Case :-cr-0-jat Document Filed 0// Page of Michael D. Kimerer #00 Rhonda Elaine Neff #0 KIMERER & DERRICK, P.C. East Osborn, Suite 0 Phoenix, AZ 0 Telephone: (0) -00 Facsimile: (0) - Attorneys for Defendant, Stephen M. Kerr UNITED STATES OF AMERICA, UNITED STATES DISTRICT COURT DISTRICT OF ARIZONA vs. Plaintiff,. STEPHEN M. KERR. MICHAEL QUIEL. CHRISTOPHER M. RUSCH Defendants. No. CR--PHX-JAT-DKD DEFENDANT KERR S MOTION IN LIMINE (Before the Honorable James A. Teilborg) Defendant Stephen Kerr, by and through undersigned counsel, herby moves this Court in limine to exclude portions of the Government s evidence from being introduced at trial. FACTUAL BACKGROUND On December,, Defendants Stephen Kerr ( Kerr ), Michael Quiel ( Quiel ), and Christopher Rusch ( Rusch ) were indicted by the grand jury. Defendant Kerr was indicted for one () count of Conspiracy to Defraud the United States, two () counts of Willful Subscription to False Individual Tax Returns, and two () counts of Willful Failure to File FBARs on foreign accounts.
Case :-cr-0-jat Document Filed 0// Page of The Government alleges in the indictment that Defendants Kerr and Quiel conspired with Defendant Rusch to set up companies and bank accounts in Switzerland in order to move money out of the United States with the intent to evade paying taxes on that money. The Government has disclosed thousands of pages (over 00,000) of documents in this case that it alleges relate to this scheme to defraud the United States. Defendant Kerr has maintained from the beginning that, in fact, there was no conspiracy to defraud the United States. Defendant Kerr is in the business of investments and has been very successful in assisting start-up companies that seek to go public. Defendant Kerr has maintained a small ownership interest in these companies and continues to assist the companies through the transition and beyond. Defendants Kerr and Quiel sought the assistance of Defendant Rusch in creating an international presence that would make it so they were able to obtain international investors into these companies. Defendant Rusch held himself out to be an international tax expert and had assured Defendants that he could set up these international business ventures in a legal and tax compliant manner. As in their international ventures, Defendants were told that they would maintain only a small ownership interest in these foreign companies. The companies would allow foreign investors to invest in the accounts. Defendant Kerr did not prepare any of the paperwork and relied on his counsel, Defendant Rusch, to set up these businesses legally. Defendant Rusch informed Defendant Kerr that there was no
Case :-cr-0-jat Document Filed 0// Page of reporting requirement on his taxes because the ownership interest in the companies was below the threshold for tax liability. Defendant Kerr relied on this advice and did not claim his ownership interest on his taxes for the years in question. LEGAL ARGUMENT Defendant Kerr seeks to exclude the evidence delineated below and, as further grounds, submits the following: I. Securities Evidence The Government filed a Notice of Intent to Introduce Evidence (Doc. ) with this Court on September,. Within that Notice, the Government intends to introduce certain evidence that it believes will either fall outside the bounds of or fall under Rule 0(b) of the Federal Rules of Evidence. (See Doc. A-E). The information sought to be introduced by the Government serves no other purpose than to infer, without proper evidence or explanation, that the Defendants conduct in their day-to-day business operations in the United States was somehow unlawful. The admission of such evidence will extend the trial and lead to confusion of the jury and the issues in this case. The Government has not alleged, formerly, any wrongful conduct by the Defendants as it relates to securities or their business model within the United States. In fact, the Government indicted the Defendants solely based on the establishment of offshore accounts that the Government alleges the Defendants had an obligation to report on their taxes nothing more.
Case :-cr-0-jat Document Filed 0// Page of Additionally, the Government only vaguely described the 0(b) information sought to be introduced. The Government has not provided names, dates, places, and numbers. The Government has inferred wrongful or unlawful conduct by the Defendants without supplying the defense with any information on how they seek to prove such conduct. One of the things that the Government is seeking to introduce is [e]vidence that Kerr and Quiel fraudulently acquired stock that was deposited directly into their undeclared accounts that was previously held by other individuals.... (Doc. at (B)). The Government seeks to introduce evidence that Defendants Kerr and Quiel committed wrongdoing with regards to the stock held in these companies. In particular that Defendants Kerr and Quiel were involved with buy backs that the Government alleges the companies were not involved in. Additionally, the Government alleges that Defendants Kerr and Quiel would have investors sign a blank stock power when the buyback occurred, but that the issued stocks were not cancelled or transferred back into the companies names. The Government has indicated that the SEC records for these companies did not reflect the company buybacks and that the companies officers confirmed that the company was not involved in the buyback. The Government continues by alleging that the stock was then split, resulting in the share certificates being worth to times more in shares than they originally held. (Doc. at ). The Government attempts to tie the securities into this case by alleging that a portion of the shares that were maintained in the name of the original shareholders
Case :-cr-0-jat Document Filed 0// Page of was transferred to Defendants Kerr and Quiel s Swiss entities using blank stock powers. The Government has alleged additional wrongdoing with regard to these securities. However, the Government interviewed stock holders, company representatives, securities firm representatives, and others and no securities violations have been alleged or proven. This is because there was no securities violations of any kind involved with any of the transactions that Defendants Kerr and Quiel were involved in. The Government interviewed well over forty (0) people about their investments and involvement with Defendants Kerr and Quiel. After all of these interviews, the Government has still not found any evidence to charge Defendants Kerr and Quiel with a securities violation. The Government seeks to introduce this evidence for the sole purpose of making it appear to the jury that Defendants Kerr and Quiel are slimy business men who are out to scam others and commit crimes. This is nothing more than an attempt by the Government to paint a negative picture as to the character of Defendants Kerr and Quiel. The issue in this case is only whether Defendants Kerr and Quiel conspired with Defendant Rusch to evade United States taxes, whether Defendants Kerr and Quiel willfully subscribed to a tax return they knew was incorrect, and whether Defendants Kerr and Quiel willfully failed to file an FBAR on foreign accounts knowing that there was a reporting requirement. The Government has not charged, nor have they been able to indict, for any type of securities violations. If
Case :-cr-0-jat Document Filed 0// Page of the Government believes, as its Notice indicates, that these issues were inextricably intertwined with the charged offenses than it should have sought to include these charges within the indictment by the Grand Jury. It did not. The Government should not be able to bring these up now in an attempt to taint the jury. A. Inextricably Intertwined in the Charged Offenses The Government in its Notice of Intent takes the position that the evidence to be admitted is inextricably intertwined with the charged offenses or outside the scope of the Rule and thus not subject to Rule 0(b). (Doc. at ). There are two separate categories of evidence that is considered to be inextricably intertwined with a charged offense. United States v. Curtin, F.d, 0 (th Cir. 0). The first category is evidence that constitutes a part of the transaction that serves as the basis for the criminal charge. Id. (citing United States v. DeGeorge, 0 F.d, 0, (th Cir. 0). The second category is when necessary to do so in order to permit the prosecutor to offer a coherent and comprehensible story regarding the commission of the crime. Id. The Government may contend that the securities transactions constituted part of the crime; however, they have no evidence that any securities violations actually occurred because there were no securities violations. Additionally, the charges have nothing to do with securities the litigation of the securities issue is not needed in order for the Government to try its case. It is enough for the Government to show that United States stock was transferred into Swiss
Case :-cr-0-jat Document Filed 0// Page of companies and/or bank accounts. The history behind those securities has no other purpose than to make the Defendants seem like shady characters. It is enough to show that Defendants transferred stock in order to gain an interest in the foreign corporations. Additionally, there is no need for the jury to hear the entire history behind the stock that was transferred into Switzerland in order to understand that there was, in fact, stock that was transferred. The history behind the stock, the alleged wrongdoing by the Defendants, and other evidence sought to be introduced is not needed for the jury to understand the circumstances and background of the alleged criminal charge in this case. B. Evidence Does not Fall within Rule 0(b) The Government next contends that, in an abundance of caution, it is providing notice that the evidence is admissible under Federal Rules of Evidence 0(b) for Crimes, Wrongs, or Other Acts. (Doc. at -). Rule 0(b) prohibits evidence to prove a person s character in order to show that on a particular occasion the person acted in accordance with the character. Fed. R. Evid. 0(b)(). The rule does, however, allow for admittance if it is used to prove motive, opportunity, intent, preparation, plan, knowledge, identity, absence of mistake, or lack of accident. Fed. R. Evid. (0)(b)(). The Ninth Circuit has used a four-part test to determine whether evidence is admissible under Rule 0(b). See United States v. Spillone, F.d, (th Cir. ). First, there must be sufficient evidence to support the jury s finding that the defendants committed the other [act]. Curtin, F. d at
Case :-cr-0-jat Document Filed 0// Page of (citing Spillone, F.d at ). Second, the other [act] must not be too remote [in time]. Id. Third, when admitted to prove intent, the prior act must be similar. Id. Finally, the prior act must be introduced in order to prove a material element of the case. Id. In this case, there is not sufficient evidence for the jury to make a finding that the Defendants committed any wrongdoing with regard to securities. The information that the Government seeks to provide to the jury will be nothing more than a quick eyeshot as to the nature, extent, and history behind the securities. The Defendants will be required to litigate an issue that is wholly outside of the charges alleged. If the Government had sufficient evidence to believe that the Defendants have committed any type of wrongdoing with regard to the securities that were transferred to Switzerland, then the Government should have indicted as such. Instead, the Government seeks to provide the Court and the jury with a very quick background of alleged stock splits, transfers, and other acts that may appear shady when not fully explained. The only stock that would be even remotely relevant to this case is the stock that was actually transferred as the investment in the foreign corporation. The entire history of the numerous corporations, hundreds of investors, many board of directions, CPAs, lawyers, and the rest of the history is not relevant to the fact that stock did make its way to the foreign corporation and that the Defendants were involved in those transfers. So, at the very least, the Court should exclude all evidence of the history behind the stocks and allow the parties to stipulate to the fact that United States stock was used to
Case :-cr-0-jat Document Filed 0// Page of invest in the foreign accounts the only evidence that is relevant to the jury in this case. The second requirement of remoteness is not a major factor in this Motion, but may become one if the 0(b) evidence is admitted. Curtin, F.d at. The defendants are uncertain of exactly how the Government plans to use the evidence, how far back the Government intends to go, and exactly what evidence the Government plans to use to prove the securities items listed in its Notice of Intent. As such, the Defendants are not prepared to argue the remoteness at this time. The third requirement that the prior act be similar is not met. Id. There is no similarity between committing alleged securities violations and not marking a box on a federal tax return. In fact, the only similarity is that both tend to show a character trait within the Defendant a prohibited use of 0(b) evidence in a criminal case. Finally, there is the requirement that the act be introduced to prove a material element of the case. Id. This requires that the Government articulate precisely the evidential hypothesis by which a fact of consequence may be inferred from the other acts evidence. United States v. Mayans, F.d, (th Cir. ). The transfer of stock from the United States to Switzerland, and any alleged wrongdoing during the history of that stock, is not a required element of conspiracy, willful subscription to false tax returns, or willful failure to file FBARs. Therefore, the Government is unable to meet its burden that the evidence should be admissible as 0(b) evidence.
Case :-cr-0-jat Document Filed 0// Page of C. Prejudicial Value Even if the Court does find that the evidence fits within Rule 0(b) or that it falls outside of the Rule, the Court must determine whether the probative value of admissions outweighs the prejudice to the defendant. United States v. Vo, F.d, (th Cir. 0) (citing United States v. Johnson, F.d, (th Cir. ). Rule 0 says: Although relevant, evidence may be excluded if its probative value is substantially outweighed by the danger of unfair prejudice, confusion of the issues, or misleading the jury, or by considerations of undue delay, waste of time, or needless presentation of cumulative evidence. Fed. R. Evid. 0. In fact, the Ninth Circuit has specifically incorporated Rule 0 s probative value/unfair prejudice balancing requirement into the Rule 0(b) inquiry. Mayans, F.d at (citing United States v. Brown, 0 F.d, (th Cir. ), United States v. Sarault, 0 F.d, (th Cir. ). Unlike the Defendants, the Government will not be prejudiced if not allowed to raise any of the securities issues raised in its Notice of Intent. The Government will still be able to present evidence as to the investment in Switzerland without having to provide the entire history of those investments. On the other hand, the admission is extremely prejudicial to the Defendants. Defendants Kerr and Quiel have neither committed nor been charged with any type of securities violations. Allowing the jury to hear this information will confuse the jury of the issues at trial the issue at trial is the Defendants
Case :-cr-0-jat Document Filed 0// Page of obligation to mark a box on their taxes not whether they committed securities violations. The evidence will mislead the jury to believe that Defendants Kerr and Quiel have committed additional bad acts that make them more likely to have committed the ones charged. A trial on the securities issues is certain to waste the Court s and jury s time. If the Government is allowed to present this information, the Defendants will be required to put on an entire case to refute the Defendants involvement, participation in, or knowledge of securities violations. Trial of the securities issue will significantly lengthen the trial. The Defendants will be required to bring in several securities experts and other experts in order to assist the jury in understanding the complex nature of securities transactions and laws related to securities. Additionally, the Defendant will be required to bring in possibly thirty (0) or more fact witnesses, including investors with Defendants Kerr and Quiel, to show that there was no securities violation. This will extend the trial by at least two () week, but could possibly extend it up to four () weeks. This is without considering the time and expense to the Defendant in having to litigate an issue for which they have never been charged. It is both a waste of the Court and jury s time as well as causing undue delay in the trial. II. UBS Bank Records The Government in this case has included thousands of pages of banking records from United Bank of Switzerland ( UBS Bank ) and Pictet Bank
Case :-cr-0-jat Document Filed 0// Page of ( Pictet ). These documents were prepared by individuals other than Defendants Kerr and Quiel. In particular, the Government has included within discovery Bates Nos. -000, -0, -0, -000, -0, and -0, which are handwritten UBS bank records for Red Rock Investment SA and Legacy Asset Management AG. In addition, Bates Nos. -0, -000, -0-000, -0-000, A-0-000, A-0-000-000 are typed UBS bank records for Red Rock Investment SA, Swiss Fidelity, Swiss International, and Cyril Capital. The statements made on these documents are unsubstantiated hearsay and the individuals that created these documents were not available for cross examination. Fed. R. Evid. 0(a)-(c). The Government is using these documents as admissions by the Defendants that they had 0% beneficial ownership over these foreign accounts. In other words, the Government is using the statements to prove the truth of the matter asserted in the documentation. Id. at (c). However, these statements were not made or written by either of the Defendants. The Defendants are unaware, and the Government has not substantiated, who actually wrote these statements. These statements do not fit within a hearsay exclusion or exception. These statements were not made by either Defendant, nor were the statements adopted by either of the Defendants. See Fed. R. Evid. 0(d)(). Further, the information contained within these UBS and Pictet banks include incorrect information as to Defendant Kerr s family size, dates, etc. If
Case :-cr-0-jat Document Filed 0// Page of Defendant Kerr had in fact written or approved such documents, he certainly would have included the correct information given the other information that pertains to him that was included in the documents. This shows that it was someone else, and not Defendant Kerr, that authorized these documents. The Government may allege that these documents were authored at the direction of the Defendants; however, the statements would still be hearsay. Particularly since the Government has not indicated that it intends to call or have present at the trial the actual author of these documents. Any testimony given or evidence presented as to these documents would be pure conjecture, prejudicial, and inaccurate and these items should be excluded from evidence in this case. III. Defendant Quiel s Belize Tax Audit Defendant Quiel was involved in a civil audit. That audit showed a potential interest in a Belize Credit Card that had not previously been reported to the IRS. Defendant Quiel sought the advice of Defendant Rusch on the audit and he later began reporting the interest in the Belize Credit Card on IRS Form TD0-. (FBAR). The Government is going to seek to introduce this evidence in order to show Defendant Quiel s knowledge of the FBAR requirements and to show his willful failure to file for the other disputed Swiss accounts. This evidence is highly prejudicial to Defendant Kerr. The jury may draw the conclusion based on this evidence that since Defendant Quiel had a prior IRS issue involving an FBAR that Defendant Kerr must have also known of the FBAR
Case :-cr-0-jat Document Filed 0// Page of requirements. Defendant Kerr denies any knowledge of the FBAR requirements prior to this case. Additionally, Defendant Kerr alleges that he was acting on the advice of his counsel, Defendant Rusch, when informed that there was not a sufficient reportable interest in the Swiss companies to require reporting on the IRS taxes forms. At no time prior to this case did Defendants Quiel or Rusch inform Defendant Kerr that Defendant Quiel s prior tax issue was somehow related to an FBAR filing. All that Defendant Kerr knew was that Defendant Rusch had assisted Defendant Quiel in a prior tax issue. Allowing the jury to hear the evidence of a prior tax issue that may or may not be attributable to an FBAR violation would be extremely prejudicial to Defendant Kerr. If this information is allowed in, it will extend the length of the trial, confuse the jury of the issues, and implant a false impression in the jury as to both Defendants Kerr and Quiel. As such, the Court should exclude the admission of this evidence. IV. Golf Course The Government has indicated that it plans to introduce evidence related to a golf course in Colorado that Defendant Kerr was involved with establishing. The Government alleges that a portion of the money from the Swiss bank accounts was used to pay for a portion of that golf course. In particular, the Government alleges that approximately $,000,000 of the Swiss money was put into a Panama account for Worldnet and then was sent to Defendant Kerr for the purpose of buying a golf course. In fact, Worldnet is not a corporation or account for which
Case :-cr-0-jat Document Filed 0// Page of Defendant Kerr has any beneficial or other ownership. The account, upon information and belief, belongs to Defendant Rusch. The Government s attempt to elicit testimony and evidence related to the bank account of a co-defendant as evidence of wrongdoing is highly prejudicial. The evidence will confuse the jury and misstate the facts of the case. The jury will have a difficult time separating Defendant Rusch s and Defendant Kerr s interest in the respective accounts and may assume, without evidence, that the Worldnet account is controlled by Defendant Kerr. V. Plane/Defendant Kerr s Wealth The Government has produced pictures of private planes that appear to be planes purchased or somehow associated with Defendant Kerr. These planes have no relevancy to the case at hand. The Government has not alleged or specified how these planes relate to this case. The evidence is highly prejudicial to Defendant Kerr. The evidence tends to do nothing more than show the financial wealth of Defendant Kerr. It is foreseeable that such evidence could cause class prejudice. This evidence is in no way relevant to Defendant Kerr s guilt or innocence. See Fed. R. Evid. 0 (evidence is relevant if it has any tendency to make the existence of any fact that is of consequence to the determination of the action more probable or less probable than it would be without the evidence. ). There is nothing about the purchase, past ownership, or other interest in any plane that makes a fact of
Case :-cr-0-jat Document Filed 0// Page of consequence more probable or less probable. Instead, it serves only to prejudice the jury against Defendant Kerr based on his success and purchase choices. VI. Object to Amnesty The Government may raise the issue of amnesty that was offered to the individuals whose names were released as a result of the UBS/United States settlement agreement. This amnesty was offered prior to any criminal charges being brought against any of the individuals whose names were included within the list of American bank account holders. The Government allowed a certain amnesty period where an individual could come forward and pay some sort of fine to avoid criminal prosecution. Upon information and belief, Defendants Kerr and Quiel were two of those individuals whose names appeared on the list of American bank account holders. Defendants may have been offered amnesty prior to being criminally indicted. Defendants Kerr and Quiel were informed by their legal counsel, Defendant Rusch, that the UBS release did not relate to them and there was no need to talk with the Internal Revenue Service about the amnesty period. The Defendants took the advice of their counsel. The Government may seek to introduce evidence that the Defendants were offered, or could have sought, amnesty rather than being criminally indicted. This evidence is highly prejudicial to the Defendants. The jury will likely view the failure to accept amnesty in the same way that the jury would react to statements made during plea negotiations. In particular, the jury would very likely draw a conclusion that the Defendants failed to seek the amnesty, so the Defendants must
Case :-cr-0-jat Document Filed 0// Page of be guilty. The probative value of such evidence is far outweighed by the prejudice. The information if given by the Government does very little toward its case of proving the charges alleged. In fact, the information tends to relate only to the character or guilt of the Defendants and does not show anything towards the commission of the crimes for which they alleged committed. CONCLUSION Based upon the foregoing, Defendant Kerr respectfully requests that this Court exclude from evidence the categories and items of evidence listed above. These categories or items are highly prejudicial against the Defendants and serve little to no probative value in this case. Respectfully submitted this nd day of January,. KIMERER & DERRICK, P.C. s/ Michael D. Kimerer Michael D. Kimerer Rhonda Elaine Neff East Osborn, Suite 0 Phoenix, Arizona 0 Email: mdk@kimerer.com Email: rneff@kimerer.com Attorneys for Defendant, Stephen Kerr CERTIFICATE OF SERVICE I hereby certify that on this nd day of January,, I electronically transmitted the foregoing Defendants Kerr Motion in Limine to the Clerk of the Court using the CM/ECF System for filing and understand a copy of the filing will be emailed to the following CM/ECF registrants: Honorable James A. Teilborg: teilborg chambers@azd.uscourts.gov
Case :-cr-0-jat Document Filed 0// Page of Attorneys for the United States Monica B. Edelstein: monica.edelstein@usdoj.gov Timothy J. Stockwell: timothy.j.stockwell@usdoj.gov Attorneys for Defendant Michael Quiel Joy Malby Bertrand: joyous@mailbag.com Michael Louis Minns: mike@minnslaw.com Ashley Blair Arnett: ashley@minnslaw.com Michael Ware: ware@mikewarelaw.com Attorney for Defendant Christopher Rusch Baltazar Iniguez: zariniguez@aol.com By: s/ Rhonda Elaine Neff