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United States v. Kerr
United States District Court, D. Arizona
July 22, 2015
United States of America, Plaintiff,
Stephen M. Kerr, Michael Quiel, Defendants.
A. Teilbrog, Senior United States District Judge.
14, 2015, this Court issued an Order denying Defendant
Kerr's and Defendant Quid's (Defendants) motion for
new trial. Defendants appealed that Order. Defendants now ask
this Court to accept remand from the Court of Appeals to
consider what Defendants claim is even more evidence in
support of the previous motion for new trial (which itself
was supplemented). The Court's prior Order stated as
Pending before the Court is Defendants' Joint Motion for
New Trial or to Dismiss. (Doc. 454).
On December 8, 2011, a grand jury indicted Michael Quiel
("Quiel") and Stephen Kerr ("Kerr") on a
variety of crimes concerning failure to pay taxes on funds
held in Swiss corporations. (Doc. 3). Each Defendant was
charged with one count of Conspiracy to Defraud the United
States, two counts of Willful Subscription to False
Individual Income Tax Returns, and two counts of Willful
Failure to File Reports of Foreign Bank and Financial
Accounts ("FBAR"). (Id.).
Defendants were not alone in the indictment. Christopher
Rusch ("Rusch"), Defendants' former attorney,
was charged with one count of Conspiracy to Defraud the
United States. (Id.). An additional charge of
failure to file an FBAR was later added. (Doc. 331 at 1607).
Rusch entered into a plea agreement, which compelled him to
testify at the request of the United States. (Doc. 415).
A month-long jury trial began in early March. (Doc. 221);
(Doc. 281). At trial, Rusch testified against Defendants.
(Doc. 331). On direct examination, he admitted to engaging in
illegal activity by improperly structuring the Swiss
businesses controlled by Quiel and Kerr. (Id. at
1675). On cross-examination, Defendants introduced evidence
to impeach Rusch. (Doc. 454 at 5); (Doc. 457 at 2).
Both Defendants were acquitted of Count One (Conspiracy to
Defraud the United States). Kerr was found guilty of Counts
Two & Three (Willful Subscription to False Individual
Income Tax Returns for 2007 and 2008) and Counts Six &
Seven (Willful Failure to File FBARs for 2007 and 2008).
(Doc. 281). Quiel was found guilty of Counts Four & Five
(Willful Subscription to False Individual Income Tax Returns
for 2007 and 2008). (Id.). In addition, the jury
hung as to Counts Eight & Nine (Willful Failure to File
FBARs for 2007 and 2008). (Id.).
Following the verdict, Defendants were each sentenced to ten
months in prison. (Doc. 373); (Doc. 376). Subsequently,
Defendants moved for acquittal or alternatively a new trial.
(Doc. 299); (Doc. 300). These motions were denied. (Doc.
345); (Doc. 346).
On appeal, the Ninth Circuit Court of Appeals affirmed the
convictions. United States v. Quiel, 595 F.App'x
692 (9th Cir. 2014), cert, denied, No. 14-1237, 2015
WL 1692989 (May 18, 2015). Now, Defendants request a new
trial or alternatively an evidentiary hearing, in light of
allegedly newly discovered evidence. (Doc. 454). Defendants
have three different pieces of allegedly newly discovered
Rusch's Alleged Fraud
First, Defendants claim that evidence has emerged showing
that Rusch engaged in fraudulent activities, before and
during the trial, under the alias Christian Reeves.
(Id. at 1-9). Defendants contend that examples of
this fraud include Rusch: blogging as Reeves in early 2013,
(Id. at 4); posting on ex-pat investing sites as
Reeves starting in 2012, (Id. at 6); giving tax
advice as Reeves, (Id.); podcasting as Reeves,
(Id.); marketing himself as a rehabilitated lawyer,
(Id.); and publishing an offshore tax guide after
pleading guilty, but before trial, (Id.).
Furthermore, Defendants allege that Rusch has admitted to
being Reeves. (Doc. 459 at 3).
Defendants argue that they could have used the evidence of
Rusch's ongoing fraud to impeach his testimony at trial.
(Doc. 454 at 13). Defendants further claim that if the
Government was aware of Rusch's illegal activity, but did
not disclose this information to Defendants, then a
Brady violation has occurred, justifying a new
trial. (Id. at 12-14).
Defendants further argue that even if the Government was not
aware of this information, the newly discovered evidence, of
its own force, justifies a new trial. (Id. at 14).
Rusch's Alleged Undisclosed Benefit
Second, Defendants allege that the Government has agreed
"to look the other way while its witness commits
additional crimes." (Id. at 10). Defendants
claim that the Government has given Rusch a "fresh
start" by allowing him to continue his allegedly
fraudulent activity. (Doc. 458 at 7). Defendants argue that
this "fresh start" is the product of an undisclosed
agreement between Rusch and the Government. (Id. at
7) ("Brady and due process require that the
Government turn over information about the full benefits and
promises that the witness received for his co-operation, to
include non-enforcement of civil penalties.") (citing
United States v. Shaffer, 789 F.2d 682 (9th
Trial Exhibits 51 and 52
Third, Defendants allege that Pierre Gabris, a Swiss-national
and alleged participant in the structuring of the Swiss
accounts, would testify that "he did not prepare or send
trial exhibits 51 and 52, " which were offered into
evidence on Rusch's re-direct. (Id. at 15).
These exhibits contain emails originally sent from Gabris to
Rusch, who forwarded them to Defendants, regarding accounting
statements from Defendants' Swiss corporations. (Doc. 335
at 2533). Defendants argue that these allegedly forged
documents provide further support for a new trial. (Doc. 454
Applicable Legal Standards
Defendants claim that their newly discovered evidence
satisfies the Rule 33 new trial test. (Id. at 14).
This test requires Defendants to show: (1) that the evidence
is newly discovered; (2) that Defendants' failure to
discover the evidence sooner was not the result of a lack of
diligence; (3) that the evidence is material; (4) that the
evidence is neither cumulative nor merely impeaching; and (5)
that a new trial would likely result in acquittal. United
States v. Kulczyk, 931 F.2d 542, 548 (9th Cir. 1991).
In addition, Defendants argue that they are due a new trial
under Brady v. Maryland. (Doc. 454 at
12-14); Brady v. Maryland, 373 U.S. 83, 87
(1963). To prove a Brady violation, Defendants must
show that: (1) the evidence is newly discovered; (2) the
evidence was suppressed by the prosecution; and (3) the
evidence was material. United States v. Williams,
547 F.3d 1187, 1202 (9th Cir. 2008).
Finally, Defendants allege that trial exhibits 51 and 52 are
forgeries. (Doc. 454 at 15). While Defendants assert that
these forgeries entitle them to a new trial under
Brady, this evidence is properly considered under
Napue v. Illinois, because the evidence was not
suppressed,  [footnote numbered 1 in the original
order] Napue v. Illinois, 360 U.S. 264 (1959). To
establish a Napue violation, Defendants must prove
that: (1) there was false evidence; (2) the prosecution knew,
or should have known that the evidence was false; and (3) the
evidence was material. Towery v. Schriro, 641 F.3d
300, 308 (9th Cir. 2010) (citing United States v.
Zuno-Arce, 339 F.3d 886, 889 (9th Cir. 2003)).
Because both Brady and Napue violations are
implicated by Defendants' allegations, the Court will use
a two-step test described in further detail below, see
supra Part II.D, to determine materiality.
Finally, to determine whether Defendants are entitled to an
evidentiary hearing, the Court will presume that their
allegations are true.
Rule 33 New Trial Test
Under Rule 33, a defendant may "move for a new trial on
newly discovered evidence" within three years of the
verdict. Fed. R. Crim. P. 33. The Court may "grant a new
trial if the interest of justice so requires."
Id. These motions "are not favored by the
courts and should be viewed with great caution."
United States v. Marcello, 568 F.Supp. 738,
740 (CD. Cal. 1983), affd 731 F.2d 1354 (9th Cir.
1984) (citing 3 Charles Alan Wright, Federal Practice and
Procedure: Criminal § 557 (2d ed. 1982)). To obtain
a new trial, Defendants must satisfy each prong of a
five-part test: (\) the evidence must be newly
(2) the failure to discover the evidence sooner must not be
the result of a lack of diligence on . . . [Defendants']
(3) the evidence must be material to the issues at
(4) the evidence must be neither cumulative nor merely
(5) the evidence must indicate that a new trial would
probably result in acquittal.
United States v. Kulczyk, 931 F.2d 542, 548 (9th
The materiality and probability prongs are essentially the
same. United States v. Krasny, 607 F.2d 840, 845 n.3
(9th Cir. 1979). Accordingly, they will be treated
Rule 33 requires that evidence be newly discovered.
Kulczyk, 931 F.2d at 548. Evidence is not newly
discovered if it "was known to, or was in the possession
of, the defense" before the trial concluded. United
States v. Hinkson, 585 F.3d 1247, 1284 (9th Cir. 2009)
(en banc) (Fletcher, J., dissenting).
Rusch's Alleged Fraud and Rusch's Alleged Undisclosed
Defendants allege that they discovered Rusch's fraudulent
activities performed under the Reeves alias after trial.
(Doc. 454 at 4). Because Defendants allegedly learned of this
information after trial, the newly discovered test is
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