the morning your honour's doesn't burst in on behalf of mr viscounty with the court's permission i'd like to turn directly to the return of capital issue to begin with the first principles as always defendants have a fundamental constitutional right to present their theory of the defense it's not a platitude it's the cornerstone of the adversarial process it's not much of a process if the government gets to choose the charges and then veto the defense and that's why this court and the supreme court have consistently said the standard is generous even if the evidence is weak even if it's insufficient even if it's inconsistent or doubtful credibility the defendant gets to present his defense or her defense unless they have absolutely nothing only in those cases when there's absolutely nothing to support the defense should it be precluded distributions we have diversions we have diversions from a company when there's just no question you are not authorized by the board of directors we have divergence so where is the supreme court say that's a ball where is all about well they never quote while they never even pass through the corporation's hands even diverted funds may be seen as capital distributions for the purposes of three a one and three sixteen so our decision  and break them down so what the court actually says in its bill where decision is at the very least a taxpayer must tender some evidence of a nexus between the corporate distribution and stock ownership or show that there were no other alternate explanations and what is that saying it's think there has to be some relationship between the equity ownership and the sourcing stock this is a closely held corporation so it's not like shares of i b m i know that the court's well aware of that so there's a relationship between the equity ownership and the distribution and here that is met and it's met in three different ways first the entire oh and let me just point out one thing before i answer you directly judge you could if you just bear with me for one second what the court's this court said in ball where is in evaluating whether defendant was entitled to present a return of capital theory we examined not only the formal offer of proof but the record as a whole so what's the record as a whole as to this first so the very first thing is the entire theory of the prosecution is that because he is the majority shareholder because he controls axiom he's able to make these diversions and according to supreme court the government says now it's because he was in a managerial position and was able to to take divert funds so even will we disagree with that because he could control the corporation that he could do it with it what he wanted clued in these diversions but let's just put that one to the side if the court doesn't agree with the first one i'll go to the second and then the third second was his direct proffer through his attorney in response to the government's motion to exclude his defense quote m took distributions from axium and was authorized to do so pursuant to his right to receive a return of his capital investment in the amount of approximate thirteen million dollars that's an e r to seventy that's saying i took these diversions as my right to get a return of capital the jury could disregard that but that's the point the jury gets to separate the truth from the malarky not the court not to the government lead disregard  law as a legal matter his defense was precluded and so anything that happened thereafter is you know he's you know perhaps coming up with defenses that he shouldn't be or saying things but the more important one is the factual one that his testimony is not clear as to what loans he's talking about in his testimony was and probably a lot to do with his trial attorneys questioning his testimony was not entirely clear which loans because we know there were authorized lo and he goes back and forth that are they alone what are they he's pretty rambling i think we can all agree in terms of his his discussion but if the district court doesn't preclude his defense now that happens i mean it's a little bit unfair i think to say he said this in this after the defense was precluded so i would ask my suggestion is yes to your question is that what you got should be disregarded counsel there or is there any  in case you've got one hundred percent ownership of the the one company that owns those the other company in each case it's one hundred percent ownership of both and he does not here he does not own one hundred percent right of a corporation that owns one hundred percent of axiom that it's a good point but we had it brings up two things to mind so i shouldn't if you'll let me take back my last answer yeah i think there is yes your honor i think there is at least some principle and i'm no corporate lawyer but i do know that a number of provisions provide for first in first out money and here oh even better the only person here who put capital in is midst of a stunt and there would be no return of capital to mr garber mr garb didn't fund any of the accident so there's no capital to be returned and in fact i just took a shot at trial counsel before but i now give him some credit because that's what trial counsel is saying to the judge say he says in his response to and this is paraphrasing but to be clear only mr viscounty nobody else can say can take advantage of return of capital offense because only mr viscounty has capitalized axiom and that's undisputed there's nobody who claims that ronald garber or anybody else put any money into axiom now the government says axium the money he put in was paid back but that to me that's the first of all that goes to the third problem but second of all this is a classic jury issue i don't even think it's the ration by the c p a saying the value of the property pursuant to the escrow documents was six point two five or something along the lines but did they eat the food and did the defense proffer any evidence of value of the property yes sorry yes your honor his deck sworn declaration which was just we know about from our last case his sworn declaration estimated the property so he said i estimate the value of the property defense means to find a reasonable doubt so you think that his statement has declaration that he estimated the value of the property at eight million would be in that i think that under any standard that creates a material factual dispute that wouldn't let's just say it's worth six million dollars plus the four million he puts in that's ten million he says i only got four million back ten minus four is six million dollars the government says he took away less than six million dollars leaving under b group a huge surplus of return of capital so if you want to discredit his declaration it doesn't change on the analysis so in not in not will and i hope that answers the court's question on the head i only remember four million dollars and there was a lot of evidence saying it was more he didn't say i didn't receive any more he just said well as emirate was i'm not sure how helpful ad is i don't think that's a fair  remember getting more than four million dollars but if we're going to parse that certainly you would remember getting eight or twelve million dollars i mean this is not it's not like i don't remember whether the guy gave me fifty cents or a dollar fifty we're talking about you know twelve million dollars so to say the word remember hinges on it i don't think that's particularly fair in this context but that was not the only evidence on the other side that the government submitted evidence from other people it wasn't mr viscounty they didn't show his bank records that he got twelve million dollars this is why we have juries that's why i started with this first principle the point why are we not trusting the jury to get this right i'm not saying i don't have to this is not sufficiency claim is my evidence weak is it you know insufficient is it of doubtful credibility even if you if the court looks at me and says mr burstein just a whole three he still gets to make his defense this is not the government's decision as a defense lawyer it's not the government's decision it's his decision he's the one being charged with a federal crime he's the one standing trial if they go if the defense is nonsense you know what the jury will do the convict that's why we have a jury system that's why w federal government doesn't get the veto power here he made the minimal showing and because he made the minimal showing he should be allowed to present his defense and i think we've the most the court has questions i think we've exhausted the return of capital issue i'm happy to answer any questions we have a lot of good out there's a lot of ground to cover in terms of the trial i think the only one may be worth discussing right now is the ronald garber the cutting off of mr morning things the court angela davis from the united states in this case the facts presented before the district court after that after the offense was given more than one bite at the sample the facts actually categor refuted the return of capital defense and that is because even if we went to the fiction which i think is judged by these comments suggest and i would agree we should not indulge that fiction there is no authority that viscounty should have been treated as the equal of unity america fund which was a separate entity with separate tax returns but even if we take that leap and indulge the fiction that mr viscounty is equal community america fund the evidence categorically refuted the availability of the return of capital defense and it came in principally through the defendant's own judicial admissions in his los angeles superior court case in his divorce print in the declaration of christopher toto which the defendant put into his los angeles superior court divorce case in order to demonstrate the context as he's trying to tell the divorce court divorce i do not have unfettered access to axiom and one of the reasons i'm not a stockholder in axiom and moreover the corporation that i control unity america find got all of its stock repurchase by obscene redeemed all of its stock shares and that's laid out in that declaration the corporate charter we're talking about california state law delaware law federal law you can do your honor i'm not sure what mr toto had in mind in that declaration but i think the heart of the declaration relevance to this critical question is the payment back of axioms sherry's in the amount of twelve and a quarter million dollars and critically the defendant's response to that judge who was exactly right was i don't remember it was not i deny that it happened or i have evidence that it happened another way his response was and that is in excerpt of record excuse me two twenty six i do not recall any payment on april twenty first two thousand and five and in the concluding paragraph of the defendant's declaration he says i'm disputing mr toto's version of the facts i only recall a single payment of four million that's the government of course in response submitted authentic ated bank records a stamp wishing very clearly that in fact those payments were made in the exact amounts four million four and a quarter million four million was that the value of property was in excess of three point four million that is what the defendant said on of emmer twelve two thousand and sixteen the forensic of town whose declaration was put into evidence in this context when the court was weighing the issues said that based upon appraisals at the time the value of the property was valued at six and a quarter million which the forensic accounting of pines weighs and inflated value subsequently in this case the defendant floated the idea that the value of the property was eight and a quarter million and he never provided any evidence in the end you never even floated the idea that it could be higher than in a quarter million which the forensic accountant a pint was grossly inflated he even upon that six million was councils as the declaration of mr discard to it and he estimated it as over eight million dollars was sufficient to create a factual issue for the jury why isn't thacker act he never showed even if we assume that it was eight and a quarter million the bases would be wiped out by those twelve and a quarter million dollars in payments and also the record before the court especially with mr viscounty himself saying just a couple of months earlier that of the property was three and a quarter million and with the forensic accountant whose decoration on that particular point was never a challenge saying that the value of the property was assumed to be six million based upon transactional documents at the time but he suspected the value was inflated which would give a basis of ten and a quarter million even than even with the most charitable valuations of this property and taking the defendant's own numbers of eight million arraign a quarter million the basis was thirteen something like thirteen point one million which would be greater than the than the than what was returned from axiom that was also dealt with in the motions in limine and the way that he got to the over thirteen million was he attached to a declaration some facts that were to a person named len white however if you look at those tracks and we actually i apologize don't have the excerpt of record citation at my fingertips however the government directly responded to that that that the defendant was counting to get to the number of about thirteen million were checks from unity america fine to lyn white and they had interest on the tax and they had other details on th not capital investment in the government very clearly addressed why that was not a capital contribution and it wasn't from the defendant first of all and also it was inconsistent with the defendant's own prior statement and this is what account for how much it would account for i think the defendant at that juncture was king at the idea that the basis was about thirteen million in change but again even that twelve and a quarter million i think that's pretty conclusively established and five million was diverted in addition this would be no defense to the conspiracy by which barber also was doing was getting half of the five million in diverted funds but we needn't get there because even if we assume this grossly inflated basis of over thirteen million the defendant's diversions exceeded that and in addition just to go to by by being his initial question at the outset i don't think we need to get to this point because it's so clear that the basis was eliminated however the showing of a nexus is even weaker than the showing found insufficient in this court's decision in the two thousand corporation did not have earnings and profits and similar to the case here the defendant may have a lot of inconsistent statements including floating the idea that it was a loan and floating other alternative theories as to why the money wasn't reported so well we don't use when available explain a little bit of it anyway so i guess my specific question is if if mr viscounty is not a shareholder of axiom as a matter of walk is he barred from bringing a return of capital but absolutely i think  company it that's at stake there there there might be some sort of pass through i see the analogy your honor however tell us uncritically is a dividend case and is saying that the defendant can't hide behind the corporation and also there's language in bowl where that we've quoted in our brief about how when an individual sense of his affair is to take advantage of certain corporate structures that's fine if he wants to do it legally but that he cannot then turn around and claim advantages that might exist he set up his affairs differently and it's correct that the supreme court did not precisely define what is meant he didn't answer my question and i pod i have other circuit courts defined with that phrase means in respect to stock right corporate distribution with respect to the corporation stock i don't remember your vague statutory term and  government has to prove it so the government has to know what it means if it's an element well actually that it's it's an affirmative defense it's a friend of defense events has to prove it government would have to put in evidence  insufficient and here the defendant is not even a stockholder and unity america fund is a separate entity with the separate tax returns and moreover i i think that what really negated the availability of this offense is that even if we make that assumption that ok the defendant is the equivalent of the uni american fine and we're going to make that assumption and give him the benefit of the prong  the overwhelming evidence even with multiple bites at the apple that this district court gave to the defense with opportunities to rebury things the overwhelming evidence was that the bases had been wiped out defendant perjured himself with that but i think there's language certainly involve where that's the record as a whole is looked at and involve where there were multiple theories including that it was a loan that were floated  so i'm certainly not prepared to agree with it but i guess i think that i think we need to address that and i also would say that the bill a hoe opinion and the idea that he was deprived of a defense is is just not present here vallejo was a situation where there were ten years of documented records of a learning disability and speech and speech difficulties in the defendant was precluded from putting that on is an actual defense which would be very very relevant to his defense this is so this is an unusual case because i've been in the boat where two thousand and nine decision says we have to do a thorough examination of the record to see whether the offer of proof was sufficient in this case we happen to have had before this bankruptcy proceedings and in divorce proceeding in which a lot of evidence came out in the ordinary case you might not have those prior proceedings  prior declarations so what do you think that language record with the district court be reviewing in the ordinary case to determine whether or not there was a showing sufficient to print on the theory of the defense  the ordinary case without prior to this without the prior bankruptcy proceeding it would be just the declaration from the defendant and perhaps a declaration from an expert because there would be none of the  litigation but i would ask the court to remember that in ball where at nine seventy seven foot no four it says nothing for clues a defendant in a tax evasion case and asserting a defense that is inconsistent with information falsely reported on his challenge tax returns and the fact that we're having this debate about whether it's a return of capital or not just proves the point i don't want this go it's not i'm not asking for a ruling this is not a summary judgment motion is saying a defendant gets to make his defense and before i sit down i just want to address because judge bybee has asked several times about the usa af situation so i'd like to make two and that is that total bankruptcy filings right so what is the bankruptcy trustee set quote us is the alter ego of defendant this gaunt and there exists at all times mentioned and has existed a unity of interest and ownership possibly eighty three point two five percent of axiom is john discounting where the beneficial owner mean that's the government's words he is that we are to he is the beneficial owner does have a technical meaning in corporate law money into u a e after which that's the second point i want to get to your honor is the government's argument about this is you know we use the term kind of too cute by half if this is the the deal that there's a there's a demarcation between you a off and mr vickery well then their whole case falls old these taxes not mr viscounty because the distribution slash diversions go to us they can't have it both ways we know this is a closely held corporation these corporate veils are are are nothing but a sheet their any separateness has ceased to exist it's mr scott is the beneficial owner and thank you for bearing with me i know i'm solidly over my time but let the defendant present his defense the jury will do the right thing but that's not the point the defendant