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United States v. Stein

April 17, 2007

UNITED STATES OF AMERICA,
v.
JEFFREY STEIN, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Lewis A. Kaplan, District Judge.

MEMORANDUM OPINION

This matter is before the Court on a motion by the government to take the depositions of four foreign witnesses pursuant to Federal Rule of Criminal Procedure 15.*fn1 I assume familiarity with the prior opinions in this case.

Background

Defendants are charged with, inter alia, designing and implementing fraudulent tax shelters. Two of the shelters at issue here are the Foreign Leveraged Investment Program ("FLIP") and the Offshore Portfolio Investment Strategy ("OPIS"), which allegedly were designed to generate multi-million dollar capital losses. For purposes of the present motion, their pertinent feature is the purported use of Cayman Islands entities to make the transactions look like legitimate investments. The Indictment alleges that, in these transactions, "[t]he client purportedly entered into an 'investment' transaction with the Cayman Islands entity by purchasing a purported warrant or entering into a purported swap. The Cayman Islands entity purportedly made a pre-arranged series of purported investments . . . ."*fn2 In fact, the government alleges, the transactions were shams, the sole purpose of which was to generate phony tax losses.

One way the government intends to prove this at trial is by showing that the Caymans entities, instead of being owned by persons independent of the other participants in the FLIP and OPIS transactions, in fact were puppets of the defendants. The government intends to call four witnesses -- Kirsti Sewell, Morten Aasen, Thomas Hansen, and Jan Møller -- who were nominal owners of these Caymans entities but who the government expects will testify that they had little or no involvement in or understanding of the transactions. Among other things, they were not required to invest any money and never were informed that their participation made them nominal owners of these Caymans entities. In addition, the government expects Hansen and Møller to testify that they were offered the opportunity to participate in the transactions as compensation for their employment at an accounting firm in Oslo.

All four are citizens and residents of Norway. Aasen has agreed to come to New York to testify at trial.*fn3 Hansen also has agreed to testify at trial, provided that his work schedule permits.*fn4 Sewell informed the government, through her attorney, that she will not come to the United States to testify.*fn5 Møller originally informed Norwegian investigators that he neither would speak voluntarily to United States authorities nor travel to New York for trial but later agreed to testify in Norway.*fn6 All four are said to be willing to testify in Oslo at the offices of ØKOKRIM, a Norwegian investigative agency.

The government seeks leave to depose all four witnesses in Norway. It submits declarations of Petter Nordeng, a senior public prosecutor at ØKOKRIM, stating that voluntary depositions at ØKOKRIM's offices would be conducted in English and under oath with the defendants and their attorneys present if they wished to attend, that questioning would be conducted by the attorneys for the government and the defendants, that contemporaneous objections pursuant to the Federal Rules of Evidence could be made by the attorneys, and that the depositions would be video- and audio-taped.*fn7 In the event that any witness decided not to testify voluntarily, the government submits that he or she could be summoned by the Norwegian courts to testify in a Norwegian court.*fn8 Should that occur, the government submits, American procedural rules would govern the in-court proceedings to the extent they are not inconsistent with Norwegian law. Mr. Nordeng expresses the opinion that no procedures relevant at the depositions would be inconsistent with Norwegian law.*fn9 In view of the disposition of this motion on other grounds, it is unnecessary to determine whether this would be so.

Discussion

A. The Standard Pursuant to Federal Rule of Criminal Procedure

15, a court may order prospective witnesses to be deposed to preserve their testimony for trial where there are "exceptional circumstances and in the interest of justice."*fn10 A court "should review these motions on a case-by-case basis, examining whether the particular characteristics of each case constitute 'exceptional circumstances.'"*fn11

In determining whether exceptional circumstances exist, courts look to whether "(1) the prospective witness is unavailable for trial, (2) the witness' testimony is material, and (3) the testimony is necessary to prevent a failure of justice."*fn12 The moving party bears the burden of showing that such exceptional circumstances are present.*fn13

B. The Circumstances of This Case

The highly unusual circumstances of this case have been well-documented elsewhere and need not be repeated here. For purposes of this motion, it suffices to note briefly the tremendous burden and expense of defending this case -- defendants, for example, at last count have more than 22 million pages of discovery to sift through*fn14 -- and that the cost of bearing this burden has fallen on the shoulders of the individual defendants as a direct result of the government's unconstitutional conduct.*fn15 The resources of several of the defendants have been stretched quite thin. At least one defendant now is unable to pay his attorney, who has sought leave to withdraw.*fn16

For a defendant and his or her counsel to attend depositions in Norway would add significantly to this burden. Of course, neither a defendant nor counsel need attend, but failure to do so would waive that defendant's rights under the Confrontation Clause. Although Rule 15 provides that the government may be ordered to pay the travel and subsistence expenses of the defendant and his attorney, as well ...


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