district court judge davis gave no explanation as to why mr beckman who is essentially a minnow got five years more than the shark trevor cook he didn't mention and at orly at sentencing he authored a lengthy statement of reasons and didn't discuss it it's mr beck means position that this failure to explain the disparity requires remained it seems to me your hono that if if it's not remanded we've got a hopeless conflict in this in this in the circuit between the teaching of abbie cole and other  cases what do i mean by that in an abby cole mrs call went to trial just like mr pacman she was tried with her husband who ended up getting one hundred eighty months and judge back and say wait a minute we can't can't do anything with this because you didn't explain your sentence as to why she she was a probation in mr backlund back ms case he went to trial just like  equal and you got thirty years with no explanation the point your honour's is this it can't be the law in this court that or there were some explanation i think you're make i'm complaining you correct me of if i'm wrong is the thirty five fifty three a six the disparity in the question whether it's on awarded disparity your client's behalf well number one a couple of points there your honour's number one the fact that judge davis might have given a downward variance i'll  about that is one thing totally separate from an explanation as to why there's a disparity that that issue your honor goes to the issue of the substantive reason by most of the sentence it doesn't go to the issue of whether it's procedurally erroneous and and that's second call case there after after the remain and judge davis made may detail findings many of which were cited by the by this court in the in the in the call issue of downward variance what the government is saying is wait a minute when all is said and done beckman got a ninety percent downward variance because his guideline range was four thousand nine hundred thirty two months which figures out to three this is an argument that they didn't make at the trial court well and as a matter of fact i was i was breezing through judge davis statement of reasons this morning and on page twenty one he says he denies the defendant's request for a downward variance so clearly judge davis was not thinking about a downward variance in terms of four it should that that argument should be ignored good thing that i always fall back on the bird that spring court case a reader or they said there was adequate explanation by the district court in the district court in that case certainly i'm not going to question this court but there was very little explanation given and have a cold case as to why she got a probationary sentence and i don't recall seeing rita as a basis to powerful entity the world's ever known the government of the united states and the only thing that makes this a level playing field are the rules and in this case here these rules were broken bent twisted and whether it was out of good faith or bad faith there ought to be in there are consequences to that and i am in large measure resting on the briefs that you have but  singular argument is that the cumulative effect of these rulings did denied my client fair trial and when you look at the case law that guides you as to what you're supposed to do with an argument for acumen to rulings carol case and three or four others we cited said you have to look at the case as a whole the context of it but you look at the context of it in the case of mr durham not the entire case because these are three separate individuals and they had three different sets of conduct and mr durand unlike the other two defendants virtually everything that he did justify his testimony was saying i looked at the entire record i looked at every all the evidence but then they wouldn't the court wouldn't let us put on a critical piece of our evidence of the government's evidence was which was the video that was taken  was a conversation between two people and to extricate just the statements that mr pettengill made that there would be no meaning to it so our position is that this video should have come in it was evidence that the objections to that effect judge davis stopped me afterwards that he's an expert he can comment on the evidence clearly he's not an expert he would have been an expert he would have had to do all kinds of things before the trial even started so then i switched to rule seven zero two and then the government jumps up and says no he's not an expert so we have sham or and we have this agree just conduct of putting in this evidence about marijuana smoking asked that that jury juror be excused and he was if we would have known with a proper four hundred four b presentation there that we could have we would have been war dierdre jury on how many of them have in their family someone who had some tragic thing happen to them we didn't get that opportunity because the government did not comply with rule for for being that was allowed so this is what went wrong and the context of where it went wrong strictly to mr dura duran did not do the things that pervert cook mr beckman did or mr kiley mr grant was a guy in his sixty's who had a fairly good sampler a life he was well respected and trusted that comes up with some of the people talked about him this whole did not participate in anything after that he solicited no investor funds that's borne out by the testimony of government witnesses he thought he had an interest in this organization he thought he still own part of the stock he made had some communication but he or as i understand other than the count seventeen issues he did understand that there what the situation was with respect everything else you're out of there there was no presentation or discussion  the particular conflict that we're discussing today there was a conflict hearing involving whether or not mr mahmood should be disqualified because he might have to testify as a witness because he had knowledge surrounding some of the events that were alleged in the indictment and the magi strate judge recommended that he not be disqualified because other witnesses could provide the same testimony if necessary a trial none of those witnesses were called by the government or by mr mock mood however that the conflict of interest arising from mr mock mood potential criminal liability for his receipt of the hundred thousand dollars in storm victim funds which was referred to repeatedly a trial by government witnesses by defense witness and by mr mahmood himself when he when he was cross examin mahmood is connected to the fraud and the damage to his credibility by having that evidence repeatedly referred to in front of the jury that was never discussed before trial and mr kiley is not an attorney is not a sophisticated individual involvement with the fraud during trial substitute counsel could have been retained or supplemental trial counsel could have been retained to bolster mr kylie's credibility of this court in the de want versus lockhart case which we cite in our brief dealt with a testified but he testified that the one had not been involved in the in the burglary the prosecutor impeached out with his prior inconsistent statement and pointed at the ones attorney and said mr starr you represented during your  thereby implicating the attorney connecting him to the false statement this court held that that was a sufficient adverse effect under cool or to justify reversing the wants conviction the damage to the  credibility transferred to the one and and read of the assistance ineffective and that's exactly what we have here mr mock moods taint could only be removed by getting substitute counsel at a minimum there should have been some stipulation that avoided any other to provide there be no reference to mr mahmood as the recipient of the stolen victim funds during trial but that was not obtained either and i think the locus here a case which we discussed in our briefs is instructive here in that cas very similar an attorney was accused of money laundering for being paid in the proceeds derived from the criminal activity of his client and before trial begun it indicated that one of its witnesses was going to testify that indeed the lawyer had received criminal and the court engaged in an extensive process of obtaining or requiring that conflict counsel be obtained to advise the defendant about whether or not she should go forward with this lawyer is that as his attorney a trial   extensive waiver hearing was held there was a stipulation that this attorney would not be referred to during trial as the recipient of the funds through it to remove the taint in that case the court and the parties were sensitive to the effect of this  and there is a large volume of testimony at the trial about when the fraud was revealed which was roughly the same time that mr mahmood was paid and the jury could have reasonably inferred from the testimony and evidence that mr knew when he took the money that it was stolen from the victim investors and its interest inference was aggravated the the damage to mr mahmoud's credibility from the jurors and raided by the victim investors themselves who are testifying quite movingly about how they've been devastated by the fraud and a jerk in the germ box could not help but look out and see mr mahmoud and think that's the man who stole a hundred thousand dollars from these nice people now it's impossible for mr mahmood to adequately represent comport with this amendment when he's tainted in such a fashion so getting something to counsel obtaining a stipulation those are things that should have been done and weren't done and they're linked to the conflict because without the conflict there would've been no need to make a decision about whether or not to obtain substitute counsel or whether or not to obtain a stipulation that would not even have been at issue so i have about two minutes left in the reserve the rest of my time for a bottle thank you good morning judge reilly and other members of the panel and may please the court my name is david mclaughlin i'm with the u s attorney's office in minneapolis i was one of two lawyers from our office who tried this case in front of chief judge davis in april may and june of two thousand and twelve and as you know from the briefs in the arguments there are several issues before the court today i would like to begin my argument by suggesting that the court should view all of the issues before through the prism of the absolutely overwhelming evidence that mr bachman to rand and kylie conspired with each other and with trevor cook and chris to fool and the fraud the currency investor victims in this case this was a beautifully coordinated deftly executed fraud that had many moving parts not least of which were the three defendants who went to trial they all right off the same script every single time any one of the three were talking to a victim the currency program always had fixed returns at a very attractive rate twelve percent they were always liquid according to the difference people could get their hands on their money at any time and indeed the monitor was you will have your money in gated personal account so i was listening to one of pat kiley shows on the way over here to the court today and he emphasizes that on the show your own personal account with your name on it is where your money is going to be and of course at all times they told people you can't lose it's fully had and they knew better since mr kiley seems to be most vociferous only asserting that the evidence against him was insufficient i'd like to just talk a little bit about  this is not simply a case about mr kiley making aggrandizing statements about himself which certainly he did the evidence very particularly showed he knew that this was in part  victims statements with their own names on them that he had no hand in creating he made every one of them up with math not with reference to some outside source of information he met them up rich's brief in which he lays out a very nice paragraph of the false information packed highly was passing on to his victims that is an admission in the government's view of this fraud it's not just puff there your money will be insured we have twelve billion under management i mean these were huge misrepresentations completely false and i could go on and on trial witness took the stand to testify that kiley told him that his money would be safer than if it was in a bank and within about two weeks t j is four hundred fifty thousand dollars which by the way was his entire life kiley knew there weren't segregated accounts he made up the statements he went to the same trough to return the money he knew t j lost money and he said things that the other defendants didn't say about this currency program you know one recurring themes of trial was kyle is not that smart guy and really he's the puppet of trevor cook well the evidence didn't support that defense for example if you take a look i think it's government exhibit three forty four i'm wrong about that i'm wrong it's one of kylie's written statements about the currency program where he says we are registered with any s d there's surance available you are let me go i want to address the backman sentencing disparity argument and i would like to respectfully correct a couple of things that i heard mr altman say first of all he and mr altman disparity but that the disregard didn't explain it well i am going to agree with judge bright who i've heard many times say i wish the district courts would write more down to give us more to go on i  don't see any problem with acknowledging that but here there are so many obvious differences between cook and pet and deal and back and that the disparity in the reasons for a jump the reason he lied in front of judge davis in june in the september of two thousand and nine in connection with that unrelated civil litigation he well earned a two point enhanced win for obstruction of justice he did not receive any points off dollars from the quibble family and he did that largely by gaining the trust of and then violating the trust of two elderly people charlotte raymond olsen both of whom judge davis saw testify and so there's the n h l fraud which was this blatant series of lies that backman told to the n h l to try to become an owner of the world he told them he got a net worth of twenty one million dollars he told them that he had never been sued or otherwise accused of any kind of dishonesty when that was completely untrue so there are plenty of difference between and crook where as in cole judge davis went from one thirty five at the bottom of the range go under ciro even after he had to nod abby holds motion for judgment of saying that she was an active an important part of the conspiracy so i i think the reasons for the disparity and the reasons the disparity was warranted here are sufficiently evident on the record that no if i may go on to the argument raised by mr rich regarding mark mood first of all the united states agrees with the contention  in order to secure a reversal of a conviction under the six the moment the defendant has a fairly heavy burden the defendant has to show active representation of conflicting interests by the by the trial counsel and an adverse effect only if you show active representation of conflicting interests and an adverse interest you get relief under  presume your honour's i'm this was in nineteen of fifty seven pounds that mr rich's searching over and over again on implicates mr m indeed we have many cases where we charge a nine hundred fifty seven offense where somebody brings dirty money down to a car dealership or somewhere else and certainly the car dealership is not impugned by that but the department of justice accused him of knowingly receiving dirty money it implicated him it informed the district court judge in that case and the lawyer himself that the department of justice had  investigation of him for the receipt of those funds nothing like that happened here we knew that mr mark mood was present at certain meetings at the van dusen mansion during july of two thousand and nine that gave us  concern that he might be a necessary witness we saw this is a necessary witness conflict and we acted on it that way we brought this to the attention of magistrate judge is key we had a hearing on it and judge he ruled that there were other witnesses there who could stand in for mr mark mood with the result that he was not a necessary witness and should not be recused on that basis i want to point out to you that there were two prosecutors there who had a significant interest in defense counsel not having a conflict and there was a magistrate judge who looked right at this through the prism rule five points and a very experienced just record judge  judge davis none of us saw this issue none of us did that's because it really was not there nobody accused mr mahmood of knowing that this was dirty money the government had no basis to prove he knew it was dirty money he never worried about his own culpability he acknowledged having received the funds but i don't see how that implicates i mean any offense and furthermore his defense of mr kiley was vigorous and i don't know how a different lawyer would have done it differently his defense of carley was kyle you didn't know this was dirty money cook sent him the money cook is the bad guy here kiley had no reason to know that this was dirty that was his defense i mean i think that would have been the defense of any lawyer i frankly i don't see any adverse effect here even if there is some kind of an actual conflict i do think it's important that nobody noticed us there is no evidence in the record that he was implicated that mr mahmood was implicated i would suggest to this panel so this issue has been raised here on direct appeal on the record it was raised on that this panel can dispose of this claim and now on the record as it exists but if the panel doesn't feel comfortable doing that certainly we could develop a record and that's what twenty to fifty five's are for again my first suggestion is in as much as mr kiley is chosen to raise it here on direct appeal dispose of it here but if not kick it back to a twenty to fifty five and we'll have a hearing one last suggestion about this particular argument it strikes me iran as it approves a bit too much are we really in a situation where in every case world lawyer gets paid out of funds that aren't clean that there's an actual conflict of interest this happens all the time i mean in all kinds of cases white collar cases especially where there's a routine lawyer it turns out that some or all of the pieces they get paid  lawyer came from the criminal activity judge rightly as you pointed out several times earlier there is a countervailing doctrine under the sixth amendment countervailing to the doctrine of having an conflicted counsel and that doctrine the doctrine of counsel of your choice are we really going to have a rule that comes out of this case with that anytime a lawyer receives any dirty money even if the lawyer doesn't know it that the phantom is not going to get the lawyer that defendant wants isn't up to us i mean if we know that the money which we know that a lawyer likely to be trial counsel has received money is a simple enough for us just a charge  fifty seven to exclude lawyer i mean that this doesn't make any sense so there was no conflict here and really i think that's the bottom line i'd like to address now we the government had to resort to unfair tactics rule breaking the introduction by surprise of polarizing unfairly prejudicial evidence and so forth first of all the evidence against mr duran was not equivocal not one bit we introduced for example his s t c deposition testimony in which he says trevor cook the purported mastermind here was to his core a liar mr duran testified in front of the s c c that he well knew that trevor cook lost money he testified before the  was there mr duran was in the mansion when the lawyers were in there mendelson and berman telling them this is an illegal scheme it violates the securities l united states it is likely a ponzi scheme put distance between yourself and mr clark stop doing this and mr duran kept going he ended up leaving the mansion shortly after that and this is a big point of contention in mr durant's brief to prove that he continued to be involved in the scheme even after he physically left the mansion your honour's we introduced the trial government exhibit one fifteen and i respectfully commend it to your attention in exhibit one fifteen are gathered numerous e mails in which mr drowned is telling various people hey i i left the big house the van dusen mansion that's the only thing that's changed i mean i'm still going to be writing the newsletters i'm still an owner of the oxford i'm still and later even three months that point in time mr cook is paying him to be silent and indeed silent he stayed and both of them are yours mr meyers is no deceased unfortunately but he worked for a long time building a trucking company he had a pretty substantial net worth of twelve to fifteen million dollars and he lost all of it lost his house and this was the direct result of mr duran knowing that this was a fraud but not telling him that it was a fraud in november of two thousand and eight at a meeting at the mansion with trevor cook mr durant's repeated assertions that he withdrew from his conspiracy a mere june of two thousand and eight are unsupported by the record where there's a difference between newsletters as they went out if you look at government exhibit one fifteen he was still reviewing the newsletters that went out to victims he was maneuvering to try to get trevor cook excluded from control of the money so that he could come in  control the money he was attempting with chris patten deal to open a new company to do same thing a company called swiss aftershocks and furthermore even though he didn't have a legal obligation to come forward and speak sometimes even if you don't have a legal obligation remaining silent isn't culpa tory if he has claimed before this court in his brief is and i think this  quote he wanted to explore cook's treachery i think that is exactly how mr total wrote that in the blood group where does mr duran expose mr crooks treachery that's exactly what he didn't do he knew about all this stuff and all he cared about was somehow trying to continue this to wrest control of it from mr karkoc and keep on going so every year argue that your argument that he did not make a clean break from this whatever it was a conspiracy absolutely that is not on equivocally withdrawal corrupt he left the mansion in and his physical departure made very little difference to what he continued to do  and his involvement and his desire to remain involved in his desire to keep reviewing newsletters and his desire to be an owner of the oxford is reflected in numerous emails in government exhibit one fifteen the savior the newsletters about trying to restrict trevor cook's access to money and there were various machinations going on in the background where he's clearly intending to stay involved and intending to exercise control over the communications with the investors and the control of the money and indeed your honor this serves talk about the reporting assume that's in your notes to get there let's talk about the quality how that came up out of the district court handled that a re you referring your honor to the recording between chris patten deal and mr drowned out at the right in their argument that they were they wanted to use it what it's pretty black letter law that to the  lawsuit wants to offer his own exculpatory statements that's not going to come in under the hearsay rule here judge chief judge davis so help but he did however hold the to the extent patent things that could be used to impeach him or other government witnesses that that would be allowed to be done i understand mr toters argument that there's contacts in conversations between two people but if mr patt gill made a statement during that taped encounter at the hotel sophie tell which could be used to impeach him i don't see how joint chief judge davis order could be any more clear that that was a lo issue we oftentimes take a take a shot at it go out and do a search a recording of a defendant sometimes they're wary and they say things that are a tory and that was the case here so we decided not to offer it may i speak a bit about the allegation that we surprised mr duran with polarising drug evidence is that something you would like me to address may this argument is utterly unsupported by the record we wrote a very detailed trial brief that we submitted a month before trial in which we put the court and all three defendants on notice that we intended to introduce evidence that there was  drug and alcohol activity going on at the castle and the purpose of the service was obviously not to just dirty people up these guys remember trevor cook rianne the castle  was the headquarters of the entity that supposedly was running the most advanced sophisticated investment program in the united states no risk twelve percent returns liquid segregated accounts really really this was the same headquarters where mr cook was drunk all day were mr duran was smoking marijuana with his  stephanie bolton and asked to mr duran and to this evidence was particularly relevant because he wrote in his literature that our people are our greatest source of pride he claimed  to his victims that everybody who worked at these energies were licensed highly respected financial professionals and they just weren't heap for example hired a young man charity jenkins from rick's cabaret he was a towel guy in the bathroom over there i guess and they sealed the deal over a joint at the mansion that kind of thing his activities with his bolton were entirely inconsistent with his claim that i thought this was a legitimate business i thought that this was what i was telling people was it was directly relevant to his intent to defraud and i might add i guess this isn't in the record but we did hand out every memorandum in the case except for that one patent go on which we missed by mistake including reflecting statements by ms bolton to us in which she talked about drug use of the match and any claim that this was some how long it mr duran by ambush unfairly in order to chief judge davis that he was a marijuana user and at that point in time he wasn't sure that he could be fair to the government and for that reason chief judge davis dismissed  said i actually don't think i can be fair to the government now let me add it's interesting in other words he did not ask to be excused because he was offended by what was taking place at the big house no he i'm not coming thank you your honest i'll ask you want to issue one question and that is was anybody ever dissuaded from going to authorities by the state and federal level there's two sets people that control this that to check it out and where they ever dampen their enthused don't worry we'll take care but that excuses well i think the evidence fairly suggest that mr duran was dissuaded from doing that because mr cook was paying him to be silent other than that i'm not aware in the evidence of any of the defendants obstructing anybody else from going to the portions of my brief and if unless a court has a further questions of me i'll stand on the mr back means brief in reply brief you're told or have mr duran you have a little over five minutes rogers i would like to comment briefly on what mr mclaughlin said about a few things one thing he said that after june eighth two thousand and eight i was on your reader and got fired mr mr mclaughlin said there's very little difference well agent charmer who pretty much knows the whole case said that it mr duran did not solicit any more business for the currency program after june eighth and he was fired mr mclachlan also said that if you if you looked at the f three to by the government or did they witness its volunteer the at some point in the trial the government counsel told the judge that they want to introduce evidence of marijuana smoking  and the issues in this case without the presence of the jury miss bolton got the stand and she was inquired of by the government derrida ran smoke dope outside of the mansion with her several times the government argued that this is somehow indicative of people not being able to run and regular business if they smoke marijuana how could they the judge will let it in then miscible in testified with the jury present and said all kinds of things about gay  so it was purposeful by the government yes absolutely mr mclaughlin also said as an example that mr meyers one of your ignorance clients lost fifteen million dollars the record is clear that the total amount of money lost by mr durans clients is seventeen clients was under six million dollars and when the argument was made that the jerk that doesn't know some family where there was drug use and some devastating thing happen so you're going to have people who are for marijuana the people in colorado carl sagan smoked marijuana every day and there are some people who have been devastate it's a very polarizing thing and it's something that should have been brought to the attention to our attention with rule for all for be before trial so we could handle that in word here and the only reason any of this is relevant is because durant's conduct was equivocal when he testified before the f c c and said he knew this he knew this he knew it then it's not it he didn't say he knew it back during the time that all this was happening and i think it's very important looking back at the record  when these things happen and what people knew when these things happened the e mails exhibit one fifteen year year and a saying yeah i read this jury during and believe that he still had an interest in this business because he was promised that he was going to get remember this business started off the gentlemanly that he was going to get part of this and he didn't broadcast this to the world he these e mails or went to people like eric newman he wasn't in the conspiracy he clients that he brought into the to the currency program over there and into this legitimate transparent program which proves that he certainly thought the money was still there if he was going to take them out so this is an equivocal record  the cumulative effects of all of these things the marijuana that not letting us put the video on to do for mr sharma or the form three o two that was not revealed these deprived him of a fair trial and we respect break for this operation well saying and doing well when he was fired he never went back and he when he started a whole new company that was designed to put people into a legitimate transparent param business that was that was his clean break he was paid seventy five thousand dollars in the drawn stroke and then fifteen thousand dollars a month by cook to not take his clients out which is something a legitimate business would do when you have a non computer agreement that your understood mr romanov argument that argument in other words did he have any obligation whatsoever to to alert anybody to what this scheme had done no he didn't do anything to alert anyone but the scheme was done because that would have caused everything just a couple points first mr mclaughlin asked that the court view the issues on appeal through quote the prism of overwhelming evidence there is one issue that cannot be viewed through that prism and that is the conflict issue because as the supreme court  set forth and in tyler prejudice is presumed when there's an attorney conflict and a adverse effect present that's a situation we have here so the overwhelming evidence is not relevant to a determination of whether or not or gets back to my point is that certainly arguably right waived any conflict except i guess they didn't address this count seventeen which i have in my notes i'll remember what culture of the team is but you know did he wave everything at other gaps seventeen whatever that is there actually was no waiver solicited with regard to the rule three point seven conflict either your honor the magistrate judge simply recommended that disqualification was not required because other witnesses because provide the relevant testimony there was no discussion on the record of the conflict hearing and believe with regard to the three point seven issue there were other former and current client conflict issues that were addressed but not the rule three point seven issue and certainly not the issue of the conflict of mr a rule where an attorney who is paid in his client's illicit funds would automatically be disqualified that's not the rule we're asking for here we're asking for is a rule that's consistent with the rule it's been articulated by other courts that have considered this issue including the second circuit the third circuit the fifth circuit the ninth circuit in the d c circuit that if an attorney is burdened by a conflict of interest because he fears potential criminal liability or other sanction because of his connection to his client's crimes a conflict exist and if there's an adverse effect as a result of that conflict then the conviction must be reversed and did you or did you or somebody on behalf of mr crowley raise or in the district court same argument your honor we did not represent mr  and then on this appeal ok did you did you at that time may not have been any vehicle to do it but at that time did you raise the conflict we did not your honor and to be honest this case is so large in the record this is so vast that i don't think we understood the scope and nature of the damage that have been done by this conflict until we've had a chance to review the trial dr rickard ok thank you very much well it's a very  complex case and we thank you for your arguments both presented in your breeze presented here today and we will take it under advisement to be back to you soon as we get to thank you very much