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United States v. Hard

June 23, 2010

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



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

ORDER DENYING MOTION FOR NEW TRIAL

Before the Court is Defendant Stephen T. Hard ("Hard")'s Motion for New Trial (the "Motion"). The parties appeared for a two-day hearing on this matter April 19, 2010 and April 20, 2010, and the Court continued the hearing to June 23, 2010. Upon considering the moving, opposing, and replying papers, as well as the documents attached thereto, the Court DENIES the Motion.

I. Background*fn1

The Indictment charged Hard with one count of conspiracy and eight counts of wire fraud and aiding and abetting wire fraud. See Docket 1. The case against Hard proceeded to trial. On December 3, 2009, on the ninth day of trial, the jury returned a guilty verdict as to all nine counts. Hard moves for a new trial pursuant to Fed. R. Crim. P. 59.

A. The Government's Allegations

The charges against Hard arise out of an alleged scheme to defraud Consolidated Consulting Group (CCG) and its officers out of $1 million. Specifically, the government alleged that Hard and his co-conspirator Brad Keith Lee ("Lee") presented CCG with a so-called high yield investment scheme, which purported "privileged access to secret financial trading programs" which falsely promised high rates of immediate return on modest investments. See Docket 1 ¶ 5. In effectuating this scheme, Lee and Hard were alleged to have transferred $1 million in CCG assets to the control of a foreign individual purportedly named Claude Cressot. Hard and Lee were alleged to thereafter "lull" the CCG investors into believing that their funds would soon be invested, only to manufacture false explanations for their failure to either invest the CCG funds or return the funds to CCG. Lee and Hard were alleged to have eventually terminated contact with the CCG investors.

Hard's role in the alleged scheme related to his standing as an attorney licensed to practice law in the state of Utah. The government alleged that Lee represented himself to investors as a high-ranking United States military official with extensive contacts within the financial world. Lee, and thereafter Hard, informed investors that Lee controlled significant funds in worldwide bank accounts, all of which had been temporarily frozen. Hard's alleged role was to memorialize the agreement between Lee and the unwitting victims of Lee's fraud scheme and later use his credentials as an attorney to "lull" the CCG investors into a false sense of security about the integrity of their investments.

B. Relevant Evidence Presented at Trial

The government called a number of witnesses, including the CCG investors, the FBI investigating agent Norm Embry, Lee, and Lee's companion Kristine Montesa. Lee testified that Hard was aware of, complicit in, and a participant to the alleged defrauding of the CCG investors both before and after their funds were transferred out of their custody. Lee's testimony was used to rebut Hard's defense, which -- as Hard observes -- was predicated upon Hard's lack of "requisite specific criminal intent to commit wire fraud and to aid and abet Lee's effort to do so." See Mot. at 2.

The government also submitted for the jury's consideration an array of documentary evidence, including Hard's e-mail correspondence with the CCG investors, Hard's e-mail correspondence with Lee, and bank records purporting to track the transfer of the CCG investors' funds. The following categories of documentary evidence are relevant to the resolution of the instant Motion.

First, the government submitted the agreements that were prepared by Hard and signed and initialed by CCG's representatives, Brad Lee, and Hard. A September 23, 2004 "Joint Venture Agreement" memorialized CCG and Lee's agreement to make available $1 million in CCG funds for Lee to, inter alia, use in "private placements of purchases and sales of bank debentures or other instruments." See Ex. 1-A to Opp. to Mot. at 4. On October 5, 2004, Hard e-mailed the CCG investors informing them on the manner in which their funds could be transferred to Lee's control. Specifically, Hard instructed the investors to either: (1) engage in a potentially unavailable "'K9' transaction which allows funds to be transferred quickly between Europe and the US if the signatories to both accounts are the same" or (2) transfer funds to Hard's "lawyer trust account" from which the funds would be disbursed "to the account of Claude Cressot." See Ex. 1-C to Opp. An October 14, 2004 "Joint Venture Agreement" memorialized CCG and Lee's agreement to transfer $1 million in CCG funds to Hard's lawyer trust account for later disbursement to an overseas account. See Ex. 2 to Opp. Hard received CCG's funds and later transferred them to the overseas account, as per the agreement. See Ex. 4-A to Opp.

Second, the government submitted Hard's correspondence with CCG investors in which Hard described the nature of the investment. For the purposes of this Motion, it suffices that Hard repeatedly referred to the investment as "leveraging." For example, on October 24, 2004, Hard e-mailed the CCG investors stating that "Cressot has received the funds . . . he will start the leveraging process on Tuesday . . . The first tier of leveraging won't begin until then . . . once that is done, he needs to move the funds to a different account in order to enable the leveraged funds to be further leveraged." Ex. 6 to Opp. The investors apparently believed that their funds were undergoing "leveraging" as one of the CCG investors e-mailed Hard a week later stating "It was great to talk to Brad, Kristine and you about the updates. As per our conversation during lunch, Claude should have leveraged our account to a certain level at this time." See Ex. 7 to Opp.

Indeed, even as it became apparent that the investment was not the success it was made out to be, the CCG investors expressed gratitude that "Brad/Cressot already levereaged our funds to a certain level . . . even if we don't get approved, we still made some leveraging and at least get some profits out of this." Ex. 18 to Opp. Hard later assuaged the investors' concerns about the status of their funds by attempting to "make some sense of it all" and stating that: "[y]our funds can be leveraged and are approved to be leveraged IF you can participate in the overall transaction. The line of credit that Brad gets has been restricted so that the leveraged amounts can only be used to purchase approved instruments for immediate re-sale." See Ex. 20 to Opp.

Third, the government submitted a number of so-called "lulling" e-mails between Hard and the CCG investors, in which Hard purported to assuage the investors' concerns about the location and accessibility of their funds. In one e-mail exchange, Hard represented to one of the CCG investors that CCG's funds remained frozen in part because Lee had fallen ill as a result of exposure to airborne chemicals aboard a plane on which Lee was a passenger. Hard purported to send the e-mail from Monaco, where he, Lee, and Montesa had putatively traveled to undertake the investment of CCG's funds. The text of Hard's e-mail to the CCG investor is attached as Exhibit 31 to Hard's Affidavit in Support of the Motion. It reads as follows:

I apologize for not being able to answer your calls, but I have been watching Brad closely and have been in some meetings during which I couldn't take the calls.

On the way over here, we got bumped from two flights. Brad and Kristine made a third flight, and I followed the next day. The Air France flight that Brad was on had the flight attendants spraying insecticide inside the cabin after they were airborne. This caused a strong negative reaction with Brad. I was told by Kristine that because of Brad's bad heart, that he actually went unconscious, and she had to break up his heart medication to have it dissolve in his mouth in order to revive him.

Since we have been in Monaco, I have never seen Brad so sick for so long. He has really only been good for a couple of hours a day at the most. As a result, our meetings with Claude have been delayed; further, Claude had to go to Paris to attend a surgery for his daughter, and Friday is a Monaco-wide holiday. Bottomline, our schedule as to when the purchase and sale contracts would be signed, the instruments being purchased being posted on Euroclear, and exiting them out has been delayed. We now expect that the actual buy/sells will commence on Monday.

Ex. 31 to Hard Aff.

The "buy/sells" did not commence on the Monday after Hard sent his e-mail to the CCG investor. Instead, three days after sending the e-mail concerning Lee's purported exposure to pesticides, Hard sent another e-mail to the CCG investor explaining the delay in the investment of the funds and reassuring the investor that "[w]e have been at this business for a long time." See Ex. 40 to Hard Aff. at 1. An attachment to Hard's e-mail informed the CCG investors that Lee's pesticide-induced illness, as well as complications surrounding the forgiveness of debt held by the Iraqi government, had complicated the investment of CCG's funds and could potentially require the return of those funds to CCG with no tax consequences. See id. at 2-3.

Fourth, the government submitted evidence about the distribution of CCG's funds and amounts alleged to have been received by Hard as a result of the alleged scheme to defraud the CCG investors. The accuracy of the government's accountings were a source of great dispute at the time of trial; such dispute persists throughout the briefing on the instant Motion. The government specifically called FBI agent Norm Embry as a witness. The government also sought testimony from Lee about any amounts Hard obtained as a result of the alleged scheme to defraud the CCG investors.

Agent Embry testified as to two bank records that revealed the transfer of funds from Cressot to Hard. The first was a November 2, 2004 transfer of $25,000. Because the transfer came from a Cressot account that was not the bank account to which the investors' $1 million was sent, see Hard Aff. ¶ 200 (citing Ex. 27 to Hard Aff.), Hard does not consider the transfers inconsistent with his later representation to the investors that "[t]he one thing I am pretty clear of is that nothing has happened with the $1 million that was sent to Cressot's account pursuant to the wire transfer from my account." Ex. 43 to Hard Aff.; see also Hard Aff. ¶ 200; id. ¶ 244(c). The second was a November 30, 2004 transfer of $60,000, which was also sent from Cressot's Swiss Bank Corp. account. See Ex. 27 to Hard Aff.; see also Ex. 49 to Hard Aff. (stating to companion that "[h]aving the $60,000 sent to my account did a lot to restore my confidence and faith in what Brad is doing. At the very least, it does provide evidence that the funds are at least in a high paying money market account that we can draw upon to provide operational expenses.").

Lee testified that Hard obtained approximately $200,000 from the $1 million stolen from CCG. See Ex. 87 to Hard Aff. at 59. On the basis of Lee's testimony, the government asked Embry to calculate Hard's share of CCG investors' $1 million investment. Embry added $200,000 with the $85,000, as well as an additional $50,000 that Embry believed Hard expected to receive, and concluded that the alleged co-conspirators expected that Hard would receive approximately one-third of the $1 million.

C. Prosecutor's Closing Arguments

While Hard challenges prosecutorial conduct in eliciting Lee's and Embry's testimony about the disbursement of the CCG investors' funds, Hard argues that the government prosecutors engaged in additional misconduct during closing arguments.

1. Argument With Respect to Freezing of Lee's Funds

First, Hard challenges the manner in which the prosecutor attacked Hard's claimed belief -- and representations to investors -- that Hard was a high-ranking member of the United States armed force, whose funds had been frozen by the federal government. The prosecution argued as follows:

[Lee's] hundreds of millions of dollars in assets were frozen by the US government in order to force [Lee] to put together a paramilitary force of mercenaries, apparently to fight in a ...


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