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8646

19

20 Court Reporters: HARRY RAPAPORT
OWEN M. WICKER
21 United States District Court
Two Uniondale Avenue
22 Uniondale, New York 11553
(516) 485-6558
23
24 Proceedings recorded by mechanical stenography, transcript
produced by Computer-Assisted Transcription
25

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
8648

1 (Case called.)

2 THE COURT: Please be seated.

3 MR. DUNN: Your Honor, I have a single request,

4 if I may hand it up to you.

5 MR. TRABULUS: Your Honor, I also have some

6 further questions, relating to the tax count and the

7 lesser included.

8 Thank you. I've given copies to all counsel.

9 THE COURT: Is everybody here?

10 MR. GEDULDIG: Sorry, Judge?

11 THE COURT: Is everybody here?

12 MR. GEDULDIG: Ms. Haley appears to be among the

13 missing. I think I might have indicated before. She is

14 perfectly agreeable to proceeding without her. I don't

15 know the reason for the delay. We don't have a jury today

16 and I don't think that would be any kind of prejudice to

17 her for not appearing here during the course of the

18 conversations we'll have and she told me she would waive

19 her appearance. So I would ask the Court to proceed

20 without her. I'm sure she'll arrive shortly.

21 THE COURT: What difference -- why is this new

22 request to charge made, Mr. Trabulus, in addition to your

23 other requests?
24 MR. TRABULUS: Your Honor, one, part of it is in
25 response to or suggested by Mr. Reffsin's request to

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
8649

1 charge on good faith reliance. He turned around the good

2 faith reliance on the accountant's advice to the good

3 faith reliance on the client's advice and I have here that

4 relates to good faith reliance on the accountant's advice.

5 In addition, I requested a lesser included charge

6 originally.

7 THE COURT: So it clarifies the lesser included?

8 MR. TRABULUS: Yes, it does, Your Honor.

9 THE COURT: We'll get to that.

10 MR. TRABULUS: Sure.

11 THE COURT: And I just wanted to know what the

12 additional request was for.

13 All right. Let's proceed.

14 First with regard to the boilerplate portions in

15 which I said the defendants are being charged only with

16 the crimes set forth in the indictment and no others. In

17 the event that I charge lesser included crimes, and I'm

18 considering seriously doing that, I would add crimes set

19 forth in the indictment or lesser included crimes. We'll

20 see when w e get to that.

21 Also open was the expert testimony. Was the

22 defendant Martin Reffsin an expert? Did we resolve that?

23 I think you were to tell me.
24 MR. WALLENSTEIN: I don't know if we resolved
25 that but I would withdraw that request.

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
8650

1 THE COURT: Okay.

2 With regard to accomplices who pled guilty, I'm

3 not quite sure what we meant by that. Let me just see

4 here. I gave a charge on witnesses who pled guilty. I

5 added to that "government witnesses and so-called

6 accomplices" to that who pled guilty. So that covers

7 that.

8 Now, as far as the character evidence, this is

9 what I'm going to say.

10 You have heard testimony that the defendant

11 Martin Reffsin has a good reputation for honesty and

12 truthfulness in the community where he lives and works.

13 Along with all the other evidence you have heard, you may

14 take into consideration what you believe about the

15 defendant Martin Reffsin's reputation for truthfulness and

16 honesty when you determine whether or not the government

17 has proven beyond a reasonable doubt that the defendant

18 Martin Reffsin committed the crimes charged against him.

19 You will note that I omitted some portion of your

20 request to charge because looking at the cases I don't

21 find that that -- I find that that is not only not

22 required but very confusing to the jury and I don't

23 believe it is the law either. So that's what I'm going to
24 charge.
25 With respect to the request, we started on

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
8651

1 conspiracy and we talked about the first count, the first

2 element of the first conspiracy to commit mail fr aud and

3 the government asked me to add some portion with regard to

4 conspiracy involving secrecy, direct. "Direct proof may

5 not be available, etcetera," and I'm going to add that

6 after looking at the law as follows.

7 "In this regard you may infer its existence from

8 the circumstances in the case and the conduct of the

9 parties involved. However, since a conspiracy may be by

10 its very nature, made by its very nature be characterized

11 by secrecy, direct proof may not be available. In the

12 context of conspiracy cases actions may speak louder than

13 words." That's my amendment of what the government has

14 requested me to do.

15 All right. Now, let's get to the second element

16 in the conspiracy. That's where we left off.

17 "Membership of the conspiracy." And this of

18 course is the first Count 1, the first conspiracy to

19 commit mail fraud.

20 "In connection with the second element in the

21 conspiracy count the government must prove beyond a

22 reasonable doubt that the defendant you are considering

23 knowingly and willfully became a member of the
24 conspiracy. If you find that the government established
25 beyond a reasonable doubt that the conspiracy charged in

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER
8652

1 the indictment existed, you must next determine whether

2 the government proved that the defendant you are

3 considering was a member of the conspiracy. In deciding

4 whether the defendant you are considering was a member of

5 the conspiracy, you should consider whether the defendant

6 knowingly and willfully joined the conspiracy. To act

7 knowingly means to do something voluntarily and

8 deliberately and not because of mistake, negligence,

9 inadvertence or so me other innocent reason." And you will

10 see that I define knowingly a number of times in this

11 charge.

12 An act is done willfully if done voluntarily and

13 intentionally and with the intent to do something that the

14 law forbids, that is to say with a bad purpose either to

15 disobey or disregard the law.

16 Intent may be inferred from conduct, the

17 surrounding circumstances and from all the evidence in the

18 case.

19 As I said, in deciding whether the defendant you

20 are considering was in fact a member of the conspiracy,

21 you should consider whether the defendant knowingly and

22 willfully joined the conspiracy.

23 Did he or she participate in it with knowledge of
24 its lawful -- unlawful -- with its knowledge of unlawful
25 purpose and with the specific intention of furthering its

OWEN M. WICKER, RPR OFFICIAL COURT REPORTER

8653

1 business or objectives. While proof of a financial

2 interest in the outcome of the scheme is not essential, if

3 you find that the defendant had such an interest, that is

4 a factor which you may properly consider in determining

5 whether or not the defendant was a member of the

6 conspiracy charged in the indictment.

7 As I mentioned a moment ago before the defendant

8 you are considering can be found to have been a

9 conspirator, you must first find that he or she knowingly

10 and willfully joined in the unlawful agreement or plan.

11 The key question therefore is whether the

12 defendant joined the conspiracy with an awareness of at

13 least some of the basic aims and purposes of the unlawful

14 agreement.

15 It is for you to note that the defendant's

16 participation in the conspiracy must be established by

17 independent evidence of his or her own acts or statements

18 as well as those of the other alleged co-conspirators and

19 the reasonable inferences which may be drawn from them.

20 A defendant's knowledge may be a matter of

21 inference from the facts proved. In that connection I

22 instruct you that to become a member of the conspiracy the

23 defendant need not have known the identity of all the
24 members, nor need he or she have been fully informed as to
25 all of the details, or the scope of the conspiracy in

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8654

1 order to justify an inference of knowledge on his or her

2 part.

3 Furthermore, the defendant need not have joined

4 in all of the conspiracy's unlawful objectives and

5 activities. The extent of a defendant's participation has

6 no bearing on the issue of a defendant's guilt. A

7 conspirator' s guilt is not measured by the extent or

8 duration of his or her participation. Indeed, each member

9 may perform separate and distinct acts and may perform

10 them at different times. Some conspirators play major

11 roles, while others play minor parts in the scheme. The

12 law does not require an equal role. Even a single act may

13 be sufficient to draw the defendant within the ambit of

14 the conspiracy.

15 A person need not have been a member of the

16 conspiracy from its very start to be a co-conspirator.

17 The defendant may have joined at any point during its

18 progress.

19 I want to caution you, however, that a

20 defendant's mere presence at the scene of the alleged

21 criminal activity does not by itself make him or her a

22 member of the conspiracy. Similarly, mere association

23 with one or more members of the conspiracy does not
24 automatical ly make a defendant a member. A person may
25 know, be related to, or befriending with, or work with a

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8655

1 criminal without being a criminal himself or herself. The

2 fact that they may have been together and discussed common

3 aims and interests does not necessarily establish proof of

4 the existence of a conspiracy or knowing membership in the

5 conspiracy.

6 I also want to caution you that mere knowledge or

7 acquiescence -- what is happening now?

8 MS. SCOTT: Your Honor, I just handed out an

9 additional instruction we will request. We will get to

10 it.

11 THE COURT: Why don't you put it down for the

12 time being. I want your undivided attention on this.

13 This is very important and I don't want it interrupted by

14 anything.

15 I want to caution you that mere knowled ge or

16 acquiescence without participation in the unlawful plans

17 is not sufficient. Moreover, the acts of a defendant

18 without knowledge merely happen to further the purposes or

19 objectives of the conspiracy does not make the defendant a

20 member. More is required under the law.

21 What is necessary is that the defendant must have

22 participated with knowledge of at least some of the

23 purposes or objectives of the conspiracy, and with the
24 intention of aiding in the accomplishment of those lawful
25 objectives.

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8656

1 In sum, a defendant with an understanding -- let

2 the record indicate that Ms. Haley has advised at 9:17

3 a.m.

4 Do you want to ask Ms. Haley if it is all right

5 to have proceeded in her absence?

6 MR. GEDULDIG: You want me to ask her?

7 THE COURT: Yes.

8 MR. GEDULDIG: I told the Court that you

9 previously had told me you had no objection to proceeding

10 in court with respect to the charge conference.

11 THE DEFENDANT HALEY: Yes, it is all right.

12 MR. NELSON: Your Honor could you possibly read

13 back to the last three lines, you indicate the lawful

14 purpose, and I believe you may have misspoke.

15 THE COURT: What is necessary is that the

16 defendant may have anticipated with knowledge of at least

17 some of the purposes or objectives of the conspiracy and

18 with the intention of aiding with respect to the

19 accomplishment of those unlawful objectives.

20 MR. NELSON: Thank you.

21 THE COURT: In sum, a defendant with the

22 understanding of the unlawful character of the conspiracy

23 must have occasionally engaged, advised, or assisted in it
24 for the purpose of furthering the illega l undertaking. He
25 or she thereby becomes a knowing participant in the

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8657

1 unlawful agreement. That is to say, a conspirator.

2 The third element that the government must prove

3 beyond a reasonable doubt to establish the crime of

4 conspiracy is that at least one of the overt acts charged

5 in the indictment was knowingly committed by at least one

6 of the conspirators -- at least one of the conspirators

7 at or about the time and place alleged.

8 Count 1 of the indictment charges that the

9 following overt acts were committed in the Eastern

10 District of New York and elsewhere. And then I will read

11 that paragraph with the overt acts.

12 Have you got the amended indictment?

13 MS. SCOTT: I am doing it, your Honor.

14 THE COURT: I would like to have it today

15 sometim e.

16 MS. SCOTT: You will, your Honor.

17 THE COURT: In order for the government to

18 satisfy this element, it is not required that all of the

19 overt acts alleged in the indictment be proven. Rather,

20 the government is only required to prove the commission of

21 at least one overt act as alleged in count one of the

22 indictment in furtherance of the conspiracy.

23 Similarly, you need not find that the defendant
24 you are considering committed the overt act. It is
25 sufficient for the government to prove that one of the

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8658

1 conspirators knowingly committed a single overt act in

2 furtherance of the conspiracy, since such an act becomes

3 in the eyes of the law the act of all the members of the

4 conspiracy.

5 You are further instructed that the overt act

6 need not ha ve been committed at precisely the date alleged

7 in the indictment. It is sufficient if you are convinced

8 beyond a reasonable doubt that it occurred at or about the

9 date and place stated. You must also find that the overt

10 act occurred during the course of the conspiracy.

11 Finally, you must find that at least one of the

12 overt acts was committed in the Eastern District of New

13 York, which includes, Staten Island, Brooklyn, Queens,

14 Nassau and Suffolk Counties.

15 The fourth and final element which the government

16 must prove beyond a reasonable doubt with regard to the

17 conspiracy charged in Count 1 is that the overt act was

18 committed for the purpose of carrying out the unlawful

19 agreement alleged in Count 1 of the indictment.

20 In order for the government to satisfy this

21 element, it must prove beyond a reasonable doubt that at

22 least one overt act was knowingly and willfully done by at

23 least one conspirator in furtherance of at least one of
24 the objects or purposes of the conspiracy as charged in
25 the indictment.

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8659

1 In this regard you should bear in mind that the

2 overt act standing alone may be an innocent lawful act.

3 Frequently, however, an apparently innocent act sheds its

4 harmless character if it is a step in carrying out,

5 promoting, aiding, or assisting the conspiratorial

6 scheme.

7 You are, therefore, instructed that the overt act

8 does not have to be an act which in and of itself is

9 criminal, or constitutes an objective of the conspiracy.

10 However, it must be an act which follows and tends toward

11 accomplishment of the plan or scheme and must be knowingly

12 done in furtherance of some o bject or purpose of the

13 conspiracy charged.

14 Now, there is a request for me to charge on

15 multiple conspiracies, and I am going to charge that as

16 follows:

17 I will now address the issue of whether the

18 government has proved a single conspiracy in Count 1, or

19 two or more separate and independent conspiracies.

20 Whether there existed a single conspiracy or two or more

21 separate and independent conspiracies is a question of

22 fact for you, the jury, to determine in accordance with

23 the instructions I am about to give you.
24 The defendants contend that the evidence
25 establishes two separate conspiracies.

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8660

1 Instead of "establishes" let's say that the

2 evidence -- that's what I was requested to charge,

3 establishes.

4 The defendants contend th at the evidence

5 demonstrates --

6 MR. TRABULUS: May I suggest that the defendants

7 contend that if the evidence demonstrates a conspiracy at

8 all, it demonstrates the existence of two or more

9 conspiracies, something along those lines. Not that we

10 concede there is a conspiracy.

11 THE COURT: I am following the charge given to me

12 by the defendant Reffsin, I believe.

13 MR. WALLENSTEIN: That must be Norman's.

14 MR. NELSON: I asked for that in the second page

15 of the charge where I actually state that the defendants

16 contend if the evidence is accredited, credited, such

17 evidence establishes two separate conspiracies.

18 THE COURT: Then I took it from somewhere else.

19 Let me see where you say it?

20 MR. NELSON: The next to the last paragraph in

21 request 4 on the second page of that request, Judge.

22 See if this is all right.

23 The defendants contend if the -- I don't like
24 that other.
25 What do you say, Mr. Trabulus?

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8661

1 MR. TRABULUS: I was saying off the top of my

2 head --

3 THE COURT: But it sounded good.

4 MR. TRABULUS: I am not so sure as I think about

5 it.

6 THE COURT: How about this: The defendants

7 contend that if the government establishes beyond a

8 reasonable doubt that a conspiracy existed.

9 MR. TRABULUS: It was two or more conspiracies

10 rather than a single conspiracy.

11 THE COURT: Right.

12 How about -- are you saying it is two or more?

13 MR. TRABULUS: The multitude conspiracy is

14 applicable without the defendants contention. And I would

15 like to rather have it without our contentions.

16 THE COURT: I think you are right.

17 Let's take that out.

18 I am just going to say that if the government

19 establishes beyond a reasonable doubt that a conspiracy

20 existed --

21 MR. TRABULUS: Your Honor, may I suggest that

22 perhaps --

23 THE COURT: Just one minute now.
24 MR. TRABULUS: I am sorry.
25 (Whereupon, at this time there was a pause in the

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8662

1 proceedings.)

2 THE COURT: How about this: If the government

3 establishes beyond a reasonable doubt -- think about this

4 and then I have to take a call.

5 If the government establishes beyond a reasonable

6 doubt that a conspiracy existed, that the government must

7 prove that it was the single conspiracy alleged in the

8 indictment, rather than two separate conspiracies. How

9 about that?

10 MR. TRABULUS: Sounds good to me.

11 THE COURT : I like it.

12 MR. NELSON: Sounds good to me.

13 THE COURT: I will be right back.

14

15 (Whereupon, a recess is taken.)

16

17 THE COURT: That was the American Bar Association

18 judiciary chairman, to talk about a judicial candidate. I

19 didn't know they were putting through judicial

20 candidates. I thought they stopped doing that about two

21 years ago.

22 If the government establishes beyond a reasonable

23 doubt that a conspiracy existed, the government must prove
24 that it is the single conspiracy alleged in the indictment
25 rather than two separate conspiracies.

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8663

1 Now, what I intend to say, namely, Who's Who

2 Worldwide and Sterling Who's Who, because I think those

3 are the two separate conspiracies that are possible.

4 Proof of two or more sep arate and independent

5 conspiracies is not proof of the single overall conspiracy

6 charged in the indictment. Unless, of course, one of the

7 conspiracies proved happens to be the single conspiracy

8 described in the indictment, where persons joined together

9 to further one common unlawful design or purpose, a single

10 conspiracy existed. By way of contrast, multiple

11 conspiracies exist when there are separate unlawful

12 agreements to achieve distinct purposes.

13 As to count one, the government must prove to you

14 beyond a reasonable doubt that in the period of time

15 between approximately 1990 through March 1995, there was

16 an agreement between the defendant you are considering and

17 one or more other defendants or other persons to commit

18 one of the charged objectives of the conspiracy as I have

19 just described.

20 In deciding whether such single co nspiracy has

21 been proved, you should be aware that a single conspiracy

22 can experience a change in personnel. Certain individuals

23 can withdraw from a conspiracy after having participated
24 in it for some time. Others may join a conspiracy after
25 it has been in existence for a period of time. The fact

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8664

1 that the parties to a criminal conspiracy are not always

2 the same does not necessarily imply that separate

3 conspiracies existed. You must, however, be persuaded

4 beyond a reasonable doubt that there were in fact two or

5 more persons in agreement to engage in the criminal

6 conduct that was at the heart of the conspiracy charged in

7 count one.

8 On the other hand, if you find that the

9 conspiracy charged in the indictment did not exist at any

10 time within the date specified, then you must find all of

11 the defendants not guilty of the conspiracy charged. This

12 is so, even if you find that some other conspiracy

13 existed, or that some agreement to violate if law had been

14 reached other than the one charged in the indictment.

15 Thus, even if you find that the defendant you are

16 considering was the member of a conspiracy, but not the

17 one charged in the indictment, you must find the defendant

18 not guilty of the conspiracy charged in count one.

19 The government charges the defendants under count

20 one of the indictment with participating in the one

21 conspiracy charged in that count. Therefore, the

22 government is required to prove the one conspiracy charged

23 in the indictment, and the defendant you are considering
24 was a member of that conspiracy.
25 If you find that the government has proven two

HA RRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8665

1 separate conspiracies, and the defendant you are

2 considering was not a member of the conspiracy charged in

3 the indictment, the government has not sustained its

4 burden of proof and you must acquit the defendant on the

5 conspiracy count.

6 In sum, if the government failed to prove the

7 conspiracy charged in the indictment, you must acquit all

8 the defendants.

9 If you find that the defendant you are

10 considering was a member of another conspiracy, not the

11 one charged in the indictment, then you must acquit that

12 defendant.

13 In other words, to find a defendant guilty you

14 must find that he or she was a member of the conspiracy

15 charged in the indictment and not some other conspiracy.

16 In your consideration of the evidence in the case

17 you should first determin e whether the government proved

18 beyond a reasonable doubt that the conspiracy existed as

19 alleged in the indictment.

20 If you conclude that the conspiracy did exist,

21 you should next separately determine whether the

22 government proved that the defendant you are considering

23 knowingly and willfully became a member of that
24 conspiracy.
25 If you determine that the government has proved

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8666

1 beyond a reasonable doubt from the evidence in the case

2 that the conspiracy alleged in the indictment was

3 willfully formed, and that the defendant you are

4 considering knowingly and willfully became a member of

5 that conspiracy, and that thereafter one or more of the

6 conspirators knowingly committed one or more of the overt

7 acts charged in furtherance of some object or purpose of

8 that conspiracy, then there may be a conviction even

9 though the conspirators may not have succeeded in

10 accomplishing their common object or purpose, and in fact,

11 may have failed to accomplish such objects or purpose.

12 However, if you determine that the government

13 failed to prove any of these elements beyond a reasonable

14 doubt, you must acquit the defendant you are considering

15 as to count one.

16 MR. WHITE: Your Honor, can we go back to the

17 multiple conspiracy for just one moment?

18 THE COURT: Yes.

19 MR. WHITE: The third paragraph, at least of

20 Mr. Nelson's requests. And I guess it corresponds to the

21 charge --

22 THE COURT: Not entirely.

23 MR. WHITE: I mean in terms of the paragraph.
24 THE COURT: Yes.
25 MR. WHITE: At one point it restates basically

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPO RTER
8667

1 that the personnel can change in a conspiracy.

2 It seems to me that it is not so much that the

3 personnel are changing, but there are two separate

4 companies, so I think it would clarify it more if we

5 repeated the sentence or two that you previously said you

6 would give with respect to membership, namely, that a

7 defendant need not have known the identities of every

8 other member or have been told about all their

9 activities. That's the main point of the germane theory

10 as to conspiracy.

11 THE COURT: No. I think it would complicate or

12 confuse it. You have an exception.

13 Anything else?

14 MR. TRABULUS: Before we move to the second or

15 following counts, I think there were certain overt acts

16 set forth in the indictment for count one which the

17 government did not prove and, therefore, it should not be

18 submitted to the jury. Does your Honor want to consider

19 that at this point?

20 THE COURT: Yes. What are those?

21 MR. TRABULUS: I am on the indictment, page 10,

22 overt act C.

23 THE COURT: Mr. White, do you want to respond to
24 each one of these things? I would not rely on my memory
25 at that time all.

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8668

1 MR. TRABULUS: It is in fact C, D, E and F on

2 that page.

3 Shall I proceed to the next page?

4 THE COURT: No. Let them take a look at that.

5 (Whereupon, at this time there was a pause in the

6 proceedings.)

7 MR. WHITE: Your Honor, Mr. Trabulus is correct.

8 THE COURT: We are deleting, C, D, E and F on

9 page 10. Ms. Scott, you will amend the indictment

10 accordingly, correct?

11 MR. WHITE: Yes.

12 THE COURT: Correct, Ms. Scott?

13 MS. SCOTT: Yes, your Honor.

14 MR. TRABULUS: Page 11, K, M, as in Michael, N as

15 in Nathan, O as in Oscar.

16 MR. JENKS: O was dismissed.

17 MR. TRABULUS: Yes, so they are not in here.

18 THE COURT: So O is out; is that right?

19 MR. JENKS: Yes, that was dismissed.

20 MR. TRABULUS: K, L and M also.

21 THE COURT: I am waiting to hear from the

22 government on that.

23 MR. WHITE: I need to look at the exhibits, your
24 Honor.
25 (Whereupon, at this time there was a pause in the

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8669

1 proceedings.)

2 MR. WHITE: Your Honor, here Mr. Trabulus is

3 incorrect.

4 THE COURT: Which one?

5 MR. WHITE: All of them, your Honor.

6 THE COURT: You say O is in?

7 MR. WHITE: I believe so. Let me explain.

8 With respect to K, Government's Exhibit 21-C is

9 an order form that bears that date. And Annette Haley's

10 name and the name of the customer, William Sadler. The

11 testimony at the trial is that that order form was

12 prepared by the salesperson who spoke on the phone with

13 the customer.

14 THE COURT: Did somebody testify that Annette

15 Haley had a telephone conversation with William Sadler?

16 MR. WHITE: No. It is reflected on an order

17 form, a document, which is Exhibit 21-C.

18 THE COURT: What does the order form say?

19 MR. WHITE: The order form has Annette Haley

20 listed as the salesperson. It bears that date. It bears

21 Mr. Sadler and his address in St. Louis.

22 THE COURT: You say that that is circumstantial

23 evidence that she made the telephone call?
24 MR. WHITE: Yes, your Honor. The description of
25 how those forms were prepared was that the salesperson

HAR RY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8670

1 would speak on the telephone with the customer, and either

2 at that time or shortly thereafter prepare the order form.

3 THE COURT: All right.

4 And what about M for Mike?

5 MR. GEDULDIG: I would like to be heard on that,

6 your Honor.

7 There is contrary testimony also from government

8 witnesses that it was not necessarily so that the order

9 form reflected the person who spoke on the telephone with

10 the prospective listee, that there could be

11 circumstances -- I think in Mr. Saffer's case, he talked

12 about borrowing, where one salesperson would make the call

13 and give the call to another salesperson to fill out the

14 form although they never made the call, and they would

15 borrow sales, one to the other.

16 There was no testimony that Annette Haley had a

17 conversation with Mr. Sadler. The only evidence before

18 the jury with regard to that paragraph is that Ms. Haley

19 is getting a percentage or commission on that sale. There

20 was no evidence, circumstantial or otherwise, in my view,

21 that would show that Ms. Haley actually had the

22 conversation with Mr. Sadler.

23 THE COURT: Then the jury will not find beyond a
24 reasonable doubt that the overt act existed, this overt
25 act existed. But there is circumstantial evidence that

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8671

1 the person's name on the order form was the person who

2 made the call. There is also evidence that that didn't

3 occur. Let the jury determine that. I will overrule you

4 on K.

5 What is the next one?

6 MR. WHITE: Next is overt act M like in Mary,

7 that invoice referred to in that overt act is Exhibit

8 28-C, like in Charley. It bears the same date. It bears

9 the name of Mr. Sainte, S A I N T E. And, again, the

10 testimony was that, and we have been over this before,

11 that these invoices would be sent out through the U.S.

12 mails as a regular course of business.

13 THE COURT: There is such an invoice in

14 evidence?

15 MR. WHITE: Yes, 28-C.

16 THE COURT: That's overruled.

17 What about N for Negative? Is that the same as

18 K?

19 MR. WHITE: I didn't copy down N as one they

20 mentioned.

21 MR. TRABULUS: I did. I assume the arguments

22 there is the same with respect to K. If there is an

23 invoice or order form comparable to the one in K I will
24 withdraw the objection.
25 MR. WHITE: I skipped that one, and I will have

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8672

1 to look it up.

2 (Whereupon, at this time there was a pause in the

3 proceedings.)

4 MR. WHITE: That's the same situation.

5 THE COURT: The exception is denied as to N for

6 Negative.

7 What about O?

8 MR. WHITE: With respect to O, it indicates that

9 a solicitation letter was sent on or about that date. If

10 that solicitation letter is not in evidence -- well, if

11 you look at 40-D, like in Dog, there is a lead card that

12 was returned by Mr. Puller.

13 The evidence was that the lead card was included

14 with the solicitation letter, your Honor. And

15 Mr. Puller's card, in turn, from Hicksville to Who's Who

16 Worldwide, so there is certainly enough evidence to

17 conclude that they sent the solicitation letter and the

18 card.

19 THE COURT: I agree. And we will leave overt act

20 O for Oboe in.

21 Anything else with respect to that?

22 MR. T RABULUS: Yes, page 12.

23 I assume with regard to S there is an order form
24 to support that. Because Mr. Searle, S E A R L E, didn't
25 testify.

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8673

1 THE COURT: Let's find out.

2 MR. WHITE: I will have to look that one up.

3 THE COURT: Go ahead.

4 MR. WHITE: It looks like there are no documents

5 from Mr. Searle. So that one is out.

6 THE COURT: We will delete S.

7 MR. TRABULUS: Your Honor, with regard to T,

8 there is a tape recording in evidence. It doesn't support

9 what is in T. In the tape recording, the person speaking

10 doesn't say to the person who is listening that he

11 shouldn't use his real name in telephone conversations

12 with potential customers. What he says is don't sign your

13 real name on some kind of form which is not really

14 specified. We don't know what the form is. So he does

15 say, so you can't be identified in a court of law. So, it

16 is different than that. And on that basis it is not

17 supported.

18 MR. WHITE: Your Honor, the recording I

19 believe -- I believe the testimony was that the reference

20 was to the order form, or some other document, and the

21 question that was put to the supervisor was, do I put the

22 name, the phone name you gave me, or do I put my real

23 name. There was no dispute that he was given that phony
24 name to use on the phone with customers. So this is
25 substantially correct, even if the meaning is slightly

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8674

1 different.

2 THE COURT: Is there proof that the conversation

3 that was recorded in that conversation, a sales manager

4 advised a salesperson not to use his real name i n

5 telephone conversations with potential customers? Does it

6 say that? Did he say that? If he didn't say it I will

7 strike it out.

8 MR. WHITE: Not the tape, your Honor. But there

9 is testimony that the witness was told that. Then the

10 tape says, don't put your name -- put that phony name, not

11 your real name on this document.

12 THE COURT: Well, if the tape said it, the

13 testimony would not be accurate. It is the tape that

14 would govern.

15 MR. WHITE: I am talking about two separate

16 conversations.

17 THE COURT: You are saying there is other

18 evidence in that a sales manager advised a Sterling Who's

19 Who salesperson not to use his real name in telephone

20 conversations in order to avoid later being identified in

21 a court of law? Did he say that in this other

22 conversation?

23 MR. TRABULUS: No.
24 MR. WHITE: No. Let me be clear.
25 Mr. Ihlenfeldt testified when he worked at

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8675

1 Sterling, a supervisor instructed him to use a different

2 name, not his real name on the phone.

3 THE COURT: But never to avoid later being

4 identified in a court of law?

5 MR. WHITE: The second part is that

6 Mr. Ihlenfeldt later asked the supervisor about some form,

7 do I put my real name on it or the phony name you gave

8 me? With respect to that he is told don't put the real

9 name.

10 THE COURT: I am striking it. There is no

11 testimony that says exactly that. You are putting

12 together several conversations. I am striking it.

13 What else?

14 MR. TRABULUS: On page 13, both W and X pertain

15 to members who did not testify. And I guess the question

16 is: Is there documentary evidence t o establish those

17 things circumstantially. I frankly don't know the

18 exhibits, if there are any.

19 MR. WHITE: The same as before with respect to

20 these. With respect to W, there is a lead card returned

21 by Mr. Olsen in evidence, which is 54-D, like in Dog.

22 With respect to overt act X, there is an order

23 form indicating that Mr. Rubin was the salesman with that
24 date and that customer, and that's Rule 55-C, like in
25 Charley.

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8676

1 THE COURT: I am denying the request. You have

2 an exception.

3 Counts two through --

4 MS. SCOTT: Your Honor, before we move on, I have

5 an additional submission, which is the request that your

6 Honor provide a Pinkerton charge. And I am handing up a

7 copy to your Honor right now.

8 Basically, your Honor, what the Pinke rton charge

9 allows is to tell the jury if a defendant was found to be

10 a member of the mail fraud conspiracy, the jury can, but

11 they are not required to, find the defendant guilty of the

12 substantive crimes charged against that defendant, in

13 whatever counts they are. We have a lot of counts here.

14 And provided that the person who actually committed the

15 fraud, who was a member of the conspiracy, the crime is

16 committed in furtherance of the conspiracy, and that this

17 mail fraud count could be foreseen as a consequence of the

18 conspiracy.

19 I have support here from the Second Circuit for

20 such a charge.

21 THE COURT: What is the support?

22 MS. SCOTT: United States against Blackmon,

23 B L A C K M O N, the cite is 839 F.2d 900. The page cite
24 is 909.
25 In that case the Court does discuss the charge as

HARRY RAPAPO RT, CSR, CP, CM OFFICIAL COURT REPORTER
8677

1 I just described it to you and emphasized that it was

2 important that the judge inform the jury that they could

3 but did not have to find the defendant guilty of the

4 subsequent counts that resulted in the conspiracy.

5 THE COURT: I will have to take a look at that.

6 MS. SCOTT: Okay.

7 I have another cite to support that, United

8 States against Gallerani, G A L L E R A N I. The cite is

9 68 F.3d 611. And the page cite is 620.

10 THE COURT: This is with regard to the mail

11 fraud?

12 MS. SCOTT: Yes.

13 THE COURT: Substantive mail fraud?

14 MS. SCOTT: Yes.

15 THE COURT: I will take a look at it and let you

16 know.

17 Now, counts 2 through 52, mail fraud. If I get

18 the numbers wrong, let me know.

19 These counts charge the defendant Bruce Gordon,

20 Who's Who Worldwide, Sterling Who's Who, Tara Garboski,

21 Oral Frank Osman, Laura Weitz, Annette Haley, Scott

22 Michaelson and Steve Rubin with knowingly and willfully

23 engaging in a scheme to defraud and to obtain money
24 property from potential customers of Who's Who and
25 Sterling Who's Who by means of false and fraudulent

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8678

1 pretenses, representations and promises.

2 By the way, is Sterling involved in this?

3 MR. JENKS: Mail fraud counts?

4 THE COURT: Yes.

5 MR. JENKS: Yes, your Honor.

6 THE COURT: Do these -- here the defendants are

7 charged with placing and causing to be placed in

8 authorized depositories for mail, matter to be delivered

9 by the United States Postal Service as more particularly

10 identified in the indictment.

11 I will now read counts two through 52.

12 If relevant statute on this subject is Title 18,

13 United States Code, Section 1341. That statute provides

14 in pertinent part that, quote, whoever having devised or

15 intending to devise any scheme or artifice to defraud, or

16 for obtaining money or property by means of false or

17 fraudulent pretenses, representations or promises . . .

18 and for the purpose of executing such scheme or artifice,

19 or attempting so to do, places in any post office or

20 authorize depository for mail matter, any matter or thing

21 whatever, and for purposes of executing such scheme or

22 artifice or attempting so to do, places in any post office

23 or authorize depository for mail, any matter or thing,
24 whatever, to be sent or delivered by the Postal Service
25 . . . or knowingly causes to be delivered by mail

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8679

1 according to the directions thereof . . . any such matter

2 or thing, shall be guilty of a crime.

3 MR. WHITE: Your Honor, I don't think we included

4 it in our charge, but I think in quoting the statute and

5 describing it, we should include the part about taking or

6 receiving from the mail certain items, since a number of

7 the mailings were mailings sent by customers to Who's Who.

8 THE COURT: Do you have a copy of the statute

9 with you?

10 MR. WHITE: I do.

11 THE COURT: Can I see it?

12 (Handed to the Court.)

13 THE COURT: Mean or takes or receives therefrom?

14 MR. WHITE: Yes. And that language is in the

15 charging language in the count, too.

16 THE COURT: You have it there?

17 MR. WHITE: Yes.

18 THE COURT: I didn't see it there.

19 Now I want to caution you that this is not a

20 civil proceeding. The defend ants cannot be convicted of a

21 crime as to mail fraud merely because their conduct was

22 sales puffery. The government must prove that the

23 defendants knowingly, intentionally and willfully
24 committed the crimes involving mail fraud, the elements of
25 which crimes I am now going to instruct you.

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8680

1 In order to sustain this mail fraud charge, the

2 government must prove each of the following elements

3 beyond a reasonable doubt:

4 First, that there was a scheme or artifice to

5 defraud and to obtain money or property by false and

6 fraudulent pretenses, representations or promises as

7 alleges in the indictment.

8 Second, that the defendant you are considering

9 knowingly or willfully devised or participated in the

10 scheme or artifice to defraud with knowledge of its

11 fraudulent nature and with specific intent to defraud.

12 Third, in execution of that scheme the defendant

13 used or caused the use of the mails as specified in the

14 indictment.

15 First element, existence of scheme or artifice.

16 The first element that the government must prove

17 beyond a reasonable doubt is that there was a scheme or

18 artifice to defraud potential customers of Who's Who and

19 Sterling Who's Who, by means of false or fraudulent

20 pretenses, representations and promises.

21 A scheme or artifice is merely a plan for the

22 accomplishment of an objective.

23 A scheme to defraud is any plan, device, or
24 course of action to obtain money or property by means of
25 false or fraudulent pretenses, representations or promises

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8681

1 reasonably calculated to dece ive persons of average

2 prudence.

3 Fraud is a general term which embraces all the

4 various means in which human ingenuity can devise and

5 which is reported to by an individual to again advantage

6 over another by false representations, suggestions or

7 suppression of the truth, or by a deliberate disregard of

8 the truth.

9 Thus, a scheme to defraud is a plan to obtain

10 something of value, or to assist someone else to obtain

11 something of value by trick, deceit, deception or swindle.

12 A statement or representation is false if it is

13 untrue when made, and was then known to be untrue by the

14 person making it, or causing it to be made.

15 A representation or statement is fraudulent if it

16 was falsely made with the intent to deceive. Deceitful

17 statements, half truths, or the concealment of material

18 facts may also constitute fraud under this statute.

19 The deception need not be premised upon

20 verbalized words alone. The arrangement of the words, or

21 the circumstances in which they are used may convey the

22 false and deceptive appearance.

23 If there is deception, the manner in which it is
24 accomplished is immaterial. The fraudulent representation
25 or statement must relate to a material fact or matter. A

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8682

1 material fact is one which is reasonably expected to be of

2 concern to a reasonable or prudent potential Who's Who or

3 Sterling, in relying on the misrepresentation or statement

4 in making the decisions.

5 This means that if you find a particular

6 statement of fact to have been false, you must determine

7 whether that statement was one that a reasonable potential

8 customer would have considered importan t in making

9 decisions.

10 The same principle applies to fraudulent half

11 truths, or omissions of material facts.

12 Further, it is not necessary that the defendant

13 you are considering actually realized any gain from the

14 scheme, or the intended victim actually suffered any

15 loss.

16 In this case it so happens that the government

17 does contend that the proof establish, that the potential

18 customers were defrauded and did lose money. Although

19 whether or not the scheme actually succeeded is really not

20 the question. You may consider whether it did succeed in

21 determining whether a scheme existed.

22 A scheme to defraud need not be shown by direct

23 evidence, but may be established by all the circumstances
24 and facts in the case.
25 The representations which the government charges

HARRY RAPAPORT, CSR, CP, CM OFFICIAL CO URT REPORTER
8683

1 were made as part of the scheme to defraud are set forth

2 in the indictment.

3 In this regard I instruct you that the

4 prosecution must prove beyond a reasonable doubt that one

5 or more false, material misrepresentations, fraudulent

6 half truths, or fraudulent omissions of material fact were

7 made by each defendant you are considering and that they

8 were made in furtherance of the alleged scheme to defraud.

9 Also, in this regard I instruct you that if the

10 government fails to prove beyond a reasonable doubt that

11 each defendant you are considering made one or more

12 material misrepresentations to a potential customer, you

13 must acquit that defendant.

14 In order to find a defendant guilty of mail

15 fraud, you must find beyond a reasonable doubt that the

16 defendant intended to defraud the potential customer.

17 In addition, to be guilty of participating in a

18 fraudulent scheme, the defendant you are considering must

19 have contemplated that the potential customer would lose

20 money. It is not enough that the defendant intended to

21 receive a financial gain or advantage from the alleged

22 scheme, or even that he or she succeeded in obtaining such

23 a benefit unless he or she intended that the potential
24 customer sustain a corresponding loss. There must be a
25 direct relationship between the defendant's

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8684

1 misrepresentations and the intended deprivation of money.

2 In order to be guilty of fraud, the

3 representations made by the defendant to potential

4 customers must be of such a nature that if they were

5 successful, it is reasonably probable that the victim,

6 namely, the poten tial customer, would have suffered a

7 financial loss.

8 If you find that the government failed to sustain

9 its burden of proof that a scheme to defraud existed as

10 alleged in counts 2 through 52, then you must acquit all

11 the defendants as to those counts, if you find that the

12 government has sustained its purpose, and a scheme to

13 defraud existed as charged, you should next consider the

14 second element, participation in the scheme with intent to

15 defraud.

16 The second element that the government must prove

17 beyond a reasonable doubt is that the defendant you are

18 considering participated in the scheme to defraud

19 knowingly, willfully and with the specific intent to

20 defraud.

21 Knowingly means to act voluntarily and

22 deliberately; rather than mistakenly or inadvertently.

23 Willfully means to act knowingly and purposely, with an

24 intent to do something the law forbids. That is to say
25 with a bad purpose or to disobey or to disregard the law.

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8685

1 Intent to defraud means to act knowingly and with

2 the specific intent to deceive for the purpose of causing

3 some financial loss to another.

4 The question of whether a person acted knowingly,

5 willfully and with intent to defraud is a question of fact

6 for you to determine like any other fact question. The

7 question involves one's state of mind. Essential to a

8 conviction for a scheme to defraud under Section 1341, is

9 proof beyond a reasonable doubt of the defendant's

10 fraudulent intent. Namely, the defendant's intent to

11 deceive causing an actual financial loss. The significant

12 fact is the defendant's intent and purpose. Although the

13 government n eed not prove that the scheme to defraud was

14 successful or complete, the government must prove beyond a

15 reasonable doubt that the defendant contemplated some

16 actual financial loss to the purported victim, namely, the

17 potential customers. Misrepresentations amounting only to

18 a deceit is insufficient to convict under Section 1331.

19 The deceit must be contemplated with a financial loss to

20 the victim.

21 Direct proof of knowledge and fraudulent intent

22 is almost never available. It would be a rare case where

23 it could be shown that a person wrote or stated that as of
24 a given time in the past he or she committed an act with
25 fraudulent intent. Such direct proof is not required.

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8686

1 The ultimate facts of knowledge and criminal

2 intent, though subjective may be establis hed by

3 circumstantial evidence based upon a person's outward

4 manifestations, his or her words, conduct, acts, and all

5 the surrounding circumstances disclosed by the evidence

6 and the rational and logical inferences that may be drawn

7 from them.

8 As I advised you, circumstantial evidence, if

9 believed, is of no less value than direct evidence. In

10 either case the essential elements of the crime charged

11 must be established beyond a reasonable doubt.

12 Since an essential element of the crime charged

13 is intent to defraud, it follows that good faith on the

14 part of a defendant is a complete defense to a charge of

15 mail fraud.

16 I instruct you, however, that a defendant has no

17 burden to establish a defense of good faith. The burden

18 is on the government to prove fraudulent intent and

19 consequent lack of good faith beyond a reasonable doubt.

20 Under the mail fraud statute even false

21 representations, or statements, or omissions of material

22 facts, do not amount to a fraud unless done with

23 fraudulent intent. However misleading or deceptive a plan
24 may be, it is not fraudulent if it was devised or carried
25 out in good faith. An honest belief in the truth of the

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8687

1 representations made by a defendant is a good defense,

2 however inaccurate the statements may turn out to be.

3 Moreover, not every untrue statement designed to

4 gain the sympathetic ear of a potential customer is

5 forbidden by the mail fraud statute.

6 This I am adding what you asked, Mr. Trabulus.

7 In fact, I find that your requests to charge were very

8 helpful. So were the government's, of course, but yours

9 was very helpful in that t hey were fair. Which I paid

10 more attention than usual. I do pay attention of course,

11 but I thought they were very fair.

12 I don't accept everything you gave me, so don't

13 get excited or carried away now.

14 Moreover, not every untrue statement designed to

15 gain the sympathetic ear of a potential customer is

16 forbidden by the mail fraud statute.

17 To constitute either a scheme to defraud, or the

18 making of false or fraudulent pretenses, representations

19 or promises under the mail fraud statute, the false

20 representations must be directed to the quality, adequacy

21 or price of what is to be sold.

22 Furthermore, if a defendant makes what he or she

23 knows to be false representations with the intent that
24 those false representations induce a purchaser to make a
25 purchase, but the defendant believes in good faith that

HARRY RAP APORT, CSR, CP, CM OFFICIAL COURT REPORTER
8688

1 those false representations are not directed to the

2 quality, adequacy of what is to be sold, that defendant

3 then lacks specific intent to defraud and cannot be guilty

4 of mail fraud through such false representations. This is

5 so even if to a buyer's mind those false representations

6 actually do concern the quality, adequacy or price of what

7 is to be sold, or the nature of the agreement between

8 buyer and seller.

9 What is determinative is the defendant's own

10 personal belief as to whether they do.

11 Accordingly, I instruct you that even if you find

12 that a defendant made or was responsible for the making of

13 false representations to customers, and even if you find

14 that those false representations did in fact concern the

15 quality, adequacy or price of what was to be sold, or to

16 the nature of the agreement between buyer and seller, you

17 must find the defendant not guilty, unless you find beyond

18 a reasonable doubt that the defendant believed that they

19 did concern the quality, adequacy or price of what was to

20 be sold.

21 As a practical matter then, in order to sustain

22 this mail fraud charge against the defendant you are

23 considering, the government must establish beyond a
24 reasonable doubt that he or she knew that his or her
25 conduct as a participant in the scheme was calculated to

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8689

1 deceive the potential customers, and nevertheless he or

2 she join the defendant's fraudulent scheme for the purpose

3 of causing some financial loss to another.

4 To conclude on this element, if you find that the

5 government failed to establish beyond a reasona ble doubt

6 that the defendant you are considering was a participant

7 in the scheme to defraud, and had the specific intent to

8 deceive, you must acquit the defendant. On the other

9 hand, if you find that the government has established

10 beyond a reasonable doubt not only the first element,

11 namely, the existence of a scheme to defraud, but also

12 this second element, that the defendant you are

13 considering was a knowing participant and acted with

14 specific intent to defraud, and if the government also

15 establishes the third element which I am about to instruct

16 you of, then you have a sufficient basis upon which to

17 convict the defendant.

18 Third element, use of the United States mail.

19 The third and final element that the government

20 must establish is that the United States mail service was

21 used in furtherance of the scheme to defraud.

22 It is not necessary for the defendant you are

23 considering to be directly or personally involved in
24 sending the mailings, as long as the sending of the
25 mailings was reasonably -- in the execution of the fraud

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8690

1 in which the defendant is accused to have been

2 participating.

3 In this regard it is sufficient to establish this

4 element of the crime, if the evidence justifies a finding

5 that the defendant caused the Postal Service to be used by

6 someone else. And this does not mean that the defendant

7 himself or herself must have the specifically authorized

8 others to send the mailings. When one does an act with

9 knowledge that the use of the mails will follow in the

10 ordinary course of business, or where such use of the

11 mails can reasonably be foreseen, although not actually

12 intended, then he or she causes the Postal Service to be

13 used as intended by the statute.

14 Further, the mail matter need not disclose on its

15 face a fraudulent representation or purpose or request for

16 money, but need only be intended to further or assist in

17 carrying out the scheme to defraud.

18 With respect to the use of the mails, the

19 government must establish beyond a reasonable doubt that

20 the particular mailings charged in the indictment, namely,

21 the lead cards, invoices and solicitation letters were in

22 furtherance of the scheme to defraud.

23 Aiding and abetting.
24 With regard to Count 2, the government has
25 charged the defendants with aiding and abetting the

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8691

1 commission of the crime of mail fraud.

2 The aiding and abetting sta tute, Title 18 of the

3 United States Code, Section 2 provides that, quote,

4 whoever commits an offense against the United States, or

5 aids, abets, or counsels, commands, induces or procures

6 its commission is punishable as a principal.

7 Whoever willfully causes an act to be done, which

8 if directly performed by him or another would be an

9 offense against the United States, is punishable as a

10 principal.

11 Under the federal aiding and abetting statute it

12 is not necessary for the government to show that the

13 defendant himself or herself physically committed the

14 crime with which he or she is charged in order for you to

15 find the defendant guilty of the crime charged in counts 2

16 through 52.

17 A person who aids and abets another to commit an

18 offense is just as guilty of that offense as if he or she

19 committed it himself or herself.

20 Accordingly, you may find the defendant guilty of

21 the offense charged in counts 2 through 52, if you find

22 that the government proved beyond a reasonable doubt that

23 another person actually committed the offense with which
24 the defendant is charged, and that the defendant aided or
25 abetted that person in the commission of the offense. As

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8692

1 you can see, the first requirement is that you find that

2 another person has committed the crime charge in counts 2

3 through 52.

4 Obviously no one can be convicted of aiding or

5 abetting the criminal acts of another if no crime was

6 committed by the other person in the first place. But if

7 you do find that a crime was committed, then you must

8 consider whether the defendant you are considering aided

9 or abetted the commission o f the crime.

10 In order to aid or abet another to commit a

11 crime, it is necessary that the defendant willfully and

12 knowingly associate himself or herself in some way with

13 the crime, and that he or she willfully or knowingly seeks

14 by some act to help make the crime succeed.

15 Participation in a crime is willful if action is

16 taken voluntarily and intentionally, or in a case of a

17 failure to act, with the specific intent to fail to do

18 something the law requires to be done, that is to say with

19 a bad purpose either to disobey or to disregard the law.

20 The mere presence of a defendant where a crime is

21 being committed, even coupled with knowledge by the

22 defendant that a crime is being committed, or the mere

23 acquiescence by a defendant in the criminal conduct of
24 others, even with guilty knowledge is not sufficient to
25 establish aiding and abetting.

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8693

1 An aider or abettor must have some interest in

2 the criminal venture.

3 To determine whether the defendant aided or abets

4 the commission of the crime with which he or she is

5 charged in counts 2 through 52, ask yourselves these

6 questions: Did the defendant participate in the crime

7 charged as something he or she wished to bring about? Did

8 the defendant associate himself or herself with the

9 criminal venture, knowingly and willfully? Did the

10 defendant seek by his or her actions to make the criminal

11 venture succeed?

12 If the government proves beyond a reasonable

13 doubt that the defendant did all these things, then the

14 defendant is an aider and abettor, and, therefore, guilty

15 of the offense.

16 If on the other hand, your answers to thi s series

17 of questions are no, then the defendant is not an aider

18 and abettor and you must find him or her not guilty as to

19 counts 2 through 52.

20 In sum, if you find that the defendant you are

21 considering committed the crimes charged in counts 2

22 through 52, or aided and abetted in the commission of

23 those crimes, then you should find that defendant guilty
24 of the crime charged -- the crimes charged in those
25 counts.

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8694

1 On the other hand, if the government has not

2 satisfied you beyond a reasonable doubt that the defendant

3 either knowingly and willfully committed the crimes

4 charged in Counts 2 through 52, or aided and abetted in

5 the commission of those crimes, then you must find him or

6 her not guilty of the crimes charged in those counts.

7 Cou nt 53 --

8 MR. TRABULUS: Your Honor, can we take a break at

9 this point?

10 THE COURT: We will take a ten-minute recess.

11 Did you want to say something before?

12 MR. WHITE: I will do it during -- after the

13 break.

14 THE COURT: Do it now so I can look it up and

15 appear to know what I am doing.

16 MR. WHITE: Your Honor, I wanted to make two

17 comments about the first element of the mail fraud scheme.

18 First, I think your Honor said that they must

19 find that each defendant made a statement to a customer

20 containing one of the misrepresentations. I think that

21 should be amended to say made or caused to be made,

22 because Mr. Gordon and some others were not actually on

23 the phone with customers.
24 THE COURT: Count 1, you say?
25 MR. WHITE: Element 1, your Honor.

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER

8695

1 THE COURT: I am sorry, element one, yes.

2 MR. WHITE: I may have misheard it.

3 THE COURT: You are right, were made and caused

4 to be made is correct.

5 MR. WHITE: The other comments, your Honor, the

6 government requested you also instruct the jury in line

7 with United States against Schwartz, that it is not

8 necessary that the harm contemplated be monetary in

9 nature. It is sufficient if it goes to some essential

10 element of the bargain, and that you can find the

11 defendants -- that that requirement is satisfied if the

12 defendants intended by fraud to obtain from customers

13 money that they would not have given to the defendants

14 were it not for the fraudulent misrepresentation. That

15 instruction was specifically approved by the Second

16 Circuit. I believe it is relevant here.

17 THE COURT: I don't get it. What did I not do?

18 MR. WHITE: In other words, the jury should be

19 instructed that the contemplated harm need not necessarily

20 be monetary.

21 THE COURT: In this case it is though.

22 MR. WHITE: Correct. Then it should be explained

23 in this fashion: That it could constitute a fraud if they
24 would not have engaged in the transaction, but for the
25 fraudulent misrepresentations, namely, that the fraud is

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8696

1 obtaining their purchase by false representations,

2 regardless of what they got, as opposed to what they got

3 was worth less than what they were promised.

4 THE COURT: No. I decline to charge it. I think

5 it is confusing. I know what you are talking about. They

6 were deprived of their money, which the statute says is

7 because of this. The reason they were deprived of their

8 money is because they didn't get to be the elitist or ego

9 person they were supposed to be.

10 I mentioned the quality and the price, that is in

11 there. But I decline to confuse the jury.

12 Anything else, Mr. White?

13 MR. WHITE: Your Honor, I am not sure how this

14 would confuse them. One sentence that says, you can find

15 the defendants inflicted such harm if you believe in

16 substance that the customers would not have engaged in

17 this transaction but for the fraudulent statement.

18 THE COURT: I decline to charge that.

19 Anything else?

20 MR. WHITE: No.

21 THE COURT: We will take a ten-minute recess.

22

23 (Whereupon, a recess is taken.)
24
25

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8697

1 THE COURT: Count 53, perjury.

2 The indictment charges the defendant Bruce Gor don

3 with making false declarations before a federal court at

4 the trial of the lawsuit that Reed Elsevir brought against

5 Who's Who Worldwide.

6 The indictment reads as follows.

7 The indictment charges the defendant Bruce Gordon

8 with violating Section 1623 of Title 18 of the United

9 States code which provides in part, quote, whoever under

10 oath . . . in any proceeding before . . . any court

11 . . . of the United States knowingly makes any false

12 material declaration is guilty of a crime.

13 Stated simply perjury is the willful giving of

14 false testimony before a competent tribunal while under

15 oath knowing the testimony is false as to a material

16 matter.

17 The indictment charges that the defendant made

18 such false declarations as set forth in the indictment in

19 his testimony in a civil trial in the federal court of the

20 East ern District of New York.

21 In order to prove the perjury charge against the

22 defendant Bruce Gordon as charged in Count 53, the

23 government must establish each of the following four
24 elements beyond a reasonable doubt:
25 First, that the testimony was given before a

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8698

1 federal court while the defendant Bruce Gordon was under

2 oath;

3 Second, that such testimony was false as set

4 forth in the indictment;

5 Third, that such false testimony was willfully

6 and knowingly given in that the defendant Bruce Gordon

7 knew that the testimony was false; and

8 Fourth, as to the matters as to which it is

9 charged that the defendant Bruce Gordon gave false

10 testimony were material to the issues under inquiry in the

11 civil case then being tried.

12 There is no iss ue as to the first element. With

13 respect to the first element, that the defendant Bruce

14 Gordon took an oath to testify truly, the evidence shows,

15 and there appears to be no dispute that the defendant

16 appeared before the federal court on or about February

17 12th, 1994 and February 22nd, 1994 and took an oath to

18 testify truthfully.

19 The second element, falsity --

20 MR. WHITE: Your Honor, the dates are the 17th

21 and the 22nd.

22 THE COURT: February 17th and 22nd?

23 MR. WHITE: Yes.
24 THE COURT: Okay.
25 Your concern are with the second, third and

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8699

1 fourth elements of perjury. The second element is

2 falsity. You must determine whether any part of the

3 testimony given by the defendant Bruce Gordon as set forth

4 in the indictment was false.

5 An answer to a question is false when it is

6 contrary to the fact, that is when it is not true.

7 The truth or falsity of an answer must be

8 determined by the facts existing at the time the answer

9 was made.

10 In reviewing testimony which is alleged to have

11 been false, you should consider such testimony in the

12 context of the sequence of questions asked and answers

13 given.

14 The words used should be given their common and

15 ordinary meaning, unless the context clearly shows that a

16 different meaning was understood by both the questioner

17 and the witness.

18 The burden is upon the government to establish

19 beyond a reasonable doubt that the answers made by the

20 defendant Bruce Gordon in the federal civil trial were in

21 fact false.

22 Count 53 contains answers given by the defendant

23 Bruce Gordon reciting more than one fa ct. It is not
24 necessary that the government prove that each of these
25 factual statements is false. The government satisfies its

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8700

1 burden of proving falsity if it proves beyond a reasonable

2 doubt that any of the factual statements recited in Count

3 53 is false. However, and this is important, you may not

4 find the defendant guilty unless you all agree unanimously

5 that one particular answer is false. It is not enough

6 that you all believe that some answer given by the

7 defendant is false. That is, you cannot find the

8 defendant guilty if some of you think that only answer A

9 is false, and the rest of you think that answer B is

10 false. There must be one specific answer that all of you

11 believe is false in order to convict the defendant on this

12 count. If you should find th at a particular question was

13 ambiguous, that is, subject to more than one

14 interpretation, and that the defendant Bruce Gordon

15 truthfully answered one reasonable interpretation of the

16 question under the circumstances presented, then such

17 answer would not be false.

18 Similarly, if you should find that the question

19 is clear, but the answer was ambiguous, and one reasonable

20 interpretation of such answer would be truthful, then such

21 answer would not be false.

22 In deciding whether the defendant's answers are

23 false, the answers must be given the natural meaning in
24 the context in which the words were used. If you find an
25 answer given by the defendant was literally true but

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8701

1 unresponsive to the question asked, you may not find that

2 answer false or conv ict the defendant because of it. As

3 long as a statement or a reasonable interpretation of a

4 statement is narrowly or literally true, there can be no

5 conviction for perjury. This is so even if you find that

6 the answer was intentionally misleading.

7 Third element, willfully and knowingly given.

8 If you decide that any of the answers the

9 defendant Bruce Gordon gave were false, then you must

10 decide whether the defendant gave those answers knowingly

11 and willfully. That is, at the time the answers were

12 given did the defendant know and believe that the answers

13 were false. And if so, did the defendant give the answers

14 consciously and in the exercise of his free will. Unless

15 the government proves beyond a reasonable doubt that the

16 defendant both knew his answers were false and that he

17 purposely or intentionally gave the false answers, you may

18 not find the defendant guilty.

19 The requirement that you find the defendant Bruce

20 Gordon acted knowingly and willfully means that you may

21 not find the defendant guilty of perjury simply because

22 the defendant gave testimony which is factually

23 incorrect. The defendant may have given incorrect
24 testimony because of an honest mistake of facts,
25 confusion, haste, oversight or carelessness.

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8702

1 If the defendant Bruce Gordon made an erroneous

2 incorrect statement due to a slip of the tongue or bad

3 memory, or through misunderstanding, the defendant would

4 not be guilty of making the false statement knowingly and

5 willfully. Your decision whether the defendant acted

6 knowingly and willfully in making any statements you find

7 to be false involves a decision about the defen dant's

8 state of mind at the time the statements were made.

9 It is obviously impossible to ascertain or prove

10 directly what the operation of the defendant's mind was.

11 You cannot look into a person's mind to see what the state

12 of mind is or was. But a wise or intelligent

13 consideration of all the facts and circumstances shown by

14 the evidence and the exhibits in the case may enable you

15 to infer with a reasonable degree of accuracy what the

16 defendant's state of mind was.

17 In our every day affairs we are continuously

18 called upon to decide from the actions of others what

19 their state of mind is. Experience has taught us that

20 frequently actions speak louder, more clearly than spoken

21 or written words. Therefore, you may well rely in part on

22 circumstantial evidence in determining the defendant's

23 state of mind.
24 Proof of the circumstances surrounding the
25 defendant's actions can supply an adequate basis for a

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8703

1 finding that the defendant acted knowingly and willfully.

2 The actions of an individual must be set in their time and

3 place. The meaning of a particular act may depend on the

4 circumstances surrounding it. Thus, you may consider

5 evidence which you recall and believe about the

6 defendant's actual knowledge of certain facts and

7 occurrences, as compared to the testimony he gave about

8 these facts and circumstances the extent to which

9 statements were made to conceal facts or events, if any,

10 and in general the manner in which certain actions were

11 undertaken by the defendant and by others with his

12 knowledge. You may consider whether the defendant had a

13 motive to lie and conceal the fa cts.

14 The government is not required to prove the

15 existence of such a motive, let alone exactly what the

16 motive was. The government's failure to prove a motive

17 does not establish lack of guilt. But if you do find

18 evidence of a motive, that may help you decide what the

19 defendant's state of mind was.

20 Therefore, you should ask yourself whether the

21 defendant stood to gain any personal benefit from

22 concealing the truth, or whether he stood to avoid any

23 personal liability.
24 The fourth element that the government must prove
25 beyond a reasonable doubt is that the matter or matters as

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8704

1 to which it is charged that the defendant Gordon gave

2 false testimony were material to the issues under inquiry

3 in the civil case being tried in the federal court.

4 I instruct you that a statement is, quote,

5 material, end quote, if it has a natural tendency to

6 influence or be capable of influencing the decision of the

7 decision making body to which it was addressed -- in this

8 case, to the federal judge trying the civil case. That

9 is, it must relate to an important fact that would have a

10 natural tendency to influence his decisions as

11 distinguished from some unimportant or trivial detail. It

12 must establish this element by evidence that is clear,

13 unequivocal and convincing.

14 Count 54, obstruction of justice.

15 The defendants Gordon and Reffsin have been

16 charged in count 54 of the indictment with endeavoring to

17 obstruct the due administration of justice with regard to

18 proceedings in the bankruptcy court.

19 The indictment reads: The relevant statute is 18

20 United States Code Section 1503. It pr ovides in part:

21 Whoever corruptly . . . endeavors to influence . . . or

22 impede . . . any court of the United States . . . or

23 corruptly . . . influences, obstructs, indeed, or
24 endeavors to influence, obstruct or impede the due
25 administration of justice shall be guilty of a crime.

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8705

1 This law is designed to prevent a miscarriage of justice

2 resulting from corrupt methods. It is aimed at a variety

3 of means by which the orderly and due process of the

4 administration of justice may be impeded, thwarted, or

5 corrupted.

6 The due administration of justice refers to the

7 fair, impartial, uncorrupted and unimpeded investigation,

8 disposition or trial of any matter, civil or criminal, in

9 the courts of the United States. It includes every step

10 in a matter or proceedi ng in the federal courts to ensure

11 the just consideration and determination of the rights of

12 the parties, whether government or individual. Thus, due

13 administration of justice includes, but is not limited to

14 a federal civil or bankruptcy proceeding.

15 The sweep of the statute extends to any corrupt

16 endeavor or effort to interfere with a federal judge's

17 function in the discharge of his or her duties.

18 The key word in the statute is "endeavor." As

19 used in this statute "endeavor" means to knowingly and

20 deliberately make any effort or any act, however contrived

21 to obstruct, impede or interfere with the Court

22 proceeding. It is the endeavor which is the gist of the

23 crime. Success of the endeavor is not an element of the
24 crime. Any effort, whether successful or not, that is
25 made for the purpose of corrupting, obstructing or



HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8706

1 impeding the proceeding is condemned. To act "corruptly"

2 as that word is used in these instructions, means to act

3 voluntarily and deliberately, and for the purpose of

4 improperly influencing or obstructing or interfering with

5 the administration of justice.

6 In order to sustain its burden of proof for the

7 crime of corruptly endeavoring to obstruct or impede the

8 due administration of justice as charged in count 54, the

9 government must prove the following three essential

10 elements beyond a reasonable doubt.

11 First, the judicial proceeding in the federal

12 bankruptcy court identified in the indictment was pending

13 at the time alleged in the indictment;

14 Second, the defendant you are considering knew

15 that this bankruptcy proceeding was pending;

16 And, third, the defe ndant you are considering

17 then corruptly endeavored to influence, obstruct or impede

18 the due administration of justice in the proceeding as

19 detailed in the indictment, namely by advising, directing,

20 participating in and assisting in the creation,

21 preparation and submission of false usage logs relating to

22 the Manhasset condominium and the Manhattan penthouse and

23 giving false, evasive and misleading testimony under oath
24 with regard to the intended and actual use of the
25 Manhasset condominium and the Manhattan penthouse for

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8707

1 corporate or business purposes.

2 First element, pending judicial proceeding.

3 The first element the government must prove

4 beyond a reasonable doubt is that a judicial proceeding in

5 the federal bankruptcy court was pending at the time

6 alleged in the indictment, namely between March 1994 and

7 September 23rd, 1994.

8 In this case it is agreed by all parties that the

9 federal bankruptcy proceeding was pending at the time set

10 forth in the indictment.

11 It is no less a violation of this proceeding

12 because the proceeding involved a civil bankruptcy

13 proceeding between two private litigants to which the

14 United States was not a party. In order to satisfy this

15 element it is sufficient if you find that the civil

16 bankruptcy proceeding was pending in a federal court.

17 Second element, knowledge.

18 The second element the government must prove

19 beyond a reasonable doubt is that the defendant you are

20 considering knew that this bankruptcy proceeding was in

21 progress. In order to satisfy this element you need only

22 to determine that the defendant knew on or about the dates

23 charged that the bankruptcy proceeding was in progress.
24 In this regard there is evidence that the defendants Bruce
25 Gordon and Martin Reffsin appeared at hearings before the

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8708

1 bankruptcy court -- and this I am not sure about -- were

2 duly sworn and also testified at depositions in this

3 proceeding. Is there proof of that?

4 MR. WHITE: Yes, your Honor. Those transcripts

5 are both with respect to Mr. Gordon and Mr. Reffsin, and

6 in evidence.

7 MR. TRABULUS: Your Honor, with regard to this

8 particular element, I think Mr. Gordon would not object to

9 an instruction that it is not disputed that he knew the

10 proceeding was pending.

11 THE COURT: Okay.

12 MR. WALLENSTEIN: Mr. Reffsin would not object to

13 that either. He did testify here that he knew about it.

14 THE COURT: All right.

15 MR. WALLENSTEIN: I have another problem with

16 this charge though.

17 THE COURT: Just one minute now.

18 Both defendants concede that they knew the

19 bankruptcy proceeding was in progress?

20 MR. TRABULUS: Yes.

21 MR. WALLENSTEIN: Yes.

22 THE COURT: Yes.

23 MR. WALLENSTEIN: I don't know if you wish to
24 wait to finish --
25 THE COURT: Having to do with the second element,

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8709

1 knowledge?

2 MR. WALLENSTEIN: No. Actually in the second

3 count of the instructions here.

4 THE COURT: I am not -- you mean the second

5 obstruction counts?

6 MR. WALLENSTEIN: Right.

7 THE COURT: I am on the first obstruction count.

8 MR. WALLENSTEIN: I know that. But there was

9 some indication in the charge you just gave that one of

10 the elements for the first obstruction count was giving

11 false and evasive testimony with respect to the usage of

12 the premises. And I don't believe that's what Mr. Reffsin
13 is charged with, unless I am reading something wrong.

14 THE COURT: Okay.

15 This is the first obstruction charge, having to

16 do with the false usage logs?

17 MR. WALLENSTEIN: Yes. Mr. Reffsin is charged

18 with using a log, submitting a log, but not with respect

19 to giving testimony with respect to it, Mr. Gordon is

20 charged with that.

21 THE COURT: Is that so?

22 MR. WHITE: No, your Honor, if you look at page

23 23 and 22 of the indictment, the charge is that they both
24 obstructed justice by, A, submitting the logs, and, B,
25 giving false testimony regarding the two apartments. The

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8710



1 second obstruction charge charges Mr. Gordon with giving

2 false testimony about the ownership of the company.

3 THE COURT: Mr. Wallenstein, I say further on

4 that there has to be unanimity with regard to a particular

5 charge. I think that may cover it.

6 MR. WALLENSTEIN: It may.

7 THE COURT: Wait until you hear it. But they

8 allege that he did do this.

9 MR. WALLENSTEIN: I don't think there was any

10 evidence as to that, but, okay.

11 THE COURT: That's another matter.

12 Getting into the third element, corruptly

13 endeavoring to impede.

14 The final element the government must prove

15 beyond a reasonable doubt is that the defendant you are

16 considering did corruptly obstruct or impede or did

17 endeavor to obstruct or impede the bankruptcy proceeding.

18 As I explained previously the word "corruptly"

19 means to have the improper motive or purpose of

20 obstructing justice. As I also told you success of the

21 endeavor is not an element of the crime. The term

22 "endeavor" is designed to reach all conduct which is

23 aimed at influencing, intimidating and impeding a
24 bankruptcy court. Thus, it is sufficient to satisfy this
25 element if you find that the defendant acted in a way

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8711

1 which produced or was capable of producing an effect that

2 prevented justice from duly -- from being duly

3 administered or obstructed or impeded the proceeding.

4 The defendants are accused of two acts which

5 allegedly obstructed or impeded the administration of

6 justice in the bankruptcy proceeding. A, advising

7 directly -- advising, directing and participating in the

8 creation of and submitting of false usage logs; and, B,

9 giving false, evasive and misleading testimony under oath

10 with regard to the intended and actual use of the

11 Manhasset condominium and Manhattan penthouse for

12 corporate or business purposes.

13 However, and this is important, you may not find

14 a defendant guilty unless you all agree unanimously that

15 one particular act obstructs justice. It is not enough

16 that you all believe that one of the two acts was

17 obstructive. That is, you cannot find a defendant guilty

18 if some of you think that only act A is obstructive, and

19 the rest of you think that only act B is obstructive.

20 There must be one of the acts that all of you believed is

21 an obstruction of justice in order to convict a defendant

22 on this count.

23 I then go into aiding and abetting which is
24 charged also. You don't want to hear this over again, do
25 you?

HA RRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8712

1 MR. WALLENSTEIN: You are not going to make any

2 changes, are you?

3 THE COURT: It will have the same look,

4 Mr. Wallenstein.

5 MR. WALLENSTEIN: Okay.

6 THE COURT: Counts 55, obstruction of justice, I

7 believe the defendant Bruce Gordon was the only one

8 charged.

9 The defendant Bruce Gordon is charged in Count 55

10 of the indictment with endeavoring to obstruct the due

11 administration of justice with regard to proceedings in

12 the bankruptcy court.

13 Counts 55 reads as follows: The same statute is

14 involved, I don't have to repeat it. Section 1503.

15 The same prelude, explanation of "endeavor" and

16 "corrupt."

17 In order to sustain its burden of proof for the

18 crime of corruptly endeavoring to influence, obstruct or

19 impede the due administration of justice as charged in

20 count 55 of the indictment, the government must prove the

21 following three essential elements beyond a reasonable

22 doubt.

23 First, the judicial proceeding in the federal
24 bankruptcy court identified in the indictment was pending
25 at the time alleged in the indictment;

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8713

1 Second, the defendant Bruce Gordon knew that this

2 bankruptcy proceeding was pending; and;

3 Third, the defendant Bruce Gordon then corruptly

4 endeavored to influence, obstruct or impede the due

5 administration of justice in the proceeding as detailed in

6 the indictment, namely, by submitting a bankruptcy

7 petition containing false information and giving false,

8 evasive and misleading testimony under oath with regard to

9 the ownership of Who's Who Worldwide and other

10 corporations controlled by the defendant Bruce Gordon.

11 First element, there you concede?

12 MR. TRABULUS: Same with the second.

13 THE COURT: First and second.

14 Third element, corruptly endeavored to obstruct

15 or impede.

16 The final element the government must prove

17 beyond a reasonable doubt is that the defendant Bruce

18 Gordon did corruptly obstruct, impede, or endeavor to

19 obstruct and to impede the bankruptcy proceeding.

20 As I explained earlier, the word "corruptly"

21 means to have the improper motive or purpose of

22 obstructing justice.

23 As I also told you, success of the endeavor is
24 not an element of the crime. The term "endeavor" is
25 designed to reach all conduct which is aimed at

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8714

1 influencing, intimidating or impeding a bankruptcy co urt.

2 Thus, it is sufficient to satisfy this element if

3 you find that the defendant acted in a way which produced

4 or was capable of producing an effect that prevented

5 justice from being duly administered or obstructed or

6 impeded the proceeding.

7 Under this element it is essential that the

8 government prove beyond a reasonable doubt that the

9 defendant Bruce Gordon -- pardon me, willfully and

10 knowingly submitted a bankruptcy petition containing false

11 information under oath with regard to the ownership of

12 Who's Who Worldwide and other corporations controlled by

13 the defendant Bruce Gordon, and/or gave false, evasive and

14 misleading answers in his testimony under oath in the

15 bankruptcy court proceeding with regard to the ownership

16 of Who's Who Worldwide and other corporations controlled

17 by the defendant Bruce Gordon, and that he did so i n a

18 corrupt endeavor to obstruct the bankruptcy court

19 proceeding by giving such false information and/or

20 testimony.

21 The defendant Bruce Gordon is accused of two acts

22 which allegedly obstructed or impeded the administration

23 of justice in the bankruptcy proceeding.
24 A, submitting a bankruptcy petition containing
25 false information with regard to the ownership of Who's

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8715

1 Who Worldwide; and, B, giving false, evasive and

2 misleading testimony under oath with regard to the

3 ownership of Who's Who Worldwide and other corporations

4 controlled by the defendant Bruce Gordon.

5 However, and this is important, you may not find

6 the defendant guilty unless you all agree unanimously that

7 one particular act has obstructed justice. It is not

8 enough that you a ll believe that one of the two acts was

9 obstructive. That is, you cannot find the defendant Bruce

10 Gordon guilty if some of you think that only one act is

11 obstructive and the rest of you think that only the other

12 act is obstructive. The government must prove that one

13 specific -- withdrawn. The government must prove one

14 specific act that all of you believe is obstructive of

15 justice in order to convict the defendant on this count.

16 Now to get into the tax counts.

17 With respect to all -- withdrawn.

18 With respect to the tax counts I instruct you as

19 follows -- this is where I picked up some of the things

20 again that you had given me, Mr. Trabulus, I believe it is

21 page 15, 16 and 17 of your request to charge.

22 The government contends that the payments made by

23 various corporations on American Express charges and other
24 expenses incurre d by Bruce Gordon were not loans to him,
25 but was income to him.

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8716

1 I instruct you that a payment to a person or to

2 benefit a person by paying his obligation to a third party

3 is a loan, and that income, if at the time that the

4 payment is made, the person to whom it is made, or for

5 whose benefit it is made, intends to repay it. It is the

6 government's burden to prove beyond a reasonable doubt

7 that Bruce Gordon did not intend to repay them at the time

8 a corporation made any of the payments to or for him.

9 Unless the government has so proven, you may not consider

10 any of his tax returns or collection information

11 statements to have been false or not true and correct on

12 the basis that they failed to declare those payments as

13 income.

14 By the same token, unless the government has

15 proven beyond a reasonable doubt that Bruce Gordon did not

16 intend to repay, you may not find that he evaded the

17 payment of any tax simply on the basis that he caused a

18 corporation to make a loan to him, rather than to pay him

19 wages.

20 Instead of "wages" I will put "a salary."

21 Any attempt to avoid, minimize or alleviate taxes

22 due by legitimate means is permissible. So is any

23 legitimate attempt to avoid, reduce, minimize or alleviate
24 the amount of payment to be made under a collateral
25 agreement which sets the amount of past years taxes to be

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8717

1 paid by reference to the size of present income.

2 Such legitimate means may include choosing to

3 borrow money rather than to receive salary, so long as

4 there is a true borrowing. That is to say, so long as the

5 borrower truly intends at the time the borrowing occurs to

6 repay it later. For this reason you may not find that a

7 choice that Bruce Gordon borrow money rather than receive

8 salary was part of an attempt to evade the payment of past

9 taxes due, unless the government has established beyond a

10 reasonable doubt that Bruce Gordon did not intend to repay

11 the monies.

12 With regard to Martin Reffsin, however, that

13 would not be sufficient. The government bears the

14 additional burden of establishing beyond a reasonable

15 doubt that Martin Reffsin knew that Bruce Gordon did not

16 intend to repay the money later.

17 Count 56, conspiracy to impair, impede and

18 obstruct the Internal Revenue Service.

19 Count 56 charges the defendants Gordon and

20 Reffsin with conspiracy to defraud the United States by

21 impeding, impairing, ob structing and defeating the lawful

22 functions of the United States Department of the Treasury,

23 Internal Revenue Service, in the ascertainment,
24 computation, assessment and collection of revenue; namely,
25 the federal income taxes of the defendant Bruce Gordon.

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8718

1 Count 56 reads, the relevant statute, namely

2 conspiracy, 18 United States Code, Section 371 provides,

3 quote, if two or more persons conspire to defraud the

4 United States or any agency thereof in any manner or for

5 any purpose, and one or more of such persons do any act to

6 affect the object of the conspiracy, each is guilty of an

7 offense against the United States.

8 Then I go into a similar statement on

9 conspiracy. Do you want to hear it again? It is a

10 separate crime, the elements are the same, elements we

11 went into before, which is that there is a -- I better

12 give you this:

13 The government must prove each of the following

14 four elements beyond a reasonable doubt:

15 First, that the defendants Bruce Gordon and

16 Martin Reffsin entered into an agreement to defraud the

17 United States by impeding, impairing, obstructing and

18 defeating the lawful governmental functions of the

19 Internal Revenue Service in the ascertainment,

20 computation, assessment and collection of revenues, to

21 wit, the federal income taxes due by Bruce Gordon at or

22 about the time alleged in the indictment, by deceit or

23 trickery, or by means that are dishonest;
24 Second, that the defendant you are considering,
25 knowingly and willfully became a member of the conspiracy;

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8719

1 Third, that o ne of the members of the conspiracy,

2 not necessarily the defendant whose case you are

3 considering, knowingly and willfully committed at least

4 one of the overt acts charged in the indictment; and,

5 fourth, that the overt act or acts which you find to have

6 been committed were knowingly committed to further some

7 object or purpose of the conspiracy.

8 Now I will give you some definitions and discuss

9 each of these elements. I will now give you the

10 definitions of the term -- the terms, impede, impair,

11 obstruct and defeat.

12 The word "impede" means stopping progress or

13 hindering.

14 To "impair" means to lessen, diminish or

15 otherwise affect in an injurious manner.

16 To "obstruct" means to hinder or progress from,

17 check, stop or place obstacles in the way, to retard the

18 progress of or make accomplishment of the due

19 administ ration of the Internal Revenue Service laws

20 difficult and slow.

21 To "defeat" means to prevent.

22 The first element that the government must prove

23 beyond a reasonable doubt to establish the offense of
24 conspiracy is that the defendants Gordon and Reffsin25 entered into the unlawful agreement charged in the

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8720

1 indictment.

2 As I stated before, the unlawful agreement

3 charged by the government in this count is a conspiracy to

4 defraud the United States. Specifically, the government

5 charges that the two defendants, Gordon and Reffsin,

6 conspired to defraud the United States by impeding,

7 impairing, obstructing and defeating the lawful

8 governmental functions of the IRS in the ascertainment,

9 computation, assessment and collection of Bruce Gordon's

10 federal income taxes by deceit or trickery or by means

11 that were dishonest.

12 It is not necessary that the government lose

13 money from the fraud, but only that its legitimate,

14 official action and purpose, be defeated by the trickery

15 or deceit.

16 Since by its nature a conspiracy must have a

17 minimum of two participants, if you find that the

18 government failed to prove beyond a reasonable doubt that

19 there was this unlawful agreement between Gordon and

20 Reffsin, there is no conspiracy, and you must acquit both

21 defendants on this count. An agreement between Bruce

22 Gordon and someone other than Martin Reffsin will not

23 suffice.
24 Then I go into, you need not have direct proof.
25 You need circumstantial evidence -- I better give you

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8721

1 this.

2 It is not necessary that such an understanding be

3 established by direct proof of oral or written

4 agreements. It may be proven by inferences drawn from

5 circumstantial evidence, including the acts and conducts

6 of the alleged conspirators.

7 However, a mere showing of close relations, such

8 as the fact that the defendants are accountant and client,

9 or frequent contact between the alleged conspirators, will

10 not satisfy the government's burden absent evidence which

11 would permit the inference that an illegal agreement was

12 made.

13 I go into the same part there, like you need not

14 have a formal or express agreement, etcetera.

15 Do you want to hear the rest of that part of it?

16 MR. TRABULUS: No.

17 MR. WALLENSTEIN: No.

18 THE COURT: Okay.

19 Let me give you this, however, which is unique to

20 this conspiracy.

21 In this regard I instruct you that not every

22 action undertaken by private parties to make the

23 government's job harder is criminal, and not every
24 agreement to obstruct the governmental function
25 constitutes an unlawful conspiracy to defraud.

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8722

1 Individuals are not required to conduct their affairs in a

2 manner that will make it easy for the IRS to collect

3 taxes. Thus the defendants cannot be found guilty for

4 having participated in a conspiracy to impede, impair, or

5 obstruct the IRS in the ascertainment of taxes due and

6 owing by Bruce Gordon, unless the government has proven

7 beyond a reasonable doubt that they agreed to use

8 deceitful or dishonest means to accomplish this goal.

9 If the government proves beyond a reasonable

10 doubt that the defendants Gordon and Reffsin were involved

11 in a criminal conspiracy, then you must further find that

12 the conspiracy is the one charged in the indictment and

13 not some other.

14 The second element is knowing membership in the

15 conspiracy. That is essentially the same as the first

16 knowing membership, second element.

17 Do you want me to repeat that?

18 MR. TRABULUS: No.

19 MR. WALLENSTEIN: No.

20 THE COURT: I go into mere association is not

21 enough, etcetera.

22 Also, I say in this one, not only is mere

23 association not enough, but, further, the
24 accountant/client relationship between the defendants
25 alone does not give rise to a conspiracy. That fact that

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8723

1 they may have been together and discussed common aims and

2 interests does not necessarily establish proof of the

3 exist ence of a conspiracy, or knowing membership in the

4 conspiracy.

5 The third element is with respect to the

6 commission of overt acts. Are we set on these overt

7 acts?

8 MR. TRABULUS: No, your Honor. I believe there

9 is an issue as to whether some of the overt acts were

10 really made out. And in one instance as to whether it was

11 made out with respect to the conspiracy alleged.

12 THE COURT: Which ones are you talking about?

13 MR. TRABULUS: I know Mr. Wallenstein also has

14 some thoughts on this.

15 MR. WALLENSTEIN: My concern here, Judge, is with

16 respect to the overt acts which relate to the submission

17 of the log there is the bankruptcy proceeding, that they

18 don't belong in this conspiracy. That if in fact those

19 acts are proven they establish perhaps the obstruction of

20 justice count, which is 54, now, I believe, but they have

21 no relation to the conspiracy to impede the Internal

22 Revenue Service. Specifically, I am talking about the

23 overt acts designated Q, R, V and W; and that's on page 31
24 and 32 of the indictment.
25 THE COURT: Just a minute now.

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8724

1 MR. TRABULUS: I join in that.

2 THE COURT: You are talking about page 29?

3 MR. WALLENSTEIN: The overt acts begin on page

4 29.

5 THE COURT: Which overt acts are you talking

6 about?

7 MR. WALLENSTEIN: Page 31 beginning, Q and R, and

8 V and W on page 32. Those four overt acts relate to the

9 submission of the logs in the bankruptcy proceeding,

10 which, while the subject of the obstruction count, have

11 nothing at all to do with the conspiracy counts to impede

12 the IRS. I don't see how the bankruptcy is at all related

13 to t he alleged conspiracy of preventing the IRS from

14 collecting money.

15 THE COURT: However, it is alleged in the

16 indictment in that count, isn't it?

17 MR. TRABULUS: It is in paragraph 54, your

18 Honor. But the proof at the trial failed to support the

19 allegation in the indictment.

20 In other words, there has been proof at the trial

21 concerning the false usage logs, and I guess Gaspar

22 testified, but there was nothing to link it to the tax

23 aspects of the case. There was nothing to suggest it was
24 intended to or was submitted to the IRS or for purposes of
25 affecting the IRS' actions or collection or ascertainment

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8725

1 of taxes. The evidence is there perhaps but not expressly

2 linked to the tax aspects.

3 MR. WALLENSTEIN: None of the tax experts,

4 Peters, o r Gagliardi, testified with respect to the usage

5 of the condominiums, or specifically, the log with respect

6 to the usage of the condo or the penthouse having any

7 bearing whatsoever on the issue of Mr. Gordon's tax

8 liability. If there is evidence at all in the case with

9 respect to that, it would tend to obstruct -- support the

10 obstruction count and nothing at all to do with the tax

11 conspiracy. I believe it would be confusing to the jury

12 to have those allegations or overt acts as part of the

13 conspiracy.

14 THE COURT: Mr. White.

15 Do you agree?

16 MR. WHITE: No. I disagree.

17 We touched on this when we had the Rule 29

18 argument. There are a number of ways that the logs and

19 the bankruptcy petition are related to the tax conspiracy.

20 The evidence is that Mr. Gordon and Mr. Reffsin
21 structured Mr. Gordon's financial affairs in such a way

22 that his companies paid for everything. They furnished

23 him with a car, these apartments, paid his personal
24 expenses. The reason that the bankruptcy proceedings are
25 relevant is because at the time the bankruptcy comes along

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8726

1 it threatens to throw this in chaos, upsets the apple

2 cart. Reed wants a trustee appointed replacing

3 Mr. Gordon. If that happens the gravy train is over,

4 Mr. Gordon can't continue to have the company furnish his

5 personal expenses and furnish the condo and penthouse.

6 It is with regard to Reed's appointment as a

7 trustee that the phony logs are submitted. It is

8 constructed, the phony set up for that purpose.

9 Number two, they have to be consistent with what

10 they are telling the IRS. They didn't disclose to the IRS

11 that Mr. Go rdon had the use of this condominium and that

12 other companies were providing to him, or the penthouse or

13 these other things.

14 Now that they have to file a phony document and

15 make disclosures to the bankruptcy court, they have to be

16 consistent. If they are hiding it from the IRS they can't

17 go over all over town saying that's where he lived.

18 In addition, the use of the condominium and the

19 penthouse should have been on Mr. Gordon's tax returns.

20 Among Agent Rosenblatt's calculation is that that was

21 income he failed to declare.

22 Conceding -- concealing that fact when asked even

23 about it from third parties is relevant to the tax
24 conspiracy.
25 As your Honor pointed out, all of this is part of

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8727

1 the conspiracy alleged in this indictment. So, they can

2 argue whatever they want to the jury. But it is not as a

3 matter of law unconnected to the tax conspiracy.

4 THE COURT: I agree with the government and I

5 deny the request. You have an exception, both of you.

6 With regard to the commission of overt acts, I

7 will read what the overt acts are, do you want to hear

8 that again, the overt act portion?

9 MR. WALLENSTEIN: No, not necessary.

10 MR. TRABULUS: No.

11 THE COURT: Do you want to hear the commission of

12 the overt act in furtherance of the conspiracy which is

13 almost exactly the same as it was before?

14 MR. TRABULUS: No.

15 MR. WALLENSTEIN: Not necessary.

16 THE COURT: Okay.

17 Then I say finally with regard to the conspiracy

18 charge, which is an alleged agreement between two people,

19 namely, Bruce Gordon and Martin Reffsin, I instruct you

20 that if the government fails to establish the guilt of

21 either defendant beyond a reasonable doubt, you must

22 acquit both defendants on the conspiracy charge.

23 Count 57, tax evasion.
24 Count 57 of the indictment charges the defendant
25 Gordon and Reffsin with attempting to evade the payment of

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8728

1 federal income taxes owed by the defendant Gordon for the

2 calendar years, 1981 through 1990. I will read count 57.

3 The indictment alleges in count 57 that the

4 defendants violated Section 7201 which provides, quote,

5 any person who willfully attempts in any manner to evade

6 or defeat any tax imposed by this title, or the payment

7 thereof, shall be guilty of the offense of tax evasion.

8 In order for the crime of attempting to evade the

9 payment of income tax -- in order to prove the crime of

10 attempting to evade income tax, the government must

11 establish the following three elements beyond a reasonable

12 doubt:

13 First, that the defendant Gordon owed federal

14 income taxes for the calendar years 1981 through 1990;

15 Second, that the defendant you are considering

16 knew that the defendant Gordon owed such federal income

17 taxes for the year 1981 through 1990;

18 Third, that the defendant you are considering

19 willfully concealed and attempted to conceal from the

20 Internal Revenue Service the nature and extent of the

21 income and assets of the defendant Bruce Gordon, with the

22 intent to evade the payment of the taxes owed.

23 First element, tax due.
24 The first element that the government must prove
25 beyond a reasonable doubt is that the defendant Gordon

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8729

1 owed federal income taxes for the calendar years 1981

2 through 19.

3 Is it 1990?

4 MR. WHITE: Yes.

5 THE COURT: However the government doesn't have

6 to prove the exact amount that the defendant Bruce Gordon

7 owed. Nor does the government have to prove that the

8 payment of all the tax charged in count 57 was evaded.

9 The prosecution must prove beyond a reasonable

10 doubt that there is a substantial amount of taxes due and

11 owing from the defendant Gordon for the calendar years,

12 1981 through 1990.

13 A relatively small or insignificant deficiency in

14 taxes is not enough to make a defendant guilty of the

15 crime of tax evasion.

16 There is no mathematical formula for determining

17 what is a substantial amount of tax deficiency. It is not

18 measured in relation to the defendant's income, nor by any

19 particular percentage of tax proven to be due. The amount

20 varies from case to case, and is for you, the jury to

21 determine.

22 MR. WALLENSTEIN: Judge, I think we can concede

23 the first two elements.
24 THE COURT: All right.
25 MR. TRABULUS: Right, the language your Honor

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8730

1 read is more appropriate to not an evasion of payment, or

2 an evasion of the computation of the amount of tax.

3 THE COURT: You will concede the first two

4 elements?

5 MR. TRABULUS: That it was substantial, yes.

6 THE COURT: Wait a minute now.

7 MR. WALLENSTEIN: Yes.

8 My client testified to that. It can't easily be

9 contested.

10 THE COURT: Both defendants concede the first two

11 elements, namely that the defendant Gordon owed the taxes,

12 and they knew that he owed the taxes?

13 MR. TRABULUS: Yes.

14 MR. WALLENSTEIN: Yes.

15 THE COURT: All right.

16 Third element, willful evasion of payment.

17 The third element which the government must prove

18 beyond a reasonable doubt is that the defendant you are

19 considering willfully evaded or attempted to evade the

20 payment of the income taxes payable by the defendant

21 Gordon with the intention of defrauding the government of

22 such taxes owed.

23 The Internal Revenue Code makes it a crime to
24 willfully attempt in any manner to evade or defeat the
25 payment of any income tax imposed by law. There are many

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8731

1 different ways in which a tax may be evaded or an attempt

2 may be made to evade payment of such tax.

3 In this case the indictment alleges that the

4 defendant concealed and attempted to conceal from the IRS

5 the nature and extent of the income and assets of the

6 defendant Bruce Gordon in order to avoid the payment of

7 Gordon's federal income tax liability for the years 1981

8 through 1990.

9 MR. TRABULUS: Your Honor, in that sentence at

10 one point your Honor said there are many ways in which a

11 tax may be evaded. Can it be changed to say that there

12 are many ways in which a payment of a tax may be evaded?

13 THE COURT: Yes.

14 However, the attempt to evade or defeat the

15 payment of a tax must be a willful attempt. In other

16 words, in order for the government to prove the crime

17 charged, it must establish beyond a reasonable doubt that

18 the defendant you are considering acted voluntarily and

19 intentionally, and with the specific intent to keep from

20 the government information concerning Gordon's income and

21 assets which it was the legal duty o f the defendant to set

22 forth and declare, and which the defendant you are

23 considering knew that it was Gordon's legal duty to
24 disclose.
25 I will say this again.

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8732

1 In other words, in order for the government to

2 prove the crime charged, it must establish beyond a

3 reasonable doubt that the defendant you are considering

4 acted voluntarily and intentionally, and with the specific

5 intent to keep from the government information concerning

6 Gordon's income and assets which it was the legal duty of

7 the defendant Gordon to set forth and declare, and which

8 the defendants you are considering knew that it was

9 Gordon's legal duty to disclose.

10 The defendants raise the defense of good faith.

11 I will now instruct you on the defense of good faith.

12 Good faith is an absolute defense to the charge

13 in Count 57. The grounds on which the defendants Gordon

14 and Reffsin base their claims of good faith in a belief

15 that their conduct was lawful, may be considered in

16 deciding whether they in fact acted in good faith, and

17 whether they intended and willfully attempted to evade the

18 payment of Gordon's income tax.

19 The issue of intent as to whether the defendant

20 you are considering willfully attempted to evade the

21 payment of Gordon's income tax is one that you must

22 determine from a consideration of all the evidence in the

23 case, bearing on the defendant's state of mind. In
24 deciding whether the government has proved that the
25 defendant you are considering attempted to evade the

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8733

1 payment of Gordon's income tax, that is to say whether he

2 acted willfully, voluntarily and intentionally, you may

3 consider all of his knowledge and any advice which was

4 given to him.

5 The views of the defendant you are considering

6 need not be legally correct or objectively reasonable.

7 Just as long as he honestly and in good faith believed

8 them to be true.

9 In considering the defendant's claim that he

10 acted in good faith, the question is whether or not he

11 truly held such a belief. The question you should focus

12 on is, quote, what did the defendant actually believe, end

13 quote, regardless of whether the belief was correct or

14 objectively reasonable. Cheek against the United States.

15 I will not tell that to the jury though. They may know

16 what Cheek is. Do you think, Mr. White, they know that?

17 MR. WHITE: Probably not, but I know, your Honor.

18 THE COURT: All right.

19 If you find that the defendant truly believed in

20 good faith that he did not attempt to evade the income

21 taxes due by Gordon, then such defendant did not have the

22 requisite intent to be convicted of the tax offense

23 charged, and you must find the defendant not guilty.
24 The burden of establishing lack of good faith and
25 criminal intent rests upon the prosecution. A defendant

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8734

1 is under no burden to prove his good faith. Rather, the

2 prosecution must prove lack of good faith beyond a

3 reasonable doubt.

4 I am also charging aiding and abetting.

5 MR. WHITE: Before you move to that, your Honor?

6 THE COURT: Yes.

7 MR. WHITE: I may have missed it, I am sorry.

8 But there was a sentence even in Mr. Reffsin's request to

9 charge on that Cheek issue, where he says, howe ver, you

10 may consider whether the defendant's belief was actually

11 reasonable as a factor in deciding whether he held that

12 belief in good faith.

13 THE COURT: Absolutely not. I don't care if

14 Mr. Reffsin wants me to charge it. It is confusing. The

15 United States Supreme Court said, if you have a dream at

16 night that you don't have to pay taxes, a voice told me, I

17 don't have to pay tax -- by the way, I had three or four

18 cases just like that.

19 MR. WHITE: I know.

20 THE COURT: Just like that.

21 They said they were exempt from tax because they

22 gave money to the church, and the church exempted them

23 from paying any taxes. I never heard of this particular
24 church. But I told the jury that if those defendants
25 really believed that they don't have to pay taxes because

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER

8735

1 this church, whatever it is, told them not to, acquit

2 them. I don't care how unreasonably it was; Church of

3 St. Matthews.

4 MR. WALLENSTEIN: Do you mind using that tone?

5 MR. TRABULUS: I had the case before Judge

6 Mishler. I represented one of those defendants.

7 THE COURT: All convicted by the jury and all

8 confirmed.

9 MR. TRABULUS: True.

10 MR. WHITE: I don't understand why it is

11 confusing to say to the jury, yes, if you believe he

12 honestly believe that, acquit them. But if you think it

13 is so unreasonable that nobody would really believe it,

14 then you should consider that.

15 THE COURT: No. You have an exception.

16 MR. WHITE: An exception doesn't do me any good.

17 THE COURT: All right, you don't want me to give

18 you an exception, I will withdraw it then.

19 I will charge aiding and abetting, whi ch I don't

20 have to go through, and I will not go through it again,

21 even with the jury.

22 Now, let's talk about the lesser included

23 offenses.
24 MR. TRABULUS: Your Honor, the request that I
25 handed up this morning has a lead in to the lesser

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8736

1 included, which distinguishes evasion of tax payment from

2 simply failing to pay a tax that is due. And it points

3 out that the tax evasion, evasion of payment requires an

4 affirmative act of evasion, and a failure to pay tax when

5 due does not in and of itself constitute tax evasion, even

6 if the person who doesn't pay the tax has the ability to

7 pay it and deliberately chooses not to pay it.

8 THE COURT: You lost me.

9 MR. TRABULUS: All I am saying is if it is not

10 inconvenient, this may be a good time to conside r the

11 supplemental request I handed up.

12 THE COURT: I will consider it. Let me take a

13 look now.

14 MS. SCOTT: I would ask for one concession, your

15 Honor. We received this submission from Mr. Trabulus this

16 morning. I have not had a chance to look at the

17 additional cases cited in the submission here. I would

18 need to do that before being able to make an informed

19 argument to your Honor.

20 THE COURT: You have until this afternoon to look

21 at them.

22 MS. SCOTT: Okay.

23 THE COURT: I want to take a look and see here.
24 What page did you start your lesser included in
25 your original request?

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8737

1 MR. TRABULUS: Page 15. I didn't lay out any

2 specific language there.

3 THE COURT: Tell me the difference between your

4 original req uest to charge -- here is what I was going to

5 do so you can get an idea of what I thought was the right

6 way to do this.

7 First of all, I was going to give the jury what a

8 lesser included offense means, that they have to

9 unanimously find the accused not guilty of the crime

10 charged in count 57 --

11 MR. TRABULUS: I would request some alternative

12 language. In the request that I gave today there is case

13 in support for it, that they should proceed to the

14 lesser -- they don't need to find a unanimous not guilty

15 to go to the lesser, although Sand sets it forth. There

16 is a case also cited in the Sand book that upon defense

17 request the Court should instruct the jury that it may

18 proceed to consider the lesser offense if after all

19 reasonable efforts to reach a unanimous verdict on the

20 greater offense they have agreed to do so.

21 T HE COURT: That's Judge Friendly's case?

22 MR. TRABULUS: Yes.

23 THE COURT: I don't agree with his case. When I
24 was in the Appellate Division in the state I had an
25 occasion criticizing -- write a decision criticizing Judge

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8738

1 Friendly, with all due respect to the legend, great

2 Friendly.

3 The prosecution has a right to get a decision on

4 the charge they allege in the indictment, up or down. In

5 my opinion your request gives the jury a chance to

6 compromise which we know is something they shouldn't have

7 a right to do.

8 What was the name of Judge Friendly's case?

9 MR. TRABULUS: Tsanas, T S A N A S, I believe.

10 THE COURT: Yes.

11 Are you familiar with this point, Ms. Scott?

12 MS. SCOTT: Unfortunately I have not read that

13 case, and that's one of th e cases I would like to take a

14 chance to look at.

15 THE COURT: Read it and weep. I don't agree with

16 it at all.

17 I started out as a state judge. We don't have

18 that rule in the state court. You have to find not guilty

19 on the main charge before you can go to the lesser

20 included. There is no doubt about that. But there is

21 this case. It is an anomaly. I don't want to comment on

22 the experience that the writer had in the criminal law

23 before he wrote that case, or lack of it, but it is
24 there. The question is: Is it still being followed?
25 MS. SCOTT: I need to find out if it is

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8739

1 distinguishable, your Honor. That's what I need to do.

2 THE COURT: I don't know about distinguishable.

3 If the law in the federal court is on a lesser

4 included that the j ury need not acquit, or find not guilty

5 before they go to the lesser included, then Mr. Trabulus

6 is right.

7 MR. TRABULUS: I believe they have to have all

8 reasonable efforts, after they reach a deadlock -- if it

9 doesn't require a not guilty, if there is a hung jury on

10 the greater offense they can go to the lesser included and

11 consider it.

12 THE COURT: I was not going to charge that. I

13 was going to charge that they have to find not guilty on

14 the main charge before they get to the lesser included.

15 Because other way gives them a chance to compromise. They

16 can skip the main charge and say, let's find it this way,

17 which is not so bad. I am not sure if that case is still

18 law. It may be. In which case I would have to follow it,

19 I guess.

20 In any event, you don't know if it is still the

21 law?

22 MS. SCOTT: I do not, you r Honor. I need to look

23 at it.
24 THE COURT: Okay.
25 This is what I was going to say: The law permits

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8740

1 the jury to find the accused guilty of any lesser offense

2 which is necessarily included in the crime charged within

3 the indictment.

4 Now, we are talking about 57, evasion -- tax

5 evasion. That's what we are talking about.

6 The law permits the jury to find the accused

7 guilty of any lesser offense which is necessarily included

8 in the crime charged in Count 57 of the indictment

9 whenever such a course is consistent with the facts found

10 by the jury from the evidence in the case and with the law

11 given and with the instructions of the Court.

12 Now, here is what Sand says, which I agree with,

13 but you don't, Mr. Trabulus: If the jury should

14 unanimously find the accused not guilty of the crime

15 charged in Count 57 of the indictment, tax evasion, then

16 you must proceed to determine whether the guilt of the

17 defendant has been proven as to the lesser offenses,

18 plural, which are necessarily included in the crime

19 charged. The crime of willfully attempting to evade or

20 defeat a tax, which is the crime charged in Count 57,

21 necessarily includes the lesser offenses of filing a false

22 tax return, and willful failure to pay tax when due, the

23 elements of which I shall now describe to you. That's
24 what I was going to do.
25 Those are the two lessers; is that correct,

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8741

1 Mr. Trabulus?

2 MR. TRABULUS: Right.

3 THE COURT: Or have you changed it?

4 MR. TRABULUS: The one I prepared and handed this

5 morn ing just sets forth language for failure to pay tax

6 when due which is 7203. So failure to file -- it is not a

7 false return. It is a false document under 7207.

8 THE COURT: Okay, you are right.

9 Do you want me to continue to charge those two

10 lessers?

11 MR. TRABULUS: Yes.

12 THE COURT: Okay.

13 Now, are you following me at this point?

14 MS. SCOTT: Yes, your Honor. I will be

15 responding though, after lunch.

16 THE COURT: Very well.

17 Now, what I am trying to find out is since I got

18 this further request to charge while I was on the bench, I

19 have not had a chance this morning to go over it.

20 Anything that needs to be changed as to anything I said so

21 far?

22 MR. TRABULUS: No, nothing has to change. It is

23 just some language explaining the distinction between tax
24 evasion and failing to pay a tax when due.
25 TH E COURT: I will take a look at this during the

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8742

1 lunch hour.

2 MR. TRABULUS: Then, your Honor, I will think a

3 little more about whether I still want 7207 or a single

4 lesser included. I need to discuss that further with

5 Mr. Gordon.

6 THE COURT: Very well.

7 MR. WHITE: Another issue, with respect to 7203,

8 that's one thing, but it doesn't seem to me that.

9 MR. WHITE: 07 is a lesser included of 7201.

10 THE COURT: I think it is.

11 MR. WHITE: We will look at it over lunch.

12 MR. TRABULUS: The Sansone, S A N S O N E case

13 says it is; the Sansone case.

14 THE COURT: I think it is, Mr. White.

15 MR. WHITE: I will look at it again.

16 THE COURT: If it is, this is what I will

17 charge: Filing of a false tax return, Section 7207

18 provides as follows: Quote, any person who willfully

19 delivers or discloses to the Secretary of the Treasury any

20 list, return, account, statement or other document known

21 by him to be fraudulent or to be false as to any material

22 matter shall be guilty of an offense against the United

23 States.
24 Then I copied some of your language which I
25 thought was good, Mr. Trabulus. A violation of Section

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8743

1 7207, filing a false tax return, but not evasion, would be

2 made out if the jury found that Gordon had submitted or

3 caused to be submitted a materially false document or

4 documents to the IRS, but had not engaged in evasion.

5 For example, if the jury were to find that the

6 government had not proven that the loans were income, but

7 had proven that Gordon had submitted false documents to

8 t he IRS, for example, promissory notes indicating that the

9 source of some of the loans was not Who's Who Worldwide,

10 but his sister Joyce Grossman, or his friend, Madeline

11 Middlemark, the jury could find that there was no evasion,

12 but a violation of Section 7207. The theory would be that

13 the documents were materially false, but there had been no

14 evasion since the loans were still loans. Let's make it

15 "valid loans," regardless of the source so that any

16 representation as to the source left the amount of

17 Gordon's income unaffected, and thus left unaffected the

18 amount of his payment obligation under the collateral

19 agreement.

20 I think we will break at this point. But I think

21 that is a very good method of explaining to the jury the

22 facts of this case which I am obligated to do, not a

23 theoretical expression of the law in the abstract, but

24 getting it down to the facts of this case. This jury will
25 have enough trouble of the abstracts principles of law.

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8744

1 They need the help of relating it to the facts in this

2 case, and it doesn't favor anybody. It just has to be

3 done. And I think this is a good way to do it.

4 We will take a recess until 1:30. And you have

5 your work cut out for you, Ms. Scott?

6 MS. SCOTT: That's correct, your Honor.

7 THE COURT: Will you be able to eat anything

8 during this time?

9 MS. SCOTT: Absolutely not.

10 (Luncheon Recess.)

11

12

13

14

15

16

17

18

19

20

21

22

23
24
25

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8745

1 A F T E R N O O N S E S S I O N

2

3 THE COURT: First of all, I received a letter

4 from the juror that I had excused with the consent of

5 everybody, the government taking no position, Sonja,

6 S O N J A, Kummer, K U M M E R. You will recall it was

7 the lady that had the alleged incident with the car. She

8 wrote to me in a letter dated March 20th, enclosing a bill

9 for $162.38. Maybe she wants me to pay the bill.

10 This letter only confirms the exercise of my

11 discretion in excusing this juror. She says, the

12 Honorable Arthur D. Spatt, sir. I am writing to ask you

13 if I have any recourse as to the damage done to my car by

14 Ms. Annette Haley, H A I L E Y, she spells it. Although I

15 did not witness the incident, her car was parked next to

16 mine the entire day. I believe that when Ms. Haley,

17 H A I L E Y, arrived in the morning and opened my -- her

1 8 car door, she slammed her door into my car and left a

19 dent. Do I have the right to present her with the

20 estimates for repair?

21 I very much appreciate your guidance in this

22 matter.

23 Sincerely.
24 I do not intend to answer this until the case is
25 over, I am telling you now. When I do, I am going to say

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8746

1 that I have nothing to do with what she does. What she

2 does is her own decision. That's how I am going to answer

3 it. I am not her lawyer nor her advisor.

4 Now, what is happening now with any of these

5 matters?

6 I looked at this Pinkerton thing, and it looks

7 like you are right, Ms. Scott.

8 MS. SCOTT: Thank you, your Honor.

9 THE COURT: Okay.

10 Now, what about this lesser included thing.

11 MR. TRABULUS: Your Honor, I had a discuss ion

12 with Mr. Gordon during the lunch hour.

13 We continue to --

14 THE COURT: One moment. Hold it a second,

15 please.

16 MR. TRABULUS: Surely.

17 (Whereupon, at this time there was a pause in the

18 proceedings.)

19 MR. NELSON: On the Pinkerton issue, your Honor,

20 I am somewhat concerned, because I read United States v.

21 Blackmon cited by the government, and in Blackmon, the

22 case was reversed on appeal. And one of the issues that

23 came up on appeal on Blackmon, one of the people on trial
24 entered the conspiracy subsequent to a number of the
25 substantive charges there. Similar to Mr. Osman's

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8747

1 position. There was some confusion apparently in the

2 instructions provided with respect to that individual and

3 the application of the Pinkerton charge at the later point

4 in time.

5 I am somewhat concerned as to the use of the

6 Pinkerton charge as relating to Mr. Osman. Because one of

7 the elements there is that the defendant was a member of

8 the conspiracy at the time that the substantive crime was

9 committed. Mr. Osman was not a member of the conspiracy.

10 At this time I believe 48 of the 56 charged substantive

11 counts occurred. In fact, they were dismissed by the

12 Court on the Rule 29 motion. So I am somewhat concerned

13 as to the use of the Pinkerton charge as relating to

14 Mr. Osman. And I believe the same would apply as relating

15 to Mr. Rubin.

16 THE COURT: Yes, I was prepared to state to the

17 jury that both Mr. Osman and Mr. Rubin were not members of

18 the conspiracy as a matter of law during a period. And if

19 you put down when that was and give it to me in writing,

20 and the same t hing is true with Mr. Dunn, I will do that.

21 MR. NELSON: Yes.

22 MR. JENKS: You have to do it with Sterling as

23 well because it didn't get up and running until March of
24 '94.
25 THE COURT: True. Put it in writing and give it

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8748

1 to me at the end of the day. You can stay for a few

2 moments after the session and do it.

3 MS. SCOTT: I would like to remind in you the new

4 redacted indictment, there is a column entitled

5 defendants, which run alongside all the substantive mail

6 fraud counts, which indicates all the defendants that can

7 be considered for each count. It shows, for instance, for

8 charges 6 -- the numbers are the old numbers, they are

9 wrong, but Counts 6 through 52 Mr. Osman's name is not

10 included. Counties 3 through 41 Mr. Rubin's name is not

11 inc luded. There is a long list. But it is clear from

12 looking at the substantive counts.

13 THE COURT: That may be, but it will not hurt to

14 say it again, would it?

15 MS. SCOTT: All right.

16 THE COURT: Why would the government be opposed

17 to my making it clearer?

18 MS. SCOTT: I guess I would be concerned in it

19 spilling over to when they were members of the conspiracy,

20 they were members.

21 THE COURT: I will take a look at the dates and

22 try to frame an instruction that would be satisfactory to

23 everybody.
24 MS. SCOTT: Thank you, your Honor.
25 THE COURT: With this Pinkerton, which is -- I

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8749

1 don't want to characterize what it is, but I will give

2 such a charge with respect to that. It is clear that

3 Pinkerton only applies to a substantive crime c ommitted at

4 the time that the defendant was a member of the

5 conspiracy, during that time. Otherwise it doesn't

6 apply. So I will be very clear about that.

7 MR. NELSON: Your Honor, one other question that

8 co-counsel and I have had with respect to the Pinkerton

9 charge, would be where within the instruction would the

10 Pinkerton charge be provided. Would it be the conclusions

11 with respect to the conspiracy, and the conclusions with

12 respect to mail fraud?

13 THE COURT: Mail fraud.

14 MR. SCHOER: Also your Honor, there is a question

15 with respect to the order you will charge things, is the

16 Court going to charge it the same way that it appears in

17 the indictment, with conspiracy first?

18 THE COURT: Yes.

19 MR. SCHOER: I would like to suggest that the

20 mail fraud is or should be charged before the conspiracy,

21 because in order t o convict on the conspiracy the jury has

22 to know the elements of mail fraud.

23 THE COURT: They will know it. Sometimes I do it
24 that way when it is a major situation with 20 or 30
25 substantive crimes, like in a RICO case I would do it.

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8750

1 But not where there is only one crime. It is not

2 necessary, Mr. Schoer. They will understand it

3 thoroughly.

4 MR. SCHOER: Okay.

5 MR. TRABULUS: Your Honor, with regard to the

6 lesser included, we request they both be charged, 7203 and

7 7207. I request you not charge the language that you read

8 from page 15 of my request to charge, the last single

9 spaced paragraph. That's the one talking about the

10 Grossman and the Middlemark notes.

11 That language was put in there not as a request

12 to the charge, but as a discussion s o I could highlight to

13 your Honor the state of facts a jury might find which

14 could support a conviction on the lesser rather than the

15 greater offense. I think to take that language and give

16 it to the jury would basically be giving them a roadmap to

17 convicting on the lesser.

18 THE COURT: You want me to charge the lesser

19 without this?

20 MR. TRABULUS: All right.

21 THE COURT: Okay.

22 MS. SCOTT: We will oppose your Honor charging on

23 the lesser and for the following reasons:
24 The case, Sansone against the United States,
25 S A N S O N E, and the cite is 380 U.S. 343, or 85 Supreme

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8751

1 Court 1004. It makes clear that where the greater offense

2 or the lesser offense are identical, were one subsumes the

3 other, the defense does not have a right to a lesse r

4 offense instruction. The government is entitled to charge

5 the greater offense if it so chooses.

6 Now, in the case of Sansone, the Court analyzed

7 not only 7201 and 7203, but also 7201 and 7207, exactly

8 the two lesser offense counts that Mr. Trabulus has

9 requested your Honor charge the jury.

10 So, I will first address 7201 and 7203.

11 As Sansone pointed out, the only element that

12 7201 has that 7203 does not have is that there be an

13 affirmative act constituting an evasion of the tax law.

14 So, one can violate 7203 by willfully failing to

15 perform certain acts as required by the tax law. But such

16 an activity would not violate 7201 if they were not also

17 an affirmative act which constitutes an evasion.

18 Now, in this case, Sansone, all the defendant did

19 was file false income tax returns. And for that reason

20 the Court found that there was an affirmative act that the

21 jury had to consider in order to meet the third

22 requirement, the third element of 7201. And for that

23 reason -- I am confused by this. I will straighten out in
24 a minute.
25 THE COURT: No problem. I am confused by many of

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8752

1 this as well. But let the record reflect I am not

2 confused or I unconfused myself. Well, so I say.

3 MS. SCOTT: In that case it was undisputed that

4 there was an affirmative commission which consisted of the

5 filing of false tax returns. So that sort of put the

6 third element of 7201 out of the picture. So that the

7 only element that was still in dispute was whether that

8 action was willful, whether it was done with the intention

9 to violate the tax laws.

10 In this case, your Honor, it is undisputed that

11 there were several affirmative actions which we argue

12 constitute tax evasion. There was the filing of the false

13 433's that contained false information. There was a

14 submission of an offer in compromise which also contained

15 what we contend to be false information. There were

16 responses to Officer Gagliardi's request for more

17 information as he considered the merits of the offer in

18 compromise.

19 As in Sansone, the question then is: Were these

20 statements intentionally made with the intent to evade the

21 tax laws?

22 There is no dispute that the statements were

23 actually made. Therefore, the affirmative action or act
24 constituting an evasion is undisputed. The issue for the
25 jury is as to whether these misstatements were willful.

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8753

1 I submit that, therefore, the 7201 offense

2 subsumes the 7203 offense. And for that reason the

3 defense is not entitled to a charge on the lesser included

4 offense, 7203. Is that clear?

5 THE COURT: No.

6 How about 7207?

7 MS. SCOTT: 7207, the same analysis applies to

8 that.

9 The defense is taking the position that the

10 defendant's false statements did not affect his tax

11 deficiency.

12 Sansone says conducts can violate 7207 without

13 violating 7201, where the false statement does not

14 constitute an attempt to evade or defeat taxation because

15 it doesn't have the effect on increasing the tax

16 deficiency.

17 Are you with me so far?

18 THE COURT: Not really.

19 MS. SCOTT: Okay.

20 THE COURT: I will have to take a look at it

21 myself.

22 It appears to me that the elements under the tax

23 evasion count, which is un der 7201 do cover the elements
24 of those two lesser included.
25 MS. SCOTT: Exactly correct. Because if the

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8754

1 greater offense subsumes the lesser offense there is no

2 right to an instruction on the lesser offense.

3 What the Court does is it analyzes whether on the

4 facts of each case the two offenses become the same for

5 purposes of the jury's analysis.

6 In other words, if it is undisputed -- well, say

7 7201 has three elements and 7203 has two elements, and the

8 two elements of 7203 are the same elements as the first

9 two elements of 7201, then 7201 has one element that does

10 not need to be considered when you are trying to make a

11 determination as to whether someone is guilty of 7203.

12 And I think I have again lost your Honor. Have I?

13 THE COURT: I have to take a nother look at it.

14 What do you say, Mr. Trabulus?

15 MR. TRABULUS: There are two questions as to

16 lesser included. First as to whether or not the elements

17 tests is satisfied, as to whether the elements of the

18 lesser is in the greater. The Sansone case is abstract of

19 both of these, because it holds both of them in the proper

20 case can be closer included of 7201.

21 The next question is: Is there a reasonable view

22 of the evidence in which the jury can convict on the

23 greater, convict on the greater and acquit on the lesser.
24 THE COURT: Can you just hold it a minute?
25 (Whereupon, at this time there was a pause in the

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8755

1 proceedings.)

2 THE COURT: According to the United States

3 Supreme Court, citing from United States against

4 Hourihan, H O U R I H A N. I don't have the citation, but

5 it was decided by the Second Circuit on December 13th,

6 1995. And this is what it says: In determining when a

7 lesser included offense instruction is proper, we are

8 instructed by the Supreme Court to apply the elements

9 test. And then they quote from the Supreme Court. Quote,

10 to determine when a lesser included offense instruction is

11 appropriate under Federal Rule of Criminal Procedure

12 31(c), a court must apply the elements test, citation

13 omitted.

14 Under this test one offense is not included in

15 the other unless the elements of the lesser offense or a

16 subset of the charged offense. Where the lesser offense

17 requires an element not required for the greater offense

18 no instruction is to be given under Rule 31(c). . And

19 that's from United States against Mena, M E N A, 931 Supp.

20 2d 19, page 29, First C ircuit, 1991. The Supreme Court

21 case is Schmuck, S C H M U C K, against United States, 489

22 U.S.

23 One offense is not necessarily included in
24 another unless the elements of the lesser offense are a
25 subset of the elements of the charged offense.

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8756

1 Are the elements of both a subset? ?

2 MR. TRABULUS: Yes, that's what the Sansone case

3 said in the Schmuck offense or Schmuck case you cited

4 quotes a cite to Sansone and approved it. It applied the

5 elements there. So Schmuck didn't in any way change

6 Sansone.

7 Let's talk about the two offenses, lesser

8 separately.

9 The difference as Ms. White herself said --

10 THE COURT: Ms. Scott.

11 MR. TRABULUS: Excuse me, Ms. Scott herself said,

12 between 7201 at 7203 is the evasion one, the greater

13 offense requires an affirmative act of evasion. The

14 lesser offense of willful failure to pay doesn't require

15 that affirmative act. It is just an omission. That's the

16 difference.

17 THE COURT: 7203 is failure to file a tax

18 return?

19 MR. TRABULUS: Or pay tax. There are a whole

20 bunch of alternatives.

21 THE COURT: Yes.

22 MR. TRABULUS: The difference between the two of

23 them is, and the facts on which the jury can find the
24 lesser, but not the greater are this: If the jury were to
25 find that there was no tax evasion, and there was no --

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8757

1 the various filings were made in good faith, the loan

2 treatment was believed in good faith or valid, or

3 whatever, all those things it would still is to deal with

4 the fact that Mr. Gordon, according to the evidenc e got a

5 lot of money from the companies.

6 Now, whether that was reportable as income or

7 not, the jury may find it was something that should have

8 been paid over to the government by way of paying down his

9 taxes.

10 My concern, and I am making it clear why I am

11 asking for the lesser included, I am concerned unless it

12 is explained to the jury that a willful failure to pay

13 that money over in and of itself does not constitute tax

14 evasion. They may improperly convict him of an evasion

15 based on simply the fact he had a lot of money and didn't

16 pay it to the government. So that's the basis for the

17 7203 lesser included.

18 MR. WALLENSTEIN: The 7203 lesser included, your

19 Honor, doesn't apply to Mr. Reffsin, and can't. He had no

20 control over the corporate funds to cause them to be paid

21 over. Nor were the corporate funds necessarily an

22 appropriate vehicle for that. It would have been

23 Mr. Gordon's personal liability. And there is no evidence
24 whatsoever that Mr. Reffsin had any control over
25 Mr. Gordon's accounts or his funds. So that first lesser

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8758

1 included would not at all apply to Mr. Reffsin.

2 THE COURT: You request it not be charged?

3 MR. WALLENSTEIN: Right. If you charge it with

4 respect to Mr. Gordon, I think you have to indicate to the

5 jury it doesn't apply to Mr. Reffsin.

6 THE COURT: What about 7207?

7 MR. WALLENSTEIN: A little more problematic.

8 MR. WHITE: Can we talk about that one, 7203

9 first before we move to that then?

10 MR. WALLENSTEIN: Fine with me. Give me a few

11 moments to think about it.

12 MR. WHITE: Your Honor, let's try to clarify what

13 the governm ent's position is.

14 Lesser included instruction is not appropriate

15 here. There is no set of facts on the evidence at this

16 trial where a jury might convict Mr. Gordon of the lesser

17 included offense and not and not make out the 7201 tax

18 evasion.

19 As Mr. Trabulus pointed out, the difference is an

20 affirmative act is needed for 7201. 7203 is just a

21 failure to pay.

22 In this case there is no dispute that Mr. Gordon

23 took affirmative acts. He filed tax returns and different
24 things. The only question is was it willful or was it
25 done for purposes of evading taxes. And that's exactly

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8759

1 the case in Sansone. There they said a lesser included

2 instruction need not be included here because the only

3 difference -- because there is no difference. In Sansone

4 like here there were affirmative filings. The only

5 question is was it willful. That's the question here.

6 The problem with giving a lesser included

7 instruction under these circumstances is the jury can end

8 up convicting on a misdemeanor when the facts are made out

9 for the felony anyway.

10 THE COURT: Why would they not convict on a

11 felony if the facts are made out beyond a reasonable

12 doubt? I don't understand that thinking, especially when

13 I charge that they have to find not guilty on the --

14 MR. WHITE: Precisely for the reason your Honor

15 said earlier because the jury could just compromise

16 because they felt the punishment should be less. That's

17 the danger that Sansone and the other cases talking about

18 lesser included offenses identify.

19 MS. SCOTT: Sansone says, your Honor, that a

20 lesser offense charge is not proper where on the evidence

21 presented the factual issues to be resolved by the jury

22 are the same as to both the lesser and greater offenses.

23 MR. TRABULUS: They are not here the same.
24 THE COURT: They are not the same.
25 MR. TRABULUS: The jury can find there was the

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8760

1 same willfulness in all the filings, but the failure to

2 pay over the money is willful. And that's to support the

3 lesser and not the greater. That's on 7203.

4 MR. WHITE: Your Honor, it's one thing if

5 Mr. Gordon filed returns and didn't pay over the money

6 only. But here it is inescapable there is an affirmative

7 act if they feel he should have paid it over. It is

8 evasion.

9 MR. TRABULUS: Not at all, your Honor.

10 THE COURT: I will charge it. You have an

11 exception again.

12 Do you want 7203 and 7207?

13 MR. TRABULUS: Yes, your Honor, we do.

14 THE COURT: Okay. I will charge it.

15 MR. WHITE: Your Honor, that is a little

16 different for the same reason.

17 They are saying that the jury may find a false

18 document was submitted, but the false document did not

19 affect how much Mr. Gordon owed, therefore it is not tax

20 evasion, but it might be that lesser offense.

21 I don't think, again, on the facts of this case

22 you could conclude that. There is no document that the

23 jury can conclude was false to have affected his tax
24 liability. Because the contents of all these documents --
25 well, the returns speak for themselves, if those were

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8761

1 false it obviously affects what he owes. But the context

2 for the rest is this offer in compromise, where

3 Mr. Gagli ardi is evaluating, am I going to accept this

4 $150,000 you offered me, or am I not.

5 So, if false documents are submitted to him, they

6 were certainly capable of influencing his assessment of

7 whether or not that offer was reasonable and how much

8 Mr. Gordon had to pay. The example that Mr. Trabulus

9 gives is these alleged promissory notes which may or may

10 not be false, which identified the source of loans as

11 Joyce Grossman as opposed to Who's Who Worldwide.

12 Mr. Trabulus tries to portray that as having no

13 effect on tax liability because if they are loans, they

14 are loans, and it doesn't matter where the loans are

15 from. But that's not the case. Because you know if

16 Mr. Gagliardi knew that Mr. Gordon had another source of

17 income, another source of money he could borrow, that

18 could potentially affect his decision.

19 So, for them to try to suggest that this document

20 has nothing to do with tax evasion is ridiculous. There

21 is no way the jury can say he submitted the false

22 documents, but it wasn't an act of evasion.

23 THE COURT: You have an exception. I will charge
24 it.
25 Now, what I would like to do is get a suggested

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8762

1 charge on both the lesser included as soon as possible,

2 and before tomorrow morning, by both the government -- I

3 know you don't believe it should be charged, but assume

4 that I will charge it, as to what it should be.

5 MR. TRABULUS: I gave you one, your Honor.

6 THE COURT: In the new request?

7 MR. TRABULUS: Yes, your Honor, on 7203.

8 THE COURT: How about 7207?

9 MR. TRABULUS: I have not done it, and I will do

10 it.

11 THE COURT: Do it, both of you.

12 72 07 doesn't apply to Mr. Reffsin, does it?

13 MR. WALLENSTEIN: It could apply to Mr. Reffsin.

14 The question is as to whether I want it to apply to him.

15 THE COURT: Do you want it? Let me know tomorrow

16 morning.

17 MR. WALLENSTEIN: Yes, I will talk to Mr. Reffsin
18 about it and do some soul searching.

19 THE COURT: Go back to the other counts.

20 I will have you come in early tomorrow morning.

21 The jury is coming in at 9:30. So I will say something

22 like 8:30 tomorrow morning.

23 If we don't get through everything on the lesser
24 included, do you have any objection to going ahead with
25 the summations? At a break we will discuss more. I think

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8763

1 we will be able to, however.

2 MR. TRABULUS: I have no objection.

3 MR. WALLENSTEIN: I am the first defendant to sum

4 up, and it certainly makes a difference as to whether or

5 not the lesser included will be charged. It will make

6 more of a difference to the government.

7 THE COURT: It is going to be charged. It is a

8 question of the exact wording.

9 MR. WALLENSTEIN: As to the exact wording, I have

10 no objection.

11 THE COURT: Mr. White?

12 MR. WHITE: It makes no difference.

13 THE COURT: Let's go through counts 68 through --

14 58 through 61, which we are up to now. Filing false tax

15 returns.

16 Counts 58 through 61 of the indictment --

17 incidentally, I have not seen the revised indictment yet.

18 I think it is important that I get that.

19 MS. SCOTT: Yes, your Honor.

20 Your Honor, we are taking things out as we go

21 along here and the numbers change. So there will not be a

22 final version until the end of the day.

23 THE COURT: Okay.

24 MR. TRABULUS: Your Honor, the Tsanas issue, the
25 issue Ms. White -- Ms. Scott was going to be addressing,

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8764

1 the Judge Friendly decision.

2 THE COURT: Yes. How do you pronounce that

3 name?

4 MS. SCOTT: Tsanas.

5 THE COURT: Yes, the one I don't agree with.

6 MS. SCOTT: The only thing Tsanas says is 7206

7 can be charged as a lesser included to 7201. And that is

8 not what is requested here. What is requested is a lesser

9 included 7203 and 7207 to the greater offense of 7201.

10 Tsanas actually discusses 7207, but only to say

11 it cannot be a lesser to a 7206. It is not the issue

12 here.

13 THE COURT: There is another case then.

14 MR. TRABULUS: That's the case, your Honor.

15 THE COURT: There is another case, and I remember

16 I read it when I was in the Appellate Division. We

17 expressly disagreed with it. It says that the jury does

18 not have to come to a not guilty verdict unanimously on

19 the main charge before it goes down to the lesser

20 included.

21 MR. TRABULUS: That's Tsanas.

22 MS. SCOTT: Yes. I am sorry, I thought we were

23 still on --
24 THE COURT: We are now on what is to be charged
25 to the jury.

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8765

1 MS. SCOTT: All right.

2 THE COURT: In my opinion the government has a

3 right to a decision, up or down, on the main charge. That

4 is what was alleged in the indictment. That's what the

5 proof was. And they have a right to have the jury

6 determine that charge before it goes to the lesser

7 included. That's my view.

8 That is not Judge Friendly's view?

9 MR. TRABULUS: He says in the absence of a

10 defense request the Court can charge it and it is not

11 error. But if the defendant requests the alternative the

12 Court should do it.

13 THE COURT: I know he says that. But the

14 question is: Is that still the law.

15 MR. TRABULUS: As far as I know it is, your

16 Honor. And in fact, although Sand sets forth the type of

17 charge your Honor prefers, in the commentary to it, it

18 talks about Tsanas and says it is still the law, and it

19 says that, you know, refers to it.

20 THE COURT: You are requesting I charge the

21 Tsanas charge if they don't reach a verdict, and they can

22 go to the lesser included?

23 MR. TRABULUS: After all reasonable efforts to
24 reach it, yes.
25 MS. SCOTT: We don't have any law on that, your

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8766

1 Honor. I don't have a computer at my disposal here. So I

2 am going to look into it tonight and see if it is still

3 good law. That's the best I could do at this point.

4 THE COURT: Okay.

5 If I can possibly avoid the charge I will do it.

6 If it is still the law I am bound by it.

7 Now let's get to counts 58 through 61 for

8 Identification charging the defendant Bruce Gordon with

9 knowingly and willfully filing false United States income

10 tax returns for the years 1991, 1992, 1993 and 1994.

11 The statute is Section 7206(1) which provides,

12 quote, any person who willfully makes and subscribes any

13 return, statement or other document which contains or

14 which is verified by a written declaration that it is made

15 under the penalties of perjury and which he does not

16 believe to be true and correct as to any material matter

17 that be guilty of an offense against the United State s.

18 Initially I instruct you that

19 Government's Exhibits -- which are the exhibits that are

20 the United States tax returns for 1991, '92, '93, '94, do

21 you have those numbers?

22 MR. WHITE: They are easily obtainable.

23 THE COURT: All right.
24 I instruct you initially that
25 Government's Exhibits, whatever they are, are the 1991

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8767

1 through 1994 Bruce Gordon United States income tax

2 returns. They are returns within the meaning of Section

3 7206(1). Each count concerns a separate tax return for

4 each year involved, namely, Count 58, 1991 calendar year;

5 Count 59, 1992 calendar year; Count 60, 1993 calendar

6 year; Count 61, 1994 calendar year.

7 In order to find the defendant Bruce Gordon

8 guilty of willfully making and subscribing to a false tax

9 re turn, the government must establish each of the

10 following four elements beyond a reasonable doubt:

11 First, that the defendant made and signed

12 individual income tax returns for the years 1991, 1992,

13 1993 and 1994, and that each of the returns contained a

14 written declaration that it was made under the penalties

15 of perjury.

16 Second, the tax returns for the year you are

17 considering was not true and correct as to a material

18 matter.

19 Third, that the defendant Bruce Gordon did not

20 believe that the information stated in his individual tax

21 returns was true and correct as to his personal taxable

22 income.

23 Fourth, that in filing the false tax returns, the
24 defendant acted willfully as to each return.
25 What about the first element, Mr. Trabulus?

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8768



1 MR. TRABULUS: Meaning do I wish to hear it

2 again?

3 THE COURT: Do you concede the first element,

4 that he made and signed individual income tax returns for

5 those years and they contained a declaration?

6 MR. TRABULUS: Yes.

7 THE COURT: You don't have to.

8 MR. TRABULUS: Yes. In the case of one of

9 them -- no, that's right.

10 THE COURT: Yes?

11 MR. TRABULUS: Yes.

12 THE COURT: So the first element the defendant

13 concedes.

14 The second element which the government must

15 prove beyond a reasonable doubt is that the 1991, '92, '93

16 and '94 tax returns were not true and correct as to a

17 material matter.

18 By true and correct, I mean accurate and

19 complete. And material matter means important or

20 substantial matter.

21 As to these counts the government charges that

22 all of these individual tax r eturns for the defendant

23 Gordon were not true and correct as to one material
24 matter, namely, that they understated Bruce Gordon's
25 taxable income.

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8769

1 In this regard the government must prove beyond a

2 reasonable doubt that Bruce Gordon received additional

3 personal income other than that reported on his tax

4 returns. It is for you to decide whether the government

5 proved beyond a reasonable doubt as to each individual tax

6 return at issue, whether it was not true and correct as to

7 a material matter.

8 The third element is that the defendant did not

9 believe that the information stated in his individual tax

10 returns for the years at issue was true and correct as to

11 his personal taxable income. The government must prove

12 beyond a reasonable doubt that the defend ant Gordon knew

13 that his individual income tax returns were false as to a

14 material matter when he signed the tax returns.

15 A statement or entry is false if it is untrue by

16 the person making the statement, or causing it to be

17 made.

18 A defendant's knowledge may be established by

19 direct or circumstantial evidence, just as any other fact

20 in this case. If you find that the defendant Bruce Gordon

21 believed that the statements as to his personal taxable

22 income in the tax returns at issue was true and correct,

23 you must find him not guilty as to counts 58 through 61.
24 The fourth and final element of the charge
25 alleged in these counts is that the defendant Gordon acted

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8770

1 willfully in making and signing the false individual

2 income tax returns for the years , '91, '92, '93 and '94.

3 The offenses charged in these counts involve the alleged

4 making of a false statement on a tax return, and not the

5 alleged attempt to evade taxes.

6 Accordingly, as to these counts, it is not

7 necessary for you to find that the defendant Gordon had a

8 specific intent to evade the payment of taxes. The

9 government must prove, however, beyond a reasonable doubt

10 that the defendant willfully made and signed a false

11 return as to a material fact.

12 As I have previously instructed you, an act is

13 done willfully if it is done voluntarily, intentionally

14 and purposefully, and with the specific intent to do

15 something the law forbids, and that that is to say with a

16 bad purpose to disobey or disregard the law.

17 Stated otherwise "willfully" simply means a

18 voluntary intentional violation of a known legal duty.

19 Howev er, an act is not willful if it is done

20 through carelessness, inadvertence, accident, negligence

21 or some other innocent reason.

22 Mere negligence, even gross negligence, is not

23 sufficient to establish willfulness.
24 A defendant does not willfully make and sign a
25 false tax return if it is shown that he is merely careless

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8771

1 in keeping the books, or if errors of judgment are made,

2 or if there is a failure to hire a competent accountant,

3 or if there is employed a tax return preparer who is

4 incompetent or inefficient. There must be established a

5 specific intent to make and sign a false return.

6 Good faith on the part of the defendant Gordon is

7 an absolute offense to the charges alleged in these

8 counts. A return made with a good faith belief that it is

9 correc t is not a criminal act. I have already instructed

10 you at length on the good faith offense which the

11 government must disprove beyond a reasonable doubt.

12 It is sufficient if you find that the government

13 has established beyond a reasonable doubt that one

14 material item was falsely reported or falsely failed to be

15 reported on the individual tax returns alleged in these

16 counts.

17 You are instructed that in attempting to prove

18 that the defendant Gordon violated Section 7206(1), the

19 government does not have to prove that there was a tax due

20 and owing for the year at issue.

21 Whether the government has or has not suffered a

22 pecuniary or monetary loss as a result of the alleged

23 return is not an element of Section 7206(1).
24 Count 62 through 65, assisting in the filing of
25 false income tax returns.

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8772

1 The defendant Martin Reffsin is charged in counts

2 62 through 65 with violating 26 United States Code,

3 Section 7206(2). That section makes it a crime for anyone

4 willfully to assist in the preparation of a return under

5 the Internal Revenue Service laws, which is fraudulent or

6 false, as to any material matter.

7 And then I read those counts.

8 Section 7206(2) provides in part as follows:

9 Any person who willfully aids or assists in or

10 procures, counsels, or advises the preparation or

11 presentation under or in connection with any manner

12 arising out of the Internal Revenue Service laws of a

13 return, which is fraudulent or false as to any material

14 matter, whether or not such falsity or fraud is with the

15 knowledge or consent of the person authorized to present

16 such return, shall be guil ty of an offense against the

17 United States.

18 Initially I instruct you that

19 Government's Exhibits -- do we have the numbers for these

20 now?

21 MR. WHITE: Yes, your Honor, Exhibits 409 through

22 412.

23 THE COURT: All right, 409, 410, 411 and 412; is
24 that correct?
25 MR. WHITE: Yes, your Honor, in chronological

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8773

1 order.

2 THE COURT: The same ones for the filing of false

3 tax returns; is that correct?

4 MR. WHITE: Correct.

5 THE COURT: Initially I instruct you that

6 Government's Exhibit s 409 through 412, which is the 1991

7 through 1994 Bruce Gordon individual tax returns are,

8 quote, returns, and within the meaning the section. Each

9 count concerns a separate tax return for each year

10 involved.

11 In order to find the defendant Martin Reffsin
12 guilty on counts 62 through 65 of aiding and assisting in

13 the preparation and presentation of the allegedly false

14 Bruce Gordon United States individual income tax returns

15 for the years '91 through '94, the government must

16 establish each of the following four elements beyond a

17 reasonable doubt:

18 First, that the defendant Reffsin aided or

19 assisted in or procured, counselled, or advised the

20 preparation of the Bruce Gordon United States individual

21 income tax returns, arising under the Internal Revenue

22 laws for the years 1991, 1992, 1993 and 1994.

23 Second, that the Bruce Gordon United States
24 income tax returns for the years named, were false as to a
25 material matter, namely, that they understated Bruce

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8774

1 Gordon's taxable in come.

2 Third, that the defendant Martin Reffsin knew

3 that information provided for the preparation of the Bruce

4 Gordon income tax returns for the years 1991 through 1994

5 was false.

6 Fourth, that the defendant Martin Reffsin acted

7 knowingly and willfully at the time he aided or assisted

8 in the preparation or presentation of the false Bruce

9 Gordon income tax returns for these years, and that he

10 knew that the statements as to the taxable income of Bruce

11 Gordon in the returns were false; and he acted with the

12 specific intent to violate a known legal duty and not as a

13 result of accident, negligence or a good faith

14 misunderstanding of the law, inadvertence or some other

15 innocent reason.

16 First element is that the defendant Reffsin
17 aided, assisted, procured, counselled or advised the

18 preparation or presentation of the allegedl y false Bruce

19 Gordon income tax returns for the years 1991 through 1994.

20 You will note that the words of the statute in

21 this element relate to the preparation or presentation of

22 the tax returns.

23 MR. WALLENSTEIN: Judge, we will concede the
24 first element.
25 THE COURT: Okay.

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8775

1 The second and third elements of the charges

2 alleged in Counts 62 through 65 are that the Bruce Gordon

3 individual income tax returns named in these counts were

4 each false as to at least one material matter, namely,

5 that the returns understated Bruce Gordon's taxable

6 income, and that the defendant Reffsin knew that the

7 information provided for the preparation of the income tax

8 returns for the years '91, '92, '93, '94 respectively was

9 false as to that material matter.

10 The fourth and last element you must find beyond

11 a reasonable doubt is that the defendant Reffsin acted

12 knowingly and willfully.

13 I have defined these terms earlier, and the

14 definitions apply with equal force here.

15 To recap, you must find that the defendant

16 Reffsin acted deliberately and with the intent to violate

17 the tax law and not carelessly, accidentally, negligently

18 or inadvertently.

19 Thus, the government must prove beyond a

20 reasonable doubt that the defendant Reffsin had actual

21 knowledge that the tax returns at issue on these counts

22 contain a material and false entry at the time he

23 allegedly participated in aiding and assisting in the
24 preparation or presentation of the returns.
25 The word "willfully" as that term is used in

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8776



1 these instructions, means that the act was committed

2 voluntarily and purposefully with the specific purpose to

3 do something that the law forbids; that is, voluntarily

4 and with the specific intent to violate the income tax

5 laws.

6 Thus, the government must prove that the

7 defendant Reffsin intended to aid in the preparation of

8 each false return with knowledge of its falsity, or

9 knowingly committed an act or acts that furthered the

10 preparation of a false return.

11 A defendant is not willfully aiding and assisting

12 in the preparation of a false return if he is merely

13 careless or incompetent and/or inefficient. There must be

14 a specific intent to aid and assist in the preparation of

15 a false return.

16 Good faith is an absolute defense to the charges

17 made in Count 62 through 65.

18 If the defendant Reffsin in good faith beli eved

19 that the information provided in the tax return's

20 truthfully reports Bruce Gordon's taxable income, the

21 defendant Reffsin cannot be guilty of willfully aiding or

22 assisting in the preparation of a false income tax return.

23 The defendant's views need not be legally
24 correct, just as long as he honestly and in good faith
25 believed them to be true.

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8777

1 In considering the defendant's claim that he

2 assisted in the preparation of the tax return in good

3 faith, the question is whether or not he truly held such a

4 belief; whether such belief was reasonable or

5 unreasonable. Your determination of these questions must

6 be made after examining all of the evidence.

7 The burden of establishing lack of good faith and

8 criminal intent rests upon the prosecution. A defe ndant

9 is under no burden to prove his good faith. Rather, the

10 prosecution must prove lack of good faith beyond a

11 reasonable doubt.

12 Counts 60 through 68 -- I am sorry, 66 through

13 68; charge the defendant Bruce Gordon with knowingly and

14 willfully making, subscribing and filing three false

15 collection information statements in violation of Title 26

16 of the United States Code, Section 7206(1). The counts

17 read as follows, the statute provides -- I gave it to you

18 already, I don't have to give it to you again.

19 In sum, Counts 66 through 68 charge Bruce Gordon

20 with submitting to and filing with the IRS collection

21 information statements --

22 By the way, I got this from you, Mr. Trabulus.

23 MR. TRABULUS: I see.
24 THE COURT: Which as I told you is very helpful.
25 In sum, counts 66 through 68 charge Bruce Gordon

H ARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8778

1 with submitting to and filing with the IRS collection

2 information statements Form 433-A, made and subscribed by

3 him, and each containing a written declaration that it was

4 made under the penalties of perjury, which the indictment

5 alleges he knew and believed were not true and correct in

6 that they allegedly failed to disclose certain matters

7 which the indictment alleges were material.

8 In this regard these counts allege a failure to

9 disclose Bruce Gordon's 1, income; 2, assets; 3, living

10 expenses; 4, compensation from Who's Who Worldwide as a

11 result of the payment by Who's Who Worldwide of his

12 personal living expenses; 5, ownership, interest in the

13 Who's Who Worldwide; and, 6, possession, and use of an

14 American Express gold card.

15 Counts 66 through 68 allege an addition al seventh

16 failure to disclose loans made by Bruce Gordon to other

17 individuals.

18 In order to find the defendant Gordon guilty of

19 willfully making, subscribing and filing a false

20 collection information statement, the government must

21 establish each of the following four elements beyond a

22 reasonable doubt:

23 First, that the defendant Gordon made and signed
24 collection information statements on or about the dates
25 specified in counts 66 through 68, namely September 16,

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8779

1 1991, July 8th, 1993, and December 29th, 1993. And each

2 statement contained a written declaration that it was made

3 under the penalties of perjury.

4 Second, that the collection information statement

5 for the year you are considering was not true and correct

6 as to a material matt er.

7 Third, that the defendant Bruce Gordon did not

8 believe that the statements contained in his collection

9 information statements dated September 16th, 1991, July

10 8th, 1993, and December 29th, 1993, were true and

11 correct.

12 Fourth, in filing the false collection

13 information statements, the defendant Gordon acted

14 willfully as to each statement dated September 16th, 1991,

15 July 8th, 1993, and December 29th, 1993.

16 Now, as to the first element.

17 The first element is that the defendant Gordon

18 made and signed collection information statements dated

19 the three dates, and that each of the statements contained

20 a declaration that it was made under the penalties of

21 perjury.

22 In this statute the word "subscribe" is used.

23 The word "subscribe" simply means the signing of one's
24 name to a document. These counts are based on three
25 collection information statements signed and filed by the

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8780

1 defendant allegedly -- allegedly signed and filed by the

2 defendant Bruce Gordon which are Government's Exhibits --

3 do we know what exhibit numbers they are?

4 MR. WHITE: Yes, your Honor. The 1991 form is

5 Exhibit 404. The July '93 one is Exhibit 420-D, like in

6 Dog.

7 THE COURT: 420-D as in Dog?

8 MR. WHITE: Right.

9 The December 1993 one is Exhibit 423.

10 THE COURT: These counts are based on three

11 collection information statements allegedly signed and

12 filed by the defendant Gordon which are

13 Government's Exhibits 404, 420-D and 423.

14 These collection information statements are in

15 evidence, and they are tax, quote, statements, end quote,

16 within the meaning of the statute .

17 There is no dispute that the defendant Bruce

18 Gordon signed the three collection information statements

19 at issue.

20 MR. TRABULUS: That's fine, your Honor.

21 Earlier on when we conceded the other element

22 with respect to the other counts, did your Honor say made

23 and signed or just say signed?
24 The reason I raise that is because the word
25 "made" is ambiguous, but the jury may not understand

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8781

1 it --

2 THE COURT: I said made and signed.

3 MR. TRABULUS: I wonder if the definition of

4 "made" may be given or just eliminated?

5 THE COURT: How about signed?

6 MR. TRABULUS: That's fine.

7 THE COURT: There is no problem with that, is

8 there?

9 MR. WHITE: I don't believe so, your Honor.

10 THE COURT: I don't think it makes any differen ce

11 to me. If you think of any difference, you let me know.

12 All right, the defendant signed.

13 Do you want to concede this first element?

14 MR. TRABULUS: Yes, sure.

15 THE COURT: The second element which the

16 government must prove beyond a reasonable doubt as to

17 these counts is that the three collection information

18 statements were not true and correct as to a material

19 matter.

20 By "true and correct" I mean accurate and

21 complete.

22 "Material matter" means important or substantial

23 matter.
24 As to these counts, the government charges that
25 all of these collection information statements made and

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8782

1 filed by the defendant Gordon were not true and correct as

2 to at least one material matter. Specifically, the

3 government alleges an d must prove beyond a reasonable

4 doubt that the three collection information statements

5 were false as to the defendant Gordon's personal income,

6 assets, living expenses, his access to an American Express

7 Gold Card, his compensation from Who's Who Worldwide, the

8 loans he received from Who's Who Worldwide and other

9 parties, and his ownership interest in Who's Who

10 Worldwide.

11 Also, I instruct you that the government must

12 prove beyond a reasonable doubt that any false statement

13 contained in these documents is material, that is that it

14 could have influenced the decisions or the activities of

15 the Internal Revenue Service.

16 An omission to disclose a fact is material if the

17 fact, once disclosed to the decision-maker, would have a

18 natural tendency to influence him or her. If the fact

19 would not have such a tendency a failure to disclose i t is

20 not material.

21 If the government establishes beyond a reasonable

22 doubt a knowing and willful failure to disclose a fact on

23 the collection information statement, you may nevertheless
24 not convict, unless it also establishes beyond a
25 reasonable doubt that the fact if disclosed on the

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8783

1 statement would have had a natural tendency to influence

2 the Internal Revenue Service in making the particular

3 decision for which the collection information statement

4 had been submitted. The government must establish this by

5 evidence that is clear, unequivocal and convincing.

6 MR. WHITE: Before we proceed, your Honor, can I

7 make one comment?

8 THE COURT: Yes.

9 MR. WHITE: When you were cataloguing the matters

10 in which the government alleges the form was false , you

11 mentioned compensation from Who's Who Worldwide.

12 I think you mentioned loans from Who's Who

13 Worldwide and other parties.

14 Obviously the government contends they were not

15 loans, we should leave it at compensation, as to whether

16 they are income or loans.

17 MR. TRABULUS: The language which your Honor

18 charged, or indicated you would charge is taken from my

19 request, which I believe takes the language from the

20 indictment verbatim. The indictment says loans.

21 MR. WHITE: No. It refers to loans from other

22 parties. It refers to the loans from the company as

23 compensation as a result of payment by Who's Who of his
24 personal living expenses.
25 MR. TRABULUS: I think what Mr. White is talking

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8784

1 about is items -- item 4.

2 THE COURT: Ju st a minute. Let me get to where

3 this is now.

4 (Whereupon, at this time there was a pause in the

5 proceedings.)

6 It says loans in two of the counts, namely 67 and

7 68. It says, quote, loans made to the defendant Bruce

8 Gordon by other individuals.

9 MR. WHITE: Right. That's a reference to the

10 alleged Dr. Grossman loan.

11 THE COURT: I see.

12 MR. WHITE: It is specifically differentiated in

13 both those counts from the compensation he got from Who's

14 Who as a result of the payment of his personal living

15 expenses.

16 THE COURT: So, I will make it loans made to the

17 defendant Bruce Gordon by other individuals.

18 MR. TRABULUS: I thought that's what your Honor

19 said.

20 THE COURT: No, I said Who's Who.

21 MR. TRABULUS: Because with regard to Who's Who

22 it says compensation as a result of the payment of his

23 personal living expenses -- okay.
24 THE COURT: The compensation is from Who's Who?
25 MR. TRABULUS: Yes.

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8785

1 MR. WHITE: Just the loans are not.

2 THE COURT: The loans are not.

3 MR. WHITE: Right.

4 MS. SCOTT: Your Honor, I have one other

5 request. That is in defining "materiality" when you

6 defined it as to the perjury count, your Honor said the

7 statement is material if it has a natural tendency. It

8 must have a natural tendency to influence or be capable of

9 influencing the decision-making body. And I would ask for

10 the second part for all the other materiality instructions

11 or be capable of influencing.

12 THE COURT: Would have a natural tendency to

13 influence?

14 MS. SCOTT: That's what you said all along. But

15 in the perjury materiality you sai d not only have a

16 natural tendency to influence, but you added and be

17 capable of influencing. You did that with respect to the

18 perjury count and not with respect to the other counts. I

19 think it should go into all others.

20 THE COURT: All right.

21 MS. SCOTT: Thank you.

22 THE COURT: The third element is that the

23 defendant Bruce Gordon did not believe that the statements
24 contained in the three collection information statements
25 at issue were true and correct.

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8786

1 The government must prove beyond a reasonable

2 doubt that defendant Gordon knew that the collection

3 information statement you are considering was false as to

4 a material matter when he signed the document.

5 A statement or entry is false if it is untrue by

6 the person making the statement or causing it to be made.

7 A defendant's knowledge may be established by

8 direct or circumstantial evidence just as any other fact

9 in this case.

10 If you find that the defendant Bruce Gordon

11 believed that the statements at issue in the collection

12 information statement you are considering was true and

13 correct, you must find him not guilty as to that count.

14 The fourth and final element of the charge is

15 alleged in these counts -- alleged in these counts is that

16 the defendant Gordon acted willfully in making and signing

17 each of the false collection information statements dated

18 the three dates we mentioned.

19 The offenses charged in these counts involve the

20 alleged making of a false statement on a collection

21 information statement, and not the alleged attempt to

22 evade taxes.

23 Accordingly as to these counts, it is not

24 necessary for to you find that the defendant Gordon had a
25 specific intent to evade the payment of taxes. However,

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8787

1 the government must prove beyond a reasonable doubt that

2 the defendant willfully made and signed a collection

3 information statement which contained a false material

4 fact.

5 As I previously instructed you, an act is

6 willfully if done voluntarily, intentionally and

7 purposefully and with the specific intent to do something

8 the law forbids, that is to say with a bad purpose to

9 disobey or disregard the law.

10 Willfulness simply means a voluntary intentional

11 violation of a known legal duty.

12 However, an act is not willful if it is done

13 through carelessness, inadvertence, accident, negligence

14 or some innocent reason.

15 Mere negligenc e, even gross negligence is not

16 sufficient to establish willfulness.

17 A defendant does not willfully make and sign a

18 false collection information statement if it is shown that

19 he is merely careless in keeping the books, or if errors

20 of judgment are made, or if there is a failure to hire a

21 competent accountant.

22 There must be established a specific intent to

23 make and sign a collection information statement
24 containing a false material fact.
25 As to being truthful and correct, you should

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8788

1 consider what was and what was not disclosed on the

2 collection information statements -- this is from your

3 charge, Mr. Trabulus.

4 MR. TRABULUS: Thank you.

5 THE COURT: You should consider what was and not

6 disclosed on the collection information statement as filed

7 in the context of the printed language on the forms 433-A,

8 as well as any Internal Revenue Service instructions in

9 evidence you may find were relied upon in filling them

10 out.

11 The words used should be given their common and

12 ordinary meaning, unless the context clearly shows that a

13 different meaning was understood by both the Internal

14 Revenue Service and the defendant.

15 The burden is upon the government to establish

16 beyond a reasonable doubt that the forms as subscribed and

17 filed by the defendant Gordon were as a result of failing

18 to make disclosures in the respects alleged not true and

19 correct.

20 Ambiguity.

21 If you should find that in one of those respects

22 the form itself was ambiguous, that is, subject to at

23 least more than one interpretation as to what had to be
24 disclosed, and that under one reaso nable interpretation of
25 the form the defendant did not have to disclose something

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8789

1 which the indictment alleged he failed to disclose, the

2 form subscribed to and signed by the defendant would

3 nevertheless be true and correct in that respect

4 notwithstanding the failure to disclose.

5 Knowingly and willfully.

6 If you decide that the forms as subscribed by the

7 defendant were not true and correct, then you must decide

8 whether the defendant knowingly and willfully made and

9 subscribed the false collection information statement;

10 that is, at the time the collection information statement

11 was submitted and filed, did the defendant know and

12 believe that it was not true and correct? And if so, did

13 the defendant omit to disclose the matters which made it

14 that way consciously and in the exercise of his free

15 will?

16 Unless you find beyond a reasonable doubt that

17 the defendant Bruce Gordon both knew that the collection

18 information statement was not true and correct, and that

19 he purposely or intentionally failed to disclose the

20 things which would have made it true and correct, you may

21 not find the defendant guilty.

22 Unanimity.

23 Counts 66 through 68 each alleged multiple
24 respects in which the collection information statements
25 are said to have failed to disclose facts. It is not

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8790

1 necessary that the government proved that each of these

2 non-disclosures rendered the collection information

3 statement not true and correct.

4 The government satisfies its burden of proving

5 that a collection information statem ent was not true and

6 correct if it proves beyond a reasonable doubt that the

7 collection information statement unambiguously called for

8 the disclosure of any of the matters allegedly omitted,

9 and that these matters were indeed omitted, and were

10 indeed factual.

11 However -- and this is important -- you may not

12 find the defendant Bruce Gordon guilty unless you all

13 agree unanimously, that one particular omission rendered

14 the collection information statement not true and correct.

15 It is not enough that you all believe that some

16 omission rendered the statement not true and correct.

17 That is, you cannot find the defendant guilty if some of

18 you think that only the omission to disclose fact A

19 rendered the statement not true and correct, and the rest

20 of you think that only the omission to disclose fact B

21 rendered the statement not true an d correct. All of you

22 must find beyond a reasonable doubt that at least one of

23 the omissions was not true and correct.
24 The same requirement of unanimity applies to the
25 element of materiality. You may not find the defendant

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8791

1 guilty unless you all agree unanimously that one

2 particular omission which rendered the collection

3 information statement not true and correct was also

4 material. It is not enough that you all believe that some

5 such admission was material. That is, you cannot find the

6 defendant Bruce Gordon guilty if some of you think that

7 only the omission to disclose fact A was material, and the

8 rest of you think that only the omission to disclose fact

9 B was material.

10 In sum, there must be at least one specific

11 knowing and willful failure to di sclose that all of you

12 believe renders the collection information statement not

13 true and correct, and that all of you believe was material

14 in order to convict the defendant Bruce Gordon of filing a

15 false collection information statement.

16 Good faith on the part of the defendant Gordon is

17 an absolute defense to the charges alleged in Counts 66

18 through 68. Making and signing a false collection

19 information statement with a good faith belief that it is

20 correct is not a criminal act.

21 I have already instructed you at length on the

22 good faith defense. I remind you that the government has

23 the burden of proving lack of good faith on the part of
24 the defendant.
25 We will take a ten-minute recess. The only thing

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8792

1 left is the money laundering. And I want to show you a

2 draft of what the verdict sheet will look like. That

3 should conclude our activities for today.

4 We will take a ten-minute recess. And that will

5 give you a chance to do a little more research.

6

7 (Whereupon, a recess is taken.)

8

9 THE COURT: You want to proceed without

10 Ms. Scott?

11 MS. SCOTT: Yes, your Honor. She is upstairs

12 trying to print out a redacted indictment for you.

13 THE COURT: All right.

14 Count 69, money laundering.

15 MR. WALLENSTEIN: Before you get into money

16 laundering, your Honor, I wonder if we can back up for a

17 moment?

18 With respect to the false statements, Mr. Reffsin
19 is not charged in those counts, but they are charged in

20 essentially the same language as overt acts in the client

21 conspiracy. So I would ask to the extent that those acts

22 are something Mr. R effsin is charged with participating,

23 in the instructions you give with respect to the
24 information statements, your Honor, that they be made
25 applicable to him as well.

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8793

1 THE COURT: What instructions?

2 MR. WALLENSTEIN: With respect to the definitions

3 and the elements on the false collection statements.

4 THE COURT: I don't understand. Specifically

5 what do you wish I say?

6 MR. WALLENSTEIN: When you instruct the jury with

7 respect to the conspiracy, you are going to indicate to

8 them that some of the overt acts in the conspiracy concern

9 the submission of allegedly false information statements.

10 I don't remember the specific numbers of the overt acts,

11 but they are charged specifically as part of the

12 conspiracy.

13 When you defined earlier the definit ions

14 applicable to the charges in -- do we have the count

15 numbers?

16 MR. TRABULUS: The false information statements?

17 MR. WALLENSTEIN: Right.

18 Whatever those three counts are involving the

19 false information statements.

20 MR. TRABULUS: It would be 66 --

21 MR. WALLENSTEIN: 67, and 68, I think.

22 MR. TRABULUS: Yes.

23 MR. WALLENSTEIN: You mentioned only Mr. Gordon
24 since he is the only one charged in those counts. But I
25 would ask when you complete that that you indicate the

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8794

1 elements with respect to that are applicable to the

2 conspiracy to those filings as overt acts in the

3 conspiracy. Is that clearer?

4 THE COURT: No.

5 What should be applicable to that?

6 MR. WALLENSTEIN: The elements of what constitute

7 a false informa tion collection statement.

8 THE COURT: The conspiracy you are talking about

9 is to defraud the United States by impeding, impairing,

10 obstructing and defeating the lawful functions of the

11 IRS.

12 MR. WALLENSTEIN: Correct.

13 THE COURT: I am not sure what you want me to

14 say?

15 MR. WALLENSTEIN: When you charge the jury with

16 respect to the elements of the false information

17 statements in those counts, when you indicate to them that

18 those elements are applicable to their finding on the

19 conspiracy as to whether or not these constitute false

20 collection statements, because they are chargeable as acts

21 which Mr. Reffsin is chargeable for in the conspiracy, but

22 not in these substantive counts.

23 THE COURT: In the conspiracy which is Count 56,
24 they are mentioned as overt acts. They are not mentioned
25 as substantive crimes of any kind.

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8795

1 MR. WALLENSTEIN: I understand.

2 THE COURT: They are only overt acts. All the

3 government has to prove with respect to the conspiracy

4 that this overt act, at least one of them, was made in

5 furtherance of the conspiracy.

6 MR. WALLENSTEIN: I understand that. But the

7 acts they have to find is that the false collection

8 information statement was submitted.

9 MS. SCOTT: All the government has to prove is

10 that they were submitted.

11 THE COURT: Where do you see "false"? All it

12 says is that the defendant submitted a Form 433-A. It

13 doesn't say false.

14 MR. WALLENSTEIN: Then I am reading it

15 incorrectly.

16 THE COURT: As I say, it could be an innocent

17 act. As long as it is in furtherance of the conspiracy.

18 I don't think it i s appropriate.

19 MR. WALLENSTEIN: I did request in writing a

20 charge with respect to Mr. Reffsin's reliance on the

21 information supplied by Mr. Gordon.

22 THE COURT: Wait until I get through and we will

23 take that up. Remind me about that.
24 MR. WALLENSTEIN: Fine.
25 THE COURT: Where were we?

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8796

1 MR. TRABULUS: Money laundering.

2 THE COURT: Okay.

3 In Count 69 the defendant Bruce Gordon is charged

4 with conducting a financial transaction involving the

5 proceeds of a specified unlawful activity, namely, mail

6 fraud.

7 The indictment reads, and then Section 1956 of

8 Title 18, United States Code deals with a participation in

9 a financial transaction involving property constituting

10 the proceeds of specified unlawful activity.

11 Section 1956, su bdivision 1, provides, quote,

12 whoever, knowing that the property involved in a financial

13 transaction, represents the proceeds of some form of

14 unlawful activity, conducts, or attempts to conduct such a

15 financial transaction which in fact involves the proceeds

16 of specified unlawful activity. (a)(ii), small 2, with

17 intent to engage in conduct constituting a violation of

18 Section 7201 or 7206 of the Internal Revenue Code, 1986.

19 By the way, are you pressing that section? Or

20 are you going only on subdivision B, to conceal and

21 disguise in nature? I think that's all you allege in the

22 indictment, isn't it?

23 MS. SCOTT: No. Both are alleged.
24 THE COURT: Are you pursuing both?
25 MS. SCOTT: Yes. Because the conduct proved here

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8797

1 fits under both.

2 M R. TRABULUS: Your Honor, I want to make clear,

3 I submitted my suggestion instruction on this which

4 incorporates both, but that is not with reference to my

5 Rule 29 motion that your Honor ruled on. And I point out

6 that the Rule 29 motion could be decided differently with

7 respect to the two prongs. I submit they failed to make

8 it out on either. There is some argument on the 7201 or

9 7206 prong that your Honor might consider even if you were

10 not to grant it on the other.

11 THE COURT: First of all, I was somewhat confused

12 by the fact that the government's request don't include,

13 except the general statement, they don't include any

14 specific charges on the first prong. The government's

15 sole request to charge are on concealing. I will now have

16 to add it to the charge if I think it is applicable.

17 Anybody have 7201 and 7206 in front of them?

18 MS. SCOTT: Yes.

19 THE COURT: Can I see it, please.

20 You have it in this blue book? Where is it in

21 this blue book? Wait a minute, there are two sections.

22 You better give it to me.

23 MS. SCOTT: There is no instruction on the tax
24 prong. There is also not any in Sand. I was not able to
25 find any anywhere.

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8798

1 (Whereupon, at this time there was a pause in the

2 proceedings.)

3 THE COURT: I can see perhaps 7201, Mr. White,

4 which is any person who willfully attempts to defeat any

5 tax. In other words, using the money to put into property

6 with intent to engage in conduct constituting a violation

7 of Section 7201, I can see that. But where does 7206 come

8 into it? 7206 --

9 MS. SCOTT: That's the filing of a false return.

10 THE COURT: Yes. What does it have to do with

11 buying property?

12 MS. SCOTT: Mr. Gordon is also charged with the

13 substantive offense of filing a false tax return.

14 THE COURT: That may be. We are talking about

15 money laundering.

16 MS. SCOTT: Yes.

17 The point is among the items that the government

18 contends, income omitted from that false tax return, was

19 the income he obtained from the provision or providing to

20 him of this condominium by the corporation. In other

21 words, he can't have it in his name, so he has Who's Who

22 Worldwide send the money to this other shell corporation

23 that buys and owns the house. And that assists him in
24 filing a false return by not having it in his name, and he
25 can thereby more easily leave it off his tax return.

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8799

1 MR. TRABULUS: This is all too remote, so is

2 7201. At the time that money is transferred from Who's

3 Who Worldwide to PVI no taxes were owed on that money.

4 That money was Who's Who Worldwide money. There is no

5 dispute that Who's Who Worldwide paid its corporate income

6 taxes on that money.

7 Than the money goes to PVI and there is no taxes

8 due on that. So when PVI pays for the condo and the

9 furnishing and maintenance of the condo, down the road

10 Mr. Gordon's personal tax return is not going to report

11 that income. It is too remote from the transaction.

12 THE COURT: I agree that it is much too

13 attenuated and I will not charge it. You pick up your

14 book.

15 So, you don't have to look that one up,

16 Ms. Scott. I am relieving you of one burden which you

17 don't want to be relieved of.

18 MS. SCOTT: That's right.

19 THE COURT: Getting back to the money launderi ng,

20 the section says, who ever, knowing they are involved in a

21 transaction representing the proceeds in some form of

22 unlawful activity conducts or attempts to conduct an

23 unlawful transaction which in fact involves the proceeds
24 of specified unlawful activity, knowing that the
25 transaction is designed in whole or in part -- knowing

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8800

1 that the transaction is designed in whole or in part to

2 conceal, disguise, the nature of the transaction, the

3 sale, the source, of the proceeds of specified unlawful

4 activity, etcetera, is guilty of a crime.

5 In order to prove the crime of money laundering

6 as charged in Count 69 -- let me tell the jury that it is

7 the final count. And that will make them happy, I guess.

8 It certainly makes me happy.

9 In order to prove the cri me of money laundering

10 as charged in Count 69 the government must prove beyond a

11 reasonable doubt each of the following four elements:

12 First, that the defendant Bruce Gordon knowingly

13 conducted or attempted to conduct a financial transaction;

14 Second, that the defendant Bruce Gordon conducted

15 or attempted to conduct the financial transaction with

16 money that involved the proceeds of mail fraud.

17 Let's get right down to it.

18 Third, that at that time the defendant Bruce

19 Gordon conduct or attempted to conduct the -- that at the

20 time the defendant Bruce Gordon conduct or attempted to

21 conduct the financial transaction he knew that the

22 property involved in the financial transaction was the

23 proceeds of some form of unlawful activity, namely, mail
24 fraud.
25 And, fourth, that the defendant Bruce Gordon

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8801

1 engaged in the financial transaction, knowing that the

2 transaction was designed in whole or in part to conceal or

3 disguise the nature or location, the source, the

4 ownership, the control of the proceeds of mail fraud.

5 Conducting a financial transaction.

6 The first element the government must prove

7 beyond a reasonable doubt is that the defendant Bruce

8 Gordon conducted or attempted to conduct a financial

9 transaction.

10 The term "conduct" includes initiating,

11 concluding, or participating in initiating or concluding a

12 transaction.

13 The term "financial transaction" means the

14 transaction involving the movement of funds by wire or

15 other means, or involving one or more monetary

16 instruments, or involving the transfer of title to any

17 real property which in any way or deg ree affects

18 interstate commerce, or a transaction involving the use of

19 a financial institution which is engaged in, or the

20 activities of which affect interstate commerce in any way

21 or degree.

22 With respect to a financial institution, a

23 "transaction" includes a deposit withdrawal, transfer
24 between accounts, exchange of currency, extension of
25 credit, purchase, sale, loan, pledge, gift, delivery or

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8802

1 other payment or transfer or delivery by, through, or to a

2 financial institution by whatever means affected.

3 The question of whether an activity or business

4 is considered interstate commerce is a question of law for

5 me to decide. However, you, the jury, must determine the

6 question of whether there was an affect on interstate

7 commerce. If you decide there was an affect at all on

8 interstate commerce, then it is enough to satisfy this

9 element.

10 The effect can be minimal.

11 For example, the use of funds to purchase

12 articles which travel through interstate commerce would be

13 a sufficient effect on interstate commerce. If you find

14 that the property involved in money laundering was derived

15 from mail fraud, then there would be an effect on

16 interstate commerce.

17 You do not have to decide whether the effect on

18 interstate commerce was harmful or beneficial to a

19 particular business or to commerce in general. The

20 government satisfies its burden of proving an effect on

21 interstate commerce, if it proves beyond a reasonable

22 doubt any effect, whether it was harmful or not.

23 In addition, it is not necessary for the
24 government to show that the defendant Bruce Gordon
25 actual ly intended or anticipates an effect on interstate

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8803

1 commerce by his actions; or that commerce was actually

2 affected. All that is necessary is that the natural and

3 probable consequences of the acts the defendant took would

4 be to affect interstate commerce.

5 Second element, a financial transaction with

6 money that involved the proceeds of mail fraud.

7 The second element of the offense that the

8 government must prove beyond a reasonable doubt is that

9 the defendant Bruce Gordon conduct or attempted to conduct

10 the financial transaction with money that involved the

11 proceeds of mail fraud.

12 In this case the only alleged specified unlawful

13 activity for you to consider is mail fraud.

14 Accordingly, if you find the defendant Bruce

15 Gordon not guilty of mail fraud, you must find him not

16 guilty of money laundering. Unless you find Bruce Gordon

17 guilty of mail fraud, you will return a verdict of not

18 guilty on the money laundering count without further

19 consideration.

20 However, even if you find Bruce Gordon guilty of

21 mail fraud, you must find him not guilty of money

22 laundering, unless the government has established each of

23 the elements of money laundering beyond a reasonable
24 doubt.
25 Third element, knowledge that property involved

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8804

1 was the proceeds of mail fraud.

2 The third element of the offense which the

3 government must prove beyond a reasonable doubt is that

4 the defendant Bruce Gordon knew that the property involved

5 in the financial transaction was the proceeds of some form

6 of unlawful activity, in this case mail fraud.

7 I instruct you that this element refers to a

8 requirement that the defendant Bruce Gordon knew that the

9 property involved in the financial transaction represented

10 proceeds from some form of activity that constitutes a

11 felony under state or federal law.

12 I instruct you as a matter of law that mail fraud

13 is a felony.

14 Fourth element, knowledge that transaction is

15 designed to conceal the origin of the property.

16 The fourth element that the government must prove

17 beyond a reasonable doubt is that the defendant Bruce

18 Gordon acted intentionally with knowledge that the

19 transaction was designed to conceal or disguise the

20 nature, location, source, ownership or control of the

21 proceeds of mail fraud.

22 To act intentionally, means to act willfully; not

23 by mistake or accident with the deliberate purpose of

24 promoting, facilitating or assisting the carrying on of
25 money laundering of the proceeds of mail fraud.

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8805

1 The government must prove beyond a reasonable

2 doubt that the defendant Bruce Gordon knew of the purpose

3 of the particular transaction at issue and that he knew

4 that the transaction was designed to conceal or disguise

5 the true origin of the property in question.

6 So that in Count 69, Mr. White, the only claim of

7 the financial transaction, the only financial transaction

8 is a single one, the Manhasset condominium.

9 MS. SCOTT: No. That's not correct, your Honor.

10 THE COURT: Where or what other transactions.

11 I thought it was the Manhasset condominium and

12 the Manhattan penthouse.

13 MS. SCOTT: No. The transactions encompassed by

14 the indictment tha t were proven were transfers from Who's

15 Who Worldwide to Publishing Ventures for the purposes set

16 forth here, namely, the purchase, improvement, furnishing

17 and maintenance. There is a whole series transactions,

18 money that goes to purchase the property, to various

19 vendors to furnish the property, for the condo

20 development, the maintenance of the property.

21 THE COURT: All involving the Manhasset

22 condominium?

23 MS. SCOTT: Yes.
24 MR. TRABULUS: They all involve, they allege, the
25 purchase, improvement, furnishing and maintenance. I

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8806

1 inferred it did not include the transfer from Who's Who

2 Worldwide to PVI, but the expenditures by PVI to purchase,

3 improve and maintain it. I don't know if it makes that

4 much difference, but the indictment does allege

5 transactions in the plural.

6 THE COURT: That's why you want the unanimity

7 clause?

8 MR. TRABULUS: Yes.

9 THE COURT: All right.

10 The indictment alleges attempts to conduct --

11 well, the indictment alleges a number of financial

12 transactions, namely, the purchase, improvement,

13 furnishing and maintenance of the Manhasset condominium.

14 In order to prove the crime of money laundering

15 against Bruce Gordon the government must establish beyond

16 a reasonable doubt each of the four elements that I have

17 instructed you on with respect to a particular financial

18 transaction.

19 For you to convict there must be one financial,

20 at least one -- at least one financial transaction as to

21 which all four elements have been established beyond a

22 reasonable doubt. It cannot suffice for the government to

23 establish one or two elements w ith respect to financial
24 transaction A and the remaining element or elements with
25 respect to financial transaction B. You cannot convict

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8807

1 the defendant Bruce Gordon unless there is at least one

2 specific financial transaction as to which all of you

3 believe that all of the elements have been established

4 beyond a reasonable doubt.

5 MR. TRABULUS: May I suggest in this language --

6 when I drafted I was thinking of three elements and I

7 wasn't thinking of interstate commerce one. Instead of

8 saying one or two element and the remaining elements, it

9 might be better to say some element or elements, and then

10 the remaining element or elements.

11 THE COURT: Okay.

12 That concludes my request on the law, any

13 question with respect to any additional counts?

14 M R. DUNN: Before you get to that. Do we address

15 the statement requests? I submitted a request to charge

16 this morning, a brief one from Sand basically.

17 THE COURT: Let's do that.

18 Where did you get this request from?

19 MR. DUNN: From Sand.

20 THE COURT: In this manner?

21 MR. DUNN: Except I took out three words. If you

22 go to the first sentence, instead of "admitted certain

23 facts," it said "admitted certain things in the
24 indictment." I don't think this statement made reference
25 to anything in the indictment. It was a more generalized

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8808

1 statement about mailing lists, that he worked there not as

2 long as he said he did.

3 THE COURT: What section in Sand is that from?

4 MR. DUNN: I believe it was 5-19, I believe was

5 the page section.

6 THE COURT : This is -- you are requesting a

7 statement on the alleged admission of the defendant

8 Rubin?

9 MR. DUNN: Yes.

10 THE COURT: Which statement are you referring to,

11 Mr. Dunn?

12 MR. DUNN: Mr. Jordan testified that out in the

13 car going back --

14 THE COURT: Yes, I see.

15 Do you want to say that about that statement?

16 Because the other statements he made on tape.

17 MR. DUNN: That's true. I guess I could have put

18 in there specifically in reference --

19 THE COURT: Do you want to do that?

20 MR. DUNN: I don't think there would be any

21 confusion with that. I think they probably know. But to

22 play it safe.

23 THE COURT: There might be confusion, just as
24 there was in my part when I read it.
25 MR. DUNN: You are right, your Honor.

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8809



1 THE COURT: Statements in a --

2 MR. DUNN: In a motor vehicle.

3 THE COURT: Okay, in a motor vehicle?

4 MR. DUNN: That will be fine, your Honor.

5 THE COURT: I am going to charge that.

6 MR. DUNN: Fine. Thank you, your Honor.

7 MS. SCOTT: In a motor vehicle is kind of vague.

8 Do you want to use the date, or on the date of his

9 arrest?

10 THE COURT: How about in a motor vehicle on the

11 date of his arrest?

12 MR. DUNN: That's good. Thank you.

13 THE COURT: All right.

14 MR. WALLENSTEIN: We still have outstanding,

15 Judge, my request to charge Mr. Reffsin's defense --

16 THE COURT: Yes, let's get into that now. Is

17 that in your requests to charge?

18 MR. WALLENSTEIN: Yes, my final request in the

19 requests, yes.

20 THE COURT: What page is that?

21 MR. WALLENSTEIN: I didn't number the pages. It

22 is the last pa ge of my requests.

23 MR. TRABULUS: Your Honor, in conjunction with
24 this, I submitted today the flip side of this request
25 relating to Mr. Gordon's reliance on Mr. Reffsin.

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8810

1 THE COURT: This is your latest request to

2 charge?

3 MR. TRABULUS: Yes. The one I filed today, your

4 Honor, beginning page 4, which is called 7-3. It is a

5 page and a half. The two requests are somewhat in

6 conflict with each other. And that's why I call it to

7 your attention at this point.

8 THE COURT: There is an old story. In the very

9 delightful Broadway show, Fiddler on the Roof, you will

10 remember that Tevya said many times, you know something,

11 you are right and you are right. And I want to just take

12 a look at this charge. Give me one moment and I will be

13 right out.

14 (Whereupon, at this time there was a pause in the

15 proceedings.)

16 THE COURT: Well, the two charges come squarely

17 in-between the one set forth in Sand. And in Sand it

18 indicates with some citation of authority, not from the

19 Second Circuit, that failure of a defendant to have made

20 full disclosure of the relevant tax information to his

21 accountant disqualifies him from being entitled to the

22 reliance on advice instruction. And it goes into the

23 Seventh Circuit decision.
24 It is not a defense that he relied on his
25 accountant, unless he made a full disclosure of all the

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8811

1 facts to his accountant and relied on his accountant's

2 advice.

3 MR. TRABULUS: Your Honor, that Sand instruction

4 was based on cases decided before Cheek. And the problem

5 wit h it is that, let's say you have a client who hears

6 advice from -- who only knows what full disclosure is from

7 what his accountant tells him. And if his accountant

8 tells him something it doesn't need to be disclosed, or it

9 is the type of something that doesn't need to be

10 disclosed, and in reliance on that the client doesn't

11 disclose it, he still may have acted in full faith on the

12 disclosure he did.

13 But this is in reliance of the charge, based on

14 the objective test based on what is disclosed and what is

15 not disclosed. But it is an objective test, or should be

16 based on what the defendant believes should have been

17 disclosed.

18 In this specific case there is evidence in the

19 record, if you accept Mr. Reffsin's testimony, Mr. Gordon

20 did not disclose to him certain loans made by Sterling and

21 other corporate ends. But at the same tim e there is the

22 testimony that in preparing the collection statements

23 filed before that and in the tax returns filed before
24 that, he didn't list corporate loans to Mr. Gordon either
25 as income or as things having to be based on the

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8812

1 collection statements.

2 Based on that Gordon may feel -- based on that

3 Mr. Gordon might have determined he did not need to

4 disclose the loans to Sterling or the other entities,

5 because based on what Mr. Reffsin had done he could

6 conclude they don't need to be disclosed on collection

7 information statements, they don't need to be disclosed on

8 his own personal tax returns.

9 Mr. Reffsin himself was not performing accounting

10 services for Sterling or those other companies, so there

11 was no other reason for Mr. Gordon to have told that to

12 Mr. Reffsin. So Mr. Gordon could have acted in complete

13 good faith in determining not to disclose those loans and

14 relied upon the advice of Mr. Reffsin in that regard. And

15 under the Sand instruction he wouldn't get the benefit of

16 it if the jury found that it should have been disclosed

17 under an objective standard, that's why the Sand

18 instruction 59-9, as you can see is based on cases decided

19 before Cheek has to be modified. And the modification on

20 which -- in which I prepared which is basically taken from

21 Sand, and just adds in what Gordon fully believed was

22 appropriate.

23 THE COURT: Let me just see that for a moment.
24 (Whereupon, at this time there was a pause in the
25 proceedings.)

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8813

1 MR. WALLENSTEIN: Judge, I don't want to be

2 accused of shifting the burden of proof. But I think in

3 order for Mr. Gordon to get the instruction he is

4 requesting he would have had to have testified or would

5 have to affirmatively adduced some evidence to show he

6 relied on Mr. Reffsin.

7 Mr. Reffsin did testify. And Mr. Reffsin's

8 testimony is that Gordon provided the information from

9 which Mr. Reffsin then prepared documents which were later

10 signed by Mr. Gordon.

11 I think, therefore, that Mr. Reffsin is entitled

12 to the charge which I have requested, which I confess is

13 somewhat unique on what is a modification of Sand 59-9, to

14 fit my particular theory in this case, because I think

15 that that is what the evidence shows. The evidence shows

16 that Reffsin consulted with Gordon, requested information

17 from Gordon, received information from Gordon, and relied

18 on the information from G ordon. Mr. Gordon has not

19 adduced any evidence to show that he relied upon

20 Mr. Reffsin. And I don't think he has to. He doesn't

21 have to prove anything, as we all know.

22 In the absence of some positive step on his part,

23 he is not entitled to this particular instruction, which I
24 think is diametrically opposed to my instruction.
25 Otherwise I would say give him both.

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8814

1 MR. TRABULUS: Your Honor, Mr. Reffsin testified

2 he prepared the collection statement or prepared the

3 returns, and there is no evidence that Mr. Gordon changed

4 them before signing them. And Mr. Reffsin testified he

5 was being paid to advise Mr. Gordon on tax matters. So I

6 don't think it is necessary that Mr. Gordon himself had to

7 have testified to establish that he relied on Mr. Reffsin
8 if not for facts, but for the accounting or tax treatment

9 to be given to those facts as embodied on the returns.

10 And it is clear that Mr. Reffsin made some decisions as to

11 what did or did not have to be disclosed on the collection

12 information statements. He testified to that when I

13 cross-examined him.

14 Certainly, having then seen the product of the

15 decisions that Mr. Reffsin then made, Mr. Gordon might

16 well have relied upon those decisions in deciding

17 subsequently what he did and did not have to tell

18 Mr. Reffsin concerning some other corporate loans. After

19 all he had seen what didn't show up in the returns? Why

20 tell him about any others?

21 MR. WALLENSTEIN: I think it is speculative.

22 THE COURT: Listening to both and looking at the

23 charges, I don't think they are entirely contradictory.
24 MR. TRABULUS: They are not.
25 THE COURT: And I think I will charge both of

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8815

1 them. And the reason is as follows:

2 First with respect to Mr. Gordon, although he did

3 not testify, there is certainly evidence that Mr. Reffsin
4 is his accountant, and was his accountant.

5 MR. WALLENSTEIN: That's conceded.

6 THE COURT: Therefore there is circumstantial

7 evidence in that relationship alone that could leave a

8 jury to believe that Mr. Reffsin gave advice to

9 Mr. Gordon, if he didn't testify to that effect on the

10 stand, I don't recall. But without that there is

11 circumstantial evidence that an accountant would give

12 advice to a client. That is what he is there for.

13 So, I think taking Mr. Gordon's charge, I think

14 it is accurate and it fits in with Cheek. So I will

15 charge that.

16 Now, this ha s to do with the filing, the filing

17 of the false tax returns, right, and the false collection

18 statements.

19 MR. TRABULUS: It goes to all counts, your Honor.

20 MR. WHITE: Your Honor, it doesn't go at a

21 minimum to the collection information statements. Because

22 Mr. Reffsin testified that he got that information from

23 Mr. Gordon. There is no issue about a lack of disclosure
24 between Gordon and Reffsin in either direction about the
25 collection information statements. In other words, both

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8816

1 Mr. Gordon and Mr. Reffsin know about the loans, the

2 credit cards, etcetera.

3 Now, the tax returns and the specific loans that

4 Mr. Trabulus is talking about, that may be a different

5 issue. But there is no issue about a lack of disclosure

6 of the things that were on those 43 3s.

7 MR. TRABULUS: It goes perhaps to Mr. Reffsin's

8 request to charge. It doesn't go to mine.

9 If Mr. Gordon disclosed that to Mr. Reffsin, and

10 Mr. Reffsin on that basis prepared a collection

11 information statement that Mr. Gordon didn't disclose to

12 him. Mr. Gordon is entitled to rely on what Mr. Reffsin
13 as an accountant prepared. He is relying on Mr. Reffsin
14 for what has to be disclosed or not on the statement,

15 after having disclosed to himself, to Gordon, the

16 underlying facts.

17 THE COURT: I think it goes to both the filing of

18 the false tax returns, it goes to filing the collection

19 information statement, and also as set forth in the

20 request to charge, it goes to any affirmative act of

21 evasion by way of payment of tax in Count 57, charging tax

22 evasion. I think that that defense would go to all of

23 those and I will ch arge it.
24 With respect to Mr. Reffsin, let me look at this
25 again.

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8817

1 This goes to the same counts?

2 MR. WALLENSTEIN: Going to the counts which

3 Mr. Reffsin is charged with assisting in the false

4 returns. It would also be applicable to the evasion

5 counts, yes.

6 THE COURT: I think they are not contradictory.

7 MR. TRABULUS: Your Honor, I have a problem with

8 a little bit of the language in Mr. Reffsin's charge, and

9 it is the second paragraph. It now reads: On the other

10 hand, even if you were persuaded beyond a reasonable doubt

11 that Bruce Gordon did provide complete and accurate

12 information to Martin Reffsin, you cannot convict Martin

13 Reffsin, etcetera.

14 The problem with that is it may unwittingly shift

15 to Mr. Gordon the burden of provi ng his innocence beyond a

16 reasonable doubt.

17 MR. WALLENSTEIN: Objection to the word

18 unwittingly.

19 MR. TRABULUS: Well, the problem could be

20 resolved if the following words were omitted, you are

21 persuaded beyond a reasonable doubt that, so it reads --

22 THE COURT: Where is that?

23 Yes, that has to come out.
24 MR. TRABULUS: It should say: On the other hand,
25 even if Bruce Gordon did provide --

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8818

1 THE COURT: Yes, that's true.

2 MR. WALLENSTEIN: I don't object to that.

3 THE COURT: I think I will charge them both as to

4 the -- as far as to Gordon on the filing, tax evasion,

5 filing false tax returns, and filing false collection

6 information statements.

7 As to Martin Reffsin, tax evasion, and assisting

8 in the filing; is that correct?

9 MR. WALLENSTEIN: Correct. Those are the only

10 counts he is charged with.

11 THE COURT: I will do that.

12 MR. WALLENSTEIN: Thank you.

13 THE COURT: I think it is a correct statement of

14 the law.

15 Anything else?

16 MR. NELSON: You had already asked that we

17 provide a limiting instruction relating to the Pinkerton

18 charge as to Mr. Osman, Sterling Who's Who and also on

19 behalf of Steve Rubin.

20 THE COURT: Do you have it?

21 MR. NELSON: I have an instruction as to

22 Mr. Osman and Sterling Who's Who, which I will hand up to

23 the Court.
24 THE COURT: How about as to Rubin?
25 MR. NELSON: I believe it is in the process of

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8819

1 being finalized this second, Judge.

2 MR. DUNN: I am almost finished with it.

3 THE COURT: All right?

4 Anything else on the counts?

5 MR. WHITE: The government has one.

6 During the trial I guess the government never

7 asked and your Honor never gave the instruction to the

8 jury that they could consider the act of the statements of

9 co-conspirators with respect to any of the other people

10 they find to be co-conspirators. We never asked you to

11 make the Bourjaily finding to instruct to the jury. You

12 frequently told them that certain evidence was admitted

13 only against certain defendants.

14 Now that your Honor made the ruling that the

15 government has at least by a preponderance shown a

16 conspiracy, the jury should be instructed that statements

17 they find are in furtherance of the conspiracy and made by

18 a co-conspirator are attributable to -- statements and

19 actions that are made in furtherance should be

20 attributable --

21 THE C OURT: What is exactly the charge you want

22 me to charge? Do you want to write it out, please?

23 MR. WHITE: Why don't I do that.
24 THE COURT: Anything else?
25 MS. SCOTT: Yes.

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8820

1 MR. NELSON: Objection to such a charge. The

2 burden of proof with respect to a co-conspiracy statement

3 is different from the burden of proof in the Court's

4 Rule 29 motion.

5 The Court made the finding that viewing the

6 evidence in the light most favorable to the government as

7 required, I would submit that the government failed to

8 make out by a preponderance of the evidence the existence

9 of a conspiracy; that the statements were made in

10 furtherance of that conspiracy; that each before defendant

11 charged here was a member of that conspiracy at the time;

12 and that the person made that statement or that was made

13 to a person in furtherance of that conspiracy.

14 I further submit to the Court that the government

15 requesting such a charge at this time after they had

16 rested is inappropriate. The application should have been

17 made prior to such period of time that the government

18 rested.

19 MR. LEE: Judge, I join in that motion on behalf

20 of Ms. Weitz.

21 THE COURT: What about that?

22 MR. WHITE: I don't understand why Mr. Nelson

23 feels it should have been made at the close of the
24 government's case. Those statements are attributable to
25 co-conspirators regardless of when the Court gives that

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8821

1 instruction. It is as each statement comes in or later

2 when the evidence is all adduced, you give them the same

3 instruction.

4 T HE COURT: Except for one thing, if it is given

5 at the end of the government's case, the defendant

6 theoretically would have a chance to refute it in some way

7 by bringing in evidence. And they didn't have that

8 opportunity because now both sides have rested.

9 MR. WHITE: Your Honor, it is not new evidence,

10 all the evidence is there for them to rebut.

11 THE COURT: You are changing the view of the

12 evidence. It is new evidence. Because I have instructed

13 them that many of the witness statements and evidence,

14 testimony, rather, is only against Sterling, only against

15 Who's Who dozens of times. Now I am changing it against

16 everybody else. They have no opportunity to rebut it,

17 respond to it, if they wanted to. They probably wouldn't

18 have anyway. But I don't know that. So I will deny your

19 request.

20 Anything else?

21 MR. DUNN: Your Ho nor, this is the before and

22 after.

23 THE COURT: I will have to read this at my
24 leisure tonight, which I have none.
25 MS. SCOTT: Your Honor, I have two requests.

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8822

1 THE COURT: Yes.

2 MS. SCOTT: They are from the government's

3 requests to charge. I don't know if you have it up on the

4 bench.

5 THE COURT: I have it.

6 MS. SCOTT: Request 52, page 87.

7 MS. SCOTT: There was comments made on the record

8 that the government didn't call certain witnesses, the

9 example most saliently I believe is Inspector Biegelman.

10 There were several allusions to him and the fact he was

11 not brought in. I remember one attorney saying that we

12 had spent all this money to bring victims in, and it

13 wouldn't have cost any more to bring Inspector Biegelman

14 in.

15 THE COURT: I am indeed surprised that you should

16 raise this subject.

17 Inspector Biegelman is under the control of the

18 government. There is no equal opportunity in my opinion.

19 He is a government employee. There, I will decline to

20 give the charge that you request.

21 Equality means under the quality of including

22 certain things. It is not only meaning who could be

23 subpoenaed. It is the character of the witness. He is a
24 government employee.
25 A very partial, according to the evidence I

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8823

1 heard, government employee. So don't tell me he is an

2 uncalled witness equally available. As a matter of law he

3 is not equally available.

4 MS. SCOTT: Your Honor, in addition, request

5 number 55 on page 91.

6 THE COURT: Yes, I will say that. I was going to

7 go into that in a few minutes.

8 That's a consideration of punishment.

9 MS. SCOTT: Did you mention in your statement on

10 Thursday any statement about people not being indicted?

11 THE COURT: I will check into that.

12 MR. SCHOER: I believe you did.

13 THE COURT: If Mr. Schoer says I did, then I

14 did. But let me take a look. Just to make sure.

15 (Whereupon, at this time there was a pause in the

16 proceedings.)

17 THE COURT: Yes, failure to name a defendant,

18 yes.

19 Anything else at this time?

20 With respect to closing instructions I give them

21 detailed closing instructions as to deliberations, the

22 right to a readback, to be patient, because it takes a

23 long time, and also to tell us what part of a witness'
24 testimony they want or else they will be here two days
25 listening to a readback.

HARRY RAP APORT, CSR, CP, CM OFFICIAL COURT REPORTER
8824

1 I tell them not to consider punishment as you

2 requested Ms. Scott, and to talk to each other, and keep

3 an open mind, and change their opinion if they feel it

4 should be done, as long as it is conscientious conviction,

5 and not just to reach a verdict, and things like that.

6 That's about it, except that they select a

7 foreperson, of course.

8 Now, I would like to show you a draft of a

9 verdict sheet. It is in draft. I have not checked it

10 out. It has to be changed probably. It gives you an

11 idea.

12 (Verdict sheet distributed.)

13 THE COURT: Now, you can see that this is simple

14 and to the point.

15 Count 1 of course has all the defendants in it.

16 And the other counts, you can check them to what

17 defendants are still in the other counts.

18 We get past the mail f raud, which is count 52,

19 and we get to the alleged perjury, obstruction of justice,

20 etcetera.

21 Does anybody have any comments at this point

22 about the verdict sheet, corrections, revisions, ideas,

23 suggestions? You can tell me about that tomorrow morning,
24 if you would like. But as I said, it is as simple as I
25 can make it, and less confusing the better, with all these

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8825

1 counts, and everything.

2 We will recess until 8:30 tomorrow morning and

3 then we will resolve the rest of the matters.

4 Do you have a copy of the indictment?

5 MS. SCOTT: I do, your Honor. The printer I used

6 seemed to have confused some page breaks and tabs that I

7 did. In places it is messy. I thought you would want to

8 have it the way that it is, and I will find a printer that

9 do esn't do that.

10 THE COURT: Better give copies to the defendants

11 and give me that one now.

12 MS. SCOTT: All right.

13 THE COURT: I want to tell you that we

14 communicated with the jurors and told them that we were

15 supplying lunch with them tomorrow, Wednesday and from

16 that point on. Tomorrow on we will at the expense of the

17 federal court pay for their lunch. And that means that we

18 bring in their lunch for them. They do not go out. And I

19 wanted you to know that.

20 I don't know how to figure these summations. I

21 will try to work at least until 5:30 tomorrow depending on

22 the jurors. The next day we will work late if necessary

23 to get through all the summations, and then so I can
24 charge the first thing on Thursday morning.
25 Anybody have any other ideas, requests,

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER

8826

1 suggestions or anything else?

2 MR. NELSON: Judge, in the brief review of the

3 verdict sheet, it is my understanding, and I don't have my

4 notes in front of me right now. But as to what is

5 included as Count 50, the January 31st, 1995 invoice, it

6 was my understanding, and I might be incorrect, that the

7 Court dismissed that count as it related to the defendants

8 other than Bruce Gordon, Who's Who Worldwide and Sterling

9 Who's Who, based on the fact that they were not employees

10 at that time on the substantive count.

11 MR. JENKS: Which count is that?

12 MR. NELSON: 50, and that's one of them.

13 THE COURT: No, it was not one of them, I don't

14 believe.

15 MR. SCHOER: Yes, Judge, that's one of them.

16 THE COURT: 50 is dismissed?

17 MR. SCHOER: 50 was dismissed against anybody

18 except Mr. Gordon and Sterling.

19 THE COURT: Is that right, Ms. Scott?

20 MS. SCOTT: What was the original number?

21 MR. SCHOER: The original number was 54. 48 was

22 similarly, and the original number of that was 52.

23 THE COURT: Go one at a time. It is probably my
24 mistake or my secretary's mistake, one or the other.
25 MR. SCHOER: Let's start with the first one, the

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8827

1 mailing of 3/7/94, which is count 39 now.

2 THE COURT: What was it before?

3 MR. SCHOER: 42.

4 THE COURT: I have here that Sterling is in only

5 in counts 42, 49, 50, 52 and 54.

6 MR. SCHOER: Right, those four counts. So now it

7 is count 39 --

8 THE COURT: Wait a minute now.

9 Let me get this straight.

10 In the original indictment, and we all have

11 copies of the original indictment. Take a look at that.

12 I totally dismissed counts 2, 39, 40 and 47. We

13 are talking originally.

14 I dismissed 52, 53 as to Osman --

15 MR. NELSON: 53 was not dismissed. I didn't

16 provide the more information needed on that.

17 THE COURT: First of all I totally dismissed

18 original counts 2, 39, 40, 47; is that correct?

19 MR. SCHOER: Yes.

20 MR. NELSON: Correct, your Honor.

21 THE COURT: Then I dismissed counts 6 through 52

22 as to Osman?

23 MR. NELSON: Correct.
24 THE COURT: Is that correct in the verdict
25 sheet?

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8828

1 MR. NELSON: Correct.

2 THE COURT: Then I dismissed as to Rubin on the

3 old counts, 3 to 41 and 56; is that correct now?

4 MR. NELSON: I believe so.

5 MR. DUNN: Yes, your Honor.

6 THE COURT: All right. So that is taken care of.

7 Then I dis missed as to Sterling, the old counts 3

8 to 41; is that correct?

9 MR. JENKS: That's correct.

10 THE COURT: In the verdict sheet.

11 Now, I dismissed as to Sterling also, according

12 to my notes, Counts 43, 44, 45, 46 --

13 MR. JENKS: 48, 50 --

14 THE COURT: 48, 51, 53, 55 and 56.

15 MR. JENKS: That's what I have, your Honor, yes.

16 I have to match these counts with the new counts

17 in your verdict sheet.

18 THE COURT: So Sterling is only in counts 42, 49,

19 50, 52 and 54.

20 Now what did I do wrong?

21 MR. SCHOER: Those counts which you just named,

22 it should only be Sterling and Mr. Gordon, and no one

23 else.
24 THE COURT: I see.
25 So what are the new counts?

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8829

1 It is four below. 38, and -- are we talking the

2 new 38?

3 MR. SCHOER: No.

4 MR. JENKS: The new 39 we are talking. The new

5 39 should have Gordon and Sterling.

6 THE COURT: If I have the former count 32, why is

7 it 39?

8 MR. JENKS: By the date, the solicitation letter.

9 THE COURT: Are you listening to this,

10 Mr. White?

11 MR. WHITE: I am. But I am not catching it all.

12 MS. SCOTT: The confusion of the numbers, your

13 Honor --

14 THE COURT: Let's do the old counts and now the

15 new count, okay?

16 Which one are you talking about?

17 MR. SCHOER: The old count 42 is now count 39.

18 THE COURT: I see that.

19 Now, 39 you say should only be --

20 MR. SCHOER: Should only be Gordon and Sterling.

21 THE COURT: Is that right.

22 MR. JENKS: Yes.

23 THE COURT: I am asking the prosecution.
24 MS. SCOTT: I am trying to find it.
25 MR. WHITE: The old 32 is now the new 38?



HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8830

1 MR. JENKS: No, 39.

2 THE COURT: It is a 3/7/94 solicit letter.

3 Do you agree with that?

4 MS. SCOTT: Yes, your Honor.

5 THE COURT: That's the new count 39.

6 Next is old.

7 MR. SCHOER: The next old 49.

8 THE COURT: All right, old 49.

9 MR. SCHOER: That's the new 45.

10 THE COURT: What should that be?

11 MR. SCHOER: Also only Gordon and Sterling.

12 THE COURT: Is that correct?

13 MS. SCOTT: That's correct.

14 THE COURT: I knew I would get help from all of

15 you. That's wonderful.

16 MR. SCHOER: The next is old 50, which is now the

17 new 46.

18 THE COURT: What is that?

19 MR. SCHOER: It should also be Gordon and

20 Sterling only.

21 MR. JENKS: That's correct.

22 THE COURT: All right.

23 MR. SCHOER: The next is old 52, which is the new
24 48, and that should be Gordon and Sterling only.
25 MR. JENKS: That's correct.

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8831

1 MS. SCOTT: That's correct.

2 THE COURT: All right.

3 MR. SCHOER: The last is old 54, which should be

4 new 50. And that, too should be Gordon and Sterling.

5 THE COURT: Boy, we are going to save space here

6 and it would be terrific. And I will save two pages, so

7 it will be a verdict sheet of 22 or 23 pages instead.

8 Anything else?

9 MR. SCHOER: Right now that's it as far as we can

10 see.

11 THE COURT: All right.

12 We will recess until 8:30 tomorrow morning

13 sharp.

14 MR. DUNN: One thing. On the second handwritten

15 sheet I sent up to you, I put down March 17th, 1994

16 instead of March 17th, 1995.

17 THE COURT: On that sheet it sh ould be March

18 17th, 1995?

19 MR. DUNN: Yes.

20 MR. DUNN: Thank you, your Honor.

21 MR. SCHOER: The list of exhibits that your Honor

22 wants, I want to make sure I understand exactly what you

23 want.
24 You just want the letters or the numbers on
25 behalf of the government, we don't have to describe the

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8832

1 document, do we? Do you want a list that says exhibit --

2 THE COURT: I would like a letter, memorandum,

3 something, something. You don't have to go in detail.

4 And you have to exchange it so you can each look at it to

5 see if it is accurate.

6 MR. GEDULDIG: Judge, is it necessary for the

7 defendants to be here tomorrow morning at 8:30?

8 THE COURT: Yes.

9 We will see you tomorrow.

10 MS. SCOTT: Your Honor, this doesn't affect

11 anythi ng. But I need to inform the Court that I will not

12 be here after Thursday the 26th because of a pressing

13 personal matter.

14 THE COURT: I am sorry. We are going to miss

15 you.

16 MS. SCOTT: Thank you, your Honor.

17 THE COURT: You contributed very well to the

18 prosecution of the case and in a very fair manner I

19 thought.

20 MS. SCOTT: Thank you, your Honor.

21 MR. WALLENSTEIN: Judge, can I ask what time you

22 intend to start the charge on Thursday so I can arrange

23 some scheduling?
24 THE COURT: 9:30 in the morning, I would think.
25 MR. WALLENSTEIN: That's what I wanted to know.

HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER
8833

1 THE COURT: Maybe 9:00.

2 MR. WALLENSTEIN: I scheduled an 8:00 o'clock

3 closing figuring I can do it in an hour and get here. I

4 was hoping you would say 9:30 in the morning.

5 THE COURT: Probably it will be.

6 (Case on trial adjourned until 8:30 o'clock a.m.,

7 Tuesday, March 24, 1998.)

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HARRY RAPAPORT, CSR, CP, CM OFFICIAL COURT REPORTER

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This site is concerned with the Who's Who Worldwide Registry tragedy, and the double scandal of government and judical corruption in one of the dirtiest trials of the twentieth century and the concomitant news media blackout regarding this incredible story.

Sixteen weeks of oft-explosive testimony, yet not a word in any of 1200 news archives. This alone supports the claim that this was a genuinely dirty trial; in fact, one of the dirtiest federal trials of the 20th century.

Show your support for justice, for exoneration of the innocent, and perhaps most importantly, government accountability, by urgently contacting your Senator, the White House, and the U.S. Department of Justice.