems

20 because I keep coming back to the proposition that if the Ninth

21 circuit, as I read the case, essentially says that there was no

22 such genuine trust, then this case has to {khrats} into what

23 you just explained.

24 THE COURT: Misrepresentation.

25 MR. HANSON: Misrepresentations, and unless the

 40

1 government can point out there was a specific misrepresentation

2 undertaken by our clients, evidence of other activities, would

3 that--
4 THE COURT: We have the diversion counts, and the
5 payment -- late payment of taxes counts, and the cover-up
6 count.

7 MR. HANSON: And--

B THE COURT: But what I am -- all I am saying is: You
9 can't come in and say because of the Ninth Circuit decision
10 there is no trust relationship between the customer and the
11 corporation. I don't think the Ninth Circuit decision says

12 that. If you are saying the government has got to prove

13 misrepresentation to the front-end and get the money indoor

14 under misrepresentations, I agree.

15 MR. HANSON: Okay.

16 THE COURT: For those counts the ones involved in
17 getting the money indoor.

18 MR. HANSON: Let's assume the Ninth Circuit decision

19 {pwpls} {eur} which is, if its been {srrs} essentially,

20 certainly stand for the proposition that we had some

21 affirmative obligation to do something with the funds, that is

22 to keep them a certain place or --

23 THE COURT: I think just assumes the fact that you

24 did not, you, the corporation

25 MR. HANSON: That is all I would --

 41

1 THE COURT: -- assumes the fact the corporation did

2 not all based on fact the corporation come in
3 MR. HANSON: So that is the only {prop} {roeugs} so

4 there is {tpo} implicit promise made by our clients to the

5 investors, or whatever, about what to do with the money_ That
6 is all I want, and if there are no implicit {eupl} promise the

7 government can rely upon in terms of good faith management of

8 the money, then the government is obligated to show actual
9 misrepresentation.

10 THE COURT: I don't know when you get -- certainly to

11 me {tru} {o} the front end {kts} counts call it the crimes
12 charged getting the customers put motion in once you get to

13 diversion counts, or how the money is used. I get --

14 MR. HANSON: I am not sure. It's needless to say I

15 am in the position we all are of as the government begins to

16 present its opening statements, to be howling about something

17 is going to come in and objectionable because of the relevance

18 is something will have determined prior to at least the opening

19 statements.

20 THE COURT: Well, it could be. I mean, you want more

21 in this motion. I can't say you won't, but -- what is our

22 trial date?

23 MR. HANSON: November 18th.

24 THE COURT: You've got time. All I am trying to tell

25 you is that, just don't use this IRS {srrs} this decision by
 42

1 the Ninth Circuit as a holding {tphros} trust relationship

2 between the customer and the company; I don't think it says

3 that.

4 MR. BROWN: We joined Mr. Hanson in defendant Fowles'

5 in omnibus motion just to have brief comment. I listened very

6 carefully to what the court said and I appreciate the court's
7 comments. I would agree that at some point pre-trial we are

8 probably going to need some further clarification. I don't

9 mean to belabor this, I am concerned that there is going to be

10 a witness on the stand and the question is going to come up.

11 THE COURT: Let's take a few minutes right now and

12 kick a little around. This is not with the idea of rUling, but
13 maybe assisting us all now on what I call a front, counts 1

14 through 3 dealing with tax process allegations, and 4 through 6

15 the tax service agreements. I suppose that your government's

16 contention is going to be that there were representations --

17 misrepresentations made to the customer to bring the money in

18 and sign these agreements, and it was done with criminal intent
19 never to perform -- so it's going to be a fraud, a

20 misrepresentation case, right; is that right?

21 MR. HARDY: At least; yes, Your Honor is correct.

22 THE COURT: So, I think we understand. What about

23 the diversion counts? Now I assume you are going to show they
24 didn't keep the money that Armstrong took out the door and used
25 it in other ventures?
 43

1 MR. HARDY: Your Honor, basically, through the

2 diversion, the government would be showing the existence

3 {poeps} {eu} schemes that monies were being removed and spent
4 at a rate they could not be replaced, and expenses were taken

5 out with the intent to repay them.

6 THE COURT: So, the customers' money was taken by the
7 corporation, or by the officer of the corporation, out of the
8 corporation funds -- out of the corporation under circumstances

9 which we infer what {tpho} {oeublt} to use them for purposes

10 {tpheu} {tkphapl} the front door.

11 MR. HARDY: In essence, shows theft.

12 THE COURT: That theft -- okay, theft is a simple way

13 to phrase it --

14 MR. HANSON: The problem you are --

15 THE COURT: There get trust {kwe} corporate money
16 corporation their own money they were stealing. The only

17 people who has the right to complain about it are the

18 stockholders. I guess Mr. Armstrong was a sole stockholder, or

19 is it still somebody else's money? So we may get into the
20 trust question. We are going to get into the trust issue; what
21 do you think?

22 MR. HARDY: I think I -- Don't you need to {Jcabg} it

23 as trust? I think everyone if you call it an obligation, they

24 enter into obligations to pay certain taxes and to do certain

25 things, and they in fact went about a business which did not
 44

~ involve doing that. They, in fact, stole the money by using it

2 for purposes other than the payment of taxes; and we were in no

3 position to replace those monies whatsoever. It's a trust in

4 the literal sense, it is still a theft. It's a taking --

5 THE COURT: That becomes a question when it's their

6 money. Now this case, the Ninth Circuit said this was not the

7 IRS money. Okay.

8 MR. HARDY: Even by the contract it's not their

9 money. They are entitled to the use of the money pending

~o payment of taxes, but if the sole purpose of their getting the

11 monies in fact the payment of taxes, and in fact the money is

12 spent for purposes other than payment of taxes, it is no longer

13 available for the payment of taxes.

14 THE COURT: That {togs} front end {koepbts}, doesn't

15 it?

16 MR. HARDY: It {ogs} the {hraeuts} count as well,

17 Your Honor. Is directed to divide into discrete crimes. It's

18 ongoing pattern which I think defies the court's efforts to

19 divide it up, but the fact is: As time went on, increasing

20 larger amounts of money was taken for other purposes which

21 amounts to a theft. The money was taken without intent to

22 perform intent to take {paeubgs} {s} was used for purposes

23 other than to pay taxes -- reach the point where payment of

24 taxes became unlikely as each new day came in was applied for

25 purposes other than what I {tkpweupl} to Hamilton {thras}

 45

1 {thru} theft.

2 MR. HANSON: I think, Your Honor, {sreu} break it

3 down because assume for the sake of argument, there was no
4 up-front misrepresentation and they had the right to spend the

5 money as corporations have the right to {sreg} {ef} it.

6 Suppose those investments go belly-up? What is the difference
7 between the corporation heading toward bankruptcy as it tries

8 to invest its money in ways that will allow it to continue to

9 function and a criminal case in which they say: "Well, it was
10 spending the money out in certain investments and it could not

11 keep its prior promise,1I and that is where criminal cases and

12 civil cases become a {tkeu} to {tkeuf} {epbt}. I think to say:

13 "Well, they were taking in money and because they couldn't pay

14 their bills and were headed toward bankruptcy that that becomes

15 criminal" is simply not law. I think that is

16 THE COURT: Why don't we take this -- Say, you give

17 me your money to pay your taxes with but I put your money

18 elsewhere, use it elsewhere in order to pay taxes {wher}

19 {tkopb} I get some more money. I go to {ph} {pheus} {eu}

20 {hreus} {er} if you gave me money to pay your taxes I will pay

21 your taxes. She gave me that money, I don't use it to pay the

22 taxes. I use it to pay catch-up and pay {urs} crime.

23 MR. HANSON: Again, two issues, what did I promise?

24 THE COURT: That is {popbs} {eu} {khras}.

25 MR. HANSON: -- classic corporate investment which
 46

1 is: You give me your money, Judge Legge, and I will put it in

2 the bank and I will pay you interest; and then I take your

3 money and I then go split it on some real estate investment

4 which I am pretty sure will give me enough money to pay your

5 interest; and then, somehow, those real estate investments go

6 bad and I can't pay your interest; and, so, then I continue to

7 try and keep my bank functioning by going to get other people

8 to invest money in my bank so that eventually I can pay the

9 interest lowe you.

10 THE COURT: What if I use your money to buy myself a

11 personal jet plane and take my wife on a trip to {kar}, things

12 like that?

13 MR. HANSON: Exactly right. So it {pwapls} {phats}

14 of {tkpwre} doesn't it; which is to what extent can I

15 characterize something which the government tries to say:

16 Look, we'll say it's okay to put it in such and such a company,

17 but we now consider money being spent on a ranch in Texas as

18 being something which is clearly so frivolous or whatever that

19 that never be construed by a reasonable person to be an

20 investment.

21 THE COURT: That is a {skwreur} {kal}.

22 MR. HANSON: It may well be. On the other hand, it

23 may be a {hrel} {kal} on your part as to when that is relevant

24 at all considering what promises were set up front to these

25 individuals, {a-r} what point of fact we have

 47

1 misrepresentations as what to be done, and whether or not

2 anybody can acquire {taos} what they did with the money if, in
3 fact, they were otherwise trying to fulfill their promises.

4 THE COURT: Well, in other {popbs} {eu} scheme type

5 of investment what statute you follow {bgs} use what statutes.

6 MR. HARDY: Really {tpoepbs} case more often than not

7 mail fraud or wire fraud.

S THE COURT: Just the mail fraud, wire fraud statutes?

9 Isn't there a specific statute bring in amounts of money for

10 purposes of saying the defendant's obligation to {pwfplt}.

11 MR. HARDY: It's simply another scheme to defraud.

12 MR. BROWN: Your Honor, there is a problem here that

13 I think is so essential to how the jury is going to perceive

14 this case. That is why I think we are going to need a

15 determination for the rUling this case, and that is, to a

16 jury -- and I say this because I know in the grand jury

17 transcript that we have been provided grand jurors asked

18 questions on one of the transcripts -- and I have it here with
19 me if you want me to read it. One of the grand jurors asked

20 one of the witnesses:

21 "How do you justify what Mr. Armstrong did when

22 he spending other people's money?"

23 At least that is how I see it., and then that --

24 THE COURT: {per} only assumes {seupbt} because you
25 are {tkhreupbt} was performing a financial service, it was
 48

1 almost like a bank.

2 MR. BROWN: The Ninth Circuit says that he had the
3 use of that money; and, in fact, Your Honor, it was Hamilton's
4 money to use and to invest; and, as we all know, when he took
5 over that company there was {pweu} {sr} {kts} for 14, 18 or 20
6 million dollars of deficit in that company, and he had a
7 plan -- and it's not the only company that worked with plan to
8 try to make some investments that would in time mature and it
9 would cover that deficit.
10 Now, he did that with the money, now the government is
11 calling those "diversions. 1f They are making out as if the use

12 of those monies are kind of things where I am {pro} the jury

13 gets the impression they were other peoples' monies, the case
14 becomes a much more horrendous thing in the eyes of the jury.
15 In fact, they are a company with contractual obligations. The
16 rUling on this Ninth Circuit decision
17 THE COURT: Except that you did take the -- did take

18 some people's money now.

19 MR. BROWN: All the money was -- was tax money of

20 clients', but when it became -- when it got into Hamilton
21 Taft's hands, according to the Ninth Circuit, it was Hamilton
22 Taft's money to use as it saw fit.
23 THE COURT: Well, vis-a-vis the IRS. No trust was

24 credited that the IRS can claim.

25 MR. BROWN: They still had contractual duties. They

 49

1 had to run the {tpwhus} reasonable fashion and they still could

2 be charged with misrepresentation if indeed there was

3 misrepresentation that I present. But as far as the use of

4 that money to pay expenses, I think the word lIexpenses," and

5 "costs,1I and "investment" are all within that Ninth Circuit

6 opinion.
7 THE COURT: {kwrao} if he -- taken in the money, and

8 invested it in CD's, during the period of a note, or government

9 notes during the period of note, cashed it and made money on
10 the interest {spred}, no problem. That is what he was entitled
11 to do.

12 All right, so suppose he got out to the {tkeuf} type of

13 investment and taken the money and invested it in first deeds

14 of trust with 30 day maturity, if you can first deed of trust

15 with 30 day maturity fully secured, okay form of investment;

16 but you can get {tpurts} out that {kwrupl} on potential on

17 types of use of the money where you got to reach a point

18 eventually something has so bad it's absolutely fraud.

19 MR. HANSON: Didn't we do that criminal contract if

20 every time Wells Fargo, my bank, {thurs} on corporate parties

21 using my money, and our {sub} {al} of assigned to claim that
22 when they promise to pay me interest and they are spending my

23 money for some kind of ski box down there at Giant/s three com

24 park that I can charge them a criminal offense for representing

25 to me what they are doing with my money. I think we got

 3

1 FRIDAY, NOVEMBER 8, 1996 1:30 P.M.

3 THE CLERK: CALLING CR-94-0276 UNITED STATES V.

4 CONNIE ARMSTRONG AND RICHARD FOWLES.

5 MR. SMETANA: GOOD AFTERNOON, YOUR HONOR, RONALD

6 SMETANA AND GEORGE HARDY FOR THE UNITED STATES.

7 MR. BROWN: GOOD AFTERNOON, YOUR HONOR, CHESTER L.

8 BROWN AND SOL WOLLACK ON BEHALF OF THE DEFENDANT ARMSTRONG,

9 WHO IS PRESENT IN COURT.

10 MR. SABELLI: GOOD AFTERNOON, YOUR HONOR, MARTIN

11 SABELLI ON BEHALF OF MR. FOWLES. MS. LEARY WILL BE JOINING US

12 SHORTLY.

13 THE COURT: ALL RIGHT. NOW WE'RE HERE FOR THE

14 MOTION BY THE DEFENDANTS FOR PARTIAL DISMISSAL OR FOR SPECIFIC

15 JURY INSTRUCTIONS, AND THEN WE ARE ALSO HERE FOR PRETRIAL

16 CONFERENCE. SO I THINK WE SHOULD, FIRST OF ALL, DISCUSS THE

17 MOTIONS FOR PARTIAL DISMISSAL OR FOR JURY INSTRUCTIONS.

18 NOW I HAVE READ YOUR MOVING AND OPPOSING PAPERS AND

19 OF COURSE THEY ARE SIMILAR BUT NOT IDENTICAL TO THE MOTION

20 THAT WAS MADE A NUMBER OF MONTHS AGO, BUT DO YOU WISH TO

21 ADDRESS THE MOTION IN ADDITION MR. BROWN?

22 MR. BROWN: YES, I DO, YOUR HONOR.

23 IN PREPARING, YOUR HONOR, TODAY FOR THE PRESENTATION

24 OF THIS MOTION, IT OCCURRED TO ME THAT I WAS THE THIRD

25 ATTORNEY THAT HAS REPRESENTED MR. ARMSTRONG, AND INDEED

DIANE E. SKILLMAN, OFFICIAL COURT REPORTER, USDC

 4

Jf ..

1 THE COURT: AT LEAST.

2 MR. BROWN: AND I JOIN MY TWO PREDECESSOR COUNSEL IN

3 FILING A MOTION OF VERY SIMILAR CHARACTER AND NATURE, ALTHOUGH

4 THERE ARE SOME DIFFERENCES IN THE MOTIONS. IT IS NOT JUST A

5 MERE COINCIDENCE, YOUR HONOR, THAT THESE MOTIONS HAVE BEEN

6 FILED BY ALL COUNSEL BECAUSE IT GOES TO THE VERY ISSUE OF THE

7 DEFENDANTS' RIGHT TO DUE PROCESS AND A FAIR TRIAL.

8 ALL THESE MOTIONS HAVE AT THEIR CORE THE QUESTION OF

9 THE CHARACTER OF THE FUNDS AS CAME FROM THE NINTH CIRCUIT

10 DECISION WHICH INDEED WAS VACATED, BUT IT1S MORE THAN THAT,

11 YOUR HONOR. THE ISSUE OF THE CHARACTER OF THE FUNDS PERMEATES

12 THE ENTIRE CASE.

I 13 AND I TRIED TO THINK OF THE BEST WAY TO EXPLAIN THE

14 DEFENDANTS' POSITION SO THE COURT WOULD UNDERSTAND WHY THIS

15 MOTION IS SO CRITICAL, EVEN BEARING ON THE ISSUE OF THE RIGHT

16 TO A FAIR TRIAL, TO PROPERLY ADVISE THE COURT OF OUR CONCERNS.

17 AND AS I THOUGHT ABOUT HOW TO BEST PRESENT THIS, I

18 THOUGHT WE WOULD START WITH THE PROPOSITION --

19 THE COURT: LET ME PERHAPS SAVE YOU THE TROUBLE.

20 YOU SAY IT'S THE CORPORATION'S MONEY.

21 MR. BROWN: YES, YOUR HONOR. WE SAY, YOUR HONOR,

22 THAT THE CORPORATION HAD THE RIGHT TO THE USE·OF THE MONEY

23 UNTIL THE TAXES WERE PAID.

24 THE COURT: OKAY.

25 MR. BROWN: AND WE BELIEVE THAT'S VERY CLEAR. SEE

DIANE E. SKILLMAN, OFFICIAL COURT REPORTER, USDe

 12

1 ASSUME WHAT YOUR SAYING IS TRUE. BUT LET ME ASSUME EVEN

2 FURTHER, IILL SAY THAT THE MONIES THAT CAME IN, WERE HAMILTON

3 TAFT'S OWN MONIES, BUT AS LONG AS THE CHARGE IS THAT

4 MR. ARMSTRONG TOOK THOSE MONIES AND USED THEM FOR HIS OWN
5 PURPOSES/ ISN'T THAT STILL A FRAUD?

6 MR. BROWN: HE HAD THE RIGHT TO TAKE THEM AND USE

7 THEM FOR HIS OWN PURPOSES. HIS DUTY WASNIT TO -- WAS ONLY TO

8 PAY THE TAXES.

9 THE COURT: THAT WAS THE CORPORATION'S DUTY. THAT

10 WAS THE CORPORATIONIS DUTY.

11 MR'. BRO\'vN: YOUR HONOR, HE IS THE SOLE SHAREHOLDER

12 OF THE CORPORATION. HE HAD THE RIGHT -- AND THOSE ARE FACTUAL

( 13 CONTENTIONS. THE LEGAL

14 THE COURT: THAT'S WHAT 1 1 M GETTING AT.

15 MR. BROWN: THE LEGAL CONTENTION THOUGH, YOUR HONOR/

16 THAT'S GOING ON HERE, THEY'RE TRYING TO ARGUE AND PLACE BEFORE

17 THE JURY AN INCORRECT LEGAL POSITION THAT THESE ARE EARMARKED

18 FUNDS. AND WE ARE DEALING HERE, YOUR HONOR --

19 THE COURT: WHAT YOU REALLY WANT ME TO DO THEN IF

20 YOU CAN'T GET A DISMISSAL, YOU WANT ME TO TELL THE GOVERNMENT

21 THAT WHEN THEY MAKE THEIR OPENING STATEMENT AND WHEN THEY PUT

22 ON THEIR WITNESSES, THEY SHOULDN'T REFER TO THE FACT THAT THE

23 MONEY IS PUT IN BY THE CUSTOMERS WERE TRUST FUNDS?

24 MR. BROWN: THAT'S -- THAT WOULD BE IN THE FORM OF A

25 MOTION IN LIMINE, WHICH IS THIS IS CLOSE TO, BUT THAT IS NOT

DIANE E. SKILLMAN, OFFICIAL COURT REPORTER, USDe

 13

.I

1 WHAT WE ARE REALLY ASKING. BECAUSE TRUST FUNDS, I DON'T THINK

2 THEY ARE GOING TO USE THE WORD "TRUST FUNDS" ANYWAY. THEY'RE
3 TOO SMART TO USE TRUST FUNDS, ESPECIALLY IN LIGHT OF ALL THAT
4 HAS OCCURRED NINTH CIRCUIT OPINION AND THE LIKE.
5 WHAT THEY ARE GOING TO DO IS THEY ARE GOING TO CALL
6 THESE CLIENTS' MONIES, CLIENTS' TRUST MONIES.

7 THE COURT: YES, I KNOW. THAT IS WHAT I --

8 MR. BROWN: THAT'S NOT WHAT THEY ARE. THERE IS

9 GOING TO BE AN INFERENCE. IF THE JURY BELIEVES THESE WERE
10 EARMARKED, DESIGNATED RESTRICTED FUNDS AND THEY WERE USED FOR
11 SOME OTHER PURPOSE OTHER THAN TO PAY TAXES, THEY ARE GOING TO
12 FIND THE DEFENDANT GUILTY. IT IS VERY EASY.

I 13 THE GOVERNMENT CAN PROVE FRAUD IN THIS CASE IN TWO

14 WAYS. ONE IS THAT HE NEVER INTENDED TO PAY. THAT IS WHAT

15 THEY HAVE ALLEGED, AND THAT'S THE CORE OF THEIR FRAUD

16 ALLEGATIONS, AND THAT IS A FAIR FIGHT.

17 WHAT THEY ARE TRYING TO DO IS ADOPT A FACTUALLY AND

18 LEGALLY INCORRECT POSITION. I WOULD LIKE TO EXPLAIN WHY IT IS
19 BOTH FACTUALLY AND LEGALLY CLEARLY INCORRECT. THEY'RE TRYING

20 TO INFER SO THIS JURY WILL BELIEVE STARTING WITH THEIR OPENING

21 STATEMENT AND WITH THE WITNESSES WHEN THEY GET ON THE STAND
22 AND THE QUESTIONS THEY ASK AND THE WAY THEY ELICIT ANSWERS,
23 THAT SOMEHOW THESE ARE SOMEHOW RESTRICTED, DESIGNATED,
24 EARMARKED FUNDS. THESE ARE TAX MONIES.
25 TO A LAY JURY, WHO PROBABLY ALL OF THEM HAVE HAD

DIANE E. SKILLMAN, OFFICIAL COURT REPORTER, US DC

 14

1 WITHHOLDING TAXES TAKEN OUT OF THEIR PAY, THIS JURY -- THEY

2 ARE ALL TAXPAYERS, WE ASSUME. THEY'RE GOING TO ASSUME THAT
3 THESE FUNDS, WITHHOLDING FUNDS ARE SOME SACRED TYPE OF FUND
4 THAT THEIR EMPLOYERS TOOK OUT.
5 THE COURT: I UNDERSTAND.
6 MR. BROWN: BUT WE DON'T HAVE THAT HERE.
7 YOUR HONOR, HAMILTON TAFT -- THERE IS FIVE VERY
8 BRIEF POINTS ON WHY IT IS LEGALLY AND FACTUALLY INCORRECT.
9 WE KNOW THE GOVERNMENT, FIRST OF ALL, BEFORE WE GET
10 TO THIS, IS THE GOVERNMENT REALLY GOING TO SAY THAT THEY
11 WEREN'T HIS MONIES TO USE? WELL, KNOW THEY ARE. EVEN IN
12 THEIR TRIAL MEMO ON PAGE 11, LINE 24 AND 25, THEY MAKE THIS
13 STATEMENT: BUT THE MONEY TO PAY FOR ALL THESE EXTRAVAGANCES
14 WAS NOT HIS.
15 WELL, IT WAS. IT WAS HIS TO USE --
16 THE COURT: IT WAS THE CORPORATION'S.
17 MR. BROWN: IT IS THE CORPORATION'S. THEY ARE
18 CALLING THE CORPORATION AND ARMSTRONG BASICALLY THE SAME.
19 THEY ARE SAYING HAMILTON TAFT OR ARMSTRONG. WHAT HAMILTON
20 TAFT DID THEY ARE CHARGING ARMSTRONG WITH DOING. THAT'S NOT
21 THE THING.
22 THEY ARE SAYING HE DID NOT HAVE THE RIGHT TO INVEST
23 THOSE FUNDS. HE DID NOT HAVE THE RIGHT TO SPEND THOSE FUNDS
24 THE WAY HE SPENT THEM BECAUSE HE NEVER INTENDED TO PAY THE
25 TAXES.

DIANE E. SKILLMAN, OFFICIAL COURT REPORTER, USDC

 6

1 BUT I WANTED TO REALLY DISCUSS THE INSTRUCTION THAT

2 WAS REALLY THE OUTGROHTH OF OUR PREVIOUS DISCUSSIONS IN COURT

3 CONCERNING PROPOSED INSTRUCTION NUI'-1BER 6.

4 AND I WOULD SUBMIT TO THE COURT THAT WE HAVE

5 CRYSTALLIZED THE ISSUE AND I BELIEVE FLESHED OUT THE PROBLEM,

6 AS WE CAN SEE FRON THE GOVERNMENT'S RESPONSE.

7 FROM THEIR RESPONSE, YOUR HONOR, I WOULD SUBMIT,

8 WITH ALL DCE RESPECT TO GOVERNMENT COUNSEL, THAT THEY ARE

9 OPERATING CLEARLY Ut~DER AN ERRONEOUS UNDERSTANDING OF THE LAW.

10 IT'S NOT JUST J.... LITTLE BIT ~'~RONG, ITIS MILES \\7RONG. IT'S WAY

11 OFF COURSE.

12 THEY SUBI·jIT TO THE COLiRT THAT THE CHARACTER OF THESE

13 FUNDS, \'JHETHER THEY BE THE PROPEHTY OF HAl·n LTON TAFT, OR

14 WHETHER THEY BE TRUST FUnDS I IS P. QUESTION OF FACT FOR THE

15 JURY TO DECIDE. Al~D TH.;T JUST SIHPLY IS NOT THE LAhi • IT'S
I
16 11JOT A QL'ESTIOlJ or FhCT . IT I S A QUESTION OF LA\·J.

17 In YOUF~ HonOR t S OPINIon, \'JHICH \'JAS REVERSED BY THE

18 NInTH CIRCl~IT, THE COFRT STATED ON THE FINAL PAGE THAT IT'S A

19 QUESTIO!: OF LJ::j";. THE COUET DID NOT REVERSE ON THAT BASIS

20 THE COL-PI: THAT ISSL:E EAS A QUESTION OF LAh'.

21

22 THE COGRT: THE INTERPRETATION OF THAT STATUTE AND

23 THE EVIDENCE PRESENTED TO ri.1E BECOME A QUESTION OF LA\v.

24 lVIR. BRO\'JN: YOUR HONOR, WE WOULD SUB1~1IT THAT' THE

25 CHARACTER OF THESE FUNDS I IvHETHER THEY BE TRUST FUNDS, OR WHAT

ROBERTA L. ROGERS, OFFICIAL REPORTER, USDC

SAN FRANCISCO, CA (415) 863-4211
 7

1 THE CHARACTER IS OF THESE FUNDS, IS CLEARLY A QUESTION OF LAW.

2 THIS IS A VERY COI·1PLEX, SUBTLE DISTINCTION. AND

3 WHEN THOSE FUNDS ARE TURNED OVER FROH HAl>1ILTON TAFT -- FROM

4 THE CLIENT COMPANIES TO HAI·1ILTON TAFT THEY LOST THEIR

5 CHARACTER AS TRUST 1\101'1IES. I'LL GET INTO THAT IN A MOMENT.

6 THE COURT: YOU STATED IT I'-1J.l.NY, J1ANY TIMES.

7 l'1R. BROI-nJ: THERE'S -- BESIDES THE NINTH CIRCUIT

8 OPIlJI01~ , YOl'R H01~OR I THEEE'S -- THERE'S JUST NO QUESTION THAT

9 THF.T PARTICULAR ISSUE IS A QUESTI01~ OF LA I'; FOR THE COURT TO

10 DETERF':INE. IT 1 S NOT A QUESTION Of FACT. IT 1 S NOT FAIR GAME.

11 IT I S nOT SOI,jETHI1JC; THAT P. JURY J A LAY JURY I SHOULD

12 DETERl·1IHE \'JHAT THOSE FUNDS ARE, h'HETHER THEY ARE TRUST FUNDS

13 OR WHE~HE~, IIJDEED, THE; ARE THE PROPERTY OF HAMILTON TAFT.

14 THJ..T IS A QUESTION OF LL.\·;.

15 AND THEY AND THE SEconD POINT' THAT THEY STATE

16 INCORRECTLY, DESPITE THE FACT THAT \';E NOh' KNOh7 THE COMMON LA\\f

17 OF TRUST E~p.KES IT CLEAR I AS i':E I VE SEEN FROH THE NINTH CIRCUIT

18 OPINI01J AnD FRO!':: THE CASES ;'.!"JD THE RESTATEI'·1ENT AND THE

19 TREATISES 01; THE SUBJECT I TH.;T THEY ARE -- THEY LOST THEIR

20 CHp.RACTER .A.S TReST FUHDS I AS E.p.RJ'1.Z~RYED FUNDS, AS DESI GNATED

21 RESTRICTED FU1JDS.

22 THE nI!:TH CI RCL'IT OPII-J Ion -- THAT \\lAS VACATED, IT IS

23 TRUE -- BCT IT WAS NOT VACATED, AS WE'VE CITED AS OUR

24 AUTHORITY FOR THAT 1 NOT VACATED BECAUSE OF INCORRECT LtGAL

25 REASONING. IT i'JAS VACATED BECAUSE OF IVJOOTNESS. THE CASE WAS

ROBERTA L. ROGERS, OFFICIAL REPORTER, USDC

SAN FRANCISCO, CA (415) 863-4211
 8

1 SETTLED.

2 THE COURT: I UNDERSTAND.

3 MR. BROh:!'J: AND THEY STILL INSIST AT THIS POINT THAT

4 THEY ARE TRUST FUNDS, AND THEY MAKE AN ARGUMENT THAT THEY ARE

5 ENTITLED TO ARGUE TO THE JURY AND PRESENT EVIDENCE THAT

6 THEY'RE TRUST FUNDS.

7 I THAT'S NOT WHAT THIS CASE IS ALL ABOUT. THIS IS A

8 iFRAUD CASE, YOUR HOJJOR. THE QUESTION BEFORE THIS JURY AND THE

9 REASOn I'~E 1 RE HERE IS BECAUSE THEY 1 VE HADE AN ALLEGATION I AS WE

10 SEE FROI·l PARAGRAPH 18 I hiHI CH I S THE SCHEt"iE.

11 IN THEIR TRIl~.L !-1EJ.'lO THEY TALK ABOUT THE FACT THAT

12 THERE IS A SII-~GLE SCHE],jE, .L.lJ p~RTIFICE TO DEFRAUD. THAT SINGLE

13 SCHEr·iI IS SET FORTH .;T P.::'.P~;GRAPH 18, PAGE 11, OF THE

14 INDICTHENT, THAT HR. AP.1·;STR01J(? nEVER INTEnDED TO PAY THE TAXES

15 AT THE TII·1E ;'.T THE TIl-·:I:. THE COIJTRACTS I':'ERE EnTERED INTO.

17 A LEVEL PLZ::.YliJG fIELD. i\lE '<'ANT TO PLAY ON A LEVEL PLAYING

18 FIELD. i'~E 1 RE THE OHE THAT'S GOING TO BE PREJUDICED,

19 PREJUDICED \';HERE I DOn'T THINK \'JE HAVE A CHANCE TO \\'IN THIS

20 CASE unLESS THIS PRETRIAL INSTRUCTIon IS GIVEN.

21 i·n-j~.T r 5 REALLY HAPPENING HERE, YOUR HONOR/ IS, AS

22 I'VE INDICATED, THERE IS T\'~O h7AYS TO PROVE THE CASE. WE

23 BELIEVE THIS BEl lJG A FRZ:..UD C.L.SE, IvIR. ARl'1STRONG' S INTENT AT THE

24 TIME THE COlJTRACTS ARE ENTERED INTO IS THE CRUCIAL FACTUAL

25 QUESTION THAT THIS JURY HAS TO RESOLVE, AND WE1RE PREPARED TO

ROBERTA L. ROGERS, OFFICIAL REPORTER, USDC

SAN FRANCISCO, CA (415) 863-4211
 9

1 DO THAT. THAT'S THE ISSUE IN THIS CASE.

2 FRAUD REQUIRES LYING/ CHEATING, DECEIT, AT THE TIME

3 THE CONTRACTS WERE ENTERED INTO. OUR SPECIAL INSTRUCTION

4 NUMBER 6 DOES NOT PRECLUDE THEM FROM ENTERING EVIDENCE AND

5 PROVING THEIR CASE. IT SIIvlPLY SETS T'HE RECORD STRAIGHT.

6 WHAT THE GOVERNMENT IS TRYING TO DO, IT'S TRYING TO

7 INJECT INTO THIS CASE SOME NEW TYPE OF SYLLOGISM THAT THERE

8 WAS A COlJTRACT BETh'EElJ HAI\jILTOlJ TAFT AND ITS CLIENT COMPANIES.

9 THE conTRACT EAS FOR THE PAYI·1ENT OF TAXES. THE TAXES WEREN'T

10 PAID. EEGO / CRII·'1E.

11 THAT'S NOT" THE LAh7 • THAT I S NOT FAIR. THAT I S NOT

12 ~HAT THIS CASE IS ALL ABOUT. THEY TRY TO BOOTSTRAP THAT

13 ARGU1'1EI!T BY SJ!..YII-JG THAT THESE FeNDS SOI\lEHOh' -- AND THEY'RE

14 GOING TO Y·:.:-'FE THE ARGUHElJT. \';E \',7ERE CONCER!1ED ABOUT IT. NOW

15 I IT
I
HAS BEE!: FLE,,:H:CD OCT. \';E SEE IT III THEIR RESPONSE.

16 THE LAST TII-1E i'~E C.4J/lE TO COURT, ~\lE HAD THEIR TRIAL

17 J\1EI'10RAl~DLTI'1 \':HERE AT ONE PARII CULAR PAGE OF THEIR TRIAL

18 IMEI'WAAJmnl THEY STATE THAT J.iR. ARHSTRONG 1 S EXPENDITURES WERE

19 OF r,10lJEY - - \';ERI B':r' THE USE OF !110NEY THAT \\'AS NOT HIS O\\'N.

20 \-7ELL/ YOUR HONOR I THAT t S SI~jPLY NOT THE LA\\l.

21 HR. AFJ·:STRONC l-F·.D THE EIGHT, AnD HAHILTON TAFT Hp.D THE RIGHT I

22 TO THE USE OF THAT I·lONEY. THAT I S TRUE FROI"1 -- \\'E KNO\\l THAT

23 FROI1 THE COI·'1I·101J LA\'J TRUSTS, FROI'1 THE NINTH CIRCUIT DECISION I

24 FROM THE NATURE OF THE BUSINESS THAT HAMILTON TAFT WAS IN, AND

25 FROM THE COJJTRACTS THEMSELVES, WHICH EACH ONE OF THEM -- EVERY

ROBERTA L. ROGERS, OFFICIAL REPORTER, USDC

SAN FRANCISCO, CA (415) 863-4211
 10

1 SINGLE ONE OF THEI'-1 STATE THAT HAJ'.1ILTON TAFT HAD THE RIGHT TO

2 THE USE OF THE FUNDS.

3 OUR SPECIAL PROPOSED INSTRUCTION NUMBER 6, YOUR

4 HONOR, NOT ONLY IS A DEFENSE THEORY OF THE CASE INSTRUCTION,

5 BUT IT'S A CORRECT STATEMENT OF LAI'J AND IN NO v,'AY PRECLUDES

6 THE GOVERIH'1£JJT FROH PROVING THEIR CASE -- IN NO HAY. IT

7 SIMPLY PUTS THIE CASE: 0:; J-. LEVEL PL.~YING FIELD.

8 THE ISSUE THAT \';E h'OlJLD SUSr-1IT TO THE COURT, RATHER

9 THAN THE SYLLOGIS!·'] PROPOSED BY THE GOVERtn·1EHT, IS MORE

10 PROPERLY THAT CONTRACTS \'JERE ENTERED INTO; THAT CONTRACTS HERE

11 FOR THE p_~ \."HIIJT OF TAXES.

12 HO\';[VER I AT THE TI!'1E THE COI'JTRZ\CT'S h7ERE ENTERED INTO

13 DID I1R. F.RHSTROIIG LIE I CHEAT AnD DECEIVE THESE ~\I0ULD-BE

14 CUSTOl·rERS IIJTO BELIIVING HE \':AS GOING TO PAY THE TAXES, AND

15 THEN THE TAXES h7 ERE I:01 P?_ID AUD IS THAT A CRIHE?

16 THAT BRIlJGS IT InTO THE COHTEXT OF THE CHARGES THAT

17 ARE PRESE~:T I]] THE Il~ DJ CTI·n:1JT. THAT' IS \'JHAT THIS CASE IS

18 ABOUT.

19 IJO\·: I ·l.·OUF: HOl;OR I THE nINTH CIRCUIT HAS I'.1ADE IT VERY

20 CLEAR -- ;'JJD I \'~OULD SUBI-iJT TO YOUR HONOP THAT OUR INSTRUCTION

21 IS SUPPORTEC E:; THE L~\'7 AlJD THE EVIDENCE. IT I S A THEORY OF

22 DEFENSE IITSTRUCTIGl1. 1 T DOESN I T PRECLUDE THE GOVERNHENT FRO}1

23 PROVING THEIR CASE.

24 THE FAILURE TO GIVE A THEORY OF THE DEFENSE

25 INSTRUCTION IS PER SE REVERSIBLE ERROR. THE DEFENSE IS

ROBERTA L. ROGERS, OFFICIAL REPORTER, USDC

SAN FRANCISCO, CA (415) 863-4211
 11

1 ENTITLED TO THAT INSTRUCTION WHEN IT IS SUPPORTED BY LAW AND

2 HAS SOME FOUNDATION IN THE EVIDENCE.

3 OUR \\'HOLE DEFEIJSE IS PREDICATED UPON THE FACT THAT

4 MY CLIENT HAD THE RIGHT TO THE USE OF THE FUNDS.

5 THE GOVERNMENT THEORY IS THAT HE INTENDED AT THE

6 TIME OF THE CONTRACT TO TAKE THE MONEY AND RUN, NEVER INTENDED

7 TO PAY THE TAXES.

8 AS lIVE SAID / 'i-JE KnOh' THAT THAT IS THE SCHEME, THE

9 SINGLE SCHEI'-'JE, AS THEY INDICATE IN THEIR TRIAL MEMORANDUM, AND

10 THAT'S IN THE ll;DI CTl'-1El'~T. THE CASE OF UNITED STATES VERSUS

11 SOTELO-MURILLO/ fOUND AT 887 F.2D 176, 1989, NINTH CIRCUIT

12 CASE, SAYS A THEORY OF DEFENSE INSTRUCTION MUST BE GIVEN.

13 THE COURT: BUT THAT'S TALKING ABOUT INSTRUCTIONS TO

14 THE JCRY AT THE EUD OF THE CASE. IT'S NOT TALKING ABOUT

15 PRELII'lI1!ARY IUSTRUCTI01JS.

16 ]·1R. BRO\":lJ: THAT I S TRUE, YOUR HONOR.

17 THE COURT: AND THERE IS A BIG/ BIG DIFFERENCE. BIG

18 DIFFEREJ;CE.

19 HR. BROI-:U: LET I'IE JUI1P AHEAD / I F I MIGHT, THEN.

20 .[,.;;D THEF;[ IS A DIfFERENCE. BUT h1 E I RE DEALING

21 HERE p.!,lD \\'E GEl Bp.CF EH'i h'E NEED IT NO\~. YOUR HONOR, IF

22 THIS INSTRUCTIO!'; \'~AITS UNTIL THE END OF THE TRIAL, IF THIS IS

23 CONSIDERED AS FAIR GAME FOR THIS JURY TO HEAR THE GOVERNMENT'S

24 THEORY THAT THIS IS TRUST MONEY, IF THEY GET THE IMPRESSION IN

25 ANY WAY THAT THESE ARE MONIES -- AND THESE ARE ALL LAY

ROBERTA L. ROGERS, OFFICIAL REPORTER, USDe

SAN FRANCISCO, CA (415) 863-4211
 12

1 PERSONS.

2 THEY ARE ALL TAXPAYERS. THEY'VE ALL HAD WITHHOLDING

3 TAKEN OUT OF THEIR PAYCHECKS. ~~E HAVE TO ASSUME THAT, AND I'M

4 SURE IT'S TRUE. THEY'RE GOING TO ASSUME THAT THESE WERE

5 SOMEHOW SACRED WITHHOLDING MONEY LIKE THEIR EMPLOYER TAKES OUT

6 OF THEIR PAYCHECK. AHD IF THEY \\lERE USED FOR ANY OTHER

7 PURPOSE BUT FOR THE PAYI'lENT OF TAXES, THEN FRAUD WAS

8 COMMITTED.

9 THAT I S ~'JHAT THE GOVERNHElJT IS TRYING TO INJECT INTO

10 THIS CASE. I F THE INSTRUCTIOl~ \\iE' RE SEEKING I \\'HICH IS ~

11 THEORY Of THE DEFENSE INSTRUCTION, WHICH HAS TO BE GIVEN

12 AND, BY THE ~'~AY I THOSE CASES DO NOT SAY IT CAN I T BE GIVEN AT

13 THE BEGlIn~I!>::; OF THE CASE. IT SAYS IT HAS TO BE GIVEN. I

14 CONCUR. yot ARE ;'.BSOLUTELY CORRECT. IT IS NOPJ1ALLY GIVEN AT

15 THE EnD OF THE Cp.SE.

16 THIS IS A UNUSUAL CASE, AS 1\1£ TALKED ABOUT LAST

17 Tllv1E. THl SIS .b.. CASE INVOLVliJG TAXES. IT IS INVOLVING NOT

18 JUST TAXES I BUT 1';ITHHOLDIl!G TAXES. ALL THE JURORS \\'ILL BE

19 FAI'olI LIAR h7 1TH TH.'\T.

20 THE GOVERN!\lEi~T SEEKS TO CALL THESE -- DESPITE THE

21 NINTH CIRCUIT I DESPITE THE COHI'10N LAh1 OF TRUSTS, DESPITE THE

22 CONTRACT, THEY STILL SEEK TO CALL THEM TRUST MONIES. THEY

23 SEEK 'ro MAEE -- GIVE THE II·IPRESSION THAT THESE ARE EARMARKED

24 FUNDS.

25 AlIY SUCH IHPRESSION LIKE THAT IS GOING TO CAUSE THIS

ROBERTA L. ROGERS, OFFICIAL REPORTER, USDC

SAN FRANCISCO, CA (415) 863-4211
 13

1 JURY TO INFER FRAUD. ~\1E CAN'T DEFEND THAT. THAT IS NOT WHAT

2 THE CASE IS ABOUT. THIS CASE IS A CASE OF INTENT. THAT'S

3 WHAT THE CASE IS ABOUT.

4 THEY'RE NOT PRECLUDED FROM PROVING THEIR CASE WITH

5 THAT PRETRIAL INSTRUCTION. IT SIMPLY MAKES THE CASE FAIR FOR

6 BOTH SIDES. IT EXPLAINS TO THE JURY \\1HAT THE SITUATION WAS

7 WITH REGARD TO THESE FUNDS; THAT HAMILTON TAFT, INDEED, HAD

8 THE RIGHT TO THE USE OF THE FUNDS UNTIL THE TIME, PURSUANT TO

9 THE CONTRACT, THAT TAXES \\iERE DUE TO BE PAID.

10 NO\'! , THE GOVERNI,1ENT CAN BRING IN ALL THE EVIDENCE

11 THEY \,~ l-~ !',J T ABOCT \'~HAT HAPPENED \\1ITH THIS Iv]ONEY. THERE'S NO

12 QUESTION THEY'RE GOING TO DO THAT. WE HAVE NO PROBLEM WITH

13 THAT. IlJ FACT, h7 f l

LL STIPUL~TE TO \\?HERE THE MONEY WENT. AND

14 IT DIDN r T ALL GO TO THE PAYJ 1ENT OF TAXES. 1 \'JE ALL KNOW THAT.

15 I F THIS JURY INFERS frHAT SOI-1EHOh' THESE MONIES COULD

16 ONLY BE USED fOR THE PA YI"lENT OF T.l\.XES, THEN THERE I S NO PURPOSE

17 IN THE TRIAL.

18 THE \';HOLE FRAUD CASE REQUIRES PROOF OF INTENT,

19 INTENT TO DECEIVE, INTENT TO CHEAT, LIES TO THESE PEOPLE AT

20 THE TII~lE THE COnTRACTS \'~EEE ENTERED INTO. THAT I S THE SCHEME.

21 THAT I S \'JHAT THE'!.' H.?l.. VI TO PROVE.

22 NOT;:, YOUP. HONOR, THESE LAY JURORS THAT ARE GOING TO

23 COME HERE, If THEY'RE SUBJECTED TO WHATEVER THIS TRIAL

24 TAKES -- TWO MONTHS, SIX WEEKS, THREE MONTHS POSSIBLY"THAT

25 WE'VE HEARD ALL THESE DIFFERENT ESTIMATES -- AND, YOU KNOW, WE

ROBERTA L. ROGERS, OFFICIAL REPORTER, USDC

SAN FRANCISCO, CA (415) 863-4211
 14

1 ALL TRY TO MAKE THOSE ESTIMATES AS ACCURATE AS WE CAN.

2 BUT IF THIS JURY GETS THE IMPRESSION THAT THESE ARE

3 EARMARKED FUNDS / THESE ARE TRUST IIIJONIES, THROUGHOUT THIS

4 TRIAL, THEytRE GOING TO HAVE THEIR OPINIONS HARDENED LIKE

5 CEMENT BEFORE THIS TRIAL IS OVER WITH. WE KNOW THAT AS A

6 PRACTICAL MATTER.

7 THAT INSTRUCTIOIJ THAT YOUR HONOR \<JOULD GIVE AT THE

8 END AFTER LENGTHY TRIAL DEJI.LING \'JITH THESE KIND OF MONIES

9 \\lON' T EVEN HATTER AT THAT PARTICULAR TIME, AND THERE WILL BE

10 SO l\ruCH ERROR IIJJECTED AnD PREJUDI CE InTO THIS CASE AND

11 MISLTNDERST.lI.NDlnGS III.1POSED UPON THIS JURY. THAT CAN ALL BE

12 CURED h'ITH p.n InSTF:UCTION THAT 'vAS TAEEN RIGHT OUT OF THE

13 NINTH CIRCUIT OPIlJIOH. AND THj'..T OPIHION, YOUR HONOR, WAS NOT

14 VACATED.

15 THE:" CC'CRT: HE. BRo\'nJ, HOh1 HANY TIMES HAVE YOU SAID

16 THAT? I HEARD YOU THE FIRST TIME. YOU SAID IT TWO WEEKS AGO.

17 YOU I VE NOh' S.l".ID IT AT LEAST FOUR TIlvlES TODAY. I UNDERSTAND

18 YOUR POInT. I AGREE. I THINK I SHOULD BE GUIDED BY THAT

19 NINTH CIRCUIT DECISIOlJ.

20 THE QUESTIon I1J r\1Y I\1IND IS ,n-L~T THEY DECIDED. 1'1>1

21 GOING TO TAEE THAT AS HY POLESTAR \\'HElJ THE TIl,lE cor·1ES TO MAKE

22 THE DECISION on l".rHIS THING. 1'1\1 NOT GOING TO DUCK \'\1HAT THEY

23 SAID BECAUSE IT WAS VACATED FROM ME.

24 NE. BRo\"nJ: OK.~Y. I APPRECIATE THAT.

25 YOUR HONOR, \\lE HAVEN' T REALLY -- NONE OF US REALLY

ROBERTA L. ROGERS, OFFICIAL REPORTER, USDC

SAN FRANCISCO, CA (415) 863-4211