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United States v. Kerr

United States District Court, D. Arizona

July 22, 2015

United States of America, Plaintiff,
v.
Stephen M. Kerr, Michael Quiel, Defendants.

          ORDER

          James A. Teilbrog, Senior United States District Judge.

         On July 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 follows:[1]

Pending before the Court is Defendants' Joint Motion for New Trial or to Dismiss. (Doc. 454).

         I. Background

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 evidence.

         A. 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).

         B. 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 Cir. 1986)).

         C. 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 at 15-16).

         II. 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, [2] [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.

         A. 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 discovered;
(2) the failure to discover the evidence sooner must not be the result of a lack of diligence on . . . [Defendants'] part;
(3) the evidence must be material to the issues at trial;
(4) the evidence must be neither cumulative nor merely impeaching; and
(5) the evidence must indicate that a new trial would probably result in acquittal.
United States v. Kulczyk, 931 F.2d 542, 548 (9th Cir. 1991).
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 concurrently.

         1. Newly Discovered

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).

         a. Rusch's Alleged Fraud and Rusch's Alleged Undisclosed Benefit

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 satisfied.

         b. Trial ...


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