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United States v. Hard

November 16, 2009

UNITED STATES OF AMERICA, PLAINTIFF(S),
v.
STEPHEN HARD DEFENDANT(S).



The opinion of the court was delivered by: David O. Carter United States District Judge

ORDER GRANTING FIRST MOTION IN LIMINE

Before the Court is Defendant Stephen T. Hard ("Hard")'s First Motion in Limine (the "Motion"), which moves for an order excluding the evidence referenced in the Government's First Notice of Intent to Admit Evidence Pursuant to Rule 404(b) filed on August 4, 2009. After considering the moving and opposing papers and parties' oral argument, and after reviewing the relevant evidence in the jury's absence, the Court hereby GRANTS the Motion.

I. Background

The Government seeks to introduce evidence that Hard and his alleged co-conspirator Brad Lee ("Lee"), developed a scheme to defraud Exousia Foundation Ltd. ("Exousia") during the Fall of 2004 and Winter of 2005 (the "Exousia Transaction" or "Exousia Agreement"). Unlike the scheme for which Hard is presently charged (the "Indictment Transaction"), the Exousia Transaction was never consummated. Nonetheless, the Government argues that Lee's testimony regarding the Exousia Transaction and, in addition, three electronic mail communications from Hard to Lee, should be admitted to prove Hard's knowledge and intent in the commission of the Indictment Scheme.

First, the Government seeks to introduce a January 14, 2005 email from Hard to Lee, in which Hard forwarded a January 12, 2005 email from Philip Sagona ("Sagona") to Hard. The January 12, 2005 email from Sagona attached the January 11, 2005 "Minutes of the Special meeting of the Board of Directors of Exousia Foundation, Ltd.," which memorialized Sagona's appointment as one of Exousia's Managers of Investments and Sagona's designation as Director of Investments of Exousia.

Second, the Government seeks to introduce a January 14, 2005 email from Hard to Lee, in which Hard forwarded a January 12, 2005 email from Sagona to Hard. The January 12, 2005 email from Sagona to Hard claimed to contain the account information for a bank account at UBS.

Third, the Government seeks to introduce a January 14, 2005 email from Hard to Lee, which attached a draft agreement between Lee and Exousia ("Proposed Exousia Agreement"). The Proposed Exousia Agreement in relevant part obligated Lee to secure the "private placement" of $5 Billion of Exousia's funds held at the Union Bank of Switzerland ("UBS").

II. Legal Standard

Federal Rule of Evidence 404(b) in relevant part provides that "[e]vidence of other crimes, wrongs, or acts is not admissible to prove the character of a person in order to show action in conformity therewith. It may, however, be admissible for other purposes, such as proof of motive, opportunity, intent, preparation, plan, knowledge, identity, or absence of mistake or accident." The Ninth Circuit has held that evidence of other acts, including "bad acts," is admissible under Rule 404(b) when: (1) there is sufficient proof for the jury to find the defendant committed the other act; (2) the other act was not too remote in time; (3) if used to prove intent, the other act must be similar; and (4) it must be used to prove a material issue. See United States v. Bailleaux, 685 F.2d 1105, 1110 (9th Cir. 1982).

III. Discussion

1. Sufficient Proof of the Exousia Transaction

The Government concedes that the Exousia Transaction was inchoate, in that Hard drafted the Proposed Agreement that was ultimately not signed by the parties. However, the evidence that Hard contemplated the Exousia Transaction and prepared for its consummation is incontrovertible, in light of the previously described Proposed Agreement, as well as the emails from Hard to Lee and Sagona to Hard.

Of more concern is the Government's failure to use the evidence of the Exousia Agreement as an additional predicate fact in support of the Indictment's charge of conspiracy. As previously mentioned, the Exousia Transaction involved the same principals (Lee and Hard), involved an alleged scheme to defraud, and involved an investor. The Court recognizes that the Proposed Exousia Agreement and the agreement at issue in the Indictment Transaction bear many common features, including identical clauses with regard to the promised return on investment and low risk. It would appear to flow from these facts that the Exousia Agreement was yet one more instance, during the time frame in question, in which Hard and Lee conspired to defraud. Yet, the Government inexplicably failed to allege the scheme in the Indictment, and when questioned about its failure to do so at oral argument, Government's counsel conceded that he was unaware of any good reason to exclude the Exousia Agreement from the ...


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