2010-05-27 Amrstrong's Reply in Support of 2255

ARMSTRONGS REPLY IN SUPPORT OF 28 U.S.C.
2255 MOTION
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CONNIE C. ARMSTRONG, JR.

8309 Laughing Waters Trail
McKinney Texas, 75070
Telephone: 469-212-2316
e-mail: chip.armstrong@yahoo.com

Petitioner Pro Se

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

OAKLAND DIVISION


Petitioner

v.

UNITED STATES OF AMERICA

Respondent
No. CR 94 276 PJH

ARMSTRONGS REPLY IN SUPPORT OF
28 U.S.C. 2255 MOTION

Armstrong submits this Reply in support of his pending motion under 28 U.S.C. 2255
and in traverse of the factual allegations and legal argument provided in the governments
response of July 24, 2009.

ARMSTRONGS REPLY IN SUPPORT OF 28 U.S.C. 2255 MOTION Page i
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TABLE OF CONTENTS
Table of Contents ............................................................................................................................. i
Index of Authorities ........................................................................................................................ ii
Statement of Issues ..........................................................................................................................1
Statement of Facts ............................................................................................................................1
Argument .........................................................................................................................................2
A. Armstrongs claims are properly before the court. ................................................2

B. Improper suppression of Brady material requires that
Armstrongs conviction be set aside. .......................................................................4

1. Summary ......................................................................................................4

2. Legal Standard .............................................................................................5

3. The Undisclosed Prior Investigation ............................................................6

4. The Undisclosed Political Pressure ..............................................................8

5. The Undisclosed Collusion with the Bankruptcy Trustee .........................10

C. Fraud on the court requires that Armstrongs conviction be set aside. ..................14

Conclusion .....................................................................................................................................15
Signature ................................................................................................................... Signature Page
Certificate of Service .............................................................................. Certificate of Service Page

ARMSTRONGS REPLY IN SUPPORT OF 28 U.S.C. 2255 MOTION Page ii
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INDEX OF AUTHORITIES
Cases
Animal Legal Defense Fund v. Veneman, 490 F.3d 725 (9th Cir. 2007) ...................................... 13
Banks v. Dretke, 540 U.S. 668 (2004). ........................................................................................... 4
Bernstein v. Universal Pictures, Inc., 79 F.R.D. 59 (S.D. N.Y. 1978) ........................................... 7
Bousley v. United States, 523 U.S. 614 (1998) ............................................................................... 3
Carrington v. United States, 503 F.3d 888 (9th Cir. 2007). ........................................................... 4
Clay v. United States, 537 U.S. 522 (2003). ............................................................................... 2, 3
Dodd v. Hood River County, 59 F.3d 852 (9th Cir.1995). ............................................................ 11
Ferrell v. West Bend Mut. Ins. Co., 393 F.3d 786 (8th Cir. 2005); .............................................. 12
Gantt v. Roe, 389 F.3d 908 (9th Cir. 2004). ............................................................................... 4, 6
In re ABA Recovery Service, Inc., 110 B.R. 484, 488 (Bankr. S.D. Cal.1990). ........................... 13
In re Hamilton Taft, 53 F.3d 285 (9th Cir. 1995) ......................................................................... 10
In re Intermagnetics America, Inc., 926 F.2d 912 (9th Cir.1991) ................................................ 15
In re Levander, 180 F.3d 1114 (9th Cir. 1999) ....................................................................... 14, 15
In re U. S. Financial Securities Litigation, 75 F.R.D. 702 (S.D. Cal. 1977) .................................. 8
Jimenez v. Quarterman, 129 S.Ct. 681 (2009); .............................................................................. 2
Jones v. S.E.C., 115 F.3d 1173 (4th Cir. 1997); ........................................................................... 12
Kunzelman v. Thompson, 799 F.2d 1172 (7th Cir. 1986). ............................................................ 12
Kyles v. Whitley, 514 U.S. 419 (1995). ........................................................................................... 5
Memorex Corp. v. IBM Corp., 458 F. Supp. 423 (N.D. Cal. 1978) ................................................ 7
Missouri v. Jenkins, 495 U.S. 33 (1990) ......................................................................................... 3
Mitchell v. McCaughtry, 291 F. Supp.2d 823 (E.D. Wis. 2003) .................................................... 4

ARMSTRONGS REPLY IN SUPPORT OF 28 U.S.C. 2255 MOTION Page iii
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Murray v. Carrier, 477 U.S. 478, 485 (1986). ..............................................................................3
Parklane Hosiery Co. v. Shore, 439 U.S. 322 (1979). ............................................................ 12, 13
Reid v. Simmons, 163 F. Supp.2d 81 (D. N.H. 2001). .................................................................... 7
Schlup v. Delo, 513 U.S. 298 (1995). ........................................................................................... 13
Stanford University Hosp. v. Federal Ins. Co., 1995, WL 912346 (N.D. Cal. 1995) .................. 12
U.S. Bancorp Mortgage Co. v. Bonner Mall Pship, 513 U.S. 18 (1994) .................................... 13
U.S. v. Bagley, 473 U.S. 667 (1985). .............................................................................................. 5
U.S. v. Blanco, 392 F.3d 382 (9th Cir. 2004) ........................................................................... 6, 10
U.S. v. Boulware, 558 F.3d 971 (9th Cir. 2009............................................................................... 7
U.S. v. Brasswell, 501 F.3d 1147 (9th Cir. 2007) ........................................................................... 4
U.S. v. Fernandez, 559 F.3d 303 (5th Cir. 2009). ........................................................................... 7
U.S. v. Golb, 69 F.3d 1417, 1430 (9th Cir. 1995) ........................................................................... 5
U.S. v. Jernigan, 492 F.3d 1050 (9th Cir. 2007)............................................................................. 4
U.S. v. Lopez, 577 F.3d 1053 (9th Cir. 2009) ............................................................................ 4, 5
Perez v. United States, 502 F. Supp. 2d 301 (N.D.N.Y 2006).........................................................3
U.S. v. Schimmels, 127 F.3d 875 (9th Cir. 1997). ......................................................................... 12
U.S. v. Shaffer, 789 F.2d 682 (9th Cir. 1986) ................................................................................. 5
Weldon v. U.S., 225 F.3d 647 (2nd Cir. 2000) .............................................................................. 15
Younan v. Caruso, 51 Cal. App. 4th 401 (1996)........................................................................... 12
Rules
Supreme Court Rule 13.1 ................................................................................................................ 3
Supreme Court Rule 13.3 ................................................................................................................ 3

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STATEMENT OF ISSUES
Armstrong replies to the opposition tendered by the government which argues that a) his
section 2255 motion was not timely, b) claims related to the late production of evidence were
procedurally defaulted, and c) his complaints regarding suppression of evidence concerning
political pressure are conclusory. The government has since withdrawn its argument concerning
timeliness. In reply, Armstrong addresses the Courts recent and erroneous sua sponte
conclusion that certain claims are procedurally barred. Further, Armstrong explains that the
issue concerning the late-produced evidence is not, per se, a Brady complaint; rather, the issue is
that the lead prosecutor and the lead FBI agent lied under oath about the character of the
evidence in an apparent effort to block a defense request for a continuance. Finally, Armstrong
shows that his suppression complaints are not conclusory but compel and support the
conclusions reached.
In its opposition, the government did not address the non-political Brady complaints
alleged in Armstrongs 2255 motion and the amendment thereto. Armstrong provides a
summary of these complaints in response to this Courts reasonable observation that his amended
motion was not entirely comprehensible. [Docket Entry 548, Order to Show Cause].
STATEMENT OF FACTS
Armstrong is currently serving a sentence imposed by the Honorable Charles Legge. On
February 26, 1997, Armstrong was convicted by a jury on each count of a twenty-one count
indictment. Armstrong appealed to the Ninth Circuit, which on April 19, 2000, affirmed in part
and reversed in part his conviction. On August 15, 2000, Judge Legge resentenced Armstrong to
108 months in prison on counts for which his conviction had been affirmed. Armstrong
appealed, and April 15, 2002, the Ninth Circuit affirmed. Armstrong filed a petition for

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rehearing in the Ninth Circuit, which was denied on January 31, 2003 with a mandate issued on
February 10, 2003. On April 22, 2008, upon a finding that Armstrong did not receive notice of
the January 31, 2003 order, the Ninth Circuit recalled its mandate, withdrew its January 31, 2003
order, and re-issued that order as of April 22, 2008.
On April 22, 2009, Armstrong filed a motion to vacate, set aside, or correct his
sentence under 28 U.S.C. 2255. On May 11, 2009, Armstrong filed an amendment to that
motion under Rule 15(c) of the Federal Rules of Civil Procedure. Armstrongs complaints center
on Brady and concern the suppression of a) evidence of a prior exculpatory investigation, b)
evidence that the prosecution was spurred by pressure from political leaders connected to
Armstrongs opponent in ongoing civil litigation, and c) evidence that the prosecution team and
the bankruptcy trustee in a collateral proceeding worked in concert, such that collateral estoppel
bound the prosecution to final judgments in the bankruptcy court. Finally, Armstrong complains
of gross prosecutorial misconduct arising from false testimony and affidavits tendered to the trial
judge by officers of the court. On July 24, 2009, the government filed an opposition to the 2255
motion.
ARGUMENT
A. Armstrongs claims are properly before the court.
The government argued in its opposition that Armstrongs complaints regarding the late
production of evidence were procedurally defaulted. Shortly after an ex parte discussion with
the governments counsel [Docket 592], this court issued an order denying certain discover
requests made by Armstrong. [Docket 594]. In its order, the Court declined to reach the merits
of Armstrongs discovery request, asserting that the claims were not cognizable because of a
procedural default. The Court conducted is procedural default analysis sua sponte.

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While the Court correct stated the rule for procedural default, the Court wholly failed to
utilize that rule in its analysis. At page three of its order, the Court writes,
The general rule is that claims not raised on direct appeal may not be raised on
collateral review unless the petitioner shows cause and prejudice. Massaro v.
United States, 538 U.S. 500, 504 (2003). Thus, a section 2255 movant raising a
claim for the first time in post-conviction proceedings is in procedural default,
and is precluded from asserting the claim.

Order, Docket 594, at p. 3. Any claim not raised on direct appealfor whatever reasonis
procedurally defaulted. See Perez v. United States, 502 F. Supp. 2d 301, 307 (N.D.N.Y 2006)
(Any claims not raised on direct appeal are, in general, procedurally defaulted.) citing Murray
v. Carrier, 477 U.S. 478, 485 (1986). As noted by this Court in the above-quoted rule, once a
claim is procedurally defaulted, the determination of whether that claim is subject to habeas
review requires a cause and prejudice analysis. Whether a procedurally defaulted claim is
barred from habeas review turns on the cause and prejudice analysis. See Bousley v. United
States, 523 U.S. 614 (1998).
Regrettably, this Court failed to conduct a cause and prejudice analysis prior to
determining that Armstrongs claims were not subject to collateral review and, therefore,
discovery was not available.
1
The Ninth Circuit has held that the cause and prejudice test for excusing the failure to
raise a claim on direct appeal will apply, for example, where the claim rests upon a new legal or
factual basis that was unavailable at the time of direct appeal, or where interference by officials
may have prevented the claim from being brought earlier. United States v. Braswell, 501 F.3d
1147, 1150 (9th Cir. 2007), quoting Murray v. Carrier, 477 U.S. 478, 488 (1986).
In an effort to prevent to propagation of error from the discovery
motion to the 2255 motion itself, Armstrong provides a brief cause and prejudice analysis.

1
Armstrong does not complain in this Reply about the Courts decision on his discovery
motion and is deferring that compliant to another time and forum.

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Each claim raised by Armstrong in his 2255 motion meets the cause standard articulated
in Braswell, as the existence of each claim was only made known years after trial when probative
FOIA documents were delivered to Armstrong. These documents revealed for the first time that,
among other facts,
the government had conducted a prior, exculpatory investigation of Armstrongs
company,
Nancy Pelosi spurred the investigation of Armstrongs company after the FBI found
no evidence of wrongdoing,
the Deputy Director of the FBI was providing reports on the status of Armstrongs
prosecution to Howard Baker, Nancy Pelosi, and Barbara Boxer, and
the trustee managing the bankruptcy of Armstrongs company was working in concert
with the prosecution team to develop the prosecution strategy.

To underscore the issue, claims whose existence was made known years after the last appeal was
filed were clearly unavailable at the time of direct appeal. United States v. Braswell, 501 F.3d at
1150.
As to the prejudice component, the Ninth Circuit has noted that the analysis of prejudice
for a procedurally defaulted claim is analogous to a materiality analysis under Brady. See
United States v. Lopez, 577 F.3d 1053 (9th Cir. 2009). Accordingly, and in the interest of
brevity, Armstrong incorporates the materiality discussion set forth in Section B below.
B. Improper suppression of Brady material requires that Armstrongs conviction be set
aside.

1. Summary

Armstrong complains of a pattern of Brady violations so profound that his conviction
must be set aside. In determining whether there has been a Brady violation, this Court must
consider whether the evidence was: (1) favorable to Armstrong, (2) suppressed by the
government and (3) material to the guilt or innocence of Armstrong. See U.S. v. Jernigan, 492
F.3d 1050, 1053 (9th Cir. 2007)(en banc). Evidence is favorable if it is exculpatory or

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impeaches a prosecution witness, and suppression occurs when favorable evidence known to the
prosecution is not disclosed, either willfully or inadvertently. See Banks v. Dretke, 540 U.S. 668,
691 (2004). Evidence is exculpatory if it is merely favorable to the accused, a rather low
standard. See Gantt v. Roe, 389 F.3d 908, 912 (9th Cir. 2004). Evidence is material when
there is a reasonable probability that, had the evidence been disclosed to the defense, the result
of the proceeding would have been different. U.S. v. Bagley, 473 U.S. 667, 682 (1985). A
reasonable probability of a different result [exists] when the governments evidentiary
suppression undermines confidence in the outcome of the trial. Id. at 678. If the petitioner
establishes all three elements, the challenged conviction or sentence must be set aside. U.S. v.
Lopez, 577 F.3d 1053, 1059 (9th Cir. 2009). As Armstrong does not anticipate any serious
debate that the subject evidence was favorable to the accused and was suppressed, his
argument in this Reply centers on the materiality of the evidence.

2. Legal Standard

The governments constitutional duty is triggered by the potential impact of favorable but
undisclosed evidence, and a showing of materiality does not require demonstration by a
preponderance that disclosure of the suppressed evidence would have resulted ultimately in
Armstrongs acquittal. See U.S. v. Bagley, 473 U.S. at 682. This specifically includes acquittal
because the jury accepted an explanation for the events that did not inculpate Armstrong. See id.
Bagleys touchstone of materiality is a reasonable probability of a different result, and the
adjective is important. The question is not whether the defendant would more likely than not
have received a different verdict with the evidence, but whether in its absence he received a fair
trial, understood as a trial resulting in a verdict worthy of confidence. Kyles v. Whitley, 514
U.S. 419, 434 (1995). The second aspect of Bagley materiality bearing emphasis here is that it

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is not a sufficiency of evidence test. A defendant need not demonstrate that after discounting the
inculpatory evidence in light of the undisclosed evidence, there would not have been enough left
to convict. Id., at 435; see also U.S. v. Golb, 69 F.3d 1417, 1430 (9th Cir. 1995) (Holding that
the ultimate question is whether there is a reasonable probability that, had the evidence been
disclosed, the result of the proceeding would have been different such that confidence in
outcome is undermined). The final aspect of Bagley materiality to be stressed here is its
definition in terms of suppressed evidence considered collectively, not item by item. Id., at 436.
This Court is to evaluate the cumulative effect of the suppressed evidence. See U.S. v. Blanco,
392 F.3d 382 (9th Cir. 2004). Brady applies even if the government fails to grasp the
significance of the suppressed evidence. Gantt v. Roe, 389 F.3d 908, 912 (9th Cir. 2004).

3. The Undisclosed Prior Investigation

The most significant Brady violation in this case arises from the governments failure to
disclose the existence of a recent, prior investigation of Hamilton Taft by AUSA Yamaguchi that
closed upon a lack of evidence of a federal crime. [Exhibits, p. 6, letter dated 9/23/1988 noting
prior investigation of Hamilton Taft by AUSA Yamaguchi who declined prosecution; Exhibits,
p. 8, letter dated 2/8/1991 referencing and reviewing prior investigation.] Neither the fact of
Yamaguchis investigation nor its exculpatory conclusion was disclosed to Armstrong before or
during trial. Indeed they were never disclosed but merely transmitted to him under FOIA several
years after his conviction. Fortunately, the failure to disclose a prior favorable investigation is an
oddity, but the Fifth Circuit nonetheless had a recent opportunity to consider the matter in U.S. v.
Fernandez, 559 F.3d 303 (5th Cir. 2009). There, a unanimous panel analyzed an undisclosed
investigation under the three familiar factors of Brady. The panel found that the fact of the
investigation was actually well-known during trial with only the results of the investigation

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remaining undisclosed. The panel further found that the district judge conducted an in camera
review of the results and found no exculpatory material. Based upon these findings, the panel
held that no Brady violation occurred.
Here, of course, the prior Hamilton Taft investigation was clearly exculpatory yet was
never disclosed to Armstrong. Further, the Hamilton Taft situation is more troubling from a
policy perspective because, unlike the Fernandez investigation that looked for conduct which
violated a known law, the Hamilton Taft inquiry turned on whether known conduct could be
interpreted as violating a yet-unknown law. Indeed, a Baker & McKenzie opinion letter relied
upon by the government found that [t]here does not appear to be any case law, regulation, or
statute dealing with an independent agent who actually pays over the taxes to the government.
[Exhibits, p. 8, FBI letter dated 2/8/1991 referencing Baker & McKenzie opinion; Exhibits, p.
14, Baker & McKenzie opinion letter dated 10/29/1981.] A prior investigation that reaches a
contrary result is highly material in a case such as this, where the government in breaking new
legal ground in creating an offense.
This suppression of material exculpatory evidence harmed Armstrong and benefitted the
government. The suppression of a recent, exculpatory investigation of Armstrongs company
obviously implicates Brady. See U.S. v. Fernandez, 559 F.3d 303 (5th Cir. 2009); Reid v.
Simmons, 163 F. Supp.2d 81 (D. N.H. 2001). But the benefit to the government is also obvious
and casts doubt upon the fundamental fairness of Armstrongs trial. See U.S. v. Boulware, 558
F.3d 971, 974 (9th Cir. 2009)(Due process requires that criminal prosecutions comport with
prevailing notions of fundamental fairness and that criminal defendants be afforded a meaningful
opportunity to present a complete defense.)

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Here, the prosecution of Armstrong involved the presentation and explanation of complex
financial transactions to lay jurors who are, generally, ill-equipped to evaluate such evidence.
See U.S. v. Hinojosa, 958 F.2d 624 (5th Cir. 1992)(Holding Batson not implicated when the
structuring of financial transaction was at issue and all jurors without a high-school education
were struck); Memorex Corp. v. IBM Corp., 458 F. Supp. 423 (N.D. Cal. 1978) (approving court
fact-finding after jury disagreement in complex case); Bernstein v. Universal Pictures, Inc., 79
F.R.D. 59 (S.D. N.Y. 1978) (jury disallowed in complex case); In re U. S. Financial Securities
Litigation, 75 F.R.D. 702 (S.D. Cal. 1977) (same). Indeed, one of the key financial concepts at
issue in this case was actually decided in a collateral bankruptcy proceeding and was not decided
until after Armstrongs indictment. Yet the suppression of the prior investigation completely
relieved the government of the heavy burden of explaining the conflict between the two
investigations. [Exhibits, pp. 8-12, Letter from FBI to U.S. Attorney McGivern and AUSA
Yamaguchi describing prior investigation; Exhibits pp. 81-83, Redacted FBI 302 revealing that
Hamilton Tafts operations at the time of the prior investigation showed the same characteristics
as those for which Armstrong was prosecuted].
As noted above, the suppression of a prior, exculpatory investigation is not a frequent
scenario. Nevertheless, it happened here and warrants a reversal of Armstrongs conviction.

4. The Undisclosed Political Pressure

Had the government disclosed its prior investigation, the jury in this trial would have
faced the additional question of which investigation to believethe September 1988 version or
the February 1991 version. One element that would have aided the jurys determination,
however, was suppressed by the government; namely, the high level of political involvement at
the onset of the 1991 inquiry. [Exhibits, p. 19, Redacted FBI Memo of March 8, 1991]. This

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memo describes the interplay between a disgruntled former Hamilton Taft employee,
2
the IRS,
the staffs of Sen. Boxer and Rep. Pelosi, the Wall Street Journal, and the FBI. On the last page
of this interesting memo, the writer discloses a conversation with AUSA Yamaguchi, who noted
the need for additional probable cause before seeking a search warrant for the Hamilton Taft
offices. About this same time, Hamilton Taft became engaged in a contractual dispute with one
of its clients, Federal Express. [Exhibits, p. 34, Original Complaint filed by Federal Express
3
In short, the investigation of Armstrongs company began with the polite rebuffing of a
disgruntled former employee by an FBI agent on March 8 and quickly escalated to the Deputy
].
One week later, the Wall Street Journal publishes a negative article about Hamilton Taft, citing
the disgruntled employee. [Exhibits, p. 41]. FBI memoranda reveal that the employee was
directed to the Wall Street Journal by Nancy Pelosi. [Exhibits, p. 19]. The article was published
on Friday, March 15, 1991. On Sunday, March 17, two days after the articles publication and
nine days after Yamaguchis statement that he lacked probable cause to pursue a warrant, the
DOJ published a press release detailing its investigation of Hamilton Taft. On April 3, 1991, two
weeks after the Federal Express filing, FBI Deputy Director Larry Potts sends a status report to
Howard Baker, then a director of Federal Express, and copies the report to individuals associated
with the staffs of Pelosi and Boxer.

[Exhibits, p. 43]. This memo is the only communiqu
produced which reveals contact between Mssrs. Baker and Potts. All documents initiating the
involvement of Mr. Potts are missing, as are the follow-up reports promised in the memo.

2
Years after trial, FOIA material delivered to Armstrong contained financial reports from
the Hamilton Taft bankruptcy trustee. The financial reports included a listing of creditors
claims and revealed that the disgruntled employee, during the time he was aiding government,
was submitting a whistleblower claim of $110 million. [Exhibits, pp. 23-33 at page 33]. The
impeachment value of this information is clear.
3
The Federal Express complaint is also interesting in that it describes Federal Express as
trustee of the monies held by Hamilton Taft. This is in direct contrast to the position the
company took at trial and the theory upon which Armstrong was convicted.

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Director of the FBI sending a status report to a politically-influential director of Federal Express
(but not to any of its corporate officers) and to staff members of Pelosi and Boxer on April 3. It
must have been an exciting 26 days in the San Francisco field office. In its opposition, the
government criticizes Armstrongs section 2255 motion as conclusory on this subject. To the
contrary, an argument is not conclusory simply because it reaches a proper conclusion. Here, the
only conclusion supported by these facts is that a dispute between Hamilton Taft and Federal
Express received attention from the highest levels of Congress and the DOJ, and that this
attention was rained down upon USAO and FBI employees in San Francisco.
As noted above, a Brady materiality analysis must consider the cumulative effect of the
suppressed evidence. See U.S. v. Blanco, 392 F.3d 382 (9th Cir. 2004). Under this standard, the
political influence both underscores and explains the governments reversal on the question of
criminal culpability, which found no violation of federal law in 1988 but commenced a public
prosecution 30 months later. This suppression undermines confidence in the outcome of the
trial, and compels the reversal of Armstrongs conviction. U.S. v. Bagley, 473 U.S. 667, 682
(1985).

5. The Undisclosed Collusion with the Bankruptcy Trustee

During trial and upon direct appeal, one of the most contested issues was Armstrongs
request for a law of the case instruction based upon the holding of the collateral bankruptcy
proceeding, In re Hamilton Taft, 53 F.3d 285 (9th Cir. 1995)(vacated as moot by reason of
settlement). The In re Hamilton Taft opinion reversed both the bankruptcy judge and the district
court judge (who was also the judge conducting Armstrongs criminal trial) and held that the
deposits transmitted to Hamilton Taft were owned by Hamilton Taft. See id., at 290. This is in
contrast to the views of the lower court and of the prosecution team, both of which considered

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the deposits as owned by the Hamilton Taft clients, with Hamilton Taft operating as a trustee
and constrained by all the statutory, judicial, and common-law obligations associated with that
designation.
This significance of this issue is obvious in a prosecution that put forth as its central trial
theme the tale of a high profile executive who financed his lifestyle with other peoples
money. That theme was gutted when the Ninth Circuit held that the funds in question were
actually owned by Hamilton Taft. [Exhibits pp. 69-80 at pp. 78-79; Brief of AUSA Yamaguchi
acknowledging six adverse prosecutorial ramifications of a law of the case instruction and
asserting that such an instruction would amount to a gutting of the governments case.]
Armstrong respectfully suggests that Mr. Yamaguchi analyzed the situation correctly and further
suggests that due process requires such an outcome when the prosecutions theory proves
erroneous.
Turning now to the issue addressable under section 2255, Mr. Yamaguchi argued to the
trial court that In re Hamilton Taft was inapplicable to the instant trial because the government
was not a party to the bankruptcy proceeding and, regardless, In re Hamilton Taft had been
vacated. [Exhibits pp. 69-80 at pp. 71-72]. To the contrary, documents delivered to Armstrong
after trial show a close alignment between the prosecution team and the bankruptcy team, such
that the two are in privity for purposes of collateral estoppel. [Exhibits p. 89, FBI memo
describing a meeting between the lead prosecutor (Yamaguchi), the lead FBI agent (Hatcher),
and counsel for the bankruptcy trustee to discuss prosecution strategy; p. 87, redacted partial
FBI 302 wherein the unnamed witness stated the trustee was doing the work of the FBI.]
Under collateral estoppel, once a court has decided an issue of fact or law necessary to
its judgment, that decision may preclude relitigation of the issue in a suit on a different cause of

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action involving a party to the first case. Dodd v. Hood River County, 59 F.3d 852, 863 (9th
Cir.1995). Under both California and federal law, collateral estoppel applies where it is
established that
(1) the issue necessarily decided at the previous proceeding is identical to the one
which is sought to be relitigated; (2) the first proceeding ended with a final
judgment on the merits; and (3) the party against whom collateral estoppel is
asserted was a party or in privity with a party at the first proceeding.

Younan v. Caruso, 51 Cal. App. 4th 401, 406-07 (1996). Here, elements one and two are
established. Thus, the remaining inquiry turns on whether the suppressed evidence is probative
of the privity issue, such that the defense was deprived of the opportunity to argue collateral
estoppel.
4
Privity is a legal conclusion designating a person so identified in interest with a party to
former litigation that he represents precisely the same right in respect to the subject matter
involved. U.S. v. Schimmels, 127 F.3d 875, 881(9th Cir. 1997). Parties are in privity when they
are aligned such that the have the same legal interest. See Ferrell v. West Bend Mut. Ins. Co.,
393 F.3d 786 (8th Cir. 2005); Jones v. S.E.C., 115 F.3d 1173 (4th Cir. 1997); Kunzelman v.
Thompson, 799 F.2d 1172 (7th Cir. 1986).
Defensive use occurs when a defendant seeks to prevent a plaintiff from asserting a
claim the plaintiff has previously litigated and lost against another defendant. Parklane Hosiery
Co. v. Shore, 439 U.S. 322, 326 (1979).
Here, suppression of FBI documents revealing collusion and cooperation between the
prosecution and the bankruptcy trustee deprived Armstrong of the opportunity to demonstrate
privity and invoke the mandatory strictures of collateral estoppel. The alignment in interests is
and wasobvious: Armstrongs conviction would allow the bankruptcy trustee to benefit from

4
While the term law of the case was a convenient moniker for the proposed instruction,
that doctrine was never fully on point given that the appellate ruling arose in a different cause of
action and was discretionary. By contrast, a collateral estoppel finding would have been binding.

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more than $50 million in insurance proceeds triggered by criminal conduct. See Stanford
University Hosp. v. Federal Ins. Co., 1995, WL 912346, *1 (N.D. Cal. 1995)(not designated for
publication)(Hamilton Taft did carry such a bond with Lloyds, with primary coverage of $20
million and umbrella coverage of $30 million.). The trustee's responsibility is to preserve and
maximize the value of the estate for the benefit of the parties in interest, and not to safeguard the
interest of the debtors principals. In re ABA Recovery Service, Inc., 110 B.R. 484, 488 (Bankr.
S.D. Cal.1990).
But while the alignment in interests supports a collateral estoppel theory, the suppressed
evidence compels the invocation of that doctrine. Due process requires that, prior to utilization
of collateral estoppel, the party or its privy to be estopped had an opportunity to be heard in the
prior proceeding. See Parklane Hosiery Co. v. Shore, 439 U.S. 322, 327 n. 7 (1979). The
alignment in interests shows that the government and the trustee were in privity as to the
bankruptcy proceeding. However, the suppressed evidence takes this a step further and shows
that the government and the trustee coordinated their respective litigations such that the
government was bound by the judgment in the bankruptcy proceeding. For this reason, the
suppression of this evidence materially harmed Armstrong and his conviction must be set aside.
Finally, Armstrong briefly addresses the arguments in the trial court and upon direct
appeal that vacatur of the In re Hamilton Taft opinion ends the inquiry. Armstrong bases his
address on a plea to the equitable power of this Court to do justice in a habeas proceeding. See
Schlup v. Delo, 513 U.S. 298 (1995). Contrary to the arguments of the government and to the
overruled cases relied upon in support of those arguments, the Ninth Circuit lacked the power to
vacate its opinion. See U.S. Bancorp Mortgage Co. v. Bonner Mall Pship, 513 U.S. 18, 29
(1994) (holding that mootness by reason of settlement does not justify vacatur of a judgment

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under review.); compare Animal Legal Defense Fund v. Veneman, 490 F.3d 725 (9th Cir.
2007)(Distinguishing U.S. Bancorp in situations where en banc review had already been granted.
That is not the situation here, where petitions for review were filed but not ruled upon at the time
of settlement.)
C. Fraud on the court requires that Armstrongs conviction be set aside.

In opposing Armstrongs complaints surrounding the 70 hours of late-disclosed audio
tapes, the government asserts that he has procedurally defaulted his claim. The government
misapprehends the issue. The issue is not whether, on the record before it, the trial court abused
its discretion in denying a continuance to allow review of the tapes. Instead, the issue is that the
record before the trial court included a) the oral assurance of Special Prosecutor Smetana and b)
the sworn affidavit of FBI SA Hatcher, both stating that the audio recordings were made by the
Dallas FBI office in connection with an unrelated investigation. [Exhibits, pp. 44-55 at p. 55 as
to Smetana; and pp. 56-59 at pp. 56-57 as to Hatcher.]. Both of these statements were lies. Not
misrepresentations or statements made with less than full knowledge, but direct and
unambiguous lies delivered with the intent that they influence a decision by this Court.
Documents recently delivered to Armstrong pursuant to a FOIA request reveal that both
the oral statement of Smetana and the affidavit of Hatcher were false and the tapes were actually
prepared by the Dallas FBI office at the express request of AUSA Yamaguchi in support of his
prosecution of the instant case. [Exhibits, p. 60].
The Ninth Circuit has explained fraud on the court as follows:
Fraud upon the court should, we believe, embrace only that species of fraud
which does or attempts to, defile the court itself, or is a fraud perpetrated by
officers of the court so that the judicial machinery can not perform in the usual
manner its impartial task of adjudging cases that are presented for adjudication.

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In re Levander, 180 F.3d 1114, 1120 (9th Cir. 1999)(Recognizing the inherent power of a court
to set aside a judgment when a party deceives the court through perjury, and the perjury was not
discovered until after trial.) See also Weldon v. U.S., 225 F.3d 647 (2nd Cir. 2000)(Sotomayor,
J.)(Explaining that the submission of a false document is one form of fraud on the court.)
Of course, the late disclosure of the subject tapes implicates Brady. See U.S. v. Shaffer,
789 F.2d 682, 690 (9th Cir. 1986)(If the arguably exculpatory statements of witnesses ... were
in the prosecutor's file and not produced, failure to disclose indicates the tip of an iceberg of
evidence that should have been revealed under Brady.) But the issue for the Special Prosecutor
and the FBI agent was not the content of the tapes; rather, the issue was opposition to a trial
continuance proposed by the defense. [Exhibits, pp. 61-68, trial transcript of hearing discussing
the volume of material and the time needed to review.]
To oppose that continuance, these men lied to the court. Armstrong cannot explain why
they lied, but lie they did. As noted above, this Court has the inherent power to set aside a
judgment obtained through fraud on the court. See In re Levander, 180 F.3d at 1120; In re
Intermagnetics America, Inc., 926 F.2d 912, 916 (9th Cir.1991)(finding fraud on the court
provided an appropriate remedy where an officer of the court made a false declaration.) The
actions of Smetana and Hatcher were inexcusable and harmed the integrity of this Courts
judicial process. For this reason, the judgment obtained pursuant to that process must be set
aside.
CONCLUSION

For the foregoing reasons, Armstrong requests that this Court grant his petition under
section 2255 and set aside his conviction.

ARMSTRONGS REPLY IN SUPPORT OF 28 U.S.C. 2255 MOTION Signature Page
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DATED: May ____, 2010

Respectfully submitted,

______________________________
Connie C. Armstrong, Jr.

ARMSTRONGS REPLY IN SUPPORT OF 28 U.S.C. 2255 MOTION Certificate of Service Page
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CERTIFICATE OF SERVICE

I certify that I served a copy of

1. Armstrongs Reply in Support of 28 U.S.C. 2255 Motion;
2. Exhibits to Armstrongs Reply in Support of 28 U.S.C.
2255 Motion;
3. Declaration of Connie C. Armstrong, Jr. in support of
Armstrongs Reply in Support of 28 U.S.C. 2255 Motion;
4. Transmittal letter dated May ____, 2010

via FedEx to the following counsel of record:
Doug Sprague
United States Attorneys Office
450 Golden Gate Avenue, 11th Floor
San Francisco, CA 94102

Dated: May ____, 2010

______________________________

DECLARATION OF CONNIE C. ARMSTRONG, JR. SOLO PAGE
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Telephone: 469-212-2316

Petitioner Pro Se



OAKLAND DIVISION


Petitioner

v.


Respondent
No. CR 94 276 PJH
DECLARATION OF CONNIE C.
ARMSTRONG, JR.
CONCERNING ARMSTRONGS REPLY IN
SUPPORT OF 28 U.S.C. 2255 MOTION

1. I am the Petitioner in this cause and the facts recited below are within my
personal knowledge and are true and correct.
9. I declare under penalty of perjury that the forgoing is within my personal
knowledge and is true and correct.
Dated: May _______, 2010.

____________________________

Telephone: 469-212-2316

Petitioner Pro Se



OAKLAND DIVISION


Petitioner

v.


Respondent
No. CR 94 276 PJH

EXHIBITS TO
ARMSTRONGS REPLY IN SUPPORT OF
28 U.S.C. 2255 MOTION

Armstrong submits these Exhibits to his Reply in support of his pending motion under 28
U.S.C. 2255 and in traverse of the factual allegations and legal argument provided in the
governments response of July 24, 2009.
EXHIBITS TO REPLY IN SUPPORT OF 2255 MOTION PAGE 1
TABLE OF CONTENTS

FBI Letter referencing prior investigation, September 23, 1988 .....................................................6

FBI Letter referencing prior investigation, February 8, 1988 ..........................................................8

Baker & McKenzie opinion letter, October 29, 1981 ....................................................................14

FBI memo disclosing political influence and lack of probable cause, March 8, 1991 ..................19

Financial report showing creditors claims, including $100 million whistleblower claim............23

Federal Express Original Complaint ..............................................................................................34

Wall Street Journal article induced by Pelosi and Boxer ...............................................................41

Status memo from FBI deputy Director Potts to Howard Baker, Pelosi, and Boxer .....................48

Hearing transcript of January 13, 1997 discussing late-produced audio tapes ..............................49

Affidavit of FBI Special Agent Hatcher disclaiming prior knowledge of audio tapes ..................56

FBI memo showing prior authorization for tapes given to Hatcher by AUSA Yamaguchi ..........60

Hearing transcript of January 27, 1997 discussing late-produced audio tapes ..............................61

Government brief authored by Yamaguchi in opposition to law of the case instruction ..............69

Partial FBI 302 disclosing Hamilton Taft problems prior to Armstrongs acquisition .................81

FBI 302 re. between FBI and counsel for bankruptcy trustee .......................................................84

FBI 302 wherein witness stated bankruptcy trustee was doing the work of the FBI.....................87

FBI memo regarding meeting between prosecution team and trustee to plan prosecution ...........89

DATED: May ____, 2010

Respectfully submitted,

______________________________
CERTIFICATE OF SERVICE

I certify that I served a copy of

1. Armstrongs Reply in Support of 28 U.S.C. 2255 Motion;
2. Exhibits to Armstrongs Reply in Support of 28 U.S.C.
2255 Motion;
3. Declaration of Connie C. Armstrong, Jr. in support of
Armstrongs Reply in Support of 28 U.S.C. 2255 Motion;
4. Transmittal letter dated May ____, 2010

via FedEx to the following counsel of record:
Doug Sprague
United States Attorneys Office
450 Golden Gate Avenue, 11th Floor

Dated: May ____, 2010

______________________________

Case 3:94-cr-0027f JH Document 531
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
v.
CONNIE ARMSTRONG, JR.,
Defendant-Appellant.
Filed 04/25, )8 Page 1 of 1
No. 00-10399
FILED
APR 22 2008
MOLLY C. DWYER, CLERK
u.s. COURT OF APPEALS
DC# CR-94-276-CAL
Northern California
(San Francisco)
ORDER
Before: BROWNING, KLEINFELD and GOULD, Circuit Judges
Armstrong's letter is a construed as a motion to recall the mandate, and so
construed, the motion is granted. We recall the mandate issued on February 10,
2003.
The order issued on January 31, 2003 is withdrawn.
The panel has voted to deny the petition for panel rehearing.
The full court has been advised of the petition for rehearing en bane and no
judge has requested a yote on whether to rehear the matter en bane. See Fed. R.
App. P. 35.
The petition for panel rehearing and the petition for rehearing en bane are
denied. The mandate shall issue forthwith.
KBiResearch
u.s. Departmen. Justice
In ReplyI Ploa-se Refer 1;0
Ftle No
Federal Bureau of InveStlgatlOn
450 Golden Gate Avenue
San Francisco, California 94102
September 23, 1988
Mr. Joseph P. Russoniello
united states Attorney
Northern District of california
Box 36055
Attention: Mr. Flay Dawson
Assistant u. S. Attorney
Re: ............ _
PRESIDENT, dba
HAMILTON TAFT AND COMPANY,
SAN FRANCISCO, CALIFORNIA;
UNKNOWN SUBJECTS I dba
MAX FHARMA, INCORPORATED,
200 CRESCENT COURT, SUITE 1375,
DALI.AS TEXAS;
POSSIBLE WIRE FRAUD
Dear Mr. Russoniello: b-: i:
Referenced conference between Assistant U.s. Attorney
(AUSA) Michael and Special Agent (SA) I I
on September 14, 1988.
This letter is to confino. the above referenced
conference in which SAI Idelineated the details of the
allegation and the results or his investigation to date regarding
captioned matter. AUSA Mike Yamaguchi indicated based on what
was presented to him as well as his examination of documentation
pertinent to the captioned matter, there was insufficient
1 - Addressee
/1 - San FranClSCO ((196A-2868)
RES/bfa
(2 )
Mr. Joseph P. Russoniello
evidence to support a violation of federal law at this time and
he would therefore decline prosecution. AUSA Yamaguchi added if
further information could be obtained regarding the allegations
presented, he would reconsider his opinion.
Based on AUSA Yamaguchi's declination, our office will
close its investigation into the captioned matter.
Very truly yours,
RICHARD W. HELD
Special Agent in Charge
.
.'
/ ---
2*
By: I f
Speclal Agent
b7C::
u.s. Department of Justice
Federal Bureau of Investigation
In Reply, Please ReIer t.o
FIle No
Mr. william T. Mc Givern
united states Attorney
Northern District of California
P.O. Box 36055
February B, 1991
yt ,( ''''''! liI.'6enhtJ/
II nYlDIIIYt{J '1
th11
/1'!uM/ ')7l'N/U
Vi,,1 /til II/If} flo,) '1 htloJ tJ .
Attn: Mr. Michael Yamaguchi
Assistant u.s. Attorney
r'
Re: Chip Armstrong, dba
Hamilton Taft and
company
#1 Market
Spear Tower
San Ca 94105
Fraud by Wirer
Tax raud
00: San Francisco
Dear Mr. Me Givern:
Our office is SUbmitting the following information to
you for a prosecutive opinion as to 'whether a violation of
Federal Law has taken place.
\
\
D
9(;ff-
/q/ .L1 - rJ':: - q '?:J c-<-:- I 11
b7C
Enclosures
The San Francisco Division first became cognizant of
the existence of Hamilton Taft and Company in August of 1988 when
I interviewed at our office. I I was
the co-founder of Hamilton Taft and the other founder was one, -
I I who founded the company in ,1979. For your
information
r
Hamilton Taft is a service company which provides. a
tax paying service on behalf of their clients. Hamilton Taft and
Company collects money from their clients and in turn
pays their clients various and local income
1 - Addressee 'nn,O '""\ I fJt, 1
1 - 196A-2868 I \ , 1/ 'V
PKM/sgc
(2)
b7C
taxes. Unemployment taxes and other various tax liabilities are
also paid by Hamilton Taft. When a company becomes a client of
Hamilton Taft, it notifies Hamilton of the companies payroll
dates, pertinent payroll information, the state in which the
company is required to pay taxes and the type of taxes which need
to be paid and on what dates. Hamilton collects monies from
these various clients and in turn pays the clients tax obligation
whether they be local, county, state and/or federal income taxes,
unemployment taxes and/or other tax liabilities.
b7C I I advised that when a client company enrolls
with Hamilton Taft, the company notifies Hamilton of its payroll
dates, pertinent payroll information the state in which the
to be paid. The company then remits to Hamilton Taft on a timely
basis its payroll tax liability. The client company will also
remit funds to Hamilton Taft which would be used to pay the
aforernentionedtax liabilities. Historically the funds were
either wired to a Hamilton Taft Impound Account each time a
payroll is paid by the company or Hamilton Taft gains access to
the companies account by a depository transfer check.
Hamilton Taft was also responsible for filing all
applicable federal, state, county and local tax filing
information on behalf of its client and pay their various taxes
as they become due for the service Hamilton Taft charges its
clients a fee based on the number of times a client renders a
payroll and the number of areas taxing agencies which have to be
ultimately paid. Hamilton Taft also receives the interest in
which it can generate on the funds its clients deposit with it.
All this information is revealed to the client prior to a
contract being entered into by the client and Hamilton Taft.
This is also done orally by Hamilton Taft's sales
representatives.
As Hamilton Taft grew, the company became concerned
with what its liability may be with the funds they were
collecting on behalf of their clients. Because of this internal
concern in 1981, the firm contacted Baker and McKenzie Attorney's
at Law, 555 California street, San Francisco, California, 94104
and requested that this firm provide Hamilton with an opinion of
the characterization of the funds it was holding on behalf of its
clients for tax payments.
On October 29, 1981, Baker and McKenzie issued an
opinion that basically stated that at the time a payroll is
rendered, that is paid by the employer, the funds representing
the withheld taxes belong to the federal government. The
employer becomes a trustee for those funds and as such the duties
and responsibilities of a trustee are mandated under common law.
2
taxes. Unemployment taxes and other various tax liabilities are
also paid by Hamilton Taft. When a company becomes a client of
Hamilton Taft, it notifies Hamilton of the companies payroll
dates, pertinent payroll information, the state in which the
to be paid and on what dates. Hamilton collects monies from
these various clients and in turn pays the clients tax obligation
whether they be local, county, state and/or federal income taxes,
unemployment taxes and/or other tax liabilities.
b7C I advised that when a client company enrolls
with Hamilton Taft, the company notifies Hamilton of its payroll
dates, pertinent payroll information the state in which the
to be paid. The company then remits to Hamilton Taft on a timely
basis its payroll tax liability. The client company will also
remit funds to Hamilton Taft which would be used to pay the
aforernentionedtax liabilities. Historically the funds were
either wired to a Hamilton Taft Impound Account each time a
payroll is paid by the company or Hamilton Taft gains access to
the companies account by a depository transfer check.
Hamilton Taft was also responsible for filing all
applicable federal, state, county and local tax filing
information on behalf of its client and pay their various taxes
as they become due for the service Hamilton Taft charges its
clients a fee based on the number of times a client renders a
payroll and the number of areas taxing agencies which have to be
ultimately paid. Hamilton Taft also receives the interest in
which it can generate on the funds its clients deposit with it.
All this information is revealed to the client prior to a
contract being entered into by the client and Hamilton Taft.
This is also done orally by Hamilton Taft's sales
representatives.
As Hamilton Taft grew, the company became concerned
with what its liability may be with the funds they were
collecting on behalf of their clients. Because of this internal
concern in 1981, the firm contacted Baker and McKenzie Attorney's
at Law, 555 California street, San Francisco, California, 94104
and requested that this firm provide Hamilton with an opinion of
the characterization of the funds it was holding on behalf of its
clients for tax payments.
On October 29, 1981, Baker and McKenzie issued an
opinion that basically stated that at the time a payroll is
rendered, that is paid by the employer, the funds representing
the withheld taxes belong to the federal government. The
employer becomes a trustee for those funds and as such the duties
and responsibilities of a trustee are mandated under common law.
2
In addition various state and federal law mandates how a trustee
needs to act in his capacity as a trustee.
Although Hamilton Taft is not the employer but an
independent agent, it was the opinion of Baker and McKenzie that
the funds are still trust funds and the holder of these funds
(Hamilton Taft) still bears the responsibility of a trustee.
...::
::l
r

()
-

When interviewed by the Federal Bureau of Investigation
(FBI) in August of 1988, I I went so far as to stat,e that some <:i::i:::-
individuals representing clients have stated that the collected
funds need to be put in a bank account separate from other funds
of that particular entity. In during his tenure at lJ
Hamil ton Taft, Hamil ton ,Taft considered themselves to be trustees "'-t..it
, for those funds on behalf of the various taxing agencies. :L:"t>:;;
. i.'
By way of background information, I I stated that in
August of 1984, Hamilton Taft was sold to the Cigna.Corporation
the large insurance conglomerate out of Philadelphia,
Pennsylvania and Hartford, Connecticut. At that time, Hamilton
Taft had approximately 900 corporate clients and was -handling on
'"a daily basis, approximately $100,000,000 in client deposits.
"'.
According to a personality conflict developed
b7C between himself and one formally Executive Vice
President of cigna W 0 was placed by that corporation
as the person in charge of Hamilton Taft's operation. Because of
I
tbe persynality differences landl lonel I
Jwas appointed as President of Hamilton Taft.
Shortly after leaving ,Hamilton Taft in the latter
of ,1stated he became aware th.at Hamilton Taft stc;rted 1
to lose approx1mately $100,000 per month. He noted that whlle he (.
was President of Hamilton Taft, that the company although not
highly profitable, was able to stay in a slight profit position.
He understands that Hamilton Taft hired another President but'the
company continued to lose, money in C.igna and soon thereafter
began to look for a buyer for Hamilton "Taft. In December of
1987, Maxphrama Incorporated of Dallas, Texas paid $500,000 to
Cigna Corporation as a down payment for the purchase of Hamilton
Taft. On February 29, 1988, Maxphrama Incorporated completed 'its
purchase of Hamilton Taft from Cigna Corporation. / .
____ stated to onel I former Executive
Vice President in charge of operations for Hamilton Taft provided
him with the foregoing information. r--1allegedly toldl Ion
February 27,1988 I ! transfer
$5,000,000 by wire transfer to a brokerage house in New
Louisiana called the Howard Wiel Labluisse Friedricke Investment
Security Incorporated. I that this wire
transfer was td'"purchase a Treasury B111 at 5 1/2% interest. rI
allegedly asked I Iwhy she was purchasing a Treasury" Birr--
3
with such a short yield period, I I would not respond to
Mayl s question and just told him to do it. c::::::J told! I that
the $5,000,000 was funds which were put on
deposit with Hamilton Taft. at the time the
transfer was made, Hamilton Taft did not have any funds of its
own.
hJ--l
:--\"'"
In order to assist you in preventing your opinion from 7 fs
a historical point of Yle are enclosing a copy of the actual r
FD-302 noting interview Of, Iwith appropriate copies of -J '1\
documents provided byl to our agent. --/-t
G
__I noted that the form 8-K report which,. was filed in -'-'.
the Securities Exchange Commission (SEC) by Maxphrama for the
purchase of Hamilton Taft, Maxphrama states it has used a
$5,000,000 Treasury Bill to secure a promissory note which funds
were used to conclude the of Hamilton Taft from Cigna
Corporation. According tal Itold him that these funds
had been transferred to brokerage firm from customer funds
in the custody of Hamilton Taft. According toL' . also
advised thatl
J
; - Ihad directed him to wire transfer $50,000
in an unrelated transaction.
b7C
b7C
I was also interviewed in December of
1988. by Hamilton Taft as Treasurer-
Manager of the firm. I I is a Certified Public Accountant
(CPA) having become a CPA in the state of :': t986.
I Ibasically stated that shortly after became
President of Hamilton Taft, she told him t a sewall e making
the day to day investment decisions regarding the funds of
Hamilton Taft. She instructed him not to make any investment
unless she okayed them. He explained to her that any monies
collected from the clients only had a two or three day "window"
during which they could be invested prior to having to be paid to
taxing entities. Thereafter, all investments he made, other than
into commercial paper, were done at the direction L
I I In connection with his responsibilitiesC:
assist in the preparation of the monthly financial statements for
Hamilton Taft. Each month a meeting would be held to discuss a
just completed financial statement for the previous month. At
the close of such a meeting in April, 1988, after the close of
the April financial statements,l lstated that he had a
conversation with in her office. During this
conversation was bragging on the financial strength of
Maxphrama an ow axphrama was in the process of purchasing C &
H Nationwide Incorporated, a specialized trucking company.
Apparently, in order to herr statements and the
strength of Maxphrama, she showedL _ the Hamilton financial
statement which listed Hamilton Taft's assets in excess of
30,000,000. r Ifinancial picture was quite different than
the financial statements which he had prepared for Hamilton from
the month of April, 1988. x -,
i,"'" t"'"'' ''''U' k'" '.' I
lin looking at the financial

statement showed him that someone had taken the April,
1988 statements of Hamilton and re-did them. The
financial statement prepared for Hamilton Taft showed its
reta)U:d earnt'ngs at approximately $200,000. , Istated he
toldL _ . during this conversation that he thought the
statements which she had showed him for Hamilton Taft
were a fabrication and not of Hamilton Taft's
actual financial condition. _ Jreplied that the people in
Dallas were taking care of these statements.
that the above incident concerning what he
considered false and misleading financial statements was a major
factor in his ultimate decision to sever his employment with
Hamilton Taft. A copy of the interview form FD-302 the interview
oil I is incorporated as part of this communication.
It should also be noted that onel I was
interviewed in september of 1988 regarding his former employment
with Hamilton Taft. At the time of this interview,c::J stated
that he was self-employed as a consultant in
employment taxes. He stated that prior to being self-employed,
he was employed for five years with Hamilton Taft in San
Francisco as their Chief Operations Officer and Executive Vice
President. A copy of the interview conducted withc::J is
attached hereto.
This matter was informally presented to the united
states Attorney's office which concluded that there was a lack of (.
evidence to support the violation of any federal law at that
time. Our case was subsequently closed. I IttI j J.'j(J ;:' .. ". /$. ' ...-,..
. .'"
On December 24, 1990
7
-the. receiy..etf complaint S/,.;
Icall from one I "and CPA. I I
( stated that he was the current Controller of Hamilton Taft and
that he was calling the FBI because he felt that his employer was). < }11
cheating the Internal Revenue Service - (IRS) by not paying I-J; ,'iiI
owing to not only the but other taxing entities J
wer,e due. I - that at least $20,000,000 J.n r
JIJ
' !
funds have been transferred to accounts controlled by Chip .
Armstrong, the new CEO of Hamilton Taft. I I stated that
I
tbe:e f"rdS were used to purchase one or more companies in Texi?-s.
stated that Hamilton Taft had approximatel: 100 .
emp oyees in San Francisco in July of 1990. Itadvised
Armstrong is basically operating a Ponzi scheme, the
tens of millions of dollars which are sent to Hamilton Taft for
the ultimate payment of tax liabilities sustained by Hamilton
Taft I s clients. I has documentation, to support his claims t;
and is scheduled to present same to rBI on Jar:uary 13"
at 10: 00 am. I I furth
7
r stated that th
7
re an , i.;
procedure for lul11ng letters to c11ents who actually
\
comPlain to Hamilton Taft when they, the client, receive a late
"" ;=
s.;- 'R
5
. :

'(";,:""1...
.. t"- 1 .;::"....
, ...... t;,.i

'-:
b7e
notice from the IRS. , ~ states that a letter on Hamilton
Taft stationery is generated to the IRS berating the IRS for
having made an error in showing at least the front copy of a
check drawn on Hamilton Taft/s checking account allegedly
demonstrating that payment was actually made on a particular date
for a particular tax liability_ These checks were never sent to
the IRS but a copy of the letter was sent to the client, thereby
stalling the clients further inquiries.
Please contact us at your earliest convenience so that
we might discuss this matter in greater detail.
Sincerely yours,
RICHARD W. HELD
Special Agent in Charge
6*
By:
b7C
:..&. = ..... .. :.
'- ':-"'C,-.
.. ::.l:e.... l'r.,;
"'H: .... C
-""' ... G";a ... a.!: .

::r: .. - .
,:,:... ... . ...:. 9":",:":'
:- o
"1I: ruPt'
:,c .. ( ,,
"O .. G ..
.: .... =CN
.... 0'0
...........
Octc=er 19, 1981
Mr. :iarc Paiva
Taft & COffi?any
1255 Post Street
Re: Charac:erization of Funds by Employer
'E'or Tax Payments
Dear Marc:
Per your request, this letter Q1SCUSSes the characteri-
zation of funds withheld by employers from employee pay
checks in satisfaction of federal and income taxes,
Social Security taxes, and state insurance '.
taxes. This letter is limited to a discussion of the In-
ternal Revenue Code ("I.R.C."), California Revenue and
Taxation Code ("Cal. Rev. & Tax. Code"), ;:he California
Unemployment Insurance Code ("Cal. U. Com. Code"), and the
general responsibilities and duties of a trustee as reflected
in the California Civil Code ("Cal. Civ. Code").
An employer is required to withhold from the wages of
employees amounts in respect of federal income taxes (I.R.C.
3402], Social Security taxes [I.R.C. 3102], state income
taxes [Cal. U. Corn. Code 13020], and state unemployment
insurance "taxes [Cal. U. Com. Code 986]. The employer is
liable for the deduction and witr.holding of taxes. I.R.C. 5
3403: Cal. U. Corn. Code 13021.
Characterization of Withheld Funds
Funds that are withheld or collected as income tax or
Social Security Tax are to be held by the employer as " a
special f:..1nd in trust for the United States." LR.C. 750l.
u.s ..... Hill, 368 F.2d 617,66-2 ::.S.T.C. at 87382 (5th
:-: :'. :.: 3 r c ? ..= ': j. .J
, 'C ::.:)0-2 r :::?, ;
?-".:ls:e :'... 0
Lhat are ..... cr :::: __ as
3re be held by employer aE "3 special fund
in tr'Jsc for the S't'ate ot Cali=ornia
ll
rCcl. -,:. Com .. Cocie
13070]; '..."hile withheld 2.5 :'nsurance tax
.:i ret0 be \.; i t h he 1d "i n t r L1 st. II Cal . - U - Ca . :: 0 d e 9 8 6 The
duty to keep Withheld taxes as a trust arises as the taxes
are withheld from wages regardless of the dace for
to the government and does not until the
taxes are paid over. ';stleforc 'I. U.S., 75-1 U.S .T.C. I! 9464
( D. i nn. 1975).
During the ?eriod the funds are held trust, the person
holding the with a few discussed
the duties and resDonsibilities of a as such
duties and are mandated under common law.
v. Home Federal Savinas & Loan Assn, 66 Cal. App. 3d
674, 136 Cal. Rptr. 180 (4th D.C.A. 1977). In general, a
trustee is a fiduciary and is bound to act in the highest
good faith toward his beneficiary, must make full disclosure
of material facts, must not acquire any adverse interest, and
must not use his position to gain any advantage over the
beneficiary or to make any special Cal. Civ. Code
2228-2233. A trustee normally should not trust
property with his own, but if he do.es willfully mingle the
trust funds with property of his own, he is absolutely liable
for their safety and for the value of use. Cal. Civ.
Code 2236.
A trustee has a general duty to invest funds for the
benefit of the beneficiaries, but he must account over to the
beneficiaries any interest earned. Cal. eiv. Code 2262.
In investing, reinvesting, or otherwise managing trust property,
a trustee must exercise the judgment and care which people of
prudence, discretion, and intelligence exercise in the management
of their own affairs. Cal. eiv. Code 2261. California law
provides a-fairly liberal description of the type of investment
a prudent person would make, including every kind of property,
real, personal, or mixed, and every kind of investment which
a prudent person might enter into. Id.
the foregoing, the parties to the trust
may alter or waive any of the standard and duties.
Rest. 2d, Trusts 216. It is possible for the parties to a
trust arrangement to authorize commingling of funds, to authorize
the trustee to retain any income rrom the trust assets, and
.' : r. arc r' 2 V i..J
>: tobe r .2 9, : 9 S 1
?age Three
:0 consent various of The G[
:;acsh Va HOi7le Federal Savir.qs &. Loan Assn. I 66 C::. ';?p . .,)0
6 7 4 , 1 36 Cal.. R t: r--:. 1 8 0 (4 t h D. C .. rl.. 1 9' 7 7), i spa=- ticu 1 a t 1Y
instructive. At issue in Marsh was the and
:egality or ':he lIimpoundll or llreserve" accounts :::.lstomar-ily
required by savings and loan and in
connection with residential to insure of
and insurance.. The suit was a class action seeking
general and punitive damages and seeking an of
interest on the impound accounts, which were customarily held
interest.
The Court first determined that the impound accounts
trusts, not escrOws. It then considered in
detail the nature of a trust and the duties of a trustee,
observing that the beneficiary of ' the trust may the
right to any income and may authorize the commingling of
Eunds. Thus, the Court noted that the deed of trust authorizing
the impound account stated specifically that the payments by
the plaintiff would be held by Home Federal "in its general
fund without interest," and concluded that the parties had
agreed that the trustees could commingle and use the trust
funds, but did not have to account for any interest earned.
9.
The statute and cases indicate that the trust funds
created by I.R.C. 7501, Cal. U. Com. Code 986, and Cal.
U. Com. Code 13070 are subject to some modification of the
general rule. Thus, although normally a trustee must segregate
the assets of a trust and not commingle the assecs with his
personal funds, see Cal. eiv. Code 2236, it is not generally
required that the-Iunds withheld for taxes be held separately
from the general accounts of the corporation or chat they be
deposited in a separate bank account, Slodov v. 436
U.S. 238, 78-1 U.S.T.C. ,[ 9447 at 84,206 (1978); Newsome v.
U.S., 431 F.2d 742, 70-2 U.S.T.e. 9504 at (5th Cir.
1970). The Treasury or the Franchise Tax Board, as the case
may be, may specially require that withheld taxes be put into
separate accounts, however, in the event the employer has
failed previously to make appropriate deposits, payments, or
returns for such taxes, I.R.C. 7512; Cal. Rev .. & Tax. Code
5 18492.
Furthermore, there is nothing in the statute or any
regulation or case with which we are acquainted to imply that
the government is entitled to any additional interest on the
trust funds doring the period such funds are held in trust.
Thus, it would follow that if an employer decided to forego
interest on the trust funds, he, too, could do so.
:1 r. :1.3 r c ? a \. i 3-
Oc tobe r :2 9, 1981
?age four
of
The foregoing discussion has considered the situation of
an emclover. There does noe appear to be any case law, regula-
tion, or statute dealing an agent who actually
pays over the taxes to the sovernment. The funds presumably
are still trust funds, and che holder of those funds still
bears the responsibilities of a trustee. Presumably, however,
the collecting agent may use the in the same manner as
the employer have, ana is noe required, insofar as the
Internal Revenue Service or the Franchise Tax Board are
concerned, to segregate the =unds from the general fund of
the collecting agent.
Penalties
The normal penalty for a breach of fiduciary duty by a
trustee is the amount of the loss to the beneficiary. A simi-
lar penalty is imposed by I.R.C. 6672 or Cal. Rev. & Tax.
Code 18815: any person required to collect, account for,
and pay over withholding taxes who willfully fails to collect,
account for, or pay over such tax, is liable for a penalty
equal to the total amount of the tax evaded, not collected,
not accounted for, or paid over.
The test is " willfullness." Basicallv, "willfullness"
does not require anintent to deprive the government of its
taxes, Newsome v. U.S., suora, 70-2 U.S.T.C. at 84,151, but
can be evidenced merely by use of the withheld funds for any
other corporate purpose, regardless of any expectation that
adequate funds would be available at the due date for the
taxes. WavchofE v. U.S., 79-2 U.S.T.C 9602 at 88,195
(S.D. Tex. 1979). Any person who voluntarily and consciously
risks the withheld taxes in the operation of a corporation is
subject to liability under I.R.C. 6672 (Cal. Rev. & Tax.
Code 18815) if subsequently the corporation is unable to
remit the withheld taxes. v. U.S., supra.
In addition to the civil penalties, however, there are
also ciminal penalties. 7202 provides that any
person required to collect, account for, and pay over any tax
who willfUlly fails to collect, account for, or pay over such
tax shall be guilty of a felony and, upon conviction thereof,
shall be fined not more than S10,000, or imprisoned not more
:lr. :larc Pa'.'.:..3
October 29, :981
?age Five
than five years. o ~ both, together with the costs of prosecu-
tion. Cal. Kev. & Tax. Code 19408 imposes a fine of nat
mOre than $2,000 or imprisonment [no staeed maximuml, or both
for the similar offense. Although the penalties under these
sections have been imposed only rarely and only in particularly
egregious situations, there is considerable need to be con-
cerned about the potential criminal penalties as well.
If you have any questions or comments.concerning the
foregoing, please do not hesitate to contact us.
t;;jY,
~ i d L. Kimpert
DLK/aw
..
Memorandum
To
. SAN FRANCISCO (196A-SF-93255) (P) Date 3/8/91
From
sAJ _
(SQ' 5) b7C
Subject
CHIP ARMSTRONG, Jr., dba
Hamilton Taft and Company
1 Market Plaza
Spear street Tower
San Francisco, California
FBW; MFi Tax Fraud;
00: SAN FRANCISCO
The purpose of this memo is tO'document events that
since 6bruary 13 I 1 99 whi,?h is the date that
last interviewed by the writer. On that
__________ a numbs ocuments to iter which
have been disse e y he writer to or the IRS
in San Francisco, telephone number 556-6850. It should:
also be noted. that a copy of these documents along with a
of the writer's review of San Francisco file 196A-2868 has been
prepared and disseminated to AUSA MICHAEL YAMAGUCHI at 556-1328.
A copy of this summary is a matter of record under a separate
communication which is a part of this file.
Due to the fact that AUSA YAMAGUCHI was on annual leave
and did not return to his office until March 4, and/or 5, 1991 no
overt investigation was undertaken. This matter was referred to
Mr. Y GUCHI because of his revious referral w' he handled
re ardin Haml on Taft in which he subse entl f r-
lJlck 0] prosecution.. This matter was investigated by S - -7
I _it was handled under--SF 196A-2868 and was closed
August, 1988.
with regard to information supplied byl I writer
was reluctant to initiate any overt investigation for fear that-
there Eotential liability attached wherein the
.QB1dJ2e accused.Qf initiatipg the downfall ,of
captioned company bvl'the mere fact that it was making overt
inquiries. [ . ' ,has provided detailed information which,
of this date, has'been unable to be thoroughly corroborated.
Progress is being made to effect such corroDorat2on. .
I. expressed apprehension in his mind regarding
the "extensive
n
time-it was taking for the government to decide
Whether or not to initiate an investigation and to effect some
criminal process. He was told that the government ha_g._:t.Q.........
victim before any process would be forthcoming. He was further
)7C
Memorandum
To
From
Subject
SAN FRANCISCO (196A-SF-93255) (P)
sAJ ..... ___ -----1 (SQ' 5) b7C
1 Market Plaza
Spear Street Tower
FBW; MFi Tax Fraud;
00: SAN FRANCISCO
Date 3/8/91
The purpose of this_memo is to'document events that
since 13 I which is the date that
________ last interviewed by the writer. On that
___________ provided a numbe ocuments to iter which
have been disse e y he writer to qA or the IRS
also be noted. that a copy of these documents along with a summqry
Mr. YAMAGUCHI because of his previous referral which he handled
HamHton Taft -in which he subsequently QIilCl j.n:p for
l.sck OJ pros
e
cntiOIL This matter was investigated by S . -- -7
August, 1988.
there potential liagility qttached wherein the
QB1d1;!e accused..Q.t initiatipg the pownfall ,of
captioned COmpany byjthe mere fact that it was making overt
inquiries. I .- .has provided detailed informat.ion which I
of this date, has been unable to be thoroughly corroborated.
Progress is being made to effect such coriOEorat2on.
I . I expressed apprehension in his mind regarding
the "extensive" time-it was taking for the government to decide
whether or not to initiate an investigation and to effect some
criminal process. He was tolc:1 tbat the government haJl._:t.Q ......
)7C
Memorandum
To
From
Subject
SAN FRANCISCO (196A-SF-93255) (P)
sAJ ..... ___ -----1 (SQ' 5) b7C
1 Market Plaza
Spear Street Tower
FBW; MFi Tax Fraud;
00: SAN FRANCISCO
Date 3/8/91
The purpose of this_memo is to'document events that
since 13 I which is the date that
________ last interviewed by the writer. On that
___________ provided a numbe ocuments to iter which
have been disse e y he writer to qA or the IRS
also be noted. that a copy of these documents along with a summqry
Mr. YAMAGUCHI because of his previous referral which he handled
HamHton Taft -in which he subsequently QIilCl j.n:p for
l.sck OJ pros
e
cntiOIL This matter was investigated by S . -- -7
August, 1988.
there potential liagility qttached wherein the
QB1d1;!e accused..Q.t initiatipg the pownfall ,of
captioned COmpany byjthe mere fact that it was making overt
inquiries. I .- .has provided detailed informat.ion which I
of this date, has been unable to be thoroughly corroborated.
Progress is being made to effect such coriOEorat2on.
I . I expressed apprehension in his mind regarding
the "extensive" time-it was taking for the government to decide
whether or not to initiate an investigation and to effect some
criminal process. He was tolc:1 tbat the government haJl._:t.Q ......
196A-SF-93255
PKM/sgc
advised on more than one occasion by the writer of the potential
civil liability which miggt attach to the revelation to the
general public that the FBI was conducting or maybe conducting an
investigation into certain alleged criminal activities on the
part of Hamilton Taft. .
Nonetheless, on February 1-1, lsaw fit to
contact the congressional offices here in San Francisco of
Congress persons NANCY PELOSI and BARBARA BOXER.
on resswoman PELOSI's office to whom
spoke ave arne of an investi ative re orter e
consider contacting.. with infOrmat.iQD. On
the as well as lof the Cln
- receiving telephone calls from an attorney at the Department of
Justice making inquiry as to the FBI and/or IRS' connection if
any with Hamilton Taft.
On February 13, 1991, during the interview __
conducted by the writer, he was again questioned as to the reason
for making calls to the aforementioned conaressional offices. He
stated that he was concerned about I
Ifollowing his resignation from Hamilton
It should be noted that I l
during this interview on February 13, 1991 re-iterated that fact.-
thatl I
1 I He was J----
again reminded of potential civil liability problems that might
gn?ue from the publicatiQD Qf the of the FBI
with to-Jiamilton
On Wednesday, March 6 1991, the writer received
telephone call from SAJ ; JIRS CID who advised that he
had been called by a M-. RALPH :IN
W
, an investigative reporter
for the Wall street Journal here in San Francisco. The purpose
of KING's call to SWAIN was to confirm that the IRS was
regarding Hamilton Taft. On the
morning of March 6, 1991, the writer reviewed message slips that
had arrived on Tuesday, March 5, 1991, the writer having been on
sick leave that day and one of, them was from RALPH KING of the
Wall street Journal. The writer did not return KING's phone
call, however, in to a page, for a telephone calIon
the afternoon call of 1991, the writer became connected
to Mr. KING of the Wall street,Journal. The usual inquiries were
made and the usual response, is we can neither confirm
and/or deny the existence of any investigation was provided to
Mr. KING who seemed perturbed y thi
2
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196A-SF-93255
PKM/sgc
civil !iability which attach to the revelation to the
investigation into certain alleged criminal activities on tne
part of Hamilton Taft. '
Nonetheless, on February ]Ll, I saw fit to
congress persons NANCY PELOSI and BARBARA BOXER.
on resswoman PELOSI/s office to whom
spoke ave arne of an investi ative
consider CQDtactjng.. with infdrmat-ion. Qn Fepruar}!'_12.';
the as wall as lof the eIn
receiving telephone calls from an attorney at the Department of
Justice making jnquiry as to the FBI and/or IRS' connection if
On February 13, 1991, during the interview ________ _
for making calls to the aforementioned oonaressional offices. He
It should be noted that I I
during this interview on February 13, 1991 re-iterated that fact
that! !
1 I He was J--'
again reminded of potential civil liability problems tnat might
n?ue from the publicatigo Qf the of the FBI
with
On Wednesday, March 6 1991, the writer received a
had been called by a M-. RALPH an investigative reporter
to Mr. KING of the Wall street Journal. The usual inquiries were
Mr. KING who seemed perturped y
2
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196A-SF-93255
PKM/sgc
civil !iability which attach to the revelation to the
investigation into certain alleged criminal activities on tne
part of Hamilton Taft. '
Nonetheless, on February ]Ll, I saw fit to
congress persons NANCY PELOSI and BARBARA BOXER.
on resswoman PELOSI/s office to whom
spoke ave arne of an investi ative
consider CQDtactjng.. with infdrmat-ion. Qn Fepruar}!'_12.';
the as wall as lof the eIn
receiving telephone calls from an attorney at the Department of
Justice making jnquiry as to the FBI and/or IRS' connection if
On February 13, 1991, during the interview ________ _
for making calls to the aforementioned oonaressional offices. He
It should be noted that I I
during this interview on February 13, 1991 re-iterated that fact
that! !
1 I He was J--'
again reminded of potential civil liability problems tnat might
n?ue from the publicatigo Qf the of the FBI
with
On Wednesday, March 6 1991, the writer received a
had been called by a M-. RALPH an investigative reporter
to Mr. KING of the Wall street Journal. The usual inquiries were
Mr. KING who seemed perturped y
2
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196A-SF-93255
PKMjsgc
On March 6, 1991,1 r head of corporate
security of Sun Micro Systems Inc. at 2550 Garcia Ave., Mountain
View, California 94043, telephone number (415) 336-0496 was
called by the writer in response to call that he had made to our
office on March 5, 1991.
that his office had
been contacted by was
accompanied by an attorneJ one (ph) who advised that
the purpose ofl . _contac lcro Systems was to
advise Sun Micro Systems that it had been the victim of a fraud
perpetrated by Hamilton Taft' on Sun -.Micro Systems and numerous
other corporate clients of Hamilton Taft. I
the writer that he would fax certain documents up to San
Francisco at the writer's 5uggestiqn. These documents included a
copy of the service agreement thal: exists Sun .Mic1;"o .
Systems and Hamil ton Taft dated (October 1, __.1987 as well as copies
of certain Federal tax forms whicn had been executed by employees
of Hamilton Taft Company. lalso advised the writer
that I rad of his own volition convened a meeting of _ "
several of the corporate representatives who he had contacted _'J_'- .. '/ .Jr
presumably in the first week of March telling these corporations
who are current and/or former clients of Hamilton Taft, that they
had in fact been ,defrauded by Hamilton Taft. Sun Micro-Systems
reluctantly agreed to "host" this meeting which was to take place .I"'"
during the afternoon of March 8, 1991 at Sun Micro System's ';
offices in Mountain View. ,i' " '
.' , ..
nf
/, :':' ;
Of the mornin: of March 7, H91, I I,throtgh'
his associatel l, an investigator for the
of un Micro Systems, facsimiled oj
documents to the writer. The most salient point of
documents was a letter to Sun Micro Systems dated February 13, "', ,'.' '
1991 from the ,.IRS in-- Fresno. The letter refers to a particular ,/' ;) >')'
tax identification number utilized by' Sun Micro Systems and .
references a tax period ending september 30 I 1990.'- The letter
}
goes on to thank tax payer (Sun Micro Systems) for its reply t ';
dated January 25, 1991 and its payment of $260,784.25 in penaltyJ;'.....
fees and for its late deposit of ($5,215, The -
signifiri:lD:e Of ::mmunication is that Sun Micro Systems .,' ..
throughLJhas represented, as of March 7, 1991, that
it did sen t e appropriate money that is $5,215,684.86
to Hamilton Taft via a wire transfer in order to pay employment
tax obligations do and owing the IRS for the tax period ended
September 30
r
1990. Per an agreement of which the writer is in
receipt, that is, the service agreement between Hamilton Taft and
Sun Micro System?, Hamilton Taft is responsible for the
payment It is an inference drawn by Sun
3
196A-SF-93255
PKM/sgc
View, California 94043
1
telephone number (415) 336-0496 was
office had
accompanied by an attorney one (ph) who advised that
the purpose of I . _ contac J.cro Systems was to
advise Sun Micro Systems that it had been tBe victim of a fraud
perpetrated by Hamilton Taft' on Sun .. Micro systems and numerous
other corporate clients of Hamilton Taft. I 'advised
Francisco at the writer's These documents'included a .
copy of the service agreement that( exists Sun . ..
systems and Hamil ton Taft dated (October 1, .. 1981 as well as copies
of Hamilton Taft Company. I I also advised the writer
that I pad of his own volition convened a meeting of .. 0,
several of the corporate representatives who he had contacted
had in fact been defrauded by Hamilton Taft. Sun Micro-Systems
reluctantly agreed to "host" this meeting which was to take place .ft"'
during the afternoon of March 8, 1991 at Sun Micro System's "
offices in Mountain View. ,1' "
,,[)if/,
Of the mornin: of March 7, 1991, I Ithrobgh .....
his associatel I, an investigator for the COJ;.porate
Security-. Department of un Micro Systems, facsirniled 16/pages 0,
documents to the writer. The most salient point of these
documents was a letter to Sun Micro systems dated February 13,
1991 from the ,.IRS in-- Fresno.. The let}:er refers to a particular
tax identification number utilized by Sun Micro Systems and .
references a tax period ending september 30, 1990.; The letter
}
goes on to thank tax payer (Sun Micro Systems) for its reply t
if
'
dated January 25, 1991 and its payment of $260,784.25 in penaltyJ,
fees and for its late deposit of ($5,215, 684.86). The "
Signifirn:e of is that Sun Micro Systems ... '
through__has represented, as of March 7, 1991, that
it did 1nact sen t e appropriate money that is $5,215,684.86
September 30
r
Sun Micro Hamilton Taft is responsible for the
3
196A-SF-93255
PKM/sgc
View, California 94043
1
telephone number (415) 336-0496 was
office had
accompanied by an attorney one (ph) who advised that
the purpose of I . _ contac J.cro Systems was to
advise Sun Micro Systems that it had been tBe victim of a fraud
perpetrated by Hamilton Taft' on Sun .. Micro systems and numerous
other corporate clients of Hamilton Taft. I 'advised
Francisco at the writer's These documents'included a .
copy of the service agreement that( exists Sun . ..
systems and Hamil ton Taft dated (October 1, .. 1981 as well as copies
of Hamilton Taft Company. I I also advised the writer
that I pad of his own volition convened a meeting of .. 0,
several of the corporate representatives who he had contacted
had in fact been defrauded by Hamilton Taft. Sun Micro-Systems
reluctantly agreed to "host" this meeting which was to take place .ft"'
during the afternoon of March 8, 1991 at Sun Micro System's "
offices in Mountain View. ,1' "
,,[)if/,
Of the mornin: of March 7, 1991, I Ithrobgh .....
his associatel I, an investigator for the COJ;.porate
Security-. Department of un Micro Systems, facsirniled 16/pages 0,
documents to the writer. The most salient point of these
documents was a letter to Sun Micro systems dated February 13,
1991 from the ,.IRS in-- Fresno.. The let}:er refers to a particular
tax identification number utilized by Sun Micro Systems and .
references a tax period ending september 30, 1990.; The letter
}
goes on to thank tax payer (Sun Micro Systems) for its reply t
if
'
dated January 25, 1991 and its payment of $260,784.25 in penaltyJ,
fees and for its late deposit of ($5,215, 684.86). The "
Signifirn:e of is that Sun Micro Systems ... '
through__has represented, as of March 7, 1991, that
it did 1nact sen t e appropriate money that is $5,215,684.86
September 30
r
Sun Micro Hamilton Taft is responsible for the
3
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196A-SF-93255
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Micro Systems personnel that this document tends to corroborate
what I I was alleging in his representations to the
government. '
On the afternoon of March 7, 1991, AUSA YAMAGUCHI was
personally visited by the writer and a brief update was provided
to him of events that have taken place. On March 8, 1991, copies
of the aforementioned facsimiles were provided to AUSA YAMAGUCHI
fore his review. On March 8, 1991, Mr. YAMAGUCHI suggested to
the writer ,that efforts continue to accumulate enough probable
cause to cause the issuance of a search warrant for the offices
at Hamilton Taft at the earliest possible date.
The following corporations have been contacted by ]
I land/or his attorney and that they' have been the
victims of fraud perpetrated on them by Hamilton Taft. These
corporations are Costal Savings Bank, Sun Micro Systems, American
West Airlines, and one or two chemical companies located at the
east coast. In addition, I I advised writer that he
has been contacted by of Lloyds of London
Insurance company with respect to Hamilton Taft. It
, __ "_9! .. J)}.e
__ systems, ,on the .afternoon
at-March 8, 1991.
San Francisco at San Francisco, California:
Investigation is continuing.
4*
196A-SF-93255
PKM/sgc
government.
the writer -that efforts continue to accumulate enough probable
b7C at Hamilton Taft at the earliest possible date.
corporations are costal Savings Bank, Sun Micro Systems, American
Insurance company with respect to Hamilton Taft. It is "'y,nkno..wIl
, ___ "_9! .. J)},e
__ Systems ,on the afternoon
8, 1991.
4*
196A-SF-93255
PKM/sgc
government.
the writer -that efforts continue to accumulate enough probable
b7C at Hamilton Taft at the earliest possible date.
corporations are costal Savings Bank, Sun Micro Systems, American
Insurance company with respect to Hamilton Taft. It is "'y,nkno..wIl
, ___ "_9! .. J)},e
__ Systems ,on the afternoon
8, 1991.
4*

SUMMARY OF CREDITORS CLAIMS
CONSOUDATED ESTATE
Proof of
Scheduled Oalm
Amounts
Hamilton Taft Customer Claims $ 91 ,925,180.61 $ 90,790,426.62
Hamillon1aft Claims 82,975.21 198,393.09
Hamilton 'Tafl Trade Claims 1,346,135.60
Other Hamlllon TsH Claims 0.00 112.298.770.21
Remington Claims 505.932.59
Dresdner Claims 10007.25
TOTAL $ 94,419.148.42 $ 205 .255,006.4Q
TOTAL CLAIMS EXCLUDiNG SOLODOFF
Dresciner Petroleum Claims
/:OlIlOhtdoc
DRESDNER PETAOIL,.EUM
Scheduled
Amounts
371.376.03
C-1
Proor 01
Claim
651,060.93
Maximum
Potential
S 95,1
204,873.85
1,535,6Hl.13
\ 12,298, 770.2.1
970,665.90
$ 2'0,181.093.92
S 100,1
Maximum
Potential
731.286.55

NOTES TO LISTS OF CLAIMS
1. The list of claims includes all claims and
amendments filed on or before October 18, 1991. The listing of a
claim or a m e n d ~ e n t filed after the bar date of september 30, 1991
does not constitute a waiver of the trustee's right to object to
the claim on the ground that it was untimely filed.
2. NScheduled Amount means the amount stated to be
owing to the creditor in the Schedules of hssets and Liabilities
filed by the respective Debtors. The nproof of Claim Amount" is
the amount claimed to be owing by the creditor in a proof of claim
filed __ with the Court. If no' proof of cla im was filed, the
"Maximum Potential Cl aim" is the Scheduled Amount. If a proof of
claim was filed, the hMaximum Potential claim" is the "Proof of
Claim Amount", regardless of whether the proof of claim amDunt is
higher or lower than the Scheduled amount. The llMaximum potential
Claim- does not constitute any admission by the trustee that the
claim is allowable in the amount stated, and all objections are
reserved.
3. All duplicate claims have been eliminated for the
purpose of the list. If a proof of claim was filed against more
than one Debtor, it appears only once.
4. The list of claims does not include any
intercompany claims of any Debtor against another Debtor, or of
any non-Debtor affiliate against a Debtor.
classification as to priority.
WTS1U,DOt
C-2

NOTES TO LISTS OF CLAIMS
1. The list of claims includes all claims and
amendments filed on or before October 18, 1991. The listing of a
claim or a m e n d ~ e n t filed after the bar date of september 30, 1991
does not constitute a waiver of the trustee's right to object to
the claim on the ground that it was untimely filed.
2. NScheduled Amount means the amount stated to be
owing to the creditor in the Schedules of hssets and Liabilities
filed by the respective Debtors. The nproof of Claim Amount" is
the amount claimed to be owing by the creditor in a proof of claim
filed __ with the Court. If no' proof of cla im was filed, the
"Maximum Potential Cl aim" is the Scheduled Amount. If a proof of
claim was filed, the hMaximum Potential claim" is the "Proof of
Claim Amount", regardless of whether the proof of claim amount is
higher or lower than the Scheduled amount. The llMaximum potential
Claim- does not constitute any admission by the trustee that the
claim is allowable in the amount stated, and all objections are
reserved.
3. All duplicate claims have been eliminated for the
purpose of the list. If a proof of claim was filed against more
than one Debtor, it appears only once.
intercompany claims of any Debtor against another Debtor, or of
any non-Debtor affiliate against a Debtor.
classification as to priority.
WTS1U,DOt
C-2

CREDITOR
ACTION CO., INC.
ADVo-Sl{STEM. INC.
AIR C1I.BLE, INC.
AI..I...E1iI FOAM CORPORATION
AMERICA WEST AIRLINES, INC.
AMERICAN MleROSYSTEHS, INC.
AMERICAN NUUM COFlPOR}l.TION
AMERICAN RESIDBNTlAL
AMERICAN RESIDENTIAL MORTGAGE
ANAL rTI 'KEM
ARRAY CORP.
COIN AHUSEHENT co
ATLAS HOTELS INC.
BI\LCO.!< PAYROLL COH.PANY
BARCLAY HOLLANDER CORP
BEEBE ORCHARD CO.
CResS & SLUE SHIELD OF TX
BLUE GOOSE GROWERS INC.
BLUE GOOSE INC.
BOARD OF TROSTEES, STANFORD
BOSTON & MAINE
BOSTON & MAINE CORPORTATION
aOYLE MIDWAY INC,
BOYLE-MIDWAY
BRINKMANN INSTRUMENTS
BRtlNSWICK SEAT COMPANY
BUD ANTLE, INC.
BUD ANTLE, I Ne
BW I rp INTERNATIONAL, INC.
C .. R CLOTHIERS
CALIFORNIA PACIFIC KED. CTR.
CARTEX CORPORATION
c)l.STLE &. coox.s
CASTLE & COOKE PROPERTIES
CASTLE & COOKE RESIDENTIAL
COOKE. INC.
CASTLE COOKE RETAIL. INC.
CITY OF PIEDMONT
CITY OF PINOLE
CITY 01:1' PINOLE
CLA.'ts CC:RPQAATION
CLEVITE aRIDGESTONE CO.
COAST FEDERAL BANK
caVIA PARTNERSHIP
C'JANOKEH
CORPORATION
DEL MANUFACTURING COMPANY
OELAWARE SEAT COMPANY
DELHI GAS PIPELINE CORPORATIOII
DIAMOND WALNUT GROWERS
DOLE FOOD COMPANY, INC.
DONNELLEY RECEIVABLE lNC.
DUBLIN/SAN RAMON SRVCS DSTRCT
ELECTRIC POWER RESEARCH INST.
ENSR CORPOAATION DELAWARE
01/19/92
COHBOLIDIl'mD E6n'I'E
"iIAHILTOH nrr CUS1"OWlm CI..JUNS
$92,092.84
SI,

$3,:226.23
$834,725.41
5267,401.62
$32,198.85
$849.&8
$156,040.21
$31,194.29 .
$35,106.01
$8,407.12
SH>7,024.91
512,211.47
$3,617.50
S14,489.1B
$1,156,576.16
5214,931.33
$6,285.72
$845.20
$5,572.54
$4,314.91
$7,61!.24
$'72,034.16
$1,096.8S
5229,477.87
$890,046.01
$310,691.23
$324,523.13
Sl,106,353.90
S24,663.04
$1,899.86
$28,I14B.13
S74,se8.42
$223,640.91
$21,522.14
53,518.58
$2,843.17
$164,378,45
$2,733.94
$1,793,303.81
$49,063.07
$146,680.78.
522,552.14
$14, gO!'>. 38
547.209.72
$.5,996.84
51,592,062.34
SlOB.26
$45,012.29
S117, 9SD. 60
5nO,506.19
PROOF OF CLAIM Ital.
AMOUNT
,654.31
51. ,288.32
$268,237.64
$32,198.85
5175,862.00
$31,194.29
saO,2HL 74
$166,601.00

$296,991. 48
5386,932.78
$1,102,264.05
$1,211.71
$3,232.54
$164,332.89
57,476.29
$1, ]92, 401. En
$49,063.07
s9n,077.10
$22,851.14
S50, 209.72
$',421.34
53,142,906.64
$45,352.57
$138,982.22
$110.506.56
"
MAXIMUM
POTENTIAL
CLAIM
$96,654.31
$1,'796,288.32.
$24,966.22
53.,;226.23
S834, 7.25.41
$:268,237.64
$32,798.85
$849.69
S l.7S . 862.00
$31,l84.29
$35,106.01
S10,218.74
$H'6,607.00
$12,211.41
617.50
$14,489.18
,623.47
931.33
$6,285.72
S296,991.46
$845.20
$5.512.54_
$4,314.!H
S7,618.24
$72,034.16
$1,096.88
$229,477.87
S890, 046. 0')
$18&,932. IS
5324,523.13
Sl,l02,204.0S
$24,663.04
51,BS9. B6
$28,648.13
S74,59B.42-
$223,640.91
$27,522.14-
$3,57.9.58
$1,221. 71
$3,232.54
$164,332.89
52,733.94
5'7,476.29
51,792,401.B1
549,063.07
$971,077 10
522, as!. 14
S14,905.3B
$50,209.72
57 ,421. j4
$3,142,906.64
$108.26
$45,352.57
$138,982.22
$110,506.56

CREDITOR
ACTION CO., INC.
ADVo-Sl{STEM. INC.
AIR C1I.BLE, INC.
AI..I...E1iI FOAM CORPORATION
AMERICA WEST AIRLINES, INC.
AMERICAN MleROSYSTEHS, INC.
AMERICAN NUUM COFlPOR}l.TION
AMERICAN RESIDBNTlAL
AMERICAN RESIDENTIAL MORTGAGE
ANAL rTI 'KEM
ARRAY CORP.
COIN AHUSEHENT co
ATLAS HOTELS INC.
BI\LCO.!< PAYROLL COH.PANY
BARCLAY HOLLANDER CORP
BEEBE ORCHARD CO.
CResS & SLUE SHIELD OF TX
BLUE GOOSE GROWERS INC.
BLUE GOOSE INC.
BOARD OF TROSTEES, STANFORD
BOSTON & MAINE
BOSTON & MAINE CORPORTATION
aOYLE MIDWAY INC,
BOYLE-MIDWAY
BRINKMANN INSTRUMENTS
BRtlNSWICK SEAT COMPANY
BUD ANTLE, INC.
BUD ANTLE, I Ne
BW I rp INTERNATIONAL, INC.
C .. R CLOTHIERS
CALIFORNIA PACIFIC KED. CTR.
CARTEX CORPORATION
c)l.STLE &. coox.s
CASTLE & COOKE PROPERTIES
CASTLE & COOKE RESIDENTIAL
COOKE. INC.
CASTLE COOKE RETAIL. INC.
CITY OF PIEDMONT
CITY OF PINOLE
CITY 01:1' PINOLE
CLA.'ts CC:RPQAATION
CLEVITE aRIDGESTONE CO.
COAST FEDERAL BANK
caVIA PARTNERSHIP
C'JANOKEH
CORPORATION
DEL MANUFACTURING COMPANY
OELAWARE SEAT COMPANY
DELHI GAS PIPELINE CORPORATIOII
DIAMOND WALNUT GROWERS
DOLE FOOD COMPANY, INC.
DONNELLEY RECEIVABLE lNC.
DUBLIN/SAN RAMON SRVCS DSTRCT
ELECTRIC POWER RESEARCH INST.
ENSR CORPOAATION DELAWARE
01/19/92

COHBOLIDIl'mD E6n'I'E
"iIAHILTOH nrr CUS1"OWlm CI..JUNS
$92,092.84
SI,

$3,:226.23
$834,725.41
5267,401.62
$32,198.85
$849.&8
$156,040.21
$31,194.29 .
$35,106.01
$8,407.12
SH>7,024.91
512,211.47
$3,617.50
S14,489.1B
$1,156,576.16
5214,931.33
$6,285.72
$845.20
$5,572.54
$4,314.91
$7,61!.24
$'72,034.16
$1,096.8S
5229,477.87
$890,046.01
$310,691.23
$324,523.13
Sl,106,353.90
S24,663.04
$1,899.86
$28,I14B.13
S74,se8.42
$223,640.91
$21,522.14
53,518.58
$2,843.17
$164,378,45
$2,733.94
$1,793,303.81
$49,063.07
$146,680.78.
522,552.14
$14, gO!'>. 38
547.209.72
$.5,996.84
51,592,062.34
SlOB.26
$45,012.29
S117, 9SD. 60
5nO,506.19
PROOF OF CLAIM Ital.
AMOUNT
,654.31
51. ,288.32
$268,237.64
$32,198.85
5175,862.00
$31,194.29
saO,2HL 74
$166,601.00

$296,991. 48
5386,932.78
$1,102,264.05
$1,211.71
$3,232.54
$164,332.89
57,476.29
$1, ]92, 401. En
$49,063.07
s9n,077.10
$22,851.14
S50, 209.72
$',421.34
53,142,906.64
$45,352.57
$138,982.22
$110.506.56
"
MAXIMUM
POTENTIAL
CLAIM
$96,654.31
$1,'796,288.32.
$24,966.22
53.,;226.23
S834, 7.25.41
$:268,237.64
$32,798.85
$849.69
S l.7S . 862.00
$31,l84.29
$35,106.01
S10,218.74
$H'6,607.00
$12,211.41
617.50
$14,489.18
,623.47
931.33
$6,285.72
S296,991.46
$845.20
$5.512.54_
$4,314.!H
S7,618.24
$72,034.16
$1,096.88
$229,477.87
S890, 046. 0')
$18&,932. IS
5324,523.13
Sl,l02,204.0S
$24,663.04
51,BS9. B6
$28,648.13
S74,59B.42-
$223,640.91
$27,522.14-
$3,57.9.58
$1,221. 71
$3,232.54
$164,332.89
52,733.94
5'7,476.29
51,792,401.B1
549,063.07
$971,077 10
522, as!. 14
S14,905.3B
$50,209.72
57 ,421. j4
$3,142,906.64
$108.26
$45,352.57
$138,982.22
$110,506.56


CR.EIH'!OR
FEDERAL EXPRESS CORPORATION ..s..:J,_"-',
FIRST CAPITAL LIFE INSRNCE CO.
GENSTU STOW PRODUCTS COMPAID;:
GLENDALE AOVEN'l'I Sf MED. CTR.
GUCKENHElMER ENTERPRrSES, INC.
GUCKENHilKER OF TEXAS, INC.
H. 1). HUDSON )oo!MU1"AC'TlJRING CO.
BBO & COMPANY OF GEORGIA
REJl.LTRQUEST LTD.
J.E.G. rooDS, INC.
JBB SPIRITS INC.
JIM BEAM BRANDS CO.
KAY TEA ROSE, INC.
KEMPER SECUR!TIES GROUP
LANAI COMPANY, INC.
LANAI COMPANY. INC.
LONG BEACH CONTAINER TERMINAL
ENTERTAINMENT CO.
LUCASF'lLH, LTD.
KABON, NUGENT & COMP AllY
HASON, NUGENT & OOKPNAY
HAINE CENTRAL CO.
MCCUTCHEN,DOYLE,BROWN& ENERSEN
Me! TELgCOMUNrCATIONS CORP.
METROHEDr,.. COKPANY
HILLS COLLEGE
MONROE FOR
INC
HT. DIABLO HOSPITAL
NATIONAL CORP.
PAYMENT SYSTEMS
NEe INC.
NEIMAN-MARCOS GROUP, INC.
NORTHLAND PLASTICS
NORWEST PUBLISHING CO.
NUXEM AOQOI5ITION CORPORAT10N
N1.7KEH TECHNOLOGIES OORPORATION
OAIro TlU\.NSPORT CO., LTD.
OAKLAND ATHLETrCS co.
CBS FINANctAL SERVICES
OCEANIC CONSTRUCTION COMPAm.'
PAYLESS 5BOE SOURCE
UNIVERSITY
R.IL nONNELLEY "" SONS COMPANY
RECLU'l'T , COLEMAN INC.
RECKITT & COLEMAN INC.
RICHMOND WHOLESALE CO.
Rl'ITERSIDE SE1I.T COMPANY J INC.
MO GENERAL INC.
RM MARKETING INC.
INSTITUTE OF TECH.
ROOT-LOWELL MANUFAC7URING CO.
ROSS STORES, INC.
S , S CREDIT COKPANIES, INC.
S.D. WARREN CO.
02/19/92
COHSOLII.U.'1'ED BInATE
B.AKIL'l'ON v..rr CUS':OOKl!:R ClJ\IHS
SCHEDULED
AMOUNT
530,432,796.91
$1:27,193.73
551B,023.:.15
$625,353.80
$95.403.19
S9,072.69
$100,556.49
$420,317.BO
$:203,803.91
51,027.79
Si.l9 4.46
S157,962.79
516,422-.46
51,078.13
5114,888.19
p,SSO.91
S9.899.80
$218,065.99
$21,432.34
$954,798.68
S2.00D.OO
$411.01
$99.993.14
$102.95
$60,6B5.10
$2,163.98
S660,777.55
Sl46,OJ3.47
$6B,911.30
S14,454.42
5285,282.60
52,665,121.26
$7,234.95
$45,237.26
$79.62
$24,700.27
$2,209.85
$90,365.04
$4.779.92
S38,607.53
5271,349.31
S581,564.39
$4,243,286.64
$1,8B8,208.34
S246,309.1)
S4.3,424.27
$16,828.57
$4,420.63
$5,231.14
Sl05,673.S7
$35,745.10
$701,843.46
5158,'329.53
53,206,607.68
C-4
PROOF OF CLAIM
AMOUNT
$28,319,089.05
$139,054.00
$603,765.00
$625,109.60
$98,091.81
59,474.00
$101,862.64
$421,924.80
S230, 626. Ol
S894.46
S157,862.19
$16,814.'98
$1,018.73
$9,186.79

$22,175.B4
$985,407.53
$100,959.51
S6.l ,317.00
$11,508.89
$650,177. SS
SH.a,724.1>0
$84, .l4 7. B2
S33D,S9l.G9
S553,250.70
p,690.1B
$24,100.27
590,499.42
Sl,052,856.30
$640,704.98
$5,143,366.45
$2,4?l,860."
$45,222.87
$4,643.63
$36,340.00
5101,843.46
S3,206,607.68
HllXIMUM
POTENTIAL
CLAIK
S28,.319,089.DS
5139,054.00
$603,165.00
$625,109.80
S9B,091.Bl
S9,474.00
$101,862.64
$4.21,924.BO
$230,626.01
Sl,027.79
$B94.46
S 15 j , B62 .19
S16,B14.96
$1,078.03
$114,B88.19
$3,550.91
$9,786.79
$2.31,851.32
S12,17S.B4
59B5,407.53
$2,000.00
S411.01
$100,959.51
$102.95
$61,317.00
511,508,89

5160,724.60
$80\1,141.12
514,454.4'
5330,591. 69
5553,:250.70
57,690.1B
$45,237.26
.$19.62
$24,100.21
52,209.85
590,499.42
$4,179.92
$38,607.53
Sl,052,B56.1C
$6.40,704.98
$5,143 .366.5&
$2.471,850.77
S246,309,17
$45,222.8")
$16,828.51
S4,643.63
$5,231.14
$105,673.57
$36,340.00
S"1 0 1 84.3 . .4 6
$158,929.53
$3,206,607.68

CR.EIH'!OR
FEDERAL EXPRESS CORPORATION ..s..:J,_"-',
FIRST CAPITAL LIFE INSRNCE CO.
GENSTU STOW PRODUCTS COMPAID;:
GLENDALE AOVEN'l'I Sf MED. CTR.
GUCKENHElMER ENTERPRrSES, INC.
GUCKENHilKER OF TEXAS, INC.
H. 1). HUDSON )oo!MU1"AC'TlJRING CO.
BBO & COMPANY OF GEORGIA
REJl.LTRQUEST LTD.
J.E.G. rooDS, INC.
JBB SPIRITS INC.
JIM BEAM BRANDS CO.
KAY TEA ROSE, INC.
KEMPER SECUR!TIES GROUP
LANAI COMPANY, INC.
LANAI COMPANY. INC.
LONG BEACH CONTAINER TERMINAL
ENTERTAINMENT CO.
LUCASF'lLH, LTD.
KABON, NUGENT & COMP AllY
HASON, NUGENT & OOKPNAY
HAINE CENTRAL CO.
MCCUTCHEN,DOYLE,BROWN& ENERSEN
Me! TELgCOMUNrCATIONS CORP.
METROHEDr,.. COKPANY
MILLS COLLEGE
MONROE FOR
INC
HT. DIABLO HOSPITAL
NATIONAL CORP.
PAYMENT SYSTEMS
NEe INC.
NEIMAN-MARCOS GROUP, INC.
NORTHLAND PLASTICS
NORWEST PUBLISHING CO.
NUXEM AOQOI5ITION CORPORAT10N
N1.7KEM TECHNOLOGIES OORPORATION
OAIro TlU\.NSPORT CO., LTD.
OAKLAND ATHLETrCS co.
CBS FINANctAL SERVICES
OCEANIC CONSTRUCTION COMPAm.'
PAYLESS 5BOE SOURCE
UNIVERSITY
R.IL nONNELLEY "" SONS COMPANY
RECLU'l'T , COLEMAN INC.
RECKITT & COLEMAN INC.
RICHMOND WHOLESALE CO.
Rl'ITERSIDE SE1I.T COMPANY J INC.
MO GENERAL INC.
RM MARKETING INC.
INSTITUTE OF TECH.
ROOT-LOWELL MANUFAC7URING CO.
ROSS STORES, INC.
S , S CREDIT COKPANIES, INC.
S.D. WARREN CO.
02/19/92
COHSOLII.U.'1'ED BInATE
B.AKIL'l'ON 'UFT CUS':OOKl!:R ClJ\IHS
SCHEDULED
AMOUNT
530,432,796.91
$1:27,193.73
551B,023.:.15
$625,353.80
$95,403.19
S9,072.69
$100,556.49
$420,317.BO
$:203,803.91
51,027.79
Si.l9 4.46
S157,962.79
516,422-.46
51,078.13
5114, B88 .19
p,SSO.91
S9,899.80
$218,065.99
$21,432.34
$954,798.68
S2,OOD.OO
$411.01
$99.993.14
$102.95
$60,6B5.10
S2,163.98
S660,777.55
Sl46,OJ3.47
$6B,911.30
S14,454.42
5285,282.60
52,665,121.26
$7,234.95
$45,237.26
$79.62
$24,700.27
$2,209.85
$90,365.04
$4.779.92
S38,607.53
5271,349.31
S581,564.39
$4,243,286.64
$1,8B8,208.34
S246,309.1)
S4.3,424.27
$16,828.57
$4,420.63
$5,231.14
Sl05,673.S7
$35,745.10
$701,843.46
5158,'329.53
53,206,607.68
C-4
PROOF OF CLAIM
AMOUNT
$28,319,089.05
$139,054.00
$603,765.00
$625,109.60
$98,091.81
59,474.00
$101,862.64
$421,924.80
S230, 626. Ol
S894.46
S157,862.19
$16,814.'98
$1,078.73
$9,186.79

$22,175.B4
$985,407.53
$100,959.51
S6l ,317.00
Sl1,508.89
$650,177. SS
SH.a,724.1>0
$84, .l4 7. B2
S33D,S9l.G9
S553,250.70
p,690.1B
$24,100.27
590,499.42
Sl,052,856.30
$640,704.98
$5,143,366.45
$2,4?l,860."
$45,222.87
$4,643.63
$36,340.00
5101,843.46
S3,206,607.68
HllXIMUM
POTENTIAL
CLAIK
S28,.319,089.DS
5139,054.00
$603,165.00
$625,109.80
S9B,091.Bl
S9,474.00
$101,862.64
$4.21,924.BO
$230,626.01
Sl,027.79
$B94.46
S 15 j , B62 .19
S16,B14.96
$1,078.03
$114,B88.19
$3,550.91
S9,7B6.79
$2.31,851.32
S12,17S.B4
59B5,407.53
$2,000.00
S411.01
$100,959.51
$102.95
$61,317.00
Sl1, 50a, 89

5160,724.60
$80\1,141.12
514,454.4'
5330,591. 69
$553,:250.70
57,690.1B
$45,237.26
.$19.62
$24,100.21
52,209.85
590,499.42
$4,179.92
$38,607.53
Sl,052,B56.1C
$6.40,704.98
$5,143 .366.5&
$2,471,850.7"/
S246,309,17
$45,222.81
$16,828.51
S4,643.63
$5,231.14
$105,673.57
$36,340.00
S"1 0 1 84.3 . .4 6
$158,929.53
$3,206,607.68

CREDITOR
NATIONAL LABORATORIES
SCM CHEMICALS, INC.
SCM METAL PRODUCTS, INC.
SCOTT CONTAINER PRODUCTS GROUP
SCOTT PAPER COMPANY
SCOTT PAPU COloU>ANY
SCO'l"r POLY.Ml!:RS
SCOTT WORLDWIDE, INC.
SIGNET ARMORLITE, INC.
SIGNE'ICS COMPANY
SINAI OF DETROIT
SINAI MANAGEMENT SERVICES co.
SI'l'KJ\ CORPORATION
SONY AVIATION SERVICES
SONY CAPITAL CORP,
SONY CHEMICAL CORP. OF
SONY CLASS 1 CAL
SONY CORPORATION OF AMERICA
SONY USA INCORPORATED
SONY USA, INC.
SOS CALIFORNIA DIVISION
50S ENVIRONMENTAL TCHNLG, INC.
SOSTAA
50UTRLAND CORP. EMPLOYEES TRU.
'SPRINGFIELD , PRDCTS CO.
SPRINGFIELD TERMINAL RAIL. co.
SPRINGFIELD TERMINAL RAIL. CO.
STANFORD UNIVERSITY HOSPITAL
STATE OF ARKANSAS
SUN MICROSYSTEMS FEDERAL, INC.
SUN MlcR05YSTEMS or
SUN MICROSYSTEKS, INC.
SUN MICROSYTEMS INC.
SUN-MAID GROWERS OF CALlFOiUHA
SUNBELT BEVERAGE CORP.
SUNSWEET GROWERS, INC.
BYaRON TRANSITION CORPORATION
T.D.S. FOODS, INC.
TANDEM COMPUTERS, INC.
TANDEM TELECOMMUNICATIONS SYST
TEXAS OIL " GAS CORPORATION
'I'm: ALL AKERICAN GOIlRMET CO.
THE CHRONICLE PUBLISHING CO.
THE COOPER COMPANIES,
THE 1WB COMPANY
THE KENDALL OOMPANY
THE 'KENDALL OOloU>ANY OF NEVADJ\
THE Pur...t..HAN COMPANY
THE STATE BAR OF CALIFORNIA
THE VINTAGE CLUB
THE'R.K1I.L1tEM
TRANS-ADVD SYSTEMS, INC.
UNGERHANN-BASS, INC.
UNITED SAVINGS BANK
VALLEY FIG GROWERS
02/19/92

ESTATE
HAMILTON :rAPT ctlSTOHER l:LAINS
SCHEbULEO
AMOUNT
$'206,809.05
549,347.49
$S.3,553.33
$7,086,901.47
$44,471.87
$6,294.42
SEl30.33
$50,.105.99
56,212,016.45
51,377,666.01
S17,195.19
S12,D41.S0
$l,539.67
S982.72
$967.24
S420.24
S414,189.1S
$5,978.17
Sl,590.29
-S675.S3
53,836.03
5178,993.18
$351,.36(1.47
$51,705.83
5188,420.35
53,512,722.32
:)23,660.37
53,085.14
$801,887.97
$528.51
p,B}4.2S
$235,422.69
$)3,141.02
S8,671.61
511,306.08
Sl,950,838.1B
$40,708.11
S30,SB1.22
$8.30.74
$1,08a,&32.47
SI8,.316.15
$11,455.66
$1, OHI, 911. 96
5331. 74
$687. 92,{1, 28
$36,787.19
S.20, 32B.O!:'
$S7,303.54
$11,169.40
$1, 844.17
595,71LlS
55,988.90
c-s
PttooP' OF c:LAIH
AMODN'J'
$300,000.00
$207,834.04
$65,785.93
$53,553.33
57.0136,801. 47
$44,471.8,)
S6,294.42
$830.32
56,:a2, OHi. 4S
$1.561,207.10
$17,773."73
$12,588.32
S2,B38.13
$1,572.12
$967.24
$1,010.24
5541,129.92
$10,347.03
$2.366.56
$8,362.82
$6
1
306.52
5178,993.14
$446,261.18
$2961 014.77
$.3,512,722.32
550,011. S6
524,011.79
53,070.86
5191,227_64
$991.44
$9,163.44
5239,938.37
$14,925.70

S12,23S.50
$2,794,142.
$53,299.35
SJJ,974.00
$1,163.471.01
S18,2B9.24
532,566.74
$1,320,460.00
57.36,111.75
523,61.3 S7
$57,303.S4
$1,101,103.57
7S
$7,227.26
KJl"XIMUH
POTENTIAL
CLAIM
S300,OOO.00
$20'.834.04
$65,765.9.3
$53,553.33
$7,086,901.47
SU,4H.Bi
$6,294.42
S830.32
$50,105.99
56,212,016.45
$1,561 , 207.70
$1'},773.73
512,588.32
$2,83B.13
$1,572.72
$9&7.24
24
$'541,129,92
510,347.03
S2,:ibG.S6
$1.590.29
$8,362.82
$6,306.52
S178,993.14
$446,261.19
551,705.83
$296,014.77
p,512,722 .l2
S50,01l.Se.
$24,011 .,e
$3,070.86
$791,22'.64
$991.44
59,163.44
S239,93B.3?
$14,925.'70
S8,80l.44
512,2.35.50
$2, '94,142.85
S40,106.11
$5.3,:299.35
$33,914.00
ilJ 163, 471.01
51B,28':':I.:24
532,566.74
51, 460.00
$331.74
$136,111.75
S36, 787.19
$23,613.51
557,303.54
$11,169.40
51.1Q1,/03.57
596,675.15
$7,227.26
,/ f

CREDITOR
NATIONAL LABORATORIES
SCM CHEMICALS, INC.
SCM METAL PRODUCTS, INC.
SCOTT CONTAINER PRODUCTS GROUP
SCOTT PAPER COMPANY
SCOTT PAPU COloU>ANY
SCO'l"r POLY.Ml!:RS
SCOTT WORLDWIDE, INC.
SIGNET ARMORLITE, INC.
SIGNE'ICS COMPANY
SINAI OF DETROIT
SINAI MANAGEMENT SERVICES co.
SI'l'KJ\ CORPORATION
SONY AVIATION SERVICES
SONY CAPITAL CORP,
SONY CHEMICAL CORP. OF
SONY CLASS 1 CAL
SONY CORPORATION OF AMERICA
SONY USA INCORPORATED
SONY USA, INC.
SOS CALIFORNIA DIVISION
50S ENVIRONMENTAL TCHNLG, INC.
SOSTAA
50UTRLAND CORP. EMPLOYEES TRU.
'SPRINGFIELD , PRDCTS CO.
SPRINGFIELD TERMINAL RAIL. co.
SPRINGFIELD TERMINAL RAIL. CO.
STANFORD UNIVERSITY HOSPITAL
STATE OF ARKANSAS
SUN MICROSYSTEMS FEDERAL, INC.
SUN MlcR05YSTEMS or
SUN MICROSYSTEKS, INC.
SUN MICROSYTEMS INC.
SUN-MAID GROWERS OF CALlFOiUHA
SUNBELT BEVERAGE CORP.
SUNSWEET GROWERS, INC.
BYaRON TRANSITION CORPORATION
T.D.S. FOODS, INC.
TANDEM COMPUTERS, INC.
TANDEM TELECOMMUNICATIONS SYST
TEXAS OIL " GAS CORPORATION
'I'm: ALL AKERICAN GOIlRMET CO.
THE CHRONICLE PUBLISHING CO.
THE COOPER COMPANIES,
THE 1WB COMPANY
THE KENDALL OOMPANY
THE 'KENDALL OOloU>ANY OF NEVADJ\
THE Pur...t..HAN COMPANY
THE STATE BAR OF CALIFORNIA
THE VINTAGE CLUB
THE'R.K1I.L1tEM
TRANS-ADVD SYSTEMS, INC.
UNGERHANN-BASS, INC.
UNITED SAVINGS BANK
VALLEY FIG GROWERS
02/19/92

ESTATE
HAMILTON :rAPT ctlSTOHER l:LAINS
SCHEbULEO
AMOUNT
$'206,809.05
549,347.49
$S.3,553.33
$7,086,901.47
$44,471.87
$6,294.42
SEl30.33
$50,.105.99
56,212,016.45
51,377,666.01
S17,195.19
S12,D41.S0
$l,539.67
S982.72
$967.24
S420.24
S414,189.1S
$5,978.17
Sl,590.29
-S675.S3
53,836.03
5178,993.18
$351,.36(1.47
$51,705.83
5188,420.35
53,512,722.32
:)23,660.37
53,085.14
$801,887.97
$528.51
p,B}4.2S
$235,422.69
$)3,141.02
S8,671.61
511,306.08
Sl,950,838.1B
$40,708.11
S30,SB1.22
$8.30.74
$1,08a,&32.47
SI8,.316.15
$11,455.66
$1, OHI, 911. 96
5331. 74
$687. 92,{1, 28
$36,787.19
S.20, 32B.O!:'
$S7,303.54
$11,169.40
$1, 844.17
595,71LlS
55,988.90
c-s
PttooP' OF c:LAIH
AMODN'J'
$300,000.00
$207,834.04
$65,785.93
$53,553.33
57.0136,801. 47
$44,471.8,)
S6,294.42
$830.32
56,:a2, OHi. 4S
$1.561,207.10
$17,773."73
$12,588.32
S2,B38.13
$1,572.12
$967.24
$1,010.24
5541,129.92
$10,347.03
$2.366.56
$8,362.82
$6
1
306.52
5178,993.14
$446,261.18
$2961 014.77
$.3,512,722.32
550,011. S6
524,011.79
53,070.86
5191,227_64
$991.44
$9,163.44
5239,938.37
$14,925.70

S12,23S.50
$2,794,142.
$53,299.35
SJJ,974.00
$1,163.471.01
S18,2B9.24
532,566.74
$1,320,460.00
57.36,111.75
523,61.3 S7
$57,303.S4
$1,101,103.57
7S
$7,227.26
KJl"XIMUH
POTENTIAL
CLAIM
S300,OOO.00
$20'.834.04
$65,765.9.3
$53,553.33
$7,086,901.47
SU,4H.Bi
$6,294.42
S830.32
$50,105.99
56,212,016.45
$1,561 , 207.70
$1'},773.73
512,588.32
$2,83B.13
$1,572.72
$9&7.24
24
$'541,129,92
510,347.03
S2,:ibG.S6
$1.590.29
$8,362.82
$6,306.52
S178,993.14
$446,261.19
551,705.83
$296,014.77
p,512,722 .l2
S50,01l.Se.
$24,011 .,e
$3,070.86
$791,22'.64
$991.44
59,163.44
S239,93B.3?
$14,925.'70
S8,80l.44
512,2.35.50
$2, '94,142.85
S40,106.11
$5.3,:299.35
$33,914.00
ilJ 163, 471.01
51B,28':':I.:24
532,566.74
51, 460.00
$331.74
$136,111.75
S36, 787.19
$23,613.51
557,303.54
$11,169.40
51.1Q1,/03.57
596,675.15
$7,227.26
,/ f

CREDITOR
VERBATIM CORPORAT10N
WAHIAWA WATER CO., INC.
SUGAR CO INC.
WAIALUA SUGAR CO., INC.
WAS'I"E CBEM CORPORATION
WBF TECHNOLOGIES
WILLIAM KARSH RICE UNrvIRSITY
WILLIAM MARSH RICE UNIVERSITY
WINCUP, INC.
WOODBRIDGE CORP.
WOODBRIDGE FOAM FABRICATING
WOODBRIDGE HOLDINGS, INC.
HooDBRIOGE INOAC, INC.
WOODBRIDGE SALES & ENGINEERING
Totalt
02/19/92

HAMILTON 'rAPT C::US'l'OMER c:LJI.IM5
SCHEDULED
AMOUNT
S391,051.78
$473.90
$46,401.38
$43,371.27
S22,385.18
$421.44
534.26
5829,l67.24
S980.19
sea,031.42
S18,528.81
$458.47
$30,799.40
$4,285.'36
591,925,180.61
6
PROOF OF CLAIM
AMOUNT
$451,398.96
$829,201.50
5990.19
$209,353.81
$90,790,426.62
MA..XIMUK
POTENTIAL
CLAIM
5451,39B.95
S473.90
546,407.38
$43,377,27
$22,385.78
$421.44
534.26
5829,201.50
S980.19
$88,031.42
S18.S2B.81
$209;353.81
$30,199.40
S4.2QS.96
$95,123,932.26

CREDITOR
AFLA1<., ZlBJ.
MA!lU., JAIME
ARMSTRONG, BOONE
ASDOUJlIAN, JEI\NNE
BENIPAYO, CONSUELa
BERNSTEIN, MATTHEW
ELIZABETH LABRADO
ilLACHAASKI, DAN
BRISCOE, EDWARD E.
SULDA,
BtJ'R.R.F!ARDT, DIANE
BUSENBARRICK, DIANA
CALLAHAN, PATRICIA
CARRIZALES, JUAN-JOSE
CATAH, RODEL
CHANG, ALBEJIT
CHENG, ).!ELODY
CONOVER, SALLY
CORPUS, ANDREW
CROWE, CINDY
DANCEL I JUnE
DAVIS, ELIZABETH
DAV!SSON, ROBE:RT
DE LA CRU Z I DAN 1L
DIKALANTA,
DtJNN, DORA E.
ERESE, JR., JOAQUIN

FELCZAX, JOHN
fIFIELD, THOMAS 8.
FITCH, URSULA
FITCH, URSULA
FONG, MICHAEL
PORESTI I JAMES
GAINEs, BRIMI
GAYO, MICHELLE
GOFMAN, RDZALIA
RAAAlS, DARRELL
BOLLOWAY, FREDERIC
HUNPHRIES, THOMAS
J AHJ A aACH:KJ>. T
KEEL I JAMES
KLEINBERG, JERRY
\tRAU'l'HAM'ER, KtrRT
KWOK GLORIA
LAFLIN, FlOBERT
LANDIG, MICHAEL
LAU, STEVEN
LEE, curoY
LILLEF, .JOHN
MAGEE, ELIZABETH
HANLEY, P1l.UL
MJl.THERS, LINDA
MENDOZA, ARACELI
MILLER, HARILl{N
02/19/92
,

ESTAXB
B.AMILTOH TA1"".r BMPLOYEE CI.Ji.YMS
SCHEDULED
AMOUNT
51,340.06
S558.69
$i,07S.SB
$124.78
SB21.76
sioa.77
S1,606.80
$1,003.89
$6,167.64
5574.74
5527.81
S580.03
$160.35
$334. BS
$335. &2
$1,120.66
$2,OSO.65
$439.B7
$416.60
$2,255.22
::;56L01
$341.60
$1,624.08
S6'14.45
$2,094.36
$1,709.85
$634.00
$759.73
SSOO.68
5634.94
$914.88
$1,117.83
S1B4.93
$751. 14
S470.64
$1,946.10
$298.64
S690.34
$2,366.Bo
$6'1-.01
$1,623.93
53,674.74
$1,646.86
$144.03
$2,119.46
$453.44
SI,189.50
51,643.53
$988.10
SlBB.54
$432. BB
$38.86
C-7
PROOF OF cr.l\I:X
AMOUNT
$1,340.06
SS58.5B
$2.684. B9
S724.78
$3,903.90
$708.71
$1.606.80
$1,003.89
S/1.J9i.Ol
$514.74
$527.BO
$643.28
$160.35
$334.89
$335.62
$1,120.66
$2,050.65
5439.87
S416.59
$2,255.22
$561. 01
$101.09
$2 . 986.56
$2,094.36
$1,211.85
$634.00
Sl,670.13
5634.93
$1, sa3. J3
$974. BS
S1,ll"1.83
$784.9)
$751.14
$470.64
$1,946.10
5298.64
$5,90B.El2
$2,366.60
567.01
$1,623.92
S2,000.00
$1,646.86
S1,391.B.3
$16,000-00
5453.44
$3,321.45
$1,643.53
5988.10
S288.54
$432.88
538.86
MAXIMUM
POTENTIAL
CLAIM
51)340.06
$556.58
$2,684.89
S724.78
53
/
903.90
5708. n
Sl,606.S0
51,003.89
$71,397.01
5574.14
$527.80
$643.28
$160.35
5334,89
$3.35.62
.!il, 120. 66.
$2,050.65
S439.97
59
S2,25!>.22
$561.0:'1
S101. 09
$2,986.56
$674.45
$2,094.36
57,211. as
$634.00
$1,670.13
$500.68
$634.93
$1,583.3)
$914.88
$1,117.83
$7e4.93
$751.14
$470.64
Sl,946.10
529B.64
55,908.82
52,366.80
567.01
$1,623.92
$3,674.14
52,000.00
$1,646.B5
$744.03
$1,391. 83
SHi, OOQ. 00
$453.44
$3,321.45
51,643.53
$988.10
$288.54
5432.88
531,,. 136

CREDITOR
AFLA1<., ZlBJ.
MA!lU., JAIME
ARMSTRONG, BOONE
ASDOUJlIAN, JEI\NNE
BENIPAYO, CONSUELO
BERNSTEIN, MATTHEW
ELIZABETH LABRADO
ilLACHAASKI, DAN
BRISCOE, EDWARD E.
SULDA,
BtJ'R.R.F!ARDT, DIANE
BUSENBARRICK, DIANA
CALLAHAN, PATRICIA
CARRIZALES, JUAN-JOSE
CATAH, RODEL
CHANG, ALBEJIT
CHENG, ).!ELODY
CONOVER, SALLY
CORPUS, ANDREW
CROWE, CINDY
DANCEL I JUnE
DAVIS, ELIZABETH
DAV!SSON, ROBE:RT
DE LA CRU Z I DAN 1L
DIKALANTA,
OtJNN, DORA E.
ERESE, JR., JOAQUIN

FELCZAX, JOHN
fIFIELD, THOMAS 8.
FITCH, URSULA
FITCH, URSULA
FONG, MICHAEL
PORESTI I JAMES
GAINEs, BRIMI
GAYO, MICHELLE
GOFMAN, RDZALIA
RAAAlS, DARRELL
BOLLOWAY, FREDERIC
HUNPHRIES, THOMAS
J AHJ A RACH:KJ>. T
KEEL I JAMES
KLEINBERG, JERRY
\tRAU'l'HAM'ER, KtrRT
KWOK GLORIA
LAFLIN, FlOBERT
LANDIG, MICHAEL
LAU, STEVEN
LEE, curoY
LILLEF, .JOHN
MAGEE, ELIZABETH
HANLEY, P1l.UL
MJl.THERS, LINDA
MENDOZA, ARACELI
MILLER, HARILl{N
02/19/92
,

ESTAXB
B.AMILTOH TA1"".r BMPLOYEE CI.Ji.YMS
SCHEDULED
AMOUNT
51,340.06
S558.69
$i,07S.SB
$124.78
SB21.76
sioa.77
S1,606.80
$1,003.89
$6,167.64
5574.74
5527.81
S580.03
$160.35
$334. BS
$335. &2
$1,120.66
$2,OSO.65
$439.B7
$416.60
$2,255.22
::;56L01
$341.60
$1,624.08
S6'14.45
$2,094.36
$1,709.B5
$634.00
$759.73
SSOO.68
5634.94
$914.88
$1,117.83
S1B4.93
$751. 14
S470.64
$1,946.10
$298.64
S690.34
$2,366.Bo
$6'1-.01
$1,623.93
53,674.74
$1,646.86
$144.03
$2,119.46
$453.44
SI,189.50
51,643.53
$988.10
SlBB.S4
$432. BB
$38.86
C7
PROOF OF cr.l\I:X
AMOUNT
$1,340.06
S558.5B
$2,684.B9
S724.78
$3,903.90
$708.71
$1.606.80
$1,003.89
S/1.J9i.Ol
$514.74
$527.BO
$643.28
$160.35
$334.89
$335.62
$1,120.66
$2,050.65
5439.87
S416.59
$2,255.22
$561. 01
$101.09
$2 . 986.56
$2,094.36
$1,211.85
$634.00
Sl,670.13
5634.93
$1, sa3. J3
$974. BS
S1,l1"1.83
$784.9)
$751.14
$470.64
$1,946.10
5298.64
$5,90B.El2
$2,366.60
567.01
$1,623.92
S2,000.00
$1,646.86
S1,391.B.3
$16,000.00
5453.44
$3,321.45
$1,643.53
5988.10
S288.54
$432.88
538.86
MAXIMUM
POTENTIAL
CLAIM
51)340.06
$556.58
$2,684.89
S724.78
53
/
903.90
5708. n
Sl,606.S0
51,003.89
$71,397.01
5574.14
$527.80
$643.28
$160.35
5334.89
$3.35.62
.!il, 120. 66.
$2,050.65
S439.97
59
S2,25!>.22
$561.0:'1
S101. 09
$2,986.56
$674.45
$2,094.36
S? ,211. as
$634.00
$1,670.13
$500.68
$634.93
$1,583.3)
$914.88
$1,117.83
$7e4.93
$751.14
$470.64
Sl,946.10
529B.64
55,908.82
52,366.80
567.01
$1,623.92
$3,674.14
52,000.00
$1,646.B5
$744.03
$1,391. 83
SHi, 000. 00
$453.44
$3,321.45
51,643.53
$988.10
$288.54
5432.88
$31.,. 136

..

..

CREDITOR
HIL.LS, TOSY
MON'.l:'kND, IRENE
MUNIZ, BE'J.""l:'E J.
MURPHY, KATflLEEN
MG, DON
OBERHOLTZER, DONNA
PMAOAN 1 EDWIN
PATERA, JEnNIFER
QUIGLEY, JOHN
ROY, JO'flAN'NA
SAHAROFF, BASIL
SANCHEZ. LORENE
SARMIENTO, ROMULO
SCHORA, BARSRA
S HEENAN. RICHA.R.D
SrKlN, ROBERT
S'l'RUTZ, STEPHEN
ANATOLY
'XABANGCtl'R1t., TONY
YEVGENIYA
TUR.t,A FLORA MlER.XEY
TUTT, GEORGE
TYLER, JAMES WM.
VIRAY, DIVINA (DEBBIE)
WATSON, iCATIE
ZAMBRANA, LILLIAN
Total:
02/19/92
,

HAMILTON TAn BKPLOY'E!: CLAIMS
SCHEDULED
AMOUNT
$1,462.40
s:nO.75
$311:1.1.3
5&64.14
5414 .10
SSB4.B4
$387.54
$411. 9B
$240.52
51,011. S9
$620.14
$1.39
$453.98
Sl,BHL 71
Sl,296.45
$717.70
51,88:2. 10
$667.20
$193.00
SlOO.02
$427.20
5346.37
52,043.44
S721. 56
$848.00
$835.03
$B2,975.21
PROOF OF CLAIM
AMOUNT
5463.90
$564.14
5884.94
SlS1.S;I
S41L9B
5240.52
S2,09B.B8
$620.14
$1,703.33
511,115.l'1
Sl,298.45
S737.70
$1,882.10
5667.20
5793.00
S427.20
$346.37
51..4,501. 17
S72l.S6
S848.00
SBlS.03
$198,393.09
MAXIMUM
POTENTIAL
CLAIM
$1,462.40
$310.'5
S46l.90
SS64.14
$414.70
SSB4.84
$387.54
$411.9B
$240.52
$2,098.88
$6:20.14
$1.39
$1,703.33
$11,715.11
51,298.45
Si3i.iO
Sl,882.10
5661.20
S793.00
$lOO.02
$427.20
5346.37
S14, 501 . .,.,
S121.S6
S848.00
5B35.03
$204, a73. as

..

..

CREDITOR
HIL.LS, TOSY
MON'.l:'kND, IRENE
MUNIZ, BE'J.""l:'E J.
MURPHY, KATflLEEN
MG, DON
OBERHOLTZER, DONNA
PMAOAN 1 EDWIN
PATERA, JEnNIFER
QUIGLEY, JOHN
ROY, JO'flAN'NA
SAHAROFF, BASIL
SANCHEZ. LORENE
SARMIENTO, ROMULO
SCHORA, BARSRA
S HEENAN. RICHA.R.D
SrKlN, ROBERT
S'l'RUTZ, STEPHEN
ANATOLY
'XABANGCtl'R1t., TONY
YEVGENIYA
TUR.t,A FLORA MlER.XEY
TUTT, GEORGE
TYLER, JAMES WM.
VIRAY, DIVINA (DEBBIE)
WATSON, iCATIE
ZAMBRANA, LILLIAN
Total:
02/19/92
,

HAMILTON TAn BKPLOY'E!: CLAIMS
SCHEDULED
AMOUNT
$1,462.40
s:nO.75
$311:1.1.3
5&64.14
5414 .10
SSB4.B4
$387.54
$411. 9B
$240.52
51,011. S9
$620.14
$1.39
$453.98
Sl,BHL 71
Sl,296.45
$717.70
51,88:2. 10
$667.20
$193.00
SlOO.02
$427.20
5346.37
52,043.44
S721. 56
$848.00
$835.03
$B2,975.21
PROOF OF CLAIM
AMOUNT
5463.90
$564.14
5884.94
SlS1.S;I
S41L9B
5240.52
S2,09B.B8
$620.14
$1,703.33
511,115.l'1
Sl,298.45
S737.70
$1,882.10
5667.20
5793.00
S427.20
$346.37
51..4,501. 17
S72l.S6
S848.00
SBlS.03
$198,393.09
MAXIMUM
POTENTIAL
CLAIM
$1,462.40
$310.'5
S46l.90
SS64.14
$414.70
SSB4.84
$387.54
$411.9B
$240.52
$2,098.88
$6:20.14
$1.39
$1,703.33
$11,715.11
51,298.45
Si3i.iO
Sl,882.10
5661.20
S793.00
$lOO.02
$427.20
5346.37
S14, 501 . .,.,
S121.S6
S848.00
5B35.03
$204, a73. as

CREDITOR
191 ASSOCIATes
191 P,SSOCIATES
ACCOUNTANTS, INC.
Jl.LCA TEL FJUDEN
ALHAMBRA NATIONAL WATER co.
ALLNET COMMUNICATION SERVICES
APOLLO COMMUNICATIONS
APTITI1DE TESTING
A.RA CORY
AA'I'RU:R. ANDERsEN
ASSOCIATEO LIHOUSINES
ASSOCIATED LOOSE LEAF
AT'T
AT&T
AT&T
AT&T
BANe ONE LEASING CORP.
BANK OF KAWAU
BEKINS
BOISE CASCADE OFFlCE PRODUCTS
BROOK FURNIT(JJ.U: RENTAL
C.lI.LHODN GUHP SPILU'.J\1'l & STACY
CATAPULT
CELLtTL.AR ONE
COCORlCO PATISSERIE
COMP IJ TOWN
CONTRACT OFfICE GROgp
PRODUCTS, INC.
E..P.TON' FINANCIAL
ENTRE COMPUrER CENTER
EQUITABLE LIFE ASSURANCE
EQUITABLE LIFE ASSURANCE SOC
ERNA PRE.55
EVANS RENTS, INC.
EXECUTIVE COURIER NETWORJ(
EXPERTLY DONE
FEDERAL EXPRESS CORP.
FIRS7 INTERSTATE BANCORP
FOX HARDWARE
GENERAL ELECTRIC CAPITAL CORP
GILTSPOR/SAN FRANCISCO
GOLDEN GATEWAY CENTER
GOODWIN, THOMPSON W.
KAKILTON MANAGEMENT
RE.ADQtl1l.RTERS COMPANIES
HI-TIMES OFFICE
HYATT REGENCY S.T. HOTEL
HOoV;C
INNOVATIVE OFfICE SYSTEMS
INTELLIGENT ELECTRONICS, INC.
lNTERNAL REVENUE SERVICE
INTRANATIONAL COMPUTER
JOHN WILLIAMS & ASSOC.
J(ESTREL RECORDS MA.llAGEMENT
KIRK PAPER CO.
D2/19/92

CONSOLIDATED
IiA.MILT'OH T..I\.l"'X TR.1U)E CIJUMS
SCHEDULED
AAOUHT
$3,250.00
$1,236.35
$640.00
$144.45
$148.10
$3,455.30
5119.57

51,598,525.00
5692.94
SaSL33
51,759.09
$55.31
$542.28
$1,475.39
57,390.40
$1,360.25
5170.13
$428.:.11
S175.00
$400.83
$158.39
$651.65
$134. Ei4
$3,270.14
S22,669.50
$11,822.75
$4,233.52
$2,665.21
51,264.42
54.90
$150.00
$3,309.85
$62.36
pO,ODO.DO
S83.81
$211.05
S1,J.6B.07
S130.81
5223.00
S6.44
513,640.00
524,204.22
$43.56
$365.41
C-9
PROOF OF CLAII-I
AMOUNT
S2,B)7.8:2
$119.57
587S.00
$439.05
$432,.397.00
$779.76
$851.33
5571. S3
Sl, )60. 25
$170.13
$10,270.94
59,0:21.47
S175.00
S3,270.14
$5,650.40
S1,943.22
53,222.35
S306,126.58
562 .36
5962.64
$6,620.96
5B15.91
$700.00
S2,131.08
$11,B11.75
S11, 640. 00
$34,977.47
MAXIMUM
POTENTIAL
CLAIM
S3,250.00
$1,236.35
5640.00
SHoll .45
$148.10
$2,837.92
5119.57
S875.00
$439.05
S432,297.00
$179.16
$851.33
$1,759.09
SSS.31
$542.28
Sl,'75.39
P ,390 .4Q
$571.53
$1,360.25
S170.13
$10,2'10.94
S8 ,an. 47
$175.00
$4.00.83
$158.39
5651.65
$134.84
53,270.14
$22,669.50
$11,822.75
55,660.40
$1,943.22
52,665.21
$1,264.42
54.90
$150.00
53,222.35
5306,126.58
$62.36
$962.64
$6,620.96
$815.91
$700.DO
$30,000.00
$83.81
$211.05
$2,131.08
5130.81
$223.00
511, 81L 75
56 .... 4
511,640.00
. $34,97"1.47
$43.56
5365.41

CREDITOR
191 ASSOCIATes
191 P,SSOCIATES
ACCOUNTANTS, INC.
Jl.LCA TEL FJUDEN
ALHAMBRA NATIONAL WATER co.
ALLNET COMMUNICATION SERVICES
APOLLO COMMUNICATIONS
APTITI1DE TESTING
A.RA CORY
AA'I'RU:R. ANDERsEN
ASSOCIATEO LIHOUSINES
ASSOCIATED LOOSE LEAF
AT'T
AT&T
AT&T
AT&T
BANe ONE LEASING CORP.
BANK OF KAWAU
BEKINS
BOISE CASCADE OFFlCE PRODUCTS
BROOK FURNIT(JJ.U: RENTAL
C.lI.LHODN GUHP SPILU'.J\1'l & STACY
CATAPULT
CELLtTL.AR ONE
COCORlCO PATISSERIE
COMP IJ TOWN
CONTRACT OFfICE GROgp
PRODUCTS, INC.
E..P.TON' FINANCIAL
ENTRE COMPUrER CENTER
EQUITABLE LIFE ASSURANCE
EQUITABLE LIFE ASSURANCE SOC
ERNA PRE.55
EVANS RENTS, INC.
EXECUTIVE COURIER NETWORJ(
EXPERTLY DONE
FEDERAL EXPRESS CORP.
FIRS7 INTERSTATE BANCORP
FOX HARDWARE
GENERAL ELECTRIC CAPITAL CORP
GILTSPOR/SAN FRANCISCO
GOLDEN GATEWAY CENTER
GOODWIN, THOMPSON W.
KAKILTON MANAGEMENT
RE.ADQtl1l.RTERS COMPANIES
HI-TIMES OFFICE
HYATT REGENCY S.T. HOTEL
HOoV;C
INNOVATIVE OFfICE SYSTEMS
INTELLIGENT ELECTRONICS, INC.
lNTERNAL REVENUE SERVICE
INTRANATIONAL COMPUTER
JOHN WILLIAMS & ASSOC.
J(ESTREL RECORDS MA.llAGEMENT
KIRK PAPER CO.
D2/19/92

CONSOLIDATED
IiA.MILT'OH T..I\.l"'X TR.1U)E CIJUMS
SCHEDULED
AAOUHT
$3,250.00
$1,236.35
$640.00
$144.45
$148.10
$3,455.30
5119.57

51,598,525.00
5692.94
SaSL33
51,759.09
$55.31
$542.28
$1,475.39
57,390.40
$1,360.25
5170.13
$428.:.11
S175.00
$400.83
$158.39
$651.65
$134. Ei4
$3,270.14
S22,669.50
$11,822.75
$4,233.52
$2,665.21
51,264.42
54.90
$150.00
$3,309.85
$62.36
pO,ODO.DO
S83.81
$211.05
S1,J.6B.07
S130.81
5223.00
S6.44
513,640.00
524,204.22
$43.56
$365.41
C-9
PROOF OF CLAII-I
AMOUNT
S2,B)7.8:2
$119.57
587S.00
$439.05
$432,.397.00
$779.76
$851.33
5571. S3
Sl, )60. 25
$170.13
$10,270.94
59,0:21.47
S175.00
S3,270.14
$5,650.40
S1,943.22
53,222.35
S306,126.58
562 .36
5962.64
$6,620.96
5B15.91
$700.00
S2,131.08
$11,B11.75
S11, 640. 00
$34,977.47
MAXIMUM
POTENTIAL
CLAIM
S3,250.00
$1,236.35
5640.00
SHoll .45
$148.10
$2,837.92
5119.57
S875.00
$439.05
S432,297.00
$179.16
$851.33
$1,759.09
SSS.31
$542.28
Sl,'75.39
P ,390 .4Q
$571.53
$1,360.25
S170.13
$10,2'10.94
S8 ,an. 47
$175.00
$4.00.83
$158.39
5651.65
$134.84
53,270.14
$22,669.50
$11,822.75
55,660.40
$1,943.22
52,665.21
$1,264.42
54.90
$150.00
53,222.35
5306,126.58
$62.36
$962.64
$6,620.96
$815.91
$700.DO
$30,000.00
$83.81
$211.05
$2,131.08
5130.81
$223.00
511, 81L 75
56 .... 4
511,640.00
. $34,97"1.47
$43.56
5365.41

CREDITOi<
LE REGENCY

LIBERTY MUTUAL INSURANCE co.
COMPUTER SERVICE
LONG & LEVIT
LOOKS YURHITURE LEASING
LVG PROPERTIES
MEADOWS OW'l!:NS COLLIER
MINDENS STATIONERS
MOORE BUSINESS PRODUCTS
MORTGAGE ADVISORS
MUNICIPAL MOTOR OPFlCER
NEW MEXICO TAX &. REVENUE:
OFFICE CLUB
ONE HARl{ET PL.UA
ONE MARKET PLAZA
PA BOARD OF FINANCE" REVENUE
PACIFIC BELL
PACIFIC BELL
PACKAGED BDSINESS
MADISON' SUTRO
PlTNE! BOWES
PLANT DESIGN
PROFESSIONAL TRAINING ASSOC
RAYZ8ERG, DDS, ALEXANDER C.
REMEDY TEMP. INC.
ROBERTS OF SAN FkANC!SCO
S.Y. NEWSPAPER AGENCY
SAN FRANCISCO TOM SNACKS
SECURITY PACIFIC NATIONAL BANX
liNET
SOOTHERN BELL
STANSBURY " ASSC
STATE BOARD or EQUALIZATION
STATE OF CALIFORNIA
TAB PRODOCTS co.
THE MARK
TKE VERY LAST WORD
INS. FINANCE
TRANSPORTf\.BLE SOFTWARE
UARCO I INC.
tiS SPRINT
VULCAN BINDER &: COVER
WEINBERG, DORON
wtSTCORP SOFTWARE SYSTEMS, IN.
WORD POWER
Tot.al:
02/19/92

CONSOLIDATED
BAMlLroH n.P'T 7:MJ)E c:::::t.JI.IHIll
SCHEDULED
.!\MOUNT
5530.00
$2,060.52
5112.50
SI,6'70.30
:;220.00
$1,033.91
$899.34
$45.00
S2,000.00
517.42
S54.06
568,822.38
S1,433.95
5575.11
$27.91
$10,451.25
56,497.00
$104.37
S17>.SS
H.OD
5662.39
5117. 00
5128.40
5340.08
$24.71
589.60
51,302.40
$500.00
51,919.17
&;58.01
S971.65
5.266.4J
525,161. 67
$1.B7
$84.40
$293.92
$1,894,052.76
10
PROOF OF CLAIM
AMOUN'f
1;2,140.77
$220.00
$112.50
$14,716.50
.72
$340,000.00
$10,143.49
$6,497.00
$12,862.69
52,978. i3
5728.40
SO.OO
$74.62
$1,302.40
$'20,350.90
$3,t!97.58
$166.62
$16,000.00
$549.9/
51,146,1.3$.60
MAXIMUM
POTENTIAL
CLAIM
5530.00
$2,140.77
$220.00
Sl.U.SO
$14,716.50
$1.670 .10
$220.00
S1,033.91
$973.72
545.00
5340,000.00
$2,000.00
517.42
$54.06
$88,822.38
51,433.95
$57.5 .11
527.91
$10,143.49
$6,497.00
$72,862.69
$104.37
5176.55
54.00
$3,600.00
$662.39
$2,978.73
S72B.40
$340.0B
SO.OO
$24.71
574.62
$1,320.40
$500.00
51,919.17
SSB.01
$971.65
$266.43
$20,350.90
SJ,t:I97.sa
$166.62
S1. 87
584.40
$16,000.00
$549.97
$293.92

Sl,53S,Sl'3.13

CREDITOR
SECURITY PACIFIC N A T I O N ~ BANK
STEV'EN SOLDOOFF
Total:
02/19/92

COHSOLIDAXED BSTArE
o:J:'BER lU.NIUMN TAJ"1' CI..AIHS
SCHEDULED
AMOUNT
$0_00
C-11
PROOF OF CLAIM
AMOUNT
S2,26B,170.21
S110 I OlD ,000.00
S112,296, '110.21
AAX.IMUH
POTENTIAL
CUlM
$2,.268,170.21
$110,030,000.00
$112,298,/10.21

CREDITOR
SECURITY PACIFIC N A T I O N ~ BANK
STEV'EN SOLDOOFF
Total:
02/19/92

COHSOLIDAXED BSTArE
o:J:'BER lU.NIUMN TAJ"1' CI..AIHS
SCHEDULED
AMOUNT
$0_00
C-11
PROOF OF CLAIM
AMOUNT
S2,26B,170.21
S110 I OlD ,000.00
S112,296, '110.21
AAX.IMUH
POTENTIAL
CUlM
$2,.268,170.21
$110,030,000.00
$112,298,/10.21
1
2
3
.4
5
6
7
8
9
10
Z 11
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13
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20
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26
27
28
GILMORE F. DIEKMANN
PATRICIA H. CULLISON
BRONSON, BRONSON & McKINNON
505 Montgomery street
San Francisco, California 94111-2514
Telephone: (415) 986-4200
Attorneys for Plaintiff
FEDERAL EXPRESS CORPORATION
FEDERAL EXPRESS CORPORATION,
Plaintiff,
v.
HAMILTON TAFT & COMPANY,
Defendant.
COMPLAINT FOR INJUNCTIVE
RELIEF AND FOR DAMAGES
FOR BREACH OF CONTRACT,
FOR BREACH OF FIDUCIARY
DUTY, AND FOR BREACH OF
THE AGENCY RELATIONSHIP
DEMAND FOR JURy TRIAL
Plaintiff, FEDERAL EXPRESS CORPORATION, hereby alleges as
follows:
I.
PARTIES
1.. Plaintiff FEDERAL EXPRESS CORPORATION ("Federal
Express
ll
) is a corporation organized and existing 'under and by
virtue of the laws of the state of Delaware, and maintains its
principal place of business in Memphis, Tennessee.
2. Plaintiff is informed and believes and thereon alleges
that Defendant HAMILTON TAFT & COMPANY (IIHamilton Taft
tl
) is a
corporation organized and existing under and by virtue of the
laws of the State of California and maintains its principal place
COMPLAINT FOR INJUNCTIVE RELIEF
1
2
3
A
5
6
7
8
9
10
Z 11
.......
'.....J
Z
Z
..". 12
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13 l.I.l CI
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i-Z
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'CI
15
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z;
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17
0
z
V'l
.(
III
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c:::
~
19
20
21
22
23
24
25
26
27
28
of business in Texas.
II.
JURISDICTION AND VENUE
3. This is an action for breach of contract, breach of
fiduciary duty, and breach of agency relationship arising, inter
alia, under the California Civil Code section 2322 et seg. The
amount in controversy exceeds the sum or value of Fifty Thousand
Dollars ($50,000) exclusive of interest and costs. The
jurisdiction of this Court is invoked pursuant to 28 U.S.C.
section 1332 .
4 . Venue properly laid in this Court pursuant to 28
u.s.c. section 1391(a), in that the claims involved arose in this
district.
III.
GENERAL ALLEGATIONS
Count One
(Breach of Contract)
5. Plaintiff realleges and incorporates by reference as
though fully set forth herein each and every allegation contained
in paragraphs 1 through 4 of this Complaint.
6. In December of 1989 Federal Express entered into a
payroll tax service contract with Hamilton Taft. Pursuant to
this agreement, Federal Express would wire transfer its employee
payroll taxes to Hamilton Taft. Under the contract Hamilton Taft
was then obligated to make disbursements to the appropriate
2 EXHIBITS TO REPLY IN SUPPORT OF 2255 MOTION PAGE 35
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21
22
23
24
25
26
27
28
taxing authorities on behalf of Federal Express including the
IRS, and state and local taxing agencies. As consideration for
performing this service, Hamilton Taft had the use of Federal
Express' money from the time of its receipt until the time of its
disbursement to the appropriate taxing authority.
7 Federal Express has performed all of its obligations
under the contract by promptly delivering to Hamilton Taft all
appropriate payroll tax summary reports and payroll tax funds.
Plaintiff has fully performed all contractual obligations except
where prevented by breach of defendant.
8. Plaintiff is informed and and thereon alleges
that defendant has breached its contractual obligations by,
rather than paying plaintiff's payroll taxes with the money
transferred for that purpose, the money would be held for an
additional 30 to 90 days. Plaintiff is informed and believes and
thereon alleges that in some cases defendant then used a
different client's incoming funds to pay Federal Express taxes
and any federal or state taxing agency penalties for late
payments.
9. Plaintiff is informed and believes that in other cases,
Federal Express taxes simply were not paid, and penalties may be
accruing.
10. Defendant has further breached the contract by not
providing original tax receipts evidencing the tax payments as
requested by plaintiff.
11. As a result of defendant's breach of contract plaintiff
has been damaged in excess of In order to discovery the
true extent of its damages plaintiff is in need of information
1
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from the defendant regarding payroll taxes paid and money
currently owed to the appropriate taxing Such
information is within the exclusive control of the defendant and
has not been made available to the plaintiff as requested.
count Two
(Breach of Fiduciary Duty)
12. Plaintiff realleges and incorporates by reference as
though fully set forth herein each and every allegation contained
in paragraphs 1 through 11 of this Complaint.
13. Plaintiff is the trustee of the tax funds withheld from
the wages of its employee. Plaintiff, as trustee of these funds,
is a fiduciary of the withheld funds for the purpose of paying
the required amounts to the united states, and state and local
agencies.
14. As custodian of these funds, defendant owed a fiduciary
duty to the plaintiff to transmit these funds to the appropriate
taxing agency promptly and in the full amount. Defendant also
had a fiduciary duty to invest these funds as a reasonably
prudent investor investing his own money would have done so as
not to jeopardize the principle. On information and belief
plaintiff alleges that by investing in high risk non-liquid
loans, defendant has breached this fiduciary duty.
Count Three
(Breach of Agency Relationship)
15. Plaintiff hereby realleges and incorporates by
reference as though fully set forth herein paragraphs 1 through
1
2
3
.4
5
6
7
8
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10
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11 of this Complaint.
16. Pursuant to the written payroll tax service contract
entered into between the defendant and plaintiff, defendant
became the agent of plaintiff.
17. Defendant consented to the creation of this
relationship by agreeing to accept payroll tax money from the
plaintiff and deposit such money on behalf of the plaintiff in
the appropriate amounts and manner on or before the statutory
deadlines as herein alleged.
18. In consideration of i ~ s entering into an agency
relationship with the plaintiff, defendant had the use of
plaintiff's employee payroll tax funds from the time received by
defendant until the time of disbursement to the appropriate
taxing authorities.
19. Pursuant to its agency relationship with the plaintiff,
defendant owed a duty of loyalty to the plaintiff. This duty of
loyalty required defendant to pay the payroll tax funds owed by
the plaintiff to the appropriate taxing authorities in a timely
manner, and to refrain from administering the payroll tax funds
in a manner harmful to the interest of the plaintiff, includIng
imprudent investments, or investments which might expose the
plaintiff to taxing authority liability.
20. Also pursuant to its agency relationship with the
plaintiff, defendant owed a duty to disclose promptly upon demand
by the plaintiff all documents, including tax receipts, relating
to the defendant's administration of the plaintiff's payroll
account.
21. Defendant has breached its agency relationship by
5
1
failing and refusing to render to Federal Express, upon its
2
demand, an accounting of its fund.
3
22. Defendants breach of its agency relationship has
4
caused plaintiff damages in an amount to be specifically
5
ascertained at trial but which is presently alleged to be in
6
excess of $50,000.
7
8
Count Four
9
(Injunctive Relief)
10
23. Plaintiff hereby realleges and incorporates by
Z 11
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24. Unless defendant is restrained by appropriate
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injunctive relief herein from destroying or otherwise disposing
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III
of tax receipts and other information in its control documenting
the use and transfer of plaintiff's employee tax funds, and
unless defendant is restrained by appropriate injunctive relief
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from continuing to operate the "ponzi scheme", and unless
~
19
defendant is ordered to immediately produce tax receipts and/or
20
other information regarding the transfer and use of funds,
21
plaintiff will suffer immediate and irreparable injury for which
22
there is no adequate remedy at law herein.
23
WHEREFORE, plaintiff prays for judgment against defendant as
24
follows:
25
1. For preliminary injunctive relief restraining or
26
otherwise preventing defendant from destroying tax receipts
27
and/or other information regarding the transfer of payment of
28
plaintiff's payroll taxes as alleged, pending trial;
6
1
2
3
5
6
7
8
9
10
11
12
13
1.4
15
16
17
18
19
20
21
22
23
24
25
26
2. For preliminary injunctive relief ordering defendant to
cease using plaintiff's payroll tax funds as part of a "ponzi
scheme", pending trial;
3. For a temporary restraining order enjoining defendant
from destroying tax receipts and/or other information regarding
plaintiff's payroll taxes; and
4. For an order mandating the production of tax receipts
and/or other information in control of the defendant regarding
the payment and transfer of plaintiff's payroll tax funds; and
4. For damages for the acts herein alleged in accordance
with proof ..
JURy DEMAND
Plaintiff Federal Express Corporation hereby makes demand
for jury.
Dated: March 13, 1991
BRONSON, BRONSON & McKINNON

PATRICIA H. CULLISON
Attorneys for Plaintiff
27 \PHC\29296 \ 9999\COMPL T eMP

28
7
Tax
Was the Big Spender
Just Spending Money
Firms Owed to IRS?
Texan 'Cbip' Armstrong Ran
&heme Processing Funds,
Former Employee Alleges
-
FedEx Frets Over $16 Million
By B.4U'H T, K(NC Ja.
SltaIl iltorll"'>rll'" orr" .. w ....... '''Ull''' .....
Wt year s FO!1l1!1 of JuJy p!rty at t.bt
l,l')(,lG-acre COu\:llt C raneb near
TexlS. "'U II l'CeDt neb! 0111
The 2&0 rutsts ft\'t [Nate<! to B. rodeo In
lJ'!!D3, !he R'lWI)t 01 C1lill'llry IUi1
SI.rn1t, 2M 8.ft hour of firelJrOl'ki a.f-
Ur e slt'dOlllll dinner.
tM host rmtll o-.mer. COOrue C.
Anm;lrong Jr .. was ulebrQl.\llr 11
pefS4!lalldfld of day: HJs b
mer hId )USt eDmDltle4 an l8'f1\Onth jlU
Il.'nn for J.!I.W)6erlng druC' !'!'lotie)'.
'Tbe eX'Q't vara.n.u was DOU!wortl:\y. lven
by !.be S'W!dard$ of Texas' by tone nI)'
boom 1l.Iltfi at! lSS8 Oup
.lliNtronr. IIOW yean llld. warked u a
S16.,{lOO-a yw I'trem.an e.ni1 b.ad a l\.I.slOI'Y Oi
1:101 tepam baJlk Joans in 19a!l. lI.e de
clared Iltrr.on.tl DWl:tIptty .ftu the fatl
ure I)r i tDUlU bUSU'less be ran ()41
&Ide-l.I!mporary worken; IIJred by Mr
Al1'Il.St
r
onr sprayed Ilre-ri!ta.rdanl mateMalI
00 tile .r.eel tta.mts af amunetdal tKItld
Ing&.
til
- tleq:in SUCb nven:a..l1. Mr . .ums:tn:lng
t:h.e.pt'St t&o c:a.m:t UJj VII1tl1 b\lI-
III U\! past tew daY$ .':er Ann-
I$.TOng em\llo1!t I Stelle &.l'lodoH. be:ran to
'PI'Wltely proV\6t I number ofmaiot t<ln\.
p:anl.fS UCI withe. Ilmple
natJar. for Am1.Jtrcng', S\.Iddtnl)'
p.!Il"fllt WId wml/lt\y
Idftll.ltb.
Belote ku.t mMU\. MI. So-
ladoU 'WAI ccn\roUer r.)/ iIll ob5el.lrt San
Frantl.aco firm. H.IUIillltJII Talt , Co ..
by tdr > Id.nu IIarth
1988, Tlltl firm Ulnu.tfy n.S btl
\lOft In payroll wtlJl.holdl.n WK OIVI!od to
In.. !Ill/!'C"I'IJI.I Servio lind cthllr !ax
np!l.elr.i (or tllch 1l'Vf:n!o! trnp!oym u
f.'e-dmJ , Castll!' &I
(:cdt. 1)/. State sal'
of CtlIfOMi.a and I.b.e OaklAnd Atll\!l\ci.
Kind Ponzl Sebeme
Mr, Salodo.t! a1Il1fti to (eden! 1"ttu:111'
UtS 911d In A memonmdum Iiled With & fed
'!lIt wt 01 promPtlY
log eU of tNsc fUndS W'ttb the ptOflel' fav
4'mnltl'lt as tUpub1ted by
Af!TIlIt1'I)!\g 6.lyeNd INJfY nullkmJ to
1111 0\Im f>rlllllf IrU"S III a bnd of Pom::\
scheme now 01\ Ult verre o( collll.p5!- Some
Ham1ItM Tall CWlICl'1N!tIl cc.nfirm tile dl
\ets.!tm.!, alId Mr, Solodor! uttmateS !.hat
tht-y t.lXa.I nearly noo mUllan.
Hl!.!ntllon T1i!t. It rul'1l!l out. Is (1M (J{ llie
hllliitlit IA>; r.ftlCl!Ul:Il'I in tnt ClllllltrY. But
tblS 1.i'I11 a to be II! rigM
1I0W. I.ASt Yt lif. Ibt [RS tfIe lag 'I1m.e
p.ayday and ux payment" from
Hlnt 4aY1 to one wlth I! JU'ilJJn1Wd de
ptest, sharply eulU.lhng /'!W"ttllS.
playetJ lite ADP artd Qa.nltAmtr1ca
I!enmtt Ill!' better lees by Ollertnc en-
f1\tte payroll
A.Dtdlt1f 11 Mr. Bi>lodaH. t!'Ie lure for
Mr. AmlStrllllf \IIU flat proftts 00\ hue.
lOWly \lQT'tfUlIttO cash (laws. Al:te:S'& to
ihat money bAs htlped hlm It Uti
rtyle lie cou.!rl ooly lIre.!un of durin: Ul\cw'
tlreba.lst shifli. II \lfe style ttw would al
low hmi to ,tar In hI.s own lUiyQme
hr V/tshK and 'OallM WCIlIUI\ he
U!l'd UI rut It Irt lOOl!t;' pam.
How It WlIrUd
how !It.tt &ebeme tw)N'
llIi tc Mr, SQlodoffs memClr611i1um filed
With ted,raJ !!.Olin doeltmtnts: .1IJ.c:
idc.1. w;u It1l1U.Sk the loti", yment 01 tAxes
tn" s:u.rting quwr.lt'a not too t.oog1I. AU
ytIl.1 dA I.s repc.rt to W lil!ncy tbJit you
are maid. tbl! p!Llf'rIlent \aU 11.9
lIew qualUf bq:!ns. 10\1 t&ke W fIN
f\lla.rtl!t' a fill last q\l.lll'teT"&
bole. 1M villi forward Dtlt'
qlJJ:!'!!r, WIUle Pl)"Rlefits recelft!j m ew .
qllUfElr Iftep .lmUI, It n.e bl.r
I1vranj for all !.bill la the. ehunk
01 UI'lpal6 tram tM ttart.lI:Ir QIlAI'!.eT
Irs; tou.1Id R\Oory.
1M tVllnrua.ll.:r. hCll .... 5.!tl.nr rea wry
c.mly. Than wIltre tht Panii aspect
emnts l.h. 'I'M u:tS t.sse'f.ll,eS A. lCl"/. fIe!lAlIV
phls U!.tete:JI on even' Ill"' UJ)-
Ut t:e.m1I\.r at least ltl"h q\lluterly
&.n.nually I lie "foond Vlo.ney"
&CId p..u.s It along to me \.aX man, yOI.I wl!!
have til dI.r the holt that !Dnell< deeper u.cn
tIm.t .... n:lUnd to rep.alr tilt I
.u bltH. itt birrer LTId rnt.rI"t c:.Ilel\1S
II'f.. blnfll, 1M el'Wlee mcna.s:es that 50l'1'l.I.'
tUttll Will rtt a peNlJty nCilkt Slid aJIk '
questions. llUlcI! HamIltOn tatl'l
. l.U 1!S'''6Ii!\\S!thit'' ae-
"",,_ .... ):1404> Ali. Col\l:l1l.ltJ
I
!
I
)
I
r
i
I
I
I
I
r
I
j
I
1
I
..
- -
L
'ax Question: WM Big-Spender 'Chip' Armstrong
Just Spending Money That Others Owed to IRS?
c.LlStorn en wUl !ruffer at
01'.1 Ha.m.t.ltOb talt's
at'llhly 1.0 ge.ne'!1kte q,u.\clQy from UI"
tUn In 0fI tb br:lo.ks. All Ilf Dee. ,
31. It beld tot.al1ng Ifi mWlon frOm
C'ompa.roe.S by Of amJla1ed wIth Mr.
Armrtn:lflg, J.C;C(lrQml UI an I.I1WldJted
eompany b.aLa.nee
"Tbere .IS un<:ert8llll:y 01 the
abUlty I/) meet Its obbgat.li:m.:' says An,
th<my llotan:stl III 1{PMG Peal MaMek.
Hanulton fait's atcOWltant JD a JUDe 1989
review, Put Ma'l"Wlck dUd a S1.9 milllon
11IOrk1nr-clPltaI dew:U and BLI.d "substan-
li.a.Uy mQn furd!I hv-e been eoDected 1'rO!n
clients thall am ellJ"rt"fltly I 'Iil1able to I18Y
those tu:i!s:' By yeaHnd. 1990, In.
internal sheet ,boWl, that filurl'!
Iw3 1.0 sa7 miUIbn..
6ly5 U has talItd tot twO
.. "m:I\I",U l full QUdll Of tht earn-
i i
Litton Unit's Soviet Venture
BEVERLY Cillf.-A gutw.dlary
of IJn.oa stgned IJl
ment with III COI'lttm w fOrm Il.!o!n\
VeD.tuf\!! Ui proVide teehnlcal Soervices in t/Ir
.RI.!.E:Il.an l'epllblic..
Of tI'Ie a,reemttlt were!! 't dis
- ;-.
Mr Baker:\f7
.
RE:
ftL P -iitpf1-s
4/3/91
CONNIE/C. JR.,
AKA
DBAvHAMILTON TAFT AND COMPANY;
32ND FLOOR, SPEAR STREET TOWER,
SAN FRANCISCO, CALIFORNIA;
FRAUD BY WIRE; MAIL FRAUD; TAX FRAUD i
00: SAN FRANCISCO
San Francisco has initiated a Fraud By Wire
investigation based on information received from the former
Comptroller of Hamilton Taft and Company (HTC) that the sUbject,
Armstrong, has'embezzled over $100 million from the firm's
clients over the last three years. ,These allegations continue to
be front-page news in San Francisco and on 3/15/91, the Wall
street Journal ran a front7page article detailing the allegations
(copy attached).
HTC contracts ,with companies who owe taxes to numerous
state and local taxing authorities. Client companies make a lump
sum wire transfer of funds to the HTC account, and thereafter,
HTC issues checks to whatever taxing authority is owed money.
The former Comptroller, I I, has alleged that
Armstrong diverted lump sum payments to his own use and
thereafter, incurred penalties associated with late payments and
7(: passed these costs along to the client companies who were not
notified of the late charges. In essence the allegation is that
Armstrong is running a "Ponzi scheme
ll
of considerable magnitude
Which requires increasing amounts of cash to keep the operat'on
going -3:1,:;"& -"
left HTC in Februar of 1991 and on 3
You will be kept apprised of pertinent developments.
NOT APPROPRIATE FOR DISSEMINATION TO THE PUBLIC

Enclosure
1 - Mr. Jones
1 - Mr. Baker
1 - Mr. Potts
1 - Mr. Bryant
GDM:gdm/sw (9)

1 - Mr. OIHara
1 - Mr. Esposito
1 - Special Assistants, CIn
COURT
NORTHERN CT FORNIA
BEFORE THE HONORABLE CHARLES A. LEGGE, JUDGE
UNITED STATES OF AMERICA,
)
)
)
)
)
)
)
)
)
)
PLAINTIFF,
VS. NO, CR 94-0276 CAL
CONNIE C. ARMSTRONG, JR./
AND RICHARD A. FOWLES,
FOR FF:
I CALIFORNIA
MONDAY JANUARY I 1997
VOLUME PAGES 868 - 3048
BY: GEORGE D.
SANTA
RONALD D
ASSISTANT
SOLOMON
94102
90404
388 MARKET STREET, SUITE 1080
SAN 94111
(APPEARANCES CONTINUED ON NEXT : )
REPORTED BY: YEOMANS J CSR
COURT REPORTER!
COMPUTERIZED BY XSCRIBE
JAMES YEOMANS, REPORTER, USDC, 415 863-5179
DISTRICT FORNIA
BEFORE
UNITED OF AMERICA,
PLAINTIFF,
VS.
CONNIE C. AJU4STRONG, JR.,
AND RICHARD A. POWLES,
DEFENDANTS.
FOR PLAINTIFF:
A. LEGGE I JUDGE
450
SAN
)
)
)
)
)
)
)
)
)
)
, CR 94-0276 CAL
CALIFORNIA
t 1997
PAGES 286B - 3048
AVENUE
, CALIFORNIA 94102
BY: GEORGE D, HARDY I ESQ.
lBB
SAN
RONALD D. SMETANA, ESQ.
ASSISTANT UNITED STATES
90404
10S0
94111
CONTINUED
REPORTED BY: YEOMANS I CSR
COURT REPORTER I
COMPUTERIZED
JAMES YEOMANS, REPORTER, 1 415-863-5179
2885
GOVERNMENT COUNSEL COME IN, PLEASE, I NEED TO SEE THEM ABOUT A
MATTER HERE.
(PAUSE IN THE PROCEEDINGS)
THE COURT: I RECEIVED FROM THE GOVERNMENT THIS
MORNING A DOCUMENT ENTITLED, IIEX PARTE SUBMISSIONS" REGARDING
WITNESS TERRI ROBINS.
NOW, IS SHE GOING TO BE COMING IN THIS MORNING?
MR. SMETANA: IT WAS OUR INTENT TO DO SO IF MR. HARDY
WAS IN THE PROCESS OF PRE-TRYING YESTERDAY WHEN HE DISCOVERED
THIS.
MR. HARDY: ONE CORRECTION TO THE SUBMISSION. THE
DATES ARE WRONG. APPARENTLY, IT WAS TWO YEARS AFTER THE FACT.
IT WAS 1993 AND 1994.
THE COURT: BUT NOW WHAT BOTHERS ME IS THAT SHE DOES
HAVE AND DOES KNOW OF STATEMENTS BY ARMSTRONG. YOU NOW KNOW OF
STATEMENTS BY ARMSTRONG.
MR. HARDY: WE KNOW SHE APPARENTLY DID RECORD SOME
STATEMENTS.
THE COURT: YOU HAVEN'T SEEN THE STATEMENTS?
MR. SMETANA: AGAIN, WE FOUND OUT YESTERDAY AND SINCE
THIS MORNING TALKED WITH THE FBI SPECIAL AGENT INVOLVED WHO
CONFIRMED FIRST, THAT IT WAS AN INVESTIGATION OF AN ENTIRELY
DIFFERENT COMPANY.
THE COURT: HE STILL MADE STATEMENTS.
MR. SMETANA: AND, SECONDLY, SHE WAS INSTRUCTED NOT TO
JAMES YEOMANS, OFFICIAL REPORTER, USDe, 415-863-5179
2885
GOVERNMENT COUNSEL COME IN, PLEASE, I NEED TO SEE THEM ABOUT A
MATTER HERE.
THE COURT: I RECEIVED FROM THE GOVERNMENT THIS
MORNING A DOCUMENT ENTITLED, "EX PARTE SUBMISSIONSII REGARDING
WITNESS TERRI ROBINS.
NOW, IS SHE GOING TO BE COMING IN THIS MORNING?
MR. SMETANA: IT WAS OUR INTENT TO DO SO IF MR. HARDY
WAS IN THE PROCESS OF PRE-TRYING YESTERDAY WHEN HE DISCOVERED
THIS.
MR. HARDY: ONE CORRECTION TO THE SUBMISSION. THE
DATES ARE WRONG. APPARENTLY I IT WAS TWO YEARS AFTER THE FACT.
IT WAS 1993 AND 1994.
THE COURT: BUT NOW WHAT BOTHERS ME IS THAT SHE DOES
HAVE AND DOES KNOW OF STATEMENTS BY ARMSTRONG. YOU NOW KNOW OF
STATEMENTS BY ARMSTRONG.
MR. HARDY: WE KNOW SHE APPARENTLY DID RECORD SOME
STATEMENTS.
THE COURT: YOU HAVEN'T SEEN THE STATEMENTS?
MR. SMETANA: AGAIN, WE FOUND OUT YESTERDAY AND SINCE
THIS MORNING TALKED WITH THE FBI SPECIAL AGENT INVOLVED WHO
CONFIRMED FIRST, THAT IT WAS AN INVESTIGATION OF AN ENTIRELY
DIFFERENT COMPANY.
THE COURT: HE STILL MADE STATEMENTS.
MR. SMETANA: AND, SECONDLY, SHE WAS INSTRUCTED NOT TO
JAMES YEOMANS, OFFICIAL REPORTER, USDC, 415-863-5179
ASK OR DISCUSS HAMILTON TAFT.
THE COURT: BUT SAY -- IT'S NOT JUST
THE WITNESS ITSELF I'M CONCERNED ABOUT, IT'S ALSO POSSIBLY
EXCULPATORY THINGS THAT WERE SAID. I THINK THE DEFENSE HAS A
RIGHT TO THOSE STATEMENTS BOTH BECAUSE THEY ARE, AI
STATEMENTS OF THE WITNESS AND, B, BECAUSE THEY'RE POTENTIAL
BRADY MATERIAL. I DON1T KNOW WHETHER THEY ARE OR NOT.
MR. HARDY: WE I VE NEVER SEEN THEM. WE I RE NOT
THAT CONCLUSION AT ALL, THAT'S WHY WE BROUGHT
YOUR ATTENTION.
THE HOW CAN WE GO AHEAD ROB INS?
MR. HARDY: CAN WE DO THIS? WE REVEAL THE FACT
THAT THE PAYMENT OF MONIES BY THE FBI TO TERRI ROBINS DURING
THE PER
DEFENSE
HERE,
CROSS SHE
1993 TO 1994?
THE COURT: DIRECT?
MR, HARDY: IN OUR DIRECT I OR WOULD BE LEFT TO THE
NOW, THEN ORDER UP ALL OF THAT/ GET IT FAXED
FEDEXED OUT HERE.
SHE'S RELEASED FROM TESTIFYING AFTER DIRECT AND
BE RELEASED SUBJECT TO RECALL FOR THE
CROSS-EXAMINATION ON THOSE POINTS. IS THAT IBLE?
TO THE SO THAT WE CAN TURNOVER THE
THEY CAN REVIEW THEM, THEY CAN DECIDE WHETHER OR NOT THEYJRE
ISSUES WANT TO BRING UP.
THE COURT: YOU DON'T THINK IT MIGHT BE BETTER TO
6
ASK OR DISCUSS
THE COURT: BUT
TAFT.
SAY -- IT'S NOT JUST
THE WITNESS ITSELF I'M CONCERNED ABOUT, IT'S ALSO POSSIBLY
EXCULPATORY THINGS THAT WERE SAID. I THINK THE DEFENSE HAS A
RIGHT TO THOSE STATEMENTS BOTH BECAUSE THEY ARE, AI
STATEMENTS OF THE WITNESS AND, B, BECAUSE THEY'RE POTENTIAL
BRADY MATERIAL. I DON1T KNOW WHETHER THEY ARE OR NOT.
MR. HARDY: WE I VE NEVER SEEN THEM. WE I RE NOT
THAT CONCLUSION AT ALL, THAT'S WHY WE BROUGHT
YOUR ATTENTION.
THE HOW CAN WE GO AHEAD ROB INS?
MR. HARDY: CAN WE DO THIS? WE REVEAL THE FACT
THAT THE PAYMENT OF MONIES BY THE FBI TO TERRI ROBINS DURING
THE PER
DEFENSE
HERE,
CROSS SHE
1993 TO 1994?
THE COURT: DIRECT?
MR, HARDY: IN OUR DIRECT I OR WOULD BE LEFT TO THE
NOW, THEN ORDER UP ALL OF THAT/ GET IT FAXED
FEDEXED OUT HERE.
SHE'S RELEASED FROM TESTIFYING AFTER DIRECT AND
BE RELEASED SUBJECT TO RECALL FOR THE
CROSS-EXAMINATION ON THOSE POINTS. IS THAT IBLE?
TO THE SO THAT WE CAN TURNOVER THE
THEY CAN REVIEW THEM, THEY CAN DECIDE WHETHER OR NOT THEYJRE
ISSUES WANT TO BRING UP.
THE COURT: YOU DON'T THINK IT MIGHT BE BETTER TO
6
2887
ROBINS?
MR. SMETANA: WE PROPOSE TO REST
WE'RE ABOUT DONE.
OR WEDNESDAY.
THE COURT: I THINK WE'RE NOW AT A POINT WE HAVE TO
TELL THE DEFENSE ABOUT THE PROBLEM. NOW, SO YOUR SUGGESTION IS
WE GO .. '.u ...... n ~ WITH WHAT WE'VE GOT AND THAT THE ONLY QUESTION THEN
WHAT TO DO ABOUT THE STATEMENTS THEMSELVES? WOULD
THEM
MR HARDY: CORRECT THEY MAY NOT WANT TO GO INTO
THEY LOOK AT THEM.
THE COURT! THEY MAY BE JUST TOTALLY IRRELEVANT. BUT
IT'S A PIECE OF MEAT FOR TO JUMP ALL OVER AND I
HAVE TO BE CONCERNED THAT IF SHE HAS RECORDED IT AND THEY ARE
PRODUCED AS WITNESS STATEMENTS AND WHETHER THERE'S POSSIBLY ANY
BRADY MATERIAL IN THERE, YET NONE OF US KNOW THAT.
(PROCEEDINGS HELD IN OPEN NOT PRESENT:)
THE COURT: LET THE RECORD I'VE RECEIVED THIS
A STATEMENT FROM THE GOVERNMENT WITNESS TERRI
ROBINS, AND THIS RAISES SOME ABOUT MS. ROBINS AS A
WITNESS AND'S, I GUESS, ANTICIPATED TO BE YOUR NEXT
WITNESS?
MR. HARDY: THAT'S
THE COURT: APPARENTLY, IT CAME TO LIGHT OVER THE
WEEKEND IN THE PRE-TESTIMONY BETWEEN THE
GOVERNMENT COUNSEL HERE AND MS. ROBINS, WHICH SHE WAS ASSISTING
YEOMANS, OFFICIAL REPORTER, USDC, 415-863-5179
ROBINS?
MR. SMETANA: WE PROPOSE TO REST
WE'RE ABOUT DONE.
2887
OR WEDNESDAY.
THE COURT: I THINK WE'RE NOW AT A POINT WE HAVE TO
TELL THE DEFENSE ABOUT THE PROBLEM. NOW, SO YOUR SUGGESTION IS
WE GO ~ ~ ~ = ~ WITH WHAT WE'VE GOT AND THAT THE ONLY QUESTION THEN
WOULD WHAT TO DO ABOUT THE STATEMENTS THEMSELVES?
MR HARDY: CORRECT THEY MAY NOT WANT TO GO INTO
THEM THEY LOOK AT THEM.
THE COURT! THEY MAY BE JUST TOTALLY IRRELEVANT. BUT
IT'S A PIECE OF MEAT FOR TO JUMP ALL OVER AND I
HAVE TO BE CONCERNED THAT IF SHE HAS RECORDED IT AND THEY ARE
PRODUCED AS WITNESS STATEMENTS AND WHETHER THERE'S POSSIBLY ANY
BRADY MATERIAL IN THERE, YET NONE OF US KNOW THAT.
(PROCEEDINGS HELD IN OPEN NOT PRESENT:)
THE COURT: LET THE RECORD I'VE RECEIVED THIS
A STATEMENT FROM THE GOVERNMENT WITNESS TERRI
ROBINS, AND THIS RAISES SOME ABOUT MS. ROBINS AS A
WITNESS AND'S, I GUESS, ANTICIPATED TO BE YOUR NEXT
WITNESS?
MR. HARDY: THAT'S
THE COURT: APPARENTLY, IT CAME TO LIGHT OVER THE
WEEKEND IN THE PRE-TESTIMONY BETWEEN THE
GOVERNMENT COUNSEL HERE AND MS. ROBINS, WHICH SHE WAS ASSISTING
YEOMANS, OFFICIAL REPORTER, USDC, 415-863-5179
2888
THE FBI AND ANOTHER INVESTIGATION OF HAMILTON TAFT INVOLVING
COMPUTECH AND THAT SHE WAS PAID BY THE FBI FOR WHAT, I DON'T
KNOW, TIME, EXPENSES, I'M NOT SURE WHAT. SHE DID RECORD
CONVERSATIONS WITH MR. ARMSTRONG.
NOW, AS I TOLD GOVERNMENT COUNSEL, I THINK THOSE
STATEMENTS THAT SHE RECORDED HAVE TO BE PRODUCED TO THE DEFENSE
BOTH AS STATEMENTS OF THE DEFENDANT AND FOR POTENTIAL BRADY
MATERIAL. NOBODY HAS YET REVIEWED THESE. IT'S MY
UNDERSTANDING GOVERNMENT COUNSEL DOESN'T KNOW WHAT'S IN THOSE
STATEMENTS, JUST FOUND OUT ABOUT IT THIS WEEKEND.
MR. HARDY! THAT 1 S CORRECT.
THE COURT: SO THE STATEMENTS HAVE TO BE PRODUCED. SO
THE QUESTION IS WHAT WE CAN DO WITH MS. ROBINS WHO'S COMING IN
TO TESTIFY TODAY. THE GOVERNMENT SUGGESTS - - WELL, MAYBE YOU
BETTER STATE THE SUGGESTION.
MR. HARDY: GOVERNMENT SUGGESTS THAT WE PROCEED TODAY
AND WHEN WE'VE FINISHED WITH THE TESTIMONY THAT THE PLAINTIFF
CROSS-EXAMINATION, WHATEVER CROSS-EXAMINATION THAT YOU GO INTO,
THAT SHE BE RELEASED SUBJECT TO RECALL FOLLOWING THE REVIEW OF
THOSE STATEMENTS, SHE BE CALLED ON CROSS ON THOSE POINTS.
WE DON'T KNOW IF YOU'RE GOING TO WANT TO GO INTO THOSE
POINTS OR NOT. WE DON'T KNOW WHAT'S THERE, BUT WE'RE RUNNING
LOW ON WITNESSES.
THE COURT: HOW SOON CAN YOU HAVE THE STATEMENTS?
MR. SMETANA: I DON'T EVEN KNOW AT THIS POINT WHAT
2888
THE FBI AND ANOTHER INVESTIGATION OF HAMILTON TAFT INVOLVING
COMPUTECH AND THAT SHE WAS PAID BY THE FBI FOR WHAT, I DON'T
KNOW, TIME, EXPENSES, I'M NOT SURE WHAT. SHE DID RECORD
CONVERSATIONS WITH MR. ARMSTRONG.
NOW, AS I TOLD GOVERNMENT COUNSEL, I THINK THOSE
STATEMENTS THAT SHE RECORDED HAVE TO BE PRODUCED TO THE DEFENSE
BOTH AS STATEMENTS OF THE DEFENDANT AND FOR POTENTIAL BRADY
MATERIAL. NOBODY HAS YET REVIEWED THESE. IT'S MY
UNDERSTANDING GOVERNMENT COUNSEL DOESN'T KNOW WHAT'S IN THOSE
STATEMENTS, JUST FOUND OUT ABOUT IT THIS WEEKEND.
MR. HARDY! THAT'S CORRECT.
THE COURT: SO THE STATEMENTS HAVE TO BE PRODUCED. SO
THE QUESTION IS WHAT WE CAN DO WITH MS. ROBINS WHO'S COMING IN
TO TESTIFY TODAY. THE GOVERNMENT SUGGESTS - - WELL, MAYBE YOU
BETTER STATE THE SUGGESTION.
MR. HARDY: GOVERNMENT SUGGESTS THAT WE PROCEED TODAY
AND WHEN WE'VE FINISHED WITH THE TESTIMONY THAT THE PLAINTIFF
CROSS-EXAMINATION, WHATEVER CROSS-EXAMINATION THAT YOU GO INTO,
THAT SHE BE RELEASED SUBJECT TO RECALL FOLLOWING THE REVIEW OF
THOSE STATEMENTS, SHE BE CALLED ON CROSS ON THOSE POINTS.
WE DON'T KNOW IF YOU'RE GOING TO WANT TO GO INTO THOSE
POINTS OR NOT. WE DON'T KNOW WHAT'S THERE, BUT WE'RE RUNNING
LOW ON WITNESSES.
THE COURT: HOW SOON CAN YOU HAVE THE STATEMENTS?
MR. SMETANA: I DON'T EVEN KNOW AT THIS POINT WHAT
2889
THEY'RE IN, WHETHER HAVE BEEN TRANSCR WHETHER
THOSE ARE JUST TAPED, WHETHER THERE'S TAPES THEY HAVE BE
THE COURT: DO YOU KNOW THE VOLUME?
MR. SMETANA: I KNOW WHAT WE
ONE OF THE AGENTS WHO IS HERE IN COURT IN TOUCH
FBI AGENTS IN DALLAS AND ARRANGE TO HAVE THOSE
ALONG THE WAY FIND OUT.
IS HAVE
THE
AND
ONE OF THE PROBLEMS WE APPARENTLY ENCOUNTERED IS THERE
IS APPARENTLY ICE AND SLEET IN DALLAS AND THE FBI OFFICE IS
OFFICIALLY CLOSED. AS IT HAPPENS, THE AGENT WENT IN, BUT I
GUESS THEY WERE GIVEN AN ADMINISTRATIVE DAY OFF
WEATHER, SO WE HAVE A PAGER NUMBER FOR THE FBI
HAVE HIM PULL THAT
TO THE
WE CAN
THE COURT: HOW SOON DO YOU THINK YOU CAN GET THE
STATEMENTS HERE, EITHER -- IN WHATEVER FORM THEY'RE IN, TAPES
OR TYPEWRITTEN FORM?
MR. SMETANA: AT A MINIMUM 1 EVEN I F THEY WERE TO
LOCATE THEM IMMEDIATELY AND SEND THEM I IT WOULD
BE TOMORROW UNTIL WE HAVE SOME - - SOME TIME BY FEDEX. THAT'S
THE FASTEST WE CAN POSSIBLY DO IT, AND I DON'T KNOW WHETHER
THAT'S POSSIBLE.
THE COURT: THEN, OF COURSE, THE DEFENSE WOULD NEED A
REASONABLE TIME TO GO OVER THEM TO DECIDE WHAT THEY WANTED TO
WITH THEM OR DO WITH MS, ROBINS.
JAMES YEOMANS I REPORTER, USOC! 415-863-5179
2889
THEY'RE IN, WHETHER HAVE BEEN TRANSCR WHETHER
THOSE ARE JUST TAPED, WHETHER THERE'S TAPES THEY HAVE BE
THE COURT: DO YOU KNOW THE VOLUME?
MR. SMETANA: I KNOW WHAT WE
ONE OF THE AGENTS WHO IS HERE IN COURT IN TOUCH
FBI AGENTS IN DALLAS AND ARRANGE TO HAVE THOSE
ALONG THE WAY FIND OUT.
IS HAVE
THE
AND
ONE OF THE PROBLEMS WE APPARENTLY ENCOUNTERED IS THERE
IS APPARENTLY ICE AND SLEET IN DALLAS AND THE FBI OFFICE IS
OFFICIALLY CLOSED. AS IT HAPPENS, THE AGENT WENT IN, BUT I
GUESS THEY WERE GIVEN AN ADMINISTRATIVE DAY OFF
WEATHER, SO WE HAVE A PAGER NUMBER FOR THE FBI
HAVE HIM PULL THAT
TO THE
WE CAN
THE COURT: HOW SOON DO YOU THINK YOU CAN GET THE
STATEMENTS HERE, EITHER -- IN WHATEVER FORM THEY'RE IN, TAPES
OR TYPEWRITTEN FORM?
MR. SMETANA: AT A MINIMUM 1 EVEN I F THEY WERE TO
LOCATE THEM IMMEDIATELY AND SEND THEM I IT WOULD
BE TOMORROW UNTIL WE HAVE SOME - - SOME TIME BY FEDEX. THAT'S
THE FASTEST WE CAN POSSIBLY DO IT, AND I DON'T KNOW WHETHER
THAT'S POSSIBLE.
THE COURT: THEN, OF COURSE, THE DEFENSE WOULD NEED A
REASONABLE TIME TO GO OVER THEM TO DECIDE WHAT THEY WANTED TO
WITH THEM OR DO WITH MS, ROBINS.
JAMES YEOMANS I REPORTER, USOC! 415-863-5179
2890
MR. HARDY:" IT'S MY UNDERSTANDING WE'LL BE BREAKING,
AFTER THE GOVERNMENT FINISHES ITS WITNESSES THIS WEEK, UNTIL
THE DEFENSE BEGINS. THERE WILL BE A GOOD BIT OF TIME FOR
REVIEW AND IF NEED BE WE COULD BRING HER BACK BEFORE YOU START
YOUR CASE.
IN OTHER WORDS, I THINK THERE WILL BE A BLOCK OF TIME
FOR YOU TO REVIEW IT AND FIGURE OUT WHAT YOU WANT TO DO.
MR. SABELLI: WE MAY HAVE RELEVANCE OBJECTION TO ANY
OF THIS AREA. THERE MAY BE 403 CONCERNS AS WELL, 404(B)
CONCERNS. IT MAY BE A BASIS FOR A MOTION TO SEVER ON THE PART
OF MR. FOWLES. I'M NOT SURE IT'S FAIR FOR US TO HAVE TO BEGIN
OUR CROSS-EXAMINATION WITHOUT KNOWING THE NATURE OF THIS
MATERIAL. MAYBE SOMETHING THAT WE CAN USE TO
MR. HARDY: YOUR COMMENTS SUGGEST WE HAVE SOME
INTEREST IN PUTTING SOME OF THAT MATERIAL IN AND USE IT IN SOME
WAY, WE DO NOT. WE HAVE NOT SEEN IT. WE DON'T KNOW WHAT'S IN
IT AND HAVE NO INTENT USING ANY OF THAT MATERIAL.
MR. BROWN: AT THE VERY LEAST, THIS WITNESS -- WE
THINK THIS WITNESS ALREADY HAS A TREMENDOUS BIAS AND SHE
INDICATED IN HER GRAND JURY TESTIMONY III'M UPSET, I'M ANGRY,
I'M VINDICTIVE. II NOW WE FIND OUT SHE BECAME A GOVERNMENT
INFORMANT. CERTAINLY THAT'S SOMETHING WE WOULD WANT TO BRING
UP ON CROSS-EXAMINATION.
THE COURT: I WOULD IMAGINE THAT COULD BE DONE EVEN
BEFORE YOU SEE THE STATEMENTS. WHAT I'M DEBATING HERE, SHOULD
2890
MR. HARDY:" IT'S MY UNDERSTANDING WE'LL BE BREAKING,
AFTER THE GOVERNMENT FINISHES ITS WITNESSES THIS WEEK, UNTIL
THE DEFENSE BEGINS. THERE WILL BE A GOOD BIT OF TIME FOR
REVIEW AND IF NEED BE WE COULD BRING HER BACK BEFORE YOU START
YOUR CASE.
IN OTHER WORDS, I THINK THERE WILL BE A BLOCK OF TIME
FOR YOU TO REVIEW IT AND FIGURE OUT WHAT YOU WANT TO DO.
MR. SABELLI: WE MAY HAVE RELEVANCE OBJECTION TO ANY
OF THIS AREA. THERE MAY BE 403 CONCERNS AS WELL, 404(8)
CONCERNS. IT MAY BE A BASIS FOR A MOTION TO SEVER ON THE PART
OF MR. FOWLES. I'M NOT SURE IT'S FAIR FOR US TO HAVE TO BEGIN
OUR CROSS-EXAMINATION WITHOUT KNOWING THE NATURE OF THIS
MATERIAL. MAYBE SOMETHING THAT WE CAN USE TO
MR. HARDY: YOUR COMMENTS SUGGEST WE HAVE SOME
INTEREST IN PUTTING SOME OF THAT MATERIAL IN AND USE IT IN SOME
WAY, WE DO NOT. WE HAVE NOT SEEN IT. WE DON'T KNOW WHAT'S IN
IT AND HAVE NO INTENT USING ANY OF THAT MATERIAL.
MR. BROWN: AT THE VERY LEAST, THIS WITNESS - - WE
THINK THIS WITNESS ALREADY HAS A TREMENDOUS BIAS AND SHE
INDICATED IN HER GRAND JURY TESTIMONY III'M UPSET, I'M ANGRY,
I'M VINDICTIVE. II NOW WE FIND OUT SHE BECAME A GOVERNMENT
INFORMANT. CERTAINLY THAT'S SOMETHING WE WOULD WANT TO BRING
UP ON CROSS-EXAMINATION.
THE COURT: I WOULD IMAGINE THAT COULD BE DONE EVEN
BEFORE YOU SEE THE STATEMENTS. WHAT I'M DEBATING HERE, SHOULD
2891
WE START ROBINS AT ALL, DIVIDE HER UP AS THE GOVERNMENT
SUGGESTS, OR THE BETTER THING TO DO IS POSTPONE HER UNTIL THE
DEFENSE HAS THE MEANS EVEN MAXIMUM SPEED IT
GETS HERE OVERNIGHT, YOU GET IT TOMORROW, IT'S GOING TO BE
WEDNESDAY BEFORE WE CAN WI MS. ROBINS.
MR. BROWN: I DON'T WE'RE ING TO HAVE, FIRST
OF ALL, A GREAT OF FFI THE GOVERNMENT'S
WE'D BE ABLE TO
IT SEEMED THAT WAY. I
WITNESSES THIS WEEK. THINK THROUGH
COMPLETE WHATEVER, WOULDN'T YOU
WOULD LIKE JUST A MOMENT OR TWO TO CONFER WITH COUNSEL.
YET.
THE COURT: APPARENTLY, THE U"-\.JI\..;;) MEN' T ALL HERE
MR. BROWN: I F WE COULD HAVE A FEW MOMENTS.
THE COURT: GO AHEAD AND CONSULT.
MR. BROWN: YOUR WEtRE STILL IN THE PROCESS OF
DISCUSSING IT AND IF WE DID A LITTLE FOR A FEW
MOMENTS, WHAT -- THE THING I'M TO SAY, I THINK,
THERE ARE SOME CASES TO SUPPORT WHAT I'M ABOUT TO SAY.
THE FIRST MOTION WE WOULD MAKE WOULD BE THAT THE
WITNESS BE EXCLUDED ENTIRELY. THIS COMPUCHECK WE'RE TRYING TO
SET UP THE TIME FRAME. I'M EVEN WONDERING IF IT WAS COMPUCHECK
AND I DON'T EVEN KNOW IF MR. SMETANA OR MR. HARDY KNOWS AT THIS
POINT, BUT I'M WONDERING IF SHE WAS REALLY
COMPUCHECK OR THERE WAS A SPILLOVER HER
GATING
WERE FOR THIS
J k ~ E S YEOr4ANS, OFFICIAL REPORTER, USDC, 415-863-5179
2891
WE START ROBINS AT ALL, DIVIDE HER UP AS THE GOVERNMENT
SUGGESTS, OR THE BETTER THING TO DO IS POSTPONE HER UNTIL THE
DEFENSE HAS THE MEANS EVEN MAXIMUM SPEED IT
GETS HERE OVERNIGHT, YOU GET IT TOMORROW, IT'S GOING TO BE
WEDNESDAY BEFORE WE CAN WI MS. ROBINS.
MR. BROWN: I DON'T
OF ALL, A GREAT OF FFI
ING TO HAVE, FIRST
THE GOVERNMENT'S
WE'D BE ABLE TO
IT SEEMED THAT WAY. I
WITNESSES THIS WEEK. THINK THROUGH
COMPLETE WHATEVER, WOULDN'T YOU
WOULD LIKE JUST A MOMENT OR TWO TO CONFER WITH COUNSEL.
YET.
THE COURT: APPARENTLY, THE 1..I'"'",.,n..... MEN' T ALL HERE
MR. BROWN: I F WE COULD HAVE A FEW MOMENTS.
THE COURT: GO AHEAD AND CONSULT.
MR. BROWN: YOUR WEtRE STILL IN THE PROCESS OF
DISCUSSING IT AND IF WE DID A LITTLE FOR A FEW
MOMENTS, WHAT -- THE THING I'M GOING TO SAY, I THINK,
THERE ARE SOME CASES TO SUPPORT WHAT I'M ABOUT TO SAY.
THE FIRST MOTION WE WOULD MAKE WOULD BE THAT THE
WITNESS BE EXCLUDED ENTIRELY. THIS COMPUCHECK WE'RE TRYING TO
SET UP THE TIME FRAME. riM EVEN WONDERING IF IT WAS COMPUCHECK
AND I DON'T EVEN KNOW IF MR. SMETANA OR MR. HARDY KNOWS AT THIS
POINT, BUT I'M WONDERING IF SHE WAS REALLY
COMPUCHECK OR THERE WAS A SPILLOVER HER
GATING
WERE FOR THIS
J k ~ E S YEOr4ANS, OFFICIAL REPORTER, USDC, 415-863-5179
2892
MATTER.
THE COURT: THAT'S THE ISSUE, THAT'S PART OF THE
QUESTION. NOW, MY FEELING, JUST AS I'M THINKING ABOUT IT, IT'S
NOT FAIR TO THE DEFENSE TO HAVE THEM HAVE TO TAKE MS. ROBINS ON
CROSS AND TIPTOE AROUND THE QUESTION WITHOUT KNOWING THE WHOLE
STORY, THAT YOU GOT THE -- KNOW THE WHOLE STORY. AND BY THE
WHOLE STORY, I MEAN, CERTAINLY THE RECORDED STATEMENTS BEFORE
YOU CROSS-EXAMINE.
MR. BROWN: I AGREE WITH YOU.
THE COURT: I THINK
MR. BROWN: BUT I'M GOING ONE STEP BEYOND THAT FOR MY
FIRST INITIAL DISCUSSION WITH THE COURT. IN THE PREPARATION
OUR DEFENSE, IN AND ANALYZING ALL THESE CASES AND RECEIVING ALL
THE WORK THE GOVERNMENT DID SO NICELY IN ALL THESE BINDERS AND
BOOKS AND LOOKING AT ALL THE 302'S, WE HAD TWO 302'S FROM THIS
WITNESS. SHE GAVE A COUPLE OF DEPOSITIONS AT OR ABOUT THIS
TIME AND SHE HAD GRAND JURY TESTIMONY. IT'S NOT MENTIONED
ANYWHERE. THEY DIDN'T KNOW IT EITHER. SHE'S MISLED THE
GOVERNMENT. SHE J S MI SLED EVERYBODY. AND WE WERE NOT ABLE TO
TAKE THIS INTO ACCOUNT IN PREPARATION OF OUR DEFENSE.
I REALLY THINK SHE NOT BE ALLOWED TO TESTIFY.
THE COURT: I'M NOT GOING TO GO THAT FAR UNTIL I SEE
WHAT IT IS. IT MAY BE HAS ABSOLUTELY NOTHING TO DO WITH THIS
CASE AT ALL, BUT I'M NOT PREPARED TO STRIKE HER, BUT CERTAINLY
NOT GOING TO FORCE YOU FOLKS TO DO YOUR CROSS BEFORE YOU HAVE A
JAMES YEOMANS, OFFICIAL REPORTER, USDC, 415-B63-5179
2892
MATTER.
THE COURT: THAT'S THE ISSUE, THAT'S PART OF THE
QUESTION. NOW, MY FEELING, JUST AS I'M THINKING ABOUT IT, IT'S
NOT FAIR TO THE DEFENSE TO HAVE THEM HAVE TO TAKE MS. ROBINS ON
CROSS AND TIPTOE AROUND THE QUESTION WITHOUT KNOWING THE WHOLE
STORY, THAT YOU GOT THE -- KNOW THE WHOLE STORY. AND BY THE
WHOLE STORY, I MEAN, CERTAINLY THE RECORDED STATEMENTS BEFORE
YOU CROSS-EXAMINE.
MR. BROWN: I AGREE WITH YOU.
THE COURT: I THINK
MR. BROWN: BUT I'M GOING ONE STEP BEYOND THAT FOR MY
FIRST INITIAL DISCUSSION WITH THE COURT. IN THE PREPARATION
OUR DEFENSE, IN AND ANALYZING ALL THESE CASES AND RECEIVING ALL
THE WORK THE GOVERNMENT DID SO NICELY IN ALL THESE BINDERS AND
BOOKS AND LOOKING AT ALL THE 302'S, WE HAD TWO 302'S FROM THIS
WITNESS. SHE GAVE A COUPLE OF DEPOSITIONS AT OR ABOUT THIS
TIME AND SHE HAD GRAND JURY TESTIMONY. IT'S NOT MENTIONED
ANYWHERE. THEY DIDN'T KNOW IT EITHER. SHE'S MISLED THE
GOVERNMENT. SHE J S MI SLED EVERYBODY. AND WE WERE NOT ABLE TO
TAKE THIS INTO ACCOUNT IN PREPARATION OF OUR DEFENSE.
I REALLY THINK SHE NOT BE ALLOWED TO TESTIFY.
THE COURT: I'M NOT GOING TO GO THAT FAR UNTIL I SEE
WHAT IT IS. IT MAY BE HAS ABSOLUTELY NOTHING TO DO WITH THIS
CASE AT ALL, BUT I'M NOT PREPARED TO STRIKE HER, BUT CERTAINLY
NOT GOING TO FORCE YOU FOLKS TO DO YOUR CROSS BEFORE YOU HAVE A
JAMES YEOMANS, OFFICIAL REPORTER, USDC, 415-B63-5179
2893
LITTLE , AND THAT RAISES THE ABOUT I
SHOULD LET HER ON BEFORE THAT OCCURS, TOO.
MS. LEARY: WE JOIN IN MR. BROWN'S MOTION.
THE COURT: IS THERE A MOTION? WHAT'S THE MOTION?
MS. LEARY: THE MOTION IS EXCLUDE HER AS WITNESS
ON DUE PROCESS GROUNDS, SPECIFICALLY ON BRADY GROUNDS.
THE COURT: WE DON'T KNOW WE HAVE ANY BRADY.
MS. LEARY: WE KNOW THIS WOMEN PARTICIPATED IN AN
INVESTIGATION OF MR. I POSSIBLY MR. FOWLES I
WE HOPE NOT. THE FACT THAT INVESTIGATION DIDN'T RESULT IN
ANYTHING, MAYBE ON ITS FACE BRADY, CERTAINLY IT'S IMPEACHMENT
MATERIAL AND THAT IS A TYPE OF BRADY MATERIAL, THIS RAISES SOME
GRAVE DUE PROCESS CONCERNS.
THIS PERSON HAS HAD CONSTANT CONTACT WITH THE FBI AND
WITH THE GOVERNMENT. 'S TESTIFIED BEFORE THE JURY, AT
NO INDICATING
THE COURT: GRAND JURY WHERE, IN TEXAS?
THAT
MS. LEARY: MR. SMETANA AND MR. YAMAGUCHI DIRECTED
JURY TESTIMONY. SHE AT NO POINT INDICATED --
THE COURT: YOU HAVE THAT
MS. LEARY: WE DO. THIS
CONCERNS. THIS IS SOMETHING THAT
GRAVE DUE
EXTREMELY
MUST HAVE MET WITH MR. YAMAGUCHI, AND MR. SMETANA AT
DIVULGES THIS TYPE INFORMATION.
SHE
POINT
IN FACT, I HAVE A LIST OF IN LIMINE MOTIONS I'D LIKE
JAMES YEOMANS, OFFICIAL REPORTER, USDC, 415-863 5179
2893
LITTLE , AND THAT RAISES THE ABOUT I
SHOULD LET HER ON BEFORE THAT OCCURS, TOO.
MS. LEARY: WE JOIN IN MR. BROWN'S MOTION.
THE COURT: IS THERE A MOTION? WHAT'S THE MOTION?
MS. LEARY: THE MOTION IS EXCLUDE HER AS WITNESS
ON DUE PROCESS GROUNDS, SPECIFICALLY ON BRADY GROUNDS.
THE COURT: WE DON'T KNOW WE HAVE ANY BRADY.
MS. LEARY: WE KNOW THIS WOMEN PARTICIPATED IN AN
INVESTIGATION OF MR. I POSSIBLY MR. FOWLES I
WE HOPE NOT. THE FACT THAT INVESTIGATION DIDN'T RESULT IN
ANYTHING, MAYBE ON ITS FACE BRADY, CERTAINLY IT'S IMPEACHMENT
MATERIAL AND THAT IS A TYPE OF BRADY MATERIAL, THIS RAISES SOME
GRAVE DUE PROCESS CONCERNS.
THIS PERSON HAS HAD CONSTANT CONTACT WITH THE FBI AND
WITH THE GOVERNMENT. 'S TESTIFIED BEFORE THE JURY, AT
NO INDICATING
THE COURT: GRAND JURY WHERE, IN TEXAS?
MS. LEARY: MR. SMETANA AND MR. YAMAGUCHI DIRECTED
THAT JURY TESTIMONY. SHE AT NO POINT INDICATED --
THE COURT: YOU HAVE THAT
MS. LEARY: WE DO. THIS
CONCERNS. THIS IS SOMETHING THAT
GRAVE DUE
EXTREMELY
MUST HAVE MET WITH MR. YAMAGUCHI, AND MR. SMETANA AT
DIVULGES THIS TYPE INFORMATION.
SHE
POINT
IN FACT, I HAVE A LIST OF IN LIMINE MOTIONS I'D LIKE
2894
TO MAKE ABOUT HER TESTIMONY TODAY THAT'S THIS,
WHO IS MORE THAN WILLING TO BEND THE TRUTH IN AN
AGGRESSIVE WAY.
AND I THINK THIS IS AN EXTREMELY UPSETTING EXAMPLE OF
THE EXTENT TO WHICH SHE IS IN MR. ARMSTRONG
AND BY IMPLICATION OF MR. FOWLES. AND I WOULD MOVE TO STRIKE
THE TESTIMONY OF SOMEBODY WHO WITHHELD THIS
FOR THIS PERIOD OF TIME.
THE COURT: I'M NOT PREPARED TO
SHE MAY HAVE, QUOTE, "WITHHELD, II AS YOU
OF INFORMATION
FAR. BECAUSE
IT, MAY BE
SOMETHING THAT IS TOTALLY NOT TANGENTIAL BUT TOTALLY IRRELEVANT
TO AN ENTIRE DIFFERENT MATTER.
I'M NOT PREPARED TO SAY IT IS OR ISN'T, BUT I DO THINK
THAT I SHOULD NOT LET MS. ROBINS TESTIFY HERE TODAY UNTIL
RE READY TO CROSS.
THE WHOLE STORY. AND ONCE YOU
I YOU CAN RENEW YOUR MOTION
TO BE A WITNESS AT ALL.
MS. LEARY: THERE'S TWO
THE
STAND NOW AND VOIR DIRE HER OUTSIDE
WE
L YOU HAVE
AND THEN,
THINK
HER
THE PRESENCE THE
JURy WHAT SHE DID, WHAT THE STATEMENTS WERE, AND TRY F
WHAT THE RELEVANCE ON THAT BASIS.
WE CAN ASK THE GOVERNMENT I ALSO, I WHAT
KNOW ABOUT THE COMPUCHECK, INVESTIGATION; WHO INITIATED, WAS IT
JAMES YEOMANS, OFFICIAL REPORTER, USDe, 415-863-5179
2894
TO MAKE ABOUT HER TESTIMONY TODAY THAT'S THIS,
WHO IS MORE THAN WILLING TO BEND THE TRUTH IN AN
AGGRESSIVE WAY.
AND I THINK THIS IS AN EXTREMELY UPSETTING EXAMPLE OF
THE EXTENT TO WHICH SHE IS IN MR. ARMSTRONG
AND BY IMPLICATION OF MR. FOWLES. AND I WOULD MOVE TO STRIKE
THE TESTIMONY OF SOMEBODY WHO WITHHELD THIS
FOR THIS PERIOD OF TIME.
THE COURT: I'M NOT PREPARED TO
SHE MAY HAVE, QUOTE, "WITHHELD, II AS YOU
OF INFORMATION
FAR. BECAUSE
IT, MAY BE
SOMETHING THAT IS TOTALLY NOT TANGENTIAL BUT TOTALLY IRRELEVANT
TO AN ENTIRE DIFFERENT MATTER.
I'M NOT PREPARED TO SAY IT IS OR ISN'T, BUT I DO THINK
THAT I SHOULD NOT LET MS. ROBINS TESTIFY HERE TODAY UNTIL
RE READY TO CROSS.
AND I DON/T THINK YOU/RE READY TO
THE WHOLE STORY. AND ONCE YOU HAVE THE
I YOU CAN RENEW YOUR MOTION
TO BE A WITNESS AT ALL.
MS. LEARY: THERE'S TWO
STAND NOW AND VOIR DIRE HER OUTSIDE
WE
L YOU HAVE
AND THEN,
THINK
HER
THE PRESENCE THE
JURy WHAT SHE DID, WHAT THE STATEMENTS WERE, AND TRY F
WHAT THE RELEVANCE ON THAT BASIS.
WE CAN ASK THE GOVERNMENT I ALSO I I WHAT
KNOW ABOUT THE COMPUCHECK, INVESTIGATION; WHO INITIATED, WAS IT
2895
} OUT OF TO WHAT EXTENT THESE GENTLEMEN WERE
WERE INVOLVED, IF THE TWO INVESTIGATIONS WERE
COMBINED IN SOME WAY AND SHE KEPT THAT INFORMATION FROM THEM.
THE COURT: AREN'T YOU GOING TO KNOW BETTER WHEN
SEE THE ?
MS. WE MAY, BUT WE CAN CERTAINLY GET A PIECE
OF IT NOW HAVING HER ON THE STAND, VOIR DIRE HER ON THE
MR. I THINK I JUST TO MAKE RECORD I MY
COMPUCHECK WAS A SEPARATE INVESTIGATION IN
DALLAS.
HAD ANY
'S SOMETHING THAT WE HAVE PLAYED A ROLE IN OR
WITH. I NEED TO SPEAK ONLY BECAUSE I I M THE ONE
WHO'S BEEN WITH
RECENT ADDITION.
CASE THE LONGEST. MR. HARDY A FAIRLY
WE'VE NOT BEEN INVOLVED IN COMPUCHECK INVESTIGATION.
I DON'T KNOW IT'S CURRENT STATUS, IF IT'S STILL AN OPEN
INVESTIGATION, I BELIEVE IT IS. JUST FROM MY
MORNING, TO MY KNOWLEDGE THEY'RE TWO TOTALLY SEPARATE
HAD JUST
THE
THIS MORNING I REVIEWED A COPY OF THE 10K OR
FROM SEPTEMBER OF 1993, AND THAT POINT MR.
MS. LEARY:
INTEREST, SO IT IS SOME TWO YEARS
TAFT.
THE GOVERNMENT KNOW WHETHER
MR. MURPHY WAS INVOLVED IN THAT INVESTIGATION?
JAMES YEOMANS, OFFICIAL REPORTER, usnc, 415-863-5179
THIS
NOT
2895
OF TO WHAT EXTENT THESE GENTLEMEN WERE
WERE INVOLVED, IF THE TWO INVESTIGATIONS WERE
COMBINED IN SOME WAY AND SHE KEPT THAT INFORMATION FROM THEM.
THE COURT: AREN'T YOU GOING TO KNOW BETTER WHEN
SEE THE ?
MS. WE MAY, BUT WE CAN CERTAINLY GET A PIECE
OF IT NOW HAVING HER ON THE STAND, VOIR DIRE HER ON THE
MR. I THINK I JUST TO MAKE RECORD I MY
COMPUCHECK WAS A SEPARATE INVESTIGATION IN
DALLAS.
HAD ANY
'S SOMETHING THAT WE HAVE PLAYED A ROLE IN OR
WITH. I NEED TO SPEAK ONLY BECAUSE I I M THE ONE
WHO'S BEEN WITH
RECENT ADDITION.
CASE THE LONGEST. MR. HARDY A FAIRLY
WE'VE NOT BEEN INVOLVED IN COMPUCHECK INVESTIGATION.
I DON'T KNOW IT'S CURRENT STATUS, IF IT'S STILL AN OPEN
INVESTIGATION, I BELIEVE IT IS. JUST FROM MY
MORNING, TO MY KNOWLEDGE THEY'RE TWO TOTALLY SEPARATE
HAD JUST
THE
THIS MORNING I REVIEWED A COPY OF THE 10K OR
FROM SEPTEMBER OF 1993, AND THAT POINT MR.
MS. LEARY:
INTEREST, SO IT IS SOME TWO YEARS
TAFT.
THE GOVERNMENT KNOW WHETHER
MR. MURPHY WAS INVOLVED IN THAT INVESTIGATION?
JAMES YEOMANS, OFFICIAL REPORTER, usnc, 415-863-5179
THIS
NOT
1 MICHAEL J. YAMAGUCHI
United states Attorney
2
JOEL R. LEVIN
3 C ~ i e f , Criminal Division
41 RONALD D. SMETANA
Special Assistant U.S. Attorney
5 GEORGE D. HARDY
Assistant U.S. Attorney
6
7 San Francisco, CA 94102
Telephone: (415) 436-6851
II
UNITED STATES OF AKBRlCA,
CONNIE C. ARHSTRONG, JR., Iilnd
RICHARD A.FOlllrLES,
No. OR 94-0276 CAL
All!'lI!'IDAVIT Oll!' WILLARD L.
HATCHER, JR. Illi SUPPORT
OF GQVBRmU!JIIT'S EX-PARTE
SUBHXSSION
Plaintiff,
Dllfondanta.
v.
)
)
)
)
)
)
)
)
)
)
---------------)
11
10
15
16
12
14
17 I, Willard L. Hatcher, Jr., state that:
18 I have been a Special Agent with the Federal Bureau of
19 Investigation ("FBI") for 6 years, and am currently the case
20 agent for the prosecution in United States v. Connie C.
21 Armstrong. Jr .. et al, I have been involved with the
22 investigation of Hamilton Taft and Company since March of 1991.
23 Prior to his retirement on January 1, 1997, FBI special Agent
24 Patrick K. Murphy was the case agent.
25 2. I first learned of the government's possession of
26 recorded conversations of Connie C. Armstrong, Jr., on the night
AFFIDAVITOP WILLARD L HATCHIJIl, lR
IN SUPPORT OF GOYllRNMENT'S EX-PARTE
SUBMISSION
1 of January 12, 1997, after witness Terri Robins informed
2 Assistant United states Attorney George Hardy of their existence.
3 3. I telephoned Patrick K. Murphy on January 13, 1997, and
4 asked his knowledge of such recordings. Mr. Murphy stated that
5 he understood that Ms. Robins had made some recordings for the
6 government on an unrelated investigation. Mr. Murphy stated he
7 did not know that Ms. Robins had ever recorded conversations with
8 Armstrong.
4. Mr. Murphy and I knew of the existence of the Dallas
10 FBI's investigation of Armstrong's activity at Comp-U-Check. We
11 understood that this investigation related to conduct that
12 occurred well after the bankruptcy of Hamilton Taft. To our
13 knowledge this investigation was unrelated to Hamilton Taft
14 except for the common involvement of Armstrong.
15 5. Since January 12, 1997, I have contacted Special Agent
16 Peter A. Galbraith, the Dallas FBI case agent for the Comp-U-
17 Check investigation, and requested all taped conversations with
18 Armstrong. I have received thirty-six (36) audio tapes and
19 special Agent Galbraith has assured me that these constitute all
20 of the tape recordings of Armstrong in the possession of the
21 Dallas FBI.
22 6. In addition, Special Agent Galbraith provided to me
23 copies of 302 reports prepared relating to the tapes and
24 documents provided to the Dallas FBI by Terri Robins. He assured
25 me that all of the reports and documents have also been forwarded
26 to San Francisco.
AFFIDAVIT OF WILLAIlD L HATCIlEll, JR
IN SUPPORT OF GOVERNMENT'S E X ~ P A R . T E
SUBMISSION 2
1 7. Agent Galbraith expressed concern about the disclosure
2 the tapes, reports and documents to Armstrong because the Comp-U-
3 Check investigation and other related investigations are on-going
4 and he is concerned that disclosure of the materials may
5 jeopardize these investigations. He understood that certain of
6 the tapes, written materials and reports may have to be turned
7 over to Armstrong, but requested that the materials be
a scrutinized carefully and that those ultimately turned over be
9 limited to those necessary to protect Armstrong's rights without
10 harming the investigations.
11 8. Agent Galbraith said that all of the conversations were
12 recorded and documents were received in late 1993 and early 1994,
13 SUbsequent to the Hamilton Taft bankruptcy and before the
14 indictment of Armstrong.
15 9. After review of the tapes and documents by myself,
16 Special Agent Laura Nielson, Assistant United States Attorney
17 George Hardy and special Assistant United states Attorney Ronald
18 Smetana, we determined that Hamilton Taft is mentioned in five
19 (5) tapes; copies of the relevant portions of those tapes have
20 been reproduced for review by the Court for a determination of
21 whether they should be turned Over to Armstrong. In addition,
22 there is one document, a "novella" about Hamilton Taft, that has
23 statements attributed to Armstrong; since I do not know its
24 authorship, that document has been copied for the Court's review.
25 10. All of the reports, tapes and documents received from
26 the Dallas FBI are being made available for the Court's in camera
AFFIDAvrrOF wn.LARD L HATCHER, JR
IN SUPPORT OF GOVEIlNMIlNl"S !lX-FARTE
SUBMISSION 3
1 review.
2
3 I declare under penalty of perjury that the foregoing is
4 true and correct. Executed
5 Francisco, California.
Ii
7
8
COUNTY OF SAN FRANCISCO )
9 ) SS.
STATE OF CALIFORNIA )
10
11 Sworn to and subscribed in my presence on January 24, 1997,
12
13
15
in San Francisco, California.
e.eeeeceee.eeeJ
@, . .. '
z Notory N:>IIc - Co1IlomlrJ !
' , Son FrancIDCO CounIV 1
d" 0 0
16 My Commission Expires on ,OJ; :: i.\" ""'\ ie,' . cl
i
.' [CYll
\
17
18
20
21
22
23
24
2S
26
AFFIDAVIT OF WILLAIID L HATCHER, JR
IN SUPPORT OF GOVERNMENT'S EX-PART!!
SUBMLSSION 4
TRANSMIT VIA:
o Teletype
o Facsimile
!KJ AIRTEL
TO
PRECEDENCE:
o Immediate
D Inority
D Routine
DALLAS, SAC
FBI
CLASSIFICATION:
o TOP SECRET
o SECRET
o CONFIDENTIAL
o UNCLAS EFT 0
o UNCLAS
Date 8/4/93
FROM
SUBJECT
SAC, SAN FRANCISCO (196A-SF-93255) (P)
CONNIE CHIP ARMSTRONG, JRj
ET ALi
WIRE FRAUD (A)i
MAIL FRAUDj
00: SAN FRANCISCO
Reference airtel dated February 22,
SA HATCHER has obtained from
united states Attorney, MICHAEL YAMAGUCHT, forL _ I
I Iconfidential source to record conversa lons with b2
subiects of this case. I I
2 - DALLAS
(1) - SAN FRANCISCO
WLH/wlh
1.
" '
Approved:
Transmitted
(Nmnber) (Tune)
PCI' _
VB.
CONNIE
STATES
THE A.
C.
OF AMERICA,
PLAHITIFF,
ARMSTRONG, ,. ,
A. FOWLES,
DEFENDANTS.
)
)
)
}
) CR 94-0276
)
)
)
)
)
SAN FORNIA
27, 1997
PAGES 3441 - 3639
ATTORNEY
AVENUE
,CALIFORNIA 102
BY: G E ( ) R G ~ E D,.
n.' . /L'''.M..I..IJ.J D.
ASSISTANT
CHESTER L. BROWN, ESQ.
2450 BROADWAY, SUITE SSD
SANTA MONICAl CALIFORNIA 90404
SOLOMON WOLLACK,
388 MARKET STREET,
SAN
CONTINUED ON NEXT PAGE:)
1080
111
BY: JAMES J. t CSR
OFFICIAL COURT REPORTER, UBDC
COMPUTERIZED BY XSCRIBE
JAMES YEOMANS, OFFICIAL -863-5179
CAL
NORTHERN
BEFORE THE HO:N01WlLE
UNITED OF
PLAINTIFF,
VS.
I
DEFENDANTS.
OF
. LEGGE, JtJDGE
)
)
)
}
\
CR 94-0276 CAL J
)
}
)
)
)
SAJ.V FORNIA
27, 1997
PAGES 3441 - 3639
AVENUE
I CALIFORNIA 102
BY; GEORGE D. I ESQ.
RONALD D. SMETANA,
2450 550
SOLOMON WOLLACK, ESQ.
388 STREET I SUITE 1080
SAN I CALIFORNIA 111
ON NEXT PAGE:)
REPORTED BY: JAMES ~ 1 . YEOMANS t CSR
OFFICIAL COuKT REPORTER
COMPUTERIZED BY
JAMES -863-5179
NORTHERN
BEFORE THE HO:N01WlLE
UNITED OF
PLAINTIFF,
VS.
I
DEFENDANTS.
OF
. LEGGE, JtJDGE
)
)
)
}
\
CR 94-0276 CAL J
)
}
)
)
)
SAJ.V FORNIA
27, 1997
PAGES 3441 - 3639
AVENUE
I CALIFORNIA 102
BY; GEORGE D. I ESQ.
RONALD D. SMETANA,
2450 550
SOLOMON WOLLACK, ESQ.
388 STREET I SUITE 1080
SAN I CALIFORNIA 111
ON NEXT PAGE:)
REPORTED BY: JAMES ~ 1 . YEOMANS t CSR
OFFICIAL COuKT REPORTER
COMPUTERIZED BY
JAMES -863-5179
1
2
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.... .1'
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3446
THE COURT: YES. COMPUCHECK INVESTIGATION? IS THAT
WHAT YOU'RE TALKING ABOUT? YES. THEY FILED SOME STUFF AND, I
GUESS, THEY GAVE IT JUST TO COUNSEL FOR MR. ARMSTRONG BECAUSE I
DON'T THINK MR. FOWLES IS INVOLVED IN IT, AT LEAST, FROM WHAT I
SAW.
MR. SMETANA: THE QUOTE STATEMENTS OF THE DEFENDANT
THAT WE HAVE AND ANY POTENTIAL BRADY THAT WE HAVE RELATE ONLY
TO MR. ARMSTRONG AND NOT TO MR. FOWLES. THOSE HAVE BEEN
PROVIDED TO COUNSEL FOR MR. ARMSTRONG.
THE COURT: AS I SAID, I GOT A GREAT BIG BOX FRIDAY
AFTERNOON FULL OF MATERIAL ON THAT, SO WHAT DO YOU FOLKS WANT
TO DO?
MR. BROWN: LET'S TALK ABOUT THESE TAPES. I KNOW --
FIRST, I KNOW THE COURT IS PROBABLY VERY CONCERNED, I KNOW WE
ARE. FROM OUR PERSPECTIVE, YOUR HONOR, IT'S A MAJOR PROBLEM.
WE'VE JUST RECEIVED -- WE HEARD ON FRIDAY, I BELIEVE,
AFTERNOON THAT THEY HAD FINALLY AND I DON'T, I DON'T BELIEVE
IT'S MR. SMETANA OR MR. HATCHER OR MR. HARDY'S FAULT, BUT IT'S
ONE GOVERNMENT AND WE ALL KNOW HOW THOSE THEORIES WORK, IT'S
THE ABOUT FBI IN DALLAS.
WHAT APPARENTLY HAS HAPPENED HERE, WHILE MR. ARMSTRONG
WAS CLEARLY REPRESENTED BY COUNSEL AND WHILE THERE WAS, I
BELIEVE, GRAND JURY GOING ON IN THIS CASE, MS. ROBINS WAS
ACTING AS AN INFORMANT FOR THE FBI DOWN IN DALLAS. IT REALLY
IS HARD TO IMAGINE, WITH THE FACT THAT SHE WAS A GRAND JURY
1
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,",
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2S
3446
THE COURT; YES. COMPUCHECK INVESTIGATION? IS THAT
SAW.
MR. SMETANA: THE QUOTE STATEMENTS OF TIrE DEFENDANT
TO MR. ARMSTRONG AND NOT TO MR. FOWLES. THOSE HA.VE BEEN
TO DO?
MR. BROWN: LET'S TALK ABOUT THESE TAPES. I KNOW
1
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5
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7
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9
10
11
12
13
,",
14
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2S
3446
THE COURT; YES. COMPUCHECK INVESTIGATION? IS THAT
SAW.
MR. SMETANA: THE QUOTE STATEMENTS OF TIrE DEFENDANT
TO MR. ARMSTRONG AND NOT TO MR. FOWLES. THOSE HA.VE BEEN
TO DO?
MR. BROWN: LET'S TALK ABOUT THESE TAPES. I KNOW
1
2
3
4
5
6
7
8
9
10
11
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-II'
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25
3447
WITNESS OF THE GOVERNMENT HERE, THE FBI HERE IN LOS ANGELES DID
A NUMBER OF INTERVIEWS DOWN IN THE DALLAs AREA.
MR. MURPHY WENT DOWN THERE ON OCCAS ION WE KNOW FROM
MR. EVERETT WHO WAS FORMALLY WORKING WITH THE GOVERNMENT
THAT - - ON ONE OCCASION, AT LEAST, THAT WERE SOME DALLAS AGENTS
THAT WORKED WITH MR. MURPHY WHEN THEY WERE IN DALLAS, THAT THIS
INFORMATION WASN'T KNOWN, ALTHOUGH, IT'S NOT REALLY OUR PROBLEM
WHETHER IT WAS COMMUNICATED TO THE SAN FRANCISCO --
THE COURT: IT IS YOUR PROBLEM. WHAT DO YOU WANT TO
DO ABOUT IT? WHAT DO YOU WANT TO DO?
MR. BROWN: YOUR HONOR, WE'VE JUST RECEIVED - - LET ME
TELL YOU WHAT'S HAPPENED. THE GOVERNMENT - - APPARENTLY,
THERE'S SOME -- 35 SOME TAPES WITH 70 SOME HOURS OF INFORMATION
ON IT.
THE COURT: I'VE GOT A GREAT BIG BOX, LITERALLY A BIG
BOX, OF MATERIAL THEY BROUGHT IN MY OFFICE FRIDAY AFTERNOON.
MR. BROWN: ALL WITH SOUND RECORDINGS ON THEM.
THE COURT: NOT ALL, SUBSTANTIAL QUANTITY OF PAPER IN
THERE. I'M NOT SURE QUITE WHAT IT IS. WHAT I ATTEMPTED TO DO
IS START WITH WHAT WAS OBVIOUSLY GREATEST INTEREST TO YOU, THAT
IS THE TAPES AND, I GUESS I THE OTHER STATEMENTS WHICH HAD MR.
ARMSTRONG ON THEM, SO --
MR. BROWN: I'LL TELL YOU, YOUR HONOR, WE WERE TOLD
THAT THERE WERE THREE HOURS WORTH OF SOUND RECORDINGS THAT
SPECIFICALLY MENTIONED HAMILTON TAFT. THE GOVERNMENT
1
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-"
14
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3447
ON IT.
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-"
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25
3447
ON IT.
1
2
ION THAT THE
THIS
3448
THEIR'
, INVOLVED MR.
3 ARMSTRONG BUT
4
5
'6
7
8
9
lAM
I
THE COURT: I GUESS THAT'S A FAIR
MR BROWN: THAT I S WE WERE AnVI SED. THESE
HONOR, AT LEAST SOME BRADY MATERIAL.
SAYING I THINK THE GOVERNMENT WOULD
IN ONE OF THEIR MOTIONS THAT THEY FILED THIS MOTION ON
OF MIND. ASKING THAT WHATEVER INFORMATION FROM
10 THESE TAPES INDICATES MR. ARMSTRONG'S DENIAL OF ANY WRONGDOING
11 AT HAMILTON TAFT NOT BE PERMITTED TO BE ADDUCED DURING THE
12 COURSE OF THIS TRIAL.
13 THE COURT: PARDON ME A SECOND. I THINK I SEE MR.
14 SOLODOFF IN THE HALLWAY THERE.
MR. HATCHER, WOULD YOU TELL HIM THAT
TELEPHONE STANDBY AND IF WE NEED HIM WE WILL
JUST TO BE ON
HIM A
17 TELEPHONE CALL. HE SHOULD BE AVAILABLE BY TELEPHONE THIS WEEK.
18
19
GO AHEAD.
MR. BROWN: HONOR, FOR US TO
20 ASSESS THIS, AND I HATE TO SAY THIS, IT'S THREE HOURS, WE WERE
21
22
23
24
25
TOLD ABOUT ON FRIDAY. WE WERE IN THE MIDDLE OF --
WERE ARRIVING.
THE COURT: DOUBT YOU HAVE NOT HAD TIME TO LI STEN
TO THE TAPES. WHAT DO YOU WANT TO DO?
MR. BROWN: I REALLY HATE TO SAY THIS. I THINK WE
JAMES YEOMANS, OFFICIAL REPORTER, USDC/ 415-863-5179
1
2
ION THAT THE
THIS
3448
THEIR'
, INVOLVED MR.
3 ARMSTRONG BUT
4
5
'6
7
8
9
lAM
I
JUST TO BE ON
HIM A
18
19
GO AHEAD.
21
22
23
24
25
WERE ARRIVING.
1
2
ION THAT THE
THIS
3448
THEIR'
, INVOLVED MR.
3 ARMSTRONG BUT
4
5
'6
7
8
9
lAM
I
JUST TO BE ON
HIM A
18
19
GO AHEAD.
21
22
23
24
25
WERE ARRIVING.
3449
1 NEED AN OPPORTUNITY TO REVIEW THESE AND/ IF WE NEED TO TAKE A
2 DAY JUST TO REVIEW TAPES, I THINK WE NEED TO DO IT. WE
3 CAN 'T - - THE COURT - - I THINK THE COURT NEEDS TO REVIEW WHAT
4 MATERIAL IT HAS. THIS DEFINITELY HAS BRADY MATERIAL IN IT.
5 THERE'S ALL KINDS OF MOTIONS, AS THE COURT KNOWS,
6 INCLUDING MOTIONS FOR DISMISSAL THAT WE OUGHT TO PERHAPS BE
7 REGARDING THIS SITUATION.
8 THERE/S MACIA PROBLEMS BECAUSE MR. ARMSTRONG IS
9 REPRESENTED BUT COUNSEL AT A TIME WHEN THE INVEST ON
10 CLEARLY HAD FOCUSED ON HIM AND HE WAS A TARGET.
11 THERE'S A NUMBER OF OTHER REMEDIES, THE LEAST OF WHICH
12 WOULD BE TERRI ROBINS SHOULD NOT BE PERMITTED TO TESTIFY.
THE GOVERNMENT HAS ALREADY INDI THAT 13
14
15
16
THE
STEP POSSIBLY
MEAN, I JUST
YOU? MAYBE
AGAIN, WHAT DO YOU WANT TO DO? I
WHAT'S COULD COME OUT FOR
FOR A MOTION TO DISMISS. I DON'T KNOW
17 WHETHER THEY HAVE MERIT OR NOT.
18 MR. BROWN: THAT WOULD OBVIOUSLY BE WHAT WE'RE LOOKING
19 FOR.
20 THE COURT: NOT GOING TO BE WANTING TO PUT MR.
21 ARMSTRONG'S OWN STATEMENTS IN THIS CASE. BECAUSE YOU'D BE
22 DISCLOSING TO THE JURY THE FACT HE'S - OTHER INVESTIGATION IN
23 ANOTHER I WOULDN'T THINK YOU'D WANT TO DO THAT. YOUR
24 CALL, BUT THAT'S A TACTICAL
25 MR. BROWN: WE WERE TOLD AND COURT WOULD HAVE TO
I USDC, 415-863-5179
3449
5 THERB'S ALL KINDS OF MOTIONS, AS THE COURT KNOWS,
7 FILED REGARDING THIS SITUATION.
9 REPRESENTED BUT COUNSEL AT A TIME WHEN THE INVESTI ON
13
14
15
16
THE
STEP POSSIBLY
MEAN, I JUST
YOU? MAYBE
THE GOVERNMENT HAS ALREADY INDI THAT
19 FOR.
23 ANOTHER I WOOLDN'T THINK YOU'D WANT TO DO THAT. YOUR
, USDC, 415-863-5179
3449
5 THERB'S ALL KINDS OF MOTIONS, AS THE COURT KNOWS,
7 FILED REGARDING THIS SITUATION.
9 REPRESENTED BUT COUNSEL AT A TIME WHEN THE INVESTI ON
13
14
15
16
THE
STEP POSSIBLY
MEAN, I JUST
YOU? MAYBE
THE GOVERNMENT HAS ALREADY INDI THAT
19 FOR.
23 ANOTHER I WOOLDN'T THINK YOU'D WANT TO DO THAT. YOUR
, USDC, 415-863-5179
1
2
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. pI
14
15
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23
24
25
3450
LOOK AT THE IN CAMERA MATERIAL.
THE COURT: DO I? I REALLY AM CHOKING ON THAT. IT'S
HOURS AND HOURS OF SITTING AND LISTENING.
MR. BROWN: I KNOW.
THE COURT: I'VE NEVER HAD ANY REASON TO QUESTION THE
GOVERNMENT'S GOOD FAITH WHEN THEY SAY HERE'S A TAPE THAT
SOMEBODY'S CONVERSATION IS ON AND THESE TAPES DON'T HAVE THAT
PERSON ON THE TAPE AT ALL. YOU KNOW, I GENERALLY TAKE THE
GOVERNMENT'S WORD ON THOSE THINGS. I'VE NEVER BEEN MISLED BY
THE GOVERNMENT.
MR. BROWN: WE, YOUR HONOR, WITH ALL -- IN ALL CANDOR,
WERE OFFERED THESE TAPES SOMETIME LATE FRIDAY AFTERNOON,
MID-AFTERNOON, AND I SIMPLY ADVISED MR. SMETANA TO FAX OVER
THESE VARIOUS MOTIONS THAT THE COURT HAS ..
IN LOOKING AT THOSE MOTIONS AND COORDINATING OUR
WITNESSES AND GETTING READY FOR TODAY AND THE COMPLETION OF
THAT, WE DID NOT HAVE TIME TO BE LISTENING AND EVALUATING THREE
HOURS.
I HAVE WITNESSES HERE FROM OUT OF TOWN TODAY. TO DO
JUSTICE TO THIS INFORMATION, QUITE FRANKLY, WE WOULD NEED TO
TAKE TODAY TO REVIEW THESE TAPES AND DETERMINE WHAT THE
APPROPRIATE RESPONSE THAT WE WOULD HAVE WI-TH REGARD TO THIS
BRADY MATERIAL AND WHATEVER OTHER INFORMATION PERTAINS TO THIS
CASE. THESE TAPES HAVE THREE HOURS OF COMMENTS BY - - AND
STATEMENTS BY THE DEFENDANT.
3450
1 LOOK AT THE IN CAMERA MATERIAL.
2 THE COURT: DO I? I REALLY AM CHOKING ON THAT. IT'S
3 HOURS AND HOURS OF SITTING AND LISTENING.
MR. BROWN: I KNOW. 4
5 THE COURT: I'VE NEVER HAD ANY REASON TO QUESTION THE
6 GOVERNMENT'S GOOD FAITH WHEN THEY SAY HERE'S A TAPE THAT
7 SOMEBODY'S CONVERSATION IS ON AND THESE TAPES DON'T HAVE THAT
8 PERSON ON THE TAPE AT ALL. YOU KNOW, I GENERALLY TAKE THE
9 GOVERNMENT'S WORD ON THOSE THINGS. I'VE NEVER BEEN MISLED BY
10 THE GOVERNMENT.
11 MR. BROWN: WE, YOUR HONOR, WITH ALL -- IN ALL CANDOR,
12 WERE OFFERED THESE TAPES SOMETIME LATE FRIDAY AFTERNOON,
13 MID-AFTERNOON, AND I SIMPLY ADVISED MR. SMETANA TO FAX OVER
14 THESE VARIOUS MOTIONS THAT THE COURT HAS ..
15 IN LOOKING AT THOSE MOTIONS AND COORDINATING OUR
16 WITNESSES AND GETTING READY FOR TODAY AND THE COMPLETION OF
17 THAT, WE DID NOT HAVE TIME TO BE LISTENING AND EVALUATING THREE
18 HOURS.
19 I HAVE WITNESSES HERE FROM OUT OF TOWN TODAY. TO DO
20 JUSTICE TO THIS INFORMATION, QUITE FRANKLY, WE WOULD NEED TO
21 TAKE TODAY TO REVIEW THESE TAPES AND DETERMINE WHAT THE
22 APPROPRIATE RESPONSE THAT WE WOULD HAVE WI-TH REGARD TO THIS
23 BRADY MATERIAL AND WHATEVER OTHER INFORMATION PERTAINS TO THIS
24 CASE. THESE TAPES HAVE THREE HOURS OF COMMENTS BY - - AND
25 STATEMENTS BY THE DEFENDANT.
3450
1 LOOK AT THE IN CAMERA MATERIAL.
2 THE COURT: DO I? I REALLY AM CHOKING ON THAT. IT'S
3 HOURS AND HOURS OF SITTING AND LISTENING.
MR. BROWN: I KNOW. 4
5 THE COURT: I'VE NEVER HAD ANY REASON TO QUESTION THE
6 GOVERNMENT'S GOOD FAITH WHEN THEY SAY HERE'S A TAPE THAT
7 SOMEBODY'S CONVERSATION IS ON AND THESE TAPES DON'T HAVE THAT
8 PERSON ON THE TAPE AT ALL. YOU KNOW, I GENERALLY TAKE THE
9 GOVERNMENT'S WORD ON THOSE THINGS. I'VE NEVER BEEN MISLED BY
10 THE GOVERNMENT.
11 MR. BROWN: WE, YOUR HONOR, WITH ALL -- IN ALL CANDOR,
12 WERE OFFERED THESE TAPES SOMETIME LATE FRIDAY AFTERNOON,
13 MID-AFTERNOON, AND I SIMPLY ADVISED MR. SMETANA TO FAX OVER
14 THESE VARIOUS MOTIONS THAT THE COURT HAS ..
15 IN LOOKING AT THOSE MOTIONS AND COORDINATING OUR
16 WITNESSES AND GETTING READY FOR TODAY AND THE COMPLETION OF
17 THAT, WE DID NOT HAVE TIME TO BE LISTENING AND EVALUATING THREE
18 HOURS.
19 I HAVE WITNESSES HERE FROM OUT OF TOWN TODAY. TO DO
20 JUSTICE TO THIS INFORMATION, QUITE FRANKLY, WE WOULD NEED TO
21 TAKE TODAY TO REVIEW THESE TAPES AND DETERMINE WHAT THE
22 APPROPRIATE RESPONSE THAT WE WOULD HAVE WI-TH REGARD TO THIS
23 BRADY MATERIAL AND WHATEVER OTHER INFORMATION PERTAINS TO THIS
24 CASE. THESE TAPES HAVE THREE HOURS OF COMMENTS BY - - AND
25 STATEMENTS BY THE DEFENDANT.
JAMES YEOMANS, OFFICIAL REPORTER, USDC, 415-863-5179 EXHIBITS TO REPLY IN SUPPORT OF 2255 MOTION PAGE 66
3451
1 THE COURT: SO YOU'RE SUGGESTING YOU NEED A DAY OFF
2 TODAY TO REVIEW TAPE?
3
4
MR. BROWN: YES, SIR.
THE THE PROBLEM WITH THAT, OF COURSE, WE
5 BROUGHT THE JURY IN.
6
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8
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19
POSS
TO THEM
MR. I THE NOW. IS IT
WELL, I'D RATHER GIVE THEM A DAY OFF TOMORROW AND I
THEY'
SIMPLY SEND THEM HOME.
, SO BE
I RATHER, IF YOU NEED A DAY OFF, TO TAKE IT OFF
RUDE
TOMORROW OR THE NEXT DAY, BUT INTO
WHAT YOU'RE TO DO
I AND YOU'RE WITH
MR. BROWN: WE CAN DO IT TOMORROW. I UNDERSTAND WHAT
THE COURT IS SAYING. I THINK WE
AS BECAUSE NOW WE'RE
IT AND IT
LOOK THESE AS SOON
DEFENSE,
EVERYTHING.
COURT: I DONIT SEE HOW. I CAN'T
20 DENY YOU THE RIGHT TO DO IT.
21 MR. SMETANA: I HATE TO SUGGEST THIS AS A TEMPEST IN A
22 TEAPOT. IF COUNSEL WILL LISTEN TO THE TAPES HE'LL FIND THERE'S
23 VERY LITTLE OF SUBSTANCE, IF ANYTHING AT ALL, NOTHING THAT
24 HASN'T BEEN SAID OR HEARD
25 MS. LEARY: AS TO MR. FOWLES I WOULD MOVE FOR THE
3451
3
4
6
7
8
9
10
11
12
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POSS
TO THEM
THEY'
, SO BE
I RATHER, IF NEED A DAY OFF, TO TAKE IT OFF
RUDE
WHAT YOU'RE TO DO
I AND YOU'RE WITH
IT AND IT
LOOK THESE AS SOON
DEFENSE,
EVERYTHING.
COURT: I DON'T SEE HOW. I CAN'T
23
24
25
VERY LITTLE OF SUBSTANCE, IF ANYTHING AT , NOTHING THAT
HASN'T BEEN SAID OR HEARD
MS. LEARY: AS TO MR. FOWLES I WOULD MOVE FOR THE
3451
3
4
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7
8
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10
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14
15
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POSS
TO THEM
THEY'
, SO BE
I RATHER, IF NEED A DAY OFF, TO TAKE IT OFF
RUDE
WHAT YOU'RE TO DO
I AND YOU'RE WITH
IT AND IT
LOOK THESE AS SOON
DEFENSE,
EVERYTHING.
COURT: I DON'T SEE HOW. I CAN'T
23
24
25
VERY LITTLE OF SUBSTANCE, IF ANYTHING AT , NOTHING THAT
HASN'T BEEN SAID OR HEARD
MS. LEARY: AS TO MR. FOWLES I WOULD MOVE FOR THE
3452
1 TAPES AND THE WRITTEN INFORMATION.
..
2 THE 'S NOTHING ON TO MR.
3
4 MS. LEARY: IF INVOLVED TAFT MR.
5 FOWLES/ THERE'S ABOUT HIM IT, THEN IT'S BRADY AS TO
6 MR.
7 THE THEN IF THAT'S TRUE THEN YOU'VE GOT THE
8 GOVERNMENT/S REPRESENTATION TO YOU MR. FOWLES NOT MENT IONED J
9 AND YOUR LISTENING TO TAPES CANJT DO ANY BETTER THAN THAT.
10 MS. LEARY: I UNDERSTAND I YOUR HONOR, BUT I ASK
II THE TAPES AND FOR THE - WHATEVER WRITTEN DOCUMENTATION EXISTS
12 SO THAT WE CAN INVESTIGATE.
13 MR. SABELLI: DOES DEPEND ON WHAT'S ON THE TAPES. THE
,.
14 STATEMENTS MADE ON THE TAPES HAVE TO DO WITH THE STRUCTURE AND
15 OVERFLOW WITHIN HAMILTON TAFT, DECISION MAKING, NOTHING
16 ABOUT MR. FOWLES. THEY MAY VERY WELL BE BRADY STATEMENTS. WE
17 DON'T KNOW WHAT STATEMENTS ARE. SIMPLY KNOWING MR. FOWLES
l8 ISN'T ON THERE ISN'T ENOUGH FOR
19 MR. SMETANA: AGAIN! MY EARLIER COMMENT REALLY MADE IN
20 GOOD , THERE REALLY IS NO DETAILED DESTRUCTION OF
21 THERE'S A PASSING MENTION HERE AND THERE OF
22 HAMILTON I SORT OFI I DIDN'T DO ANYTHING WRONG HAMILTON
23 TAFT, BUT THERE'S NO IN DEPTH PLANNING MEETING THEY DID A
24 DISCUSSION OF HAPPENED TWO EARLIER.
25 THE COURT: WHAT IS FORM OF THE MATERIAL THAT YOU
YEOMANS, CIAL REPORTER, I 415-863-5179
3452
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3
6 MR.
,.
YEOMANS, CIAL REPORTER, I 415-863-5179
3452
..
3
6 MR.
,.
YEOMANS, CIAL REPORTER, I 415-863-5179 EXHIBITS TO REPLY IN SUPPORT OF 2255 MOTION PAGE 68
1 MICHAEL J. YAMAGUCHI
United states Attorney
2
JOEL R. LEVIN
3 Chief, Criminal Division
4
5
6
7
8
RONALD D. SMETANA
GEORGE D. HARDY
Assistant U.S. Attorney
Telephone: (415) 436-6851
r ",
'. ~ t ., .":t':
. ~ ' ' ' '
''''"''
9
10
11
12 UNITED STATES OF AMERICA, )
)
13 Plaintiff,)
)
14 v. )
)
15 CONNIE C. ARMSTRONG, JR., and )
RICHARD A.FOWLES, )
16 )
Defendants. )
17 )
18
Criminal No. 94-0276-CAL
GOVERNMENT'S OPPOSITION
TO ARMSTRONG'S MOTION TO
DISMISS AND/OR REQUEST
FOR PRETRIAL INSTRUCTION
Date: Nov. 8, 1996
Time: 1:30 p.m.
Courtroom: 10
(Han. Charles A. Legge)
19 .L..
20
Introduction
\
Defendant Connie C. Armstrong, Jr., seeks (again) to
21 dismiss counts seven through twenty-one of the Indictment. In the
22 alternative, he seeks an instruction on the "law of the case." For
23 the reasons set forth below, the government opposes this motion.
24 II. Argument
25 ~ Statement of facts.
26 As set forth in the grand jury's Indictment, the charges
000156
1 arise from defendant's operation of Hamilton Taft, a San Francisco
2 based company that provided payroll tax services to large
3 companies. Client companies transferred their payroll taxes to
4 Hamilton Taft and Hamilton Taft was obligated to pay the taxes to
5 the Internal Revenue Service and other taxing authorities on time.
6 At the time the defendant acquired Hamilton Taft the
7 company had a working capital deficit of more than $14 million.
8 Over a period of two years, as money was siphoned out and Hamilton
9 Taft accrued interest and penalties on money it did not have, the
10 withholding of tax payments grew from $19.4 million to $68.2
11 million per quarter. When Hamilton Taft ultimately collapsed,
12 approximately $85 million in taxes were unpaid.
13 Despite the fact that the defendant was aware that he
14 could not pay the taxes of his clients when due, he induced a
15 number of companies to contract with Hamilton Taft with
16 representations that Hamilton Taft had the ability to pay taxes
17 when due, was paying taxes when due and would continue to pay
18 taxes when due.
19 As a further part of the scheme, the defendant concealed
20 the non-payment of taxes to induce the victims to continue sending
21 (on a weekly, biweekly or monthly basis) their tax payments and to
22 avoid the wholesale cancellation of contracts. Finally, when the
23 defendant's scheme was exposed, he sent out lulling letters denying
24 the existence of the scheme and encouraging to continue
25 sending payments.
26 II
J
GOVERNMENT'S OPPOSITION TO ARMSTRONG'S
MOTION TO DISMISS AND/OR REQUEST FOR
PRETRIAL INSTRUCTION 2
0001.57
1 .a....
2
Defendant's Reliance on In re Hamilton Taft & Co. is
misplaced.
3 The litigation underlying In re Hamilton Taft & Co., 53
4 F.3d 285 (9th Cir. 1995), was between two parties over a fixed sum
5 of money whether the trustee in bankruptcy would be able to
6 reclaim for the larger group of victims funds paid to the IRS on
7 behalf of S & S Credit. The Ninth Circuit initially ruled that a
8 preferential payment had been made on behalf of S & S and that the
9 funds paid to the IRS on its behalf would have to be repaid by S &
10 S to the trustee. S & S petitioned for rehearing, and before the
11 matter could be heard, the case was settled, the appeal was
12 dismissed as moot, and the decision was vacated. In re Hamilton
13 Taft & Co., 68 F.3d 337 (9th Cir. 1995). The Ninth Circuit s
14 vacation of the opinion nullifies and renders the judgment
15 inoperative. United States v. Munsingwear, 340 U.S. 36, 40-41
16 (1950). Arguably, the parties could now relitigate the issues.
17 340 U.S. at 40.
18 Hamilton Taft & Co.
In short, this Court is not bound by In re
19 This conclusion is made more compelling by the fact that
\
20 the government was not a party to the litigation at the time the
21 opinion was rendered by the Ninth Circuit. When the petition for
22 rehearing was filed the Court obviously recognized that its opinion
23 could well interfere with the governments right and ability to
24 collect employee taxes and thus invited the government to
25 participate in the case as an amicus curiae. The government did
26 file a brief advocating the theory that the funds were held by
J
000158
1 Hamilton Taft in trust for the government. The case was settled
2 and the opinion vacated before the government's position could be
3 considered. To resolve the i;sue t;,o
4 which had tQ b_t;.. heq.rcLi,"",fundsIDWt:lllY
5 )}is) ro
6 The inescapable conclusion from this discussion is:
7 there is no "l,,!w Rather, there remains a dispute of
8 fact that can be resolved only by the scheduled jury trial.
11
9
10
has again pummeled a straw man.
The trial evidence will show that, at a minimum, all of
defendant's argument is his premise that he complied with the
conditions of his contracts and thus did nothing wrong. Defendant
However, fundamental to
Contrary To Defendant's Contention, Hamilton Taft Did Not
Comply with Its Contractual Duties.
The government will subsequently demonstrate why counts
Hamilton Taft's contracts required timely payment of taxes on or
before the statutory deadlines.
1
Some of the contracts also
specifically limited the short-term investments that could be made.
Thus, Scott Paper's contract stated that:
7 through 21 should not be dismissed.
20
19
14
15
16
17
18
12
13
In order to satisfy Hamilton Taft's investment criteria
21 (Security of Principal, High Degree of Liquidity), Hamilton
Taft's investments are limited to investments collateralized
22 by United States Government securities and United States
Government sponsored obligations.
23
24
25
26
lContrary to defendant's assertion that he "occasionally" paid
the taxes late (Defendant's Memorandum 10:16), he intentionally
failed to make more than 300 payments aggregating more than $255
million, and the frequency of missed payments as well as .their
dollar amounts were increasing almost logarithmically.
GOVERNMENT'S OPPOSITION TO ARMSrRONG'S
J
000159
....
payments is to assure an adequate supply of current payments.
continued payment. The only way to pay past due taxes with current
contracts were executed, but on an ongoing basis in order to assure
the money was paid over to Hamilton Taft that he could use it for
any purpose he wanted. He induced his clients to do business with
Hamilton Taft on the representation that he could and would pay the
will amply demonstrate.
Defendant did not just commit fraud at the time the
taxes on a timely basis. His knowing and intentional use of the
funds otherwise clearly constitutes fraud, as the trial evidence
1 Others limited Hamilton Taft to benefits accruing from temporary
2 use of client funds or benefits accruing from proper use of client
3 funds. Given the intentional failures to pay taxes on time, the
long-term use of client funds and the other than proper use,
defendant's assertion that he complied with the contracts is
nothing less than revisionist history.
Similarly erroneous is defendant's assertion that once
Defendant and his employees concealed the tax withholds as much as
possible. When discovered, they lied about the basis for missed
payments. Thus, each payment from each of the victims was directly
attributable to the fraud and a direct and intended consequence of
22 the ongoing fraud.
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
."
21
23 Defendant's argument that this was not a Ponzi scheme
24 (Defendant's Memorandum, 10:8-10) is similarly without merit. The
25 defendant is not before this court because he paid "Client A's
26 taxes with Client B's and Client C's money;" the government would
000160
1 expect that all of A, Band C's payments would be made from the
2 collective contributions from A, Band C. Rather, defendant is
3 before the court, in part, because he bought a ranch with A's money
4 paid to Hamilton Taft for a January tax payment (while
5 intentionally failing to make A's tax payment), and then used Band
6 C's funds paid to Hamilton Taft in April for their April tax
7 payment to make A's January payment while failing to make Band C's
8 April tax payment.
9 Indeed, the description of a Ponzi scheme in In re United
10 Energy Corp., 944 F.2d 589, 590 at fn.l (9th Cir. 1991)2 describes
11 precisely what defendant was doing. Defendant made tax payments
12 for clients with monies obtained from later tax payments from other
13 clients. By funnelling later payments to earlier taxes defendant
14 created the illusion that taxes were being timely paid and that
15 (bankrupt) Hamilton Taft had the financial wherewithal to pay the
16 taxes, inducing continued use of Hamilton Taft's services, all the
17 while siphoning out funds for defendant's personal benefit. The
18 only sorcery involved was the defendant's sleight of hand;
19 unfortunately for him, the audience caught on to the trick!
,
20 IL..
21
22
There is no basis for the dismissal of Counts Seven through
Twenty-One.
Regardless of how the relationship between Hamilton Taft
23
24
25
26
2"A Ponzi scheme is a fraudulent arrangement in which an
entity makes payments to investors from monies obtained from later
investors The fraud consists of funnelling proceeds
received from new investors in guise of profits from the alleged
business venture, thereby cultivating an illusion that a legitimate
profit-making business opportunity exists and inducing further
investment.
J
000161
1 and its clients is categorized, Counts Seven through Twenty-One
2 withstand attack.
3 Defendant appears to argue that the government can
4 proceed on counts One through Six, the fraud in the inducement, but
5 that proceeding on the other counts is "illogical, excessive and
6 totally prejudicial " (Defendant's Memorandum 14:15-16) As he
7 has done throughout these proceedings, defendant has made a lengthy
8 and colorful argument all the while ignoring the one document
9 relevant to the inquiry -- the Indictment. It does not depend on
10 the existence of any particular relationship between defendant and
11 the victim companies. Rather it alleges a fraudulent course of
12 conduct in addition to and beyond the inducement to keep the money
13 flowing into Hamilton Taft. The Indictment alleges fraud on an
14 ongoing basis to keep money flowing into Hamilton Taft by a cover-
15 up3, false tax returns
4
, a change in cover-up methodology5, the
16 selection of specific clients for withholding and Armstrong's
17 attempt to disseminate a false account of what was happening to
18 client funds. All of these allegations are incorporated by
19 reference in each of the counts. (Indictment, paragraph 24.)
20
21
22
23
24
25
26
3"This concealment enabled Hamilton Taft to continue to
receive funds from its clients, to avoid massive cancellation of
its contracts, and to preserve the opportunity for new business."
4"The clients who received these returns were thereby falsely
led to believe that all their taxes had been paid."
5"By choosing to pay past due taxes instead of currently due
taxes, Armstrong was able to delay, for a much longer time,
discovery by the clients that their taxes had been paid late. At
the same time, he was able to create the false impression that
Hamilton Taft's business was running smoothly."
MOTION TO DISMISS AND/OR REQUESr FOR
000162
1 Defendant argues, however, that all allegations of the
2 Indictment, other than the fraud in the inducement allegations, are
3 legally insufficient to charge criminal activity because of the
4 Ninth Circuit opinion of In re Hamilton Taft & Co. which
5 establishes (or so defendant claims) the "law of the case" contrary
6 to the government's charging theory. The "law of the case" that
J
7 defendant sees in that opinion and on which defendant focuses his
8 argument is the conclusion that the relationship between Hamilton
9 Taft and its clients was one of "debtor-creditor", and not a trust
10 relationship. From that "law of the case", the defendant seeks to
11 extrapolate to the further conclusion that the defendant was free
12 to do with the clients' tax money whatever he wanted, because it
13 was Hamilton Taft's "property". Hence, he argues that any criminal
14 fraud allegations in the Indictment which describe what the
15 defendant did with client's tax money after the contracts were
16 signed must be legally insufficient, and therefore dismissed. His
17 argument is further based on the factual predicate that Hamilton
18 Taft complied w-ith the terms of the contracts with its clients.
19 Defendant's argument is factually and legally flawed
20 As noted earlier, the Ninth Circuit opinion has no

21 precedential .or controlling effect on this Court (and therefore can
22 not be considered "the law of the case") because it was vaca'ted.
23 It should also have little, if any, persuasive effect on this Court
24 because it was vacated in the context of a motion for
25 reconsideration, before the Ninth Circuit had heard from the
26 government. Furthermore, even if this Court were to conclude that
000163
....
1 the legal relationship between Hamilton Taft and its clients was
2 one of "debtor-credi tor", the further coneIus ion that the defendant
3 could do whatever he wished with the tax money (send it to a secret
4 Swiss bank account?) does not logically, or legally, follow. Can
5 a debtor never defraud a creditor? The answer is obvious. In
6 fact, the defendant acknowledged as much when he said:
7 "For instance, had Mr. Armstrong s imply taken clients'
monies and opened a Swiss bank account, while totally
8 ignoring his contractual duty to pay their taxes, he
almost certainly could be charged with engaging in a
9 scheme to defraud." (Motion, p. 9)
10 The defendant asserts as a matter of fact that he complied
11 with his contractual duty to pay the taxes of the Hamilton Taft
12 clients. The government intends to prove that he did not comply
13 with his contractual dutiesl Jury trials are the vehicle by which
14 such factual disputes are resolved, not motions to dismiss. There
15 is no basis for this Court to dismiss counts Seven through Twenty-
16 One.
17 .L. The Court should not make a finding of "the law of the case."
18 The government is persuaded by defendant's eloquence in
19 arguing that this court should not follow In re Hamilton Taft & Co.
20 (Defendant's Memorandum, 15:16-18), but cannot agree that the
21 vacated opinion is "a scholarly, lucid, and unassailable
22 explication of the common law of trusts" (Id. at 21-22) since the
23 court sought to implicate the government's rights without giving
24 the government an opportunity to be heard. Regardless of how
25 "scholarly" or "lucid" the opinion may be on the common law of
26 trusts, as noted above it is not "the law of the case", and clearly
I
~
000164
1 should not be used to justify making a ruling on an issue that is
2 nothing but a red herring.
3 It is clear what the defendant is attempting to do. He
4 wants the jury not to hear relevant evidence. He doesn't want the
5 jury to hear about the Ranch acquisition, or the limousine rides,
6 or the luxury jet purchase. He also doesn't want the jury to hear
7 what his lawyers and senior management were telling him--that he
8 couldn't use client tax money for long-term personal investments.
9 He also doesn't want the jury to hear about the lies he told his
10 employees regarding the source of funds for his ranch and other
11 purchases. He doesn't want the jury to hear about the lies he told
12 the victim companies in order to lull them into a false sense of
13 security. But all of this evidence is relevant to prove the
14 charges in the Indictment.
15 To his credit, the defendant spells out the remarkable
16 ramifications of a decision to declare that In re Hamilton Taft &
17 Co. represents the "law of the case". He wants:
18
19
20
21
22
23
24
25
26
1.
2.
3.
4.
Defense counsel to be able to refer to monies at
issue, in both opening and closing statements as the
property of Hamilton Taft or Hamilton Taft cash
flow;
The government not to refer to those monies as
"client monies" or "client funds" and not to state
or imply that Hamilton Taft held those monies in
trust;
The government not to present evidence of any advice
which Mr. Armstrong received from lawyers or other
experts, to the extent that such advice was
inconsistent with the "law of the case";
The court to instruct the jury that monies, once
delivered to Hamilton Taft, became the property of
J
000165.
..
1
2
3
4
5
6
7
5.
6.
Hamilton Taft;
The court to instruct that Hamilton Taft was free to
use its cash flow to cover its operating expense or
to invest those monies for its own benefit and in
anyway it wished;
The court to instruct the jury that Hamilton Taft's
sole duties to its clients were those duties stated
contractually but that clients were free to sue for
breach, if Hamilton Taft ever failed to live up to
those duties.
J
8 Nothing in the language, logic, or holding of the vacated
9 opinion in In re Hamilton Taft & Co. comes close to justifying such
10 a gutting of the government's case.
11 The defendant's motion to characterize, as a matter of law,
12 the nature of the relationship between Hamilton Taft and the victim
13 clients, in the form of a pretrial ruling should not be granted.
14 The characterization has not been settled as a matter of law. The
15 characterization, even if accepted as "debtor-creditor", does not
16 negate the presence of a fraudulent scheme or support in any way
17 the six conclusions cited above. The characterization would only
18 confuse the jury, leaving them to wonder about the illogical
19 technicalities of the law.
20 II
21 II
22 II
23 II
24 II
25 II
26 II
000166
1 III. Conclusion
2 For the foregoing reasons, the government respectfully
3 submits that the motion to dismiss be denied and that the Court
4 deny the request to make In re Hamilton Taft & Co. the law of the
5 case.
6 DATED:
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
November 5, 1996 Respectfully submitted,
YAMAGUCHI
.. __

RONALD D. SMETANA
J
HOnlG1
fD-302a 11-15-83)
196A-SF-93255
b7C
of FD-302 of On 2/ B/ 9 3 J Page 2 ---- ......1...- _-----=.-----.;____ _ _
She said that it was apparent to her within the first
twenty-four hours while reviewing Hamilton Taft financial records
that Hamilton Taft was in a cash flow crisis. She said it was
then her job to look at investments and/or loans to determine the
likelihood of these assets generating any She was to
insure that any future capital outflow was ureal investments".
She found out that almost immediately after Maxpharma
purchased Hamilton Taft from cigna corporation that Hamilton Taft
client funds were wire transferred out of Hamilton Taft. These
funds were in the form of notes and were booked at Hamilton Taft
as investments. But she saw no evidence of an attempt to collect
on these notes by Hamilton Taft. She said that some of the
transactions were incredibly complicated.
She said that she had frequent meetings concerning
these notes with Hamilton Taft officers. She discovered that
I I (PHD), Chief Financial Officer,l I
PHO), Director of Operations, I 1President
Comptroller, were the only Hamilton Taft
a knew about the loans by Hamilton Taft which Were
outstanding and uncollected.
She further explained that she recalls ten to fourteen
million dollars in loans had left Hamilton Taft with no payments
returning to Hamilton Taft. She discussed these loans with
I Ibut not with I , All of these loans were
"brokered
ll
through the Maxpharma office in Dallas, Texas. She
discovered that Maxpharma officers would telephoner 1at
Hamilton Taft and instruct her to wire money to
Dallas a9d then the fact.Maxpharma would then send the
b7C notes toL Jln San FranC1SCO.
She felt that the officers at Hamilton Taft were
protective I oftenl accuse
I IOf raiding the funds of Hamilton Taft.1 )was not
very helpful in her audit. She felt that this was because he was
the person who actually wire transferred the funds from Hamilton
alIas. She understood the process being that (FNU)
of Maxpharma in Dallas would
o transfer un s an c::: Iwould then instruct
r---...... the monies. I a director, often
got irate at her inquiries regarding Hamilton Taft loans. A day
or two after she started working at Hamilton Taft she discovered
FD-302u (Re.v 11-15-83)
196A-SP-93255
ContinuatIOn of FD-302 of
On __2-:,./_
8
....:;/_
9
_
3
PAgo __3__
J7C
a "funny" transaction where two to three million dollars of
Hamilton Taft funds was wired to Dallas, Texas. She understood
thatl working on some deal to raise funds.
She was told that these funds were supposedly to be used to
"recapitalize" Hamil ton Taft. I linstructed her that the
details of the transaction was none of her business
l
but she
believes that the funds went to either Amerimac Company in
California or to Gulftex, a real estate business in Texas.
I that from her examination of Hamilton
Taft financ1ai records she discovered that all the funds sent out
for these loans had to be dedicated Hamilton Taft client funds.
She said that' lhad to know that
Hamilton Taft client funds were being used to finance these
investments. She understood thatl lactually assisted in
the creation of the notes to Hamilton Taft. One of these loans
in 1988 in the amount of approximately $200,000.00 was to a
CONNIE CHIP ARMSTRONG, JR. business in Dallas, Texas by the name
of Dresdner Corporation (PHD).
She said thatl 1 (PHO) I Sales Manager, and
Vice Presldent of dperations, at Hamilton
Taft were both concerned and upset at the news of the loans.
These loans violated Hamilton Taft's written cash management
policy which stated that Hamilton Taft can onJY invest client
funds in safe overnight type of investments. I I said that
she recalls that most of the notes for the 1988 loans were for a
90 or 180 day period. She stated that in or around March 1989
I Iwas fired byl I resigned.
She said that Arthur Anderson C.P.A. firm withdrew from
the Hamilton Taft audit a couple of days after they gave Hamilton
Taft their appointment letter. At that point she said that
management at Hamilton Taft felt that Hamilton Taft did not have
enough interest money to pay Arthur Anderson. Therefore,
Hamilton Taft did not receive any audited financial statements to
give the increasingly concerned Hamilton Taft clients. EDS one
of Hamilton Taft's largest clients was requesting audited
financial statements.
I 'said that she started taking legal action on
the debtors at the notes to Hamilton Taft. She was taking
aggressive collection felt that she could have
collected on the Amerimac'L----Jandl rates if not for
FD-30la (Rev 11-15-83)
196A-SF-93255
Conunuullon of FD-302 of
_ ~ ~ ~ ! ! ! ! ! ! ! ! ! ! ! ~ ,---- , On __2-.;.1_
8
.....;1_9_ 3 Pngc: _4_
the ARMSTRONG takeover of Hamilton Taft in March of 1989. She
said that the I ~ and Amerimac notes totaled approximately $6
million dollars. She personally told ARMSTRONG at the Petit and
Martin law offices about the notes outstanding and her collection
efforts at Hamilton Taft. She told him that he should be able to
collect on some of these loans. She said that he did not seem
interested.
She said that in March of 19891 I concluded that
he was not able to recapitalize Hamilton Taft and that Hamilton
Taft would have to file for Chapter Seven bankruptcy protection
b7C so he conceded Hamilton Taft to ARMSTRONG 4 She recalls a $20
million dollar figure being used at Hamilton Taft around the time
ARMSTRONG took control of Hamilton Taft. She said that the $20
million dollars represented the negative capital and the negative
cash flow at Hamilton Taft. She said that she felt at that time
that this much capital would be necessary to keep Hamilton Taft a
viable company. The financial condition of Hamilton Taft was
constantly being communicated to ARMSTRONG and his attorneys
during the legal actions. I 'said that she sat through
all of the depositions during ARMSTRONG's legal action to gain
control of Hamilton Taft.
She said that she understood that ARMSTRONG's plan for
Hamilton Taft was to recapitalize Hamilton Taft by investing $20
million dollars, rehirel Ito satisfy Wells Fargo Bank and
expand Hamilton Taft's customer base to infuse more revenue into
Hamilton Taft.
FD-302 (REV. 3-10-82)
- 1 -
FEDERAL BUREAU OF INVESTIGATION
Date of transcription 2/18'/92
On the afternoon of January 13, 1992, a conference was
held at thelPffices gf Feldman. Waldman and Kline, bankruptcy
counsel for. 1trustee in the bankruptcy of
Hamilton Taft Corporation (HTC). The law firm's offices are
located at 235 Montgomery street, suite 2700, San Francisco,
California, 94104. Present at this meeting werel I
I
Esw1;re, representing Feldman, Waldman and Kline, at cetera. Mr .
. CPA, accQuntant fOr the bankruptcy trustee, and
the trustee These individuals thereafter
provided the following information:
I 'stated that he has recently received certain
accounting reports from representatives of CHIP ARMSTRONG in
Dallas, which begin reporting on the period from
November 1, 1990 through June 15, -1991. This accounting work was
generated using the Quicken Software and chronicles CHIP
ARMSTRONG's personal finances.
I stated that in July, three reports became
available to him. Wated that only copies Of!Som: CberkS
were duplicated by per a restriction put on_ _ . and
apparently agreed 0 y the for the frus ee y
Mr. ARMSTRONG's representatives. L advised that the
Quicken summary was in fact a pub11C record and that, in
addition, the law firm had filed a motion for conternptagainst
CHIP ARMSTRONG for his having allegedly violated a temporary
restraining order issued by the bankruptcy court.
I I stated that his preliminary report indicates
that approximately four million dollars of Hamilton Taft funds
have been traced directly to CHIP ARMSTRONG, that is, four
million dollars of HTC funds have been traced to going directly
to Mr. ARMSTRONG. I Istated that ARMSTRONG had or has five
bank accounts. Any payment that was made to CHIP from either
Hamilton Taft or one of the subsidiaries controlled by ARMSTRONG
are accounted for, that is, they are covered by explanations.
These explanations are usually in the form of a note receivable
or an account receivable notation. These entries to the books
and records of Hamilton Taft or anyone of these subsidiaries
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- ..
-.]ID
Invesligationon at Sa);} Caloi.;fornil
ile
11 J96A-SF-93255 Sub C
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by SA f,YNN HATCHER PKM la an Dale dictated 2 11 0 192
I ; I
IfThis document neither recommendations nor conclusions of the FBI. It Is the property of the FBr and is loaned to your agtncy;
1\ and ils contents are not to be c1blrlbuted outside your aaency.
----------------'------'--_._- ..._-- ..._---
FD-302a (B:ev. 1l-lS-83)
f:>A-SF-93255 Sub C
Con tlnua tion of FD-302 01 -J I ' On 2/10/92
, Page __
controlled by ARMSTRONG were to pay for clothing for
Mr. ARMSTRONG or for a truck for his personal use. Succinctly
stated, these documents provided a paper trail for a trloan" or
"advance
ll
to ARMSTRONG to account for the payments to him.
I that an enormous portion of
ARMSTRONG's standard of living was booked by the various
comptrollers as advances to CHIP ARMSTRONG.
I Istated that during the period March 20th
through April 4th, 1991, CHIP ARMSTRONG liquidated three assets
which were not in Hamilton Taft's name. The first asset to be
liquidated was a helicopter, apparently owned and/or leased by
Winthrup Corporation for 1.1 million dollars. The second asset
and/or payment was a $700,000 payment to CHIP ARMSTRONG's
criminal. lawyer in Dallas. Finally,1 lindicated that
$300,000 went to was possibly in turn
repaid to a law firm of Long and Leavitt in San Francisco.
. With to the helicopter transaction and
liquidation indicated million dollars was
transferred to on the same day and on the same day, CHIP
ARMSTRONG wired transferred $700,000 to his Dallas based criminal
IWith respect to this $700,000 'wire
transfer, Istated that $400,000 of the lawyers' fees were
returned toJthe Again, with respect to the helicopter
transaction indicated that three million dollars had
originally been wire transferred to another one Bridge
companies and then in turn to winthrup Realty. I I stated
that ARMSTRONG has few sources of income other than the sale of.
assets purchased with Hamilton Taft funds. Among the assets that
ARMSTRONG purchased, apparently with Hamilton Taft funds, are two
stadium boxes for the Dallas Cowboys football team and these
apparently were purchased for $140,000 and $125,000,
respectively. A third box is still owned by ARMSTRONG.
Approximately 1.1 million to 1.3 million went to various lawyers.
Seven hundred and thirty-five thousand dollars went to criminal
lawyers and one hundred seventy-five thousand, two hundred
thousand and eighty thousand dollars, respectively, went to civil
attorneys.
---_... _-- ----
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FD-301a 11-15-83)
Sub C
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Continuation of FD-302 of -J I On 2/10/92 Pagc_..lI
3
"'----
All records for Hamilton Taft and any of trmstrOnq/S
companies are currently domiciled in San Francisco.
indicated that some records are missing and those records are for
the company known as Winthrup Realty and CHIP ARMSTRONG's
personal financial records.
Additionally,l that her law firm is in b7C
possession of winthrup's ledgers through May of 1991. b7D
------ .' -------------"'---- ---_.-_.--"-----
"1-3028 (Rev. 11-15-83)
196A-SF-93255
,On 4/15/91
--------
,
Pa
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cash account for that day. If an overage, the money would go to
Hamilton Management for investing. If short, he would ask
Hamilton Management to money into the account to cover
checks written that day. _ lassumed all the trouble was
started when ARMSTRONG instructed one of these guys to send money
to somewhere else or he had the money from Kansas go to one of
his companies in Dallas for investment. "No, I don't consider
his ranch a real investment".
After the interviewing agents gavel la copy of
the sUbpoena for HT records, I 'said "I have been down a
similar shopping list as yours.
lI
He thought a chunk of client
money was taken out and used for investments. Probably a verbal
order by ARMSTRONG. This money replaced later. HT replaced
Federal Express money with Federal Express payments. HT did not
use "Joe Blow's" money to pay Federal Express's taxes and
penalties. Every tax that is owed in last quarter has been paid.
b
""1n
I Istated that HT is about 90 million short this quarter .! ....
because the clients are not putting money into the company. 4
I lexpressed that everything the trustee is
doing will help your investigation. IIHe's doing your work. I am
concerned that you guys will come in here and take all the
records away.. We will not see them for years." He had that
happen before in another case dealing with meat inspectors
getting kickbacks.
I Idiscussed he had worked for his family/s
company which had filed bankruptcy. He had successfully
reorganized the company. He had went on to work for other
companies in trouble. He decided to start consulting on his own.
That is when he answered the HT ad.
When questioned again about his contact with ARMSTRONG
he explained most of his contact was in bUdget meetings. He said
ARMSTRONG was planning to double the volume of business. There
was a summary of the meeting minutes kept by a secretary but he
was not sure which secretary.
When asked what was ARMSTRONG's long term plans
he did not know much about ARMSTRONG/s goals.
"I've been trying to do what you guys are doing. If I I
stated "I know a lot of peripheral facts, but not any detail".
I Idid say that ARMSTRONG went overseas to establish
r::D-301a (Rev. 11-15-83)
196A-SF-93255
Continuation ofFD-302 of ~ l . . . ...J----------' On 4/15/91
. Page _3_
Hamilton gaft International aed make SOme sorf of deal.
I Jsaw the bUdget that_ . prepared for
ARMSTRONG. The bUdget indicated that some $50 million dollars of
capital was to be introduced back into HT this month and
eventually catch up all the delinquent taxes due by October of
this year.
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I Ibelieves what' Istated in his written
statement about the actions of the client response unit is a lie.
He was managin; t n ~ ! unit. The intent was not to mislead ~
clients. r _ ~ h O was the supervisor in that ~
department weu d verIfy the unit's intent.
I Ilast contact with ARMSTRONG was last friday
at the HT office in San Francisco. l Istated,IIWe all met
here. It; The trustee with three others and ARMSTRONG with his
attorneys. He explained that he was trying to salvage the
business. He had another meeting later with employees. A sort
of pep talk asking them not to believe the newspapers.
I Iproduced a list of all current employees to
the interviewing agents upon the agents request. Since the
produced copy was missing the last digit of the employee's
telephone numbers another copy was sent vis facsimile to Federal
Bureau of Investigation office later the same day.
Memorandum
To
From
SAC, San Francisco ((Q(,J}-SF-Cf1}S"5)(P) 3/8/92
I b7C
Subject Connie Chip Armstrong, et al
dba, Hamilton Taft and Company, et al
San Francisco, Ca.
FBW (B); Mail Fraud, Bankruptcy Fraud, (A);
OO:SF
712
On the afternoon of March 5, 1992 a meeting was held at
the office of AUSA Michael Yamaguchi to discuss __
strategy in the above referenced matter. Present
ESQ. representing the bankruptcy trustee. Also present was Mr.
Ronald Smetana, Deputy Attorney General, Major Fraud unit of the
california state Attorney General's office. SA's will Hatcher and
re resented the FBI.
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On February 27, 1992 the accountant for the trustee
finished his second interim report for the bankruptcy which
includes among other thing a tracing of over $4,000,000 directly
into the pockets of Armstrong himself. The report cites payments
by Armstrong using Hamilton Taft funds to a stripper' and the use
of over $225,000 to purchase Dallas Cowboy "skyboxes
lt
The next investigative step is to apply for an ex parte

order for Armstrong's personal tax returns for 1988, 1989, and
1990. Also several interviews of former Armstrong associates will
be conducted in Texas.
Finally due to the continuing effort being expended by
SA Will Hatcher and his anticipated involvement in this matter it
is requested that he be designated co-case agent for the
remainder of the investigation of this case.
2

2010-05-27 Amrstrong's Reply in Support of 2255

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ARMSTRONGS REPLY IN SUPPORT OF 28 U.S.C.

lin looking at the financial

20 As noted earlier, the Ninth Circuit opinion has no

The next investigative step is to apply for an ex parte

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2010-05-27 Amrstrong&#39;s Reply in Support of 2255

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ARMSTRONGS REPLY IN SUPPORT OF 28 U.S.C.

lin looking at the financial

20 As noted earlier, the Ninth Circuit opinion has no

The next investigative step is to apply for an ex parte

S-ar putea să vă placă și

2010-05-27 Amrstrong's Reply in Support of 2255

2010-05-27 Amrstrong's Reply in Support of 2255