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992

IN THE UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

UNITED STATES OF AMERICA, )

) No. 12 CR 124

Government, )

)

Vs. ) Chicago, Illinois

)

WILLIAM BEAVERS, ) March 20, 2013, 2013

)

Defendant. ) 1:29 o'clock p.m.

VOLUME 5

TRANSCRIPT OF PROCEEDINGS

BEFORE THE HONORABLE JAMES B. ZAGEL

AND A JURY

For the Government:

THE HONORABLE GARY S. SHAPIRO,

UNITED STATES ATTORNEY

BY: Matthew Michael Getter

Carrie E. Hamilton

Debra Riggs Bonamici

Samuel B. Cole

Assistant United States Attorneys

219 South Dearborn Street

Suite 500

Chicago, Illinois 60604

For the Defendant:

KAPLAN & SOROSKY

BY: Sheldon M. Sorosky

158 West Erie

Chicago, Illinois 60610

(312) 640-1776

Court Reporter:

KATHLEEN M. FENNELL, CSR, RPR, RMR, FCRR

219 South Dearborn Street

Room 2144-A

Chicago, Illinois 60604

(312) 435-5569

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993

Appearances (continued:)

For the defendant:

OFFICES OF AARON B. GOLDSTEIN

BY: Aaron Benjamin Goldstein

6133 South Ellis

Chicago, Illinois 60637

(773) 752-6950

OFFICES OF LAUREN FAUST KAESEBERG

BY: Lauren Faust Kaeseberg

2140 N. Lincoln Park West

Suite 307

Chicago, Illinois 60614

(773) 517-0622

LAW OFFICE OF SAMUEL E. ADAM

BY: Samuel Forbes Adam

Samuel Adam, Jr.

6133 South Ellis Avenue

Suite 200

Chicago, Illinois 60637

(312) 726-2326

Henderson Adam, LLC

BY: Victor P. Henderson

The Insurance Center Building

330 South Wells, Suite 1401

Chicago, Illinois 60606

(312) 262-2900

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994

I N D E X

PAGE

BARRY GERSHINZON

Direct Examination (Resumed) By Mr. Henderson 1007

Cross Examination By Mr. Cole 1013

Redirect Examination By Mr. Henderson 1017

PHILIP ACHUSIM

Direct Examination By Mr. Henderson 1019

DAVID WEINER

Voir Dire Direct Examination By Mr. Cole 1035

Voir Dire Cross Examination By Mr. Henderson 1041

Voir Dire Redirect Examination By Mr. Cole 1050

Voir Dire Recross Examination By Mr. Henderson 1052

Further Voir Dire Redirect Examination By Mr.

Cole

1058

Further Voir Dire Recross Examination By Mr.

Henderson

1058

Direct Examination By Mr. Cole 1061

Cross Examination By Mr. Henderson 1068

INDEX TO EXHIBITS

GOVERNMENT EXHIBIT RECEIVED

Government Exhibit 7th Ward 2005 Checks 1116

Government Exhibit D-2 7 Ward-2 1116

DEFENDANT'S EXHIBIT RECEIVED

Defendant Beavers Exhibit No. 1 1116

Check 3374 1116

Check 522 1116

Check 523 1116

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(Proceedings heard in open court. Jury not present.)

THE COURT: Come to the lectern.

We can start with my list, or we can start with your

list. Anybody have a preference?

MR. HENDERSON: I'm sorry, say that again, Judge?

THE COURT: We can start with my list of what you can

do or we can start with your list.

MR. HENDERSON: As it relates to Mr. Gershinzon?

THE COURT: Yeah.

MR. HENDERSON: We're going to rest, your Honor, and

let the government cross him.

THE COURT: Well, before you do that, let me tell you

what you may be able to ask him.

MR. HENDERSON: Oh, okay.

THE COURT: You're really looking very serious with

that book.

(Laughter.)

MR. S. ADAM, JR.: Only for your Honor. Yes, sir.

THE COURT: Clutching it.

My view is is that what I believed from the very

beginning, and I confirmed this, is that an expert in this

context is not permitted -- this is 704(b) -- is not

permitted to state an opinion or inference as to whether the

defendant did or did not have a mental state or condition

constituting an element of the crime charged.

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In this case, the relevant state of mind is that he

has more than one state of mind. The relevant state of mind

is whether defendant intended to treat withdrawals from his

campaign coffers as income or as loans. The expert cannot

state an opinion on this issue.

What the expert can testify to is what indicators he

would look for in determining whether someone intended to

treat such a withdrawal as income or as a loan, and whether

and to what extent any of these indicators were present in the

documents that he examined in this case, which includes

transactional documents.

That is to say, you're not limited to having him say

there was a formal loan agreement. Say that this papers, this

set of transactions, and this is what leads me to believe that

this was -- would support the proposition -- that it would be

considered in determining whether someone intended to treat a

withdrawal as a loan and other factual observations made in

examining whatever documents there were, but cannot draw

inferences about the state of mind based on his observations.

For example, he could testify that the defendant's

W-2 from the City contained errors, which I think is not in

dispute, but he can't testify as to whether the defendant was

or was not aware of these errors.

And none of his testimony can be based on statements

that the defendant made to the expert about the defendant's

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own state of mind.

That's what I think he's permitted to do. If you

have anything else you want to talk about, you can do it now.

Or you can decide whether, now knowing what I will permit.

You can think about it. Take a few minutes.

MR. S. ADAM, JR.: Yes, your Honor.

(Pause.)

MR. S. ADAM, JR.: We understand your Honor's ruling,

and we will abide by that, your Honor.

THE COURT: That actually was not -- I assumed you

would abide by it.

(Laughter.)

THE COURT: My question is do you want to call him?

MR. S. ADAM, JR.: We do.

THE COURT: Okay. Now, you can speak.

MR. COLE: Can we get a clarification, your Honor, on

what you just said?

There's one issue I wasn't quite understanding, which

is testimony about the errors, I think you said, in the 1099

from the City. Are you talking about the 1099 from the

pension fund with respect to the $1,200?

THE COURT: No. I was talking about -- hold on a

second. Where am I? I was talking about the pension fund.

MR. COLE: So the 1099-Rs that come from the pension

fund --

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THE COURT: Yeah.

MR. COLE: -- that have to do with the 2007 and 2008?

THE COURT: Yeah.

MR. HENDERSON: As well as the W-2 that's related to

the 69,000 --

THE COURT: With respect to the 69,000, as opposed to

the 1,200 a month.

MR. HENDERSON: The 69 is supposed to be reflected in

the W-2.

THE COURT: Okay.

MR. HENDERSON: And the 1,200 is also supposed to be

reflected in the W-2. One W-2 comes from the City. The other

comes from the County.

MS. HAMILTON: I think the concern is that based on

the voir dire we just heard, the defendant's opinion that the

W-2 is in error is based on unreliable information, and it's

also based on apparently what the defendant told him about

whether it was voluntary or involuntary.

So I think the concern is I don't know how he gets to

say the W-2 is in error without explaining why.

THE COURT: If he's relying entirely on what he was

told, then it's not admissible.

MS. HAMILTON: My understanding, though, is he's

interpreting the code section in a way based on his

understanding of why Mr. Beavers did or didn't do something.

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THE COURT: If -- if that is the case, then we will

not permit it. I thought the situation was somewhat

different, and you want to talk to the --

MR. HENDERSON: Yes, Judge. We're going to make use

of the document that declares the $1,200-a-month income that

the City has already had admitted that was signed by the

commissioner.

THE COURT: Wait.

MS. HAMILTON: That's a different issue.

THE COURT: It's a different issue.

MR. HENDERSON: We're going to the 69 or the 1,200?

THE COURT: Let's start with the 68-something. We'll

call it 69,000, whatever.

MR. HENDERSON: $68,000 transaction, your Honor, we

can rely on the document that came from the pension fund which

was admitted by the government because Jane Tessaro testified

about it, and that that transaction should have been reflected

on the W-2.

MS. HAMILTON: And that's not relevant.

The expert's opinion interpreting what that letter

did or didn't say to the defendant is irrelevant. And there's

no foundation for him to testify to that unless and until

there's testimony from the defendant.

The expert's opinion interpreting that letter is not

relevant.

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1000

THE COURT: No, no, what we were talking about is

whether this expert had an opinion based not on what he was

told, but based on a transaction that the $68,000 should have

been in the W-2.

If he can make that conclusion, having nothing to do

with what he was told but simply the fact -- well, the

undisputed fact that the -- that the defendant made -- oh, I

see where you're getting.

MR. HENDERSON: Judge, there's an undisputed fact

that the government has entered into evidence that a payment

was made.

There's an undisputed fact that the payment was made

in connection with the letter that was presented by the lady

from the pension, Jane Tessaro.

There's an undisputed fact that the money was

actually received by the -- by the pension people. And so

based on those facts, the issue is simply whether or not that

transaction should have been reflected in the W-2, and the

answer to that is yes.

THE COURT: And the reason the answer -- his

reasoning that it's yes is?

MR. HENDERSON: Based on the documents that he

reviewed, the check, the letter from -- the letter from the

pension people prompted the check. The check was then

deposited. Jane Tessaro said that she received it, that the

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1001

check was not only deposited but cleared.

So you have the check going through a bank, that it

was cleared; and so, therefore, how should that transaction

have been documented by the City? They're the ones that

issued the W-2.

THE COURT: Okay. But if that's the case, then I

don't need his testimony.

MR. HENDERSON: You don't need --

THE COURT: I don't need Gershinzon's testimony.

MR. HENDERSON: Well, you need his testimony to

indicate that the W-2 should have reflected that transaction.

MS. HAMILTON: What's the relevance of that?

MR. HENDERSON: The relevance of it is that then you

have the accountant who indicates that they used or

Mr. Achusim will then say, as the government has already

established, that the W-2s are used by the tax preparer to

prepare the returns.

Now, as the Court has correctly pointed out, it

doesn't go to the defendant's state of mind, but it does go to

the reliance that the taxpayer is allowed to place on the W-2

which goes to the instruction that we'll have about good

faith.

THE COURT: No. It is a state of mind issue. It is

a state of mind issue. I'm wrong about that. But that there

are indicia that it was a loan, he can testify to.

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1002

MS. HAMILTON: He already did.

THE COURT: We'll do it again just in case, since I

kicked him off the stand fairly unceremoniously.

MS. HAMILTON: Your Honor, can I point out one

concern for the government --

THE COURT: Yeah.

MS. HAMILTON: -- based on what he's already

testified to and what happened on the voir dire?

THE COURT: Yes.

MS. HAMILTON: Just on the $68,000 check being a

loan --

THE COURT: Yeah.

MS. HAMILTON: -- he indicated a number of things he

based it on. One, what he saw and didn't see, and the second

thing was based on this being an unusual transaction, that it

was large and not written to the defendant, and I think he

said it wasn't on the tax return, and he saw no evidence that

he was going to keep the money permanently and not repay it.

There were then a series of objectionable questions

by defense counsel clearly trying to get to this point of what

was an unusual transaction. Those questions were precisely

what led us to the voir dire that just happened.

THE COURT: Yeah.

MS. HAMILTON: And so the government's concern is

that part of what he's basing just that testimony on is

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problematic.

THE COURT: It is problematic, but I -- if you're

telling me and telling them that they shouldn't go to unusual

transaction, that's correct for a variety of reasons, not the

least of which is you have to get into a long definition of

unusual.

Whatever point they want to make is it's a large

amount of money. There's no dispute with respect to that. So

they can just ask him what indicia there was that these --

that this -- these funds, and other funds for that matter,

were treated as loans. That's what he can testify to without

any reliance at all on anything that the defendant may or may

not have said to him.

MS. BONAMICI: Your Honor, I'm still struggling with

the relevance of the mistake on the W-2. The mistake on

the --

THE COURT: But we're not going to do that with this

witness.

MS. BONAMICI: Oh, we're not.

THE COURT: We're not doing that with this witness.

The issue with the come up with respect to that is what use

they can make of it, and we're not talking then about

evidence. We're talking about argument.

MS. BONAMICI: Okay.

MR. COLE: Your Honor, what about further testimony

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1004

from the witness about his opinion as to whether or not they

are loans? I think your Honor said that is not permitted; is

that correct?

THE COURT: He -- the -- the reason that is out is I

do not trust this witness's ability to separate that opinion

from what he was told.

If he's talking about what indicia, apart from what

he was told, that there was that this was a loan because of

some practice or because of some notation or because of

something else that happened, he's entitled to give that

opinion.

Now, you may very well call an expert and say that

that's full of hot air, but he's entitled to say it.

MR. HENDERSON: And, Judge, with respect to the

$1,200 a month that should have been on the W-2, we can go

into that as well?

THE COURT: No.

MR. HENDERSON: Okay.

MS. HAMILTON: Judge, regarding -- the witness has

obviously already testified that his opinion was that the

$68,000 check was a loan.

Is your Honor intending to strike the testimony that

the jury's already heard and start over from scratch?

THE COURT: I'm -- I have not made up my mind about

that. I may very well do so, but I have not made up my

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1005

mind about -- oh, you mean that it was a loan?

MS. HAMILTON: Yes.

THE COURT: Yeah, I will strike that testimony, but

I'll wait till -- or they can withdraw it. It's up to them.

MR. HENDERSON: Well, Judge, can we wait until he

testifies and then --

THE COURT: Yes, you can.

MR. HENDERSON: -- make a decision about what to do?

THE COURT: Yes, you can.

MR. HENDERSON: Okay.

MS. BONAMICI: We need a decision before you cross.

Judge, our concern is what to cover on cross. Can we

discuss that before we cross?

THE COURT: I am going to strike that opinion.

MS. BONAMICI: Okay.

MS. HAMILTON: So I guess, Judge, we're not clear in

terms of where that leaves us. Is the defense tendering him,

or do they have further questions?

THE COURT: They have further questions. Not many.

MR. HENDERSON: Right. We have some additional

questions, not many.

THE COURT: Okay. Additional other than what I

talked about?

MR. HENDERSON: I don't believe so, your Honor.

THE COURT: Good. So this will be very short.

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1006

MS. HAMILTON: Thank you.

THE COURT: The witness should be on the stand.

Okay. Get the jury.

COURT SECURITY OFFICER: All rise.

(Jury enters courtroom.)

THE COURT: Please be seated.

MR. HENDERSON: Judge, this is the exhibit that I'd

like to publish which should be on the screen.

MR. COLE: The government has an objection to this.

MR. HENDERSON: This is a government's exhibit, your

Honor.

MR. COLE: It's not relevant for this witness.

THE COURT: I'm sustaining the objection. To the

extent that what you want is what's encircled, we can deal

with that separately.

MR. HENDERSON: Okay. I'll get another exhibit then.

I'd like to go to another government exhibit then,

your Honor.

THE COURT: Okay. Let me look at it as soon as it's

up.

MR. HENDERSON: That's Government Exhibit No. --

THE COURT: I see it on the screen.

MR. HENDERSON: Oh, okay.

MR. COLE: I guess it depends on what he's going to

do with it, your Honor. It seems like it goes to the exact

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Gershinzon - direct by Henderson

1007

same issue as to what was circled on the last document.

MR. HENDERSON: It's a different exhibit, your Honor,

that there's much less information. It's just a canceled

check that they admitted into evidence.

THE COURT: The canceled check's fine.

MR. HENDERSON: We can publish it, your Honor?

THE COURT: Yes.

BARRY GERSHINZON, DEFENDANT'S WITNESS, PREVIOUSLY DULY SWORN,

DIRECT EXAMINATION (RESUMED)

BY MR. HENDERSON:

Q. Mr. Gershinzon, this is a Government Exhibit Pension

Check. Have you had an opportunity to review the check?

A. Yes.

Q. And you see that the check is dated November 14, 2006?

A. Yes.

Q. And that you also see on the bottom half of the document

that that particular check was deposited and cleared the bank?

A. Yes.

Q. And before the lunch break, you indicated that your

opinion was that Commissioner Beavers had borrowed that money.

MR. COLE: Objection, your Honor.

THE COURT: Objection sustained.

BY MR. HENDERSON:

Q. You indicated that you believed that that check reflected

a loan?

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1008

MR. COLE: Objection, your Honor.

THE COURT: Objection sustained.

MR. COLE: Move to strike, your Honor.

THE COURT: I'm striking. The jury's instructed to

disregard it.

BY MR. HENDERSON:

Q. Did you draw the conclusion that the commissioner -- you

drew the conclusion that the commissioner had taken loans from

the campaign?

MR. COLE: Objection, your Honor. Move to strike.

THE COURT: To the form of the question, I'm

sustaining the objection.

BY MR. HENDERSON:

Q. Did you draw any conclusions about the nature of the

transactions between the commissioner and the campaign?

MR. COLE: Objection.

THE COURT: You're talking about essentially all the

funds? Did you draw -- yes, you can answer this question yes

or no.

THE WITNESS: Could you repeat the question, please?

(The last question was read.)

BY THE WITNESS:

A. Yes.

BY MR. HENDERSON:

Q. And what conclusions did you draw?

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1009

MR. COLE: Objection.

THE COURT: You can answer this question in as few

words as possible.

BY THE WITNESS:

A. I'm not allowed to say.

THE COURT: Okay. The question's not answered.

BY MR. HENDERSON:

Q. Did you -- in reaching your conclusion, did you -- how did

you reach your conclusion?

A. I examined the documents that were provided to me by you

and your law firm that were from various sources, including

the government.

Q. Okay, and so let's go over it again. So you say you

reviewed documents from the government, correct?

A. Yes.

Q. Okay. What other documents did you review?

A. I reviewed documents from the government. I reviewed

documents from the campaign funds. I reviewed documents from

Commissioner Beavers.

And I reviewed the documents, and based upon the

information in the documents, my experience in accounting, I

made some conclusions.

Q. Okay.

(Counsel conferring.)

BY MR. HENDERSON:

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Gershinzon - direct by Henderson

1010

Q. And based on your review of documents from the government,

the campaign fund, Commissioner Beavers -- does that include

bank records?

A. Yes.

Q. Okay. And bank records from where?

A. It would be bank records from the bank that was used by

Citizens For Beavers and Friends For Beavers. I don't recall

the bank's actual name.

Q. Okay. And based on the review of the government's

documents and the bank statements and the campaign checks and

the things that you reviewed, you said you drew a conclusion,

right?

A. Yes.

Q. And that conclusion was based on your review of the

documents?

A. My review of all the documents, and on my experience, I

drew conclusions and inferred conclusions and deduced

conclusions based upon all the information that I had.

Q. And what conclusion was that?

MR. COLE: Objection, your Honor.

THE COURT: Objection is sustained. In light of the

previous answer, I'm sustaining the objection.

BY MR. HENDERSON:

Q. Earlier you spoke to us about what an advance is, correct?

A. Yes.

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Gershinzon - direct by Henderson

1011

Q. And you also told us in general terms what a loan is,

correct?

A. Yes.

Q. Okay. Why don't you tell us in general terms what you

look for to determine whether something is an advance?

A. An indicia of an advance would be a check of an even

amount -- 500, a thousand, $2,000 -- written to a person and

then the subsequent return by that same person of expense

receipts and cash equal to that amount of the original

advance.

Q. And why do those things -- even amount, written out to a

person, with receipts and/or money returned -- indicate an

advance to you?

A. It makes bookkeeping easier if you write a check for a

hundred dollars or a thousand dollars and a person comes back

and says here's $88 for copying, a bill from Kinko's, and $12

change. That adds up to the hundred dollars that I got.

It's much easier to do the accounting and the

bookkeeping for that versus saying, oh, take $73.13, and when

they come back with $69.48 receipt, I don't know what the

difference is, $8.16 of change, it's just easier if the

amounts are rounded on one side of the transaction.

Q. And based on the information that you reviewed in the

campaign, did it appear to you as if the commissioner took any

advances?

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Gershinzon - direct by Henderson

1012

MR. COLE: Objection, your Honor.

THE COURT: Objection is sustained.

BY MR. HENDERSON:

Q. Did you -- in the records, irrespective of who may have

taken them, did you see evidence of advances in the records?

MR. COLE: Same objection, your Honor.

THE COURT: Overruled.

BY THE WITNESS:

A. Yes.

BY MR. HENDERSON:

Q. Now let's go to loans. Tell us in very general terms what

a loan looks like.

A. Loans take on many forms, but a good indicia of a loan is

that it would not be in an even amount. A loan would be for a

specific thing, for a car or for a home or for another

purpose, and so it would be rounded -- it wouldn't be rounded,

it would be to a certain penny, this is how much you'd have to

get.

And, in general, that loan would not go to the person

receiving the benefit of the loan, that check would be written

to the third party, like the car dealership or the mortgage

company or whoever you're -- you're getting the thing from

that you got the loan for. They skip you. They go straight

to that.

Q. Now, based on your review of the campaign records, the

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Gershinzon - cross by Cole

1013

checks, the documents, the stubs, things of that nature, did

you conclude that there were any loans made from the campaign

account?

MR. COLE: Objection.

THE COURT: Objection is sustained.

BY MR. HENDERSON:

Q. Did you conclude that there were any loans at all based on

the documents you saw?

MR. COLE: Objection.

THE COURT: He may answer.

BY THE WITNESS:

A. Yes.

MR. HENDERSON: No further questions.

CROSS EXAMINATION

BY MR. COLE:

Q. Good afternoon, Mr. Gershinzon.

So you testified about your review of the various

campaign records, correct?

A. Yes.

Q. About your review of the D-2s, you looked at those?

A. Yes.

Q. The stubs of the checks from the campaign accounts,

correct?

A. Yes.

Q. The canceled checks, correct?

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Gershinzon - cross by Cole

1014

A. Yes.

Q. Now, in reviewing the campaign and bank records, did any

of the 100 campaign checks have anything written on the memo

line saying that the check was a loan to the defendant?

A. No.

Q. Now, did any of the check stubs for those 100 checks say

that the check was a loan to the defendant?

A. No.

Q. Did any of the campaign disclosure statements -- you know

what a campaign disclosure statement is?

A. Yes.

Q. -- list any of the 100 checks as loans to the defendant?

A. No.

Q. Did any of the campaign disclosure statements for any of

the three campaign committees between 2006 and 2008 use the

word "loan" at all?

A. Not to my recollection.

Q. Now, did you find any loan agreements between Mr. Beavers

and any of the campaign committees?

A. No.

Q. Did you find any promissory notes between Mr. Beavers and

any of the campaign committees?

A. No.

Q. Did you find any document indicating that Mr. Beavers paid

interest on any campaign money that he took?

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Gershinzon - cross by Cole

1015

A. No.

Q. Did you find any document reflecting a commitment from

Mr. Beavers to pay back the campaign money within a certain

period of time made at the time the defendant took the money?

A. No.

Q. Did you find any document at all that reflected a

commitment by the defendant to pay back money from any of the

100 campaign checks made at the time the defendant took the

money?

A. Could you ask that again, please?

Q. Absolutely.

Did you find any document at all that reflected a

commitment by the defendant to pay back money from any of the

100 campaign checks made at the time the defendant took the

money?

A. No.

Q. Now, you testified that you had some opinions about

whether things were loans or advances, correct?

A. Yes.

Q. And that was based on your review of certain campaign

records, right?

A. Yes.

Q. Like D-2s?

A. Yes.

Q. Like -- like the check stubs, right?

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Gershinzon - cross by Cole

1016

A. Yes.

Q. The canceled checks; is that right?

A. Yes.

Q. And you relied on those documents; isn't that correct?

A. Yes.

Q. And the information in those documents was something that

was important to you; is that right?

A. Yes.

Q. And the accuracy of the D-2s was one of the things that

you relied on; isn't that right?

A. No.

Q. It wasn't?

A. (Nodding.)

Q. You assumed they were not accurate?

A. Yes.

Q. What about the check stubs, did you rely on the accuracy

of the check stubs?

A. No.

Q. You assumed the check stubs were not accurate?

A. Correct.

Q. In fact, you have no way of knowing if any of the campaign

documents are accurate or not; isn't that right?

A. Pardon?

Q. You have no way of knowing if any of the campaign

documents are accurate or not; isn't that correct?

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Gershinzon - redirect by Henderson

1017

A. That's correct.

Q. Because you weren't there.

A. I wasn't there.

MR. COLE: May I have a moment, your Honor?

(Counsel conferring.)

MR. COLE: That's all, your Honor.

MR. HENDERSON: Your Honor, just a couple questions

on redirect.

REDIRECT EXAMINATION

BY MR. HENDERSON:

Q. Mr. Gershinzon, Attorney Cole asked you a series of

questions about what you did or did not find in the campaign

records, so I want to ask you those same questions, but we're

going to take it just one step further.

Did you see any checks in the campaign records that

said income to Commissioner Beavers?

A. No.

Q. Did you see any marks on the check stubs that said income

to Mr. Beavers?

A. No.

Q. Did you see any campaign disclosure forms that said income

to Mr. Beavers?

A. No.

Q. Did you see anything in the records related to 2006 that

said income to Mr. Beavers?

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Gershinzon - redirect by Henderson

1018

A. No.

Q. Did you see anything in the records for 2007 that said

income to Mr. Beavers?

A. No.

Q. What about 2008? Did you see anything in the records for

2008 that said income to Mr. Beavers?

A. No, sir.

Q. Did you see any documents that you reviewed that said the

campaign can't loan money to anybody? Did you see anything

like that?

A. No, sir.

Q. Did you see anything in the documents that said that you

can't make advances from the campaign for legitimate campaign

purposes? Did you see anything that said that?

A. No, sir.

Q. Did you see any W-2s in the campaign records to

Mr. Beavers?

A. No.

MR. COLE: Objection.

THE COURT: Sustained.

BY MR. HENDERSON:

Q. Did you see any document that said interest had to be paid

on loans by anybody?

MR. COLE: Objection.

THE COURT: Sustained.

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Gershinzon - redirect by Henderson

1019

BY MR. HENDERSON:

Q. Did you see any documents that said loans were prohibited?

MR. COLE: Objection.

THE COURT: Sustained.

MR. HENDERSON: No further questions.

Oh --

MR. COLE: No further questions.

THE COURT: Are you done?

MR. HENDERSON: One final question, your Honor.

THE COURT: Okay.

BY MR. HENDERSON:

Q. But you did tell us earlier based on your review of the

government's records that there was money going from the

commissioner back to the campaign, correct?

A. Yes.

MR. HENDERSON: No further questions.

THE COURT: You can step down.

(Witness excused.)

MR. HENDERSON: Next witness is coming.

THE COURT: Do you understand that you are still

under oath?

THE WITNESS: Yes, sir.

THE COURT: You may be seated.

PHILIP ACHUSIM, DEFENDANT'S WITNESS, PREVIOUSLY DULY SWORN,

DIRECT EXAMINATION

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Achusim - direct by Henderson

1020

BY MR. HENDERSON:

Q. Sir, for those who may not have been in the courtroom the

other day, would you be kind enough again to state your name

for the court reporter, the Judge and the jury.

A. My name is Philip Achusim, P-H-I-L-I-P, A-C-H-U-S-I-M.

Q. Mr. Achusim, you told us the other day that you prepared

the tax returns for Mr. Beavers for 2006, correct?

A. Yes, I did.

Q. And 2007?

A. Yes.

Q. And 2008?

A. Yes.

Q. Now, I want to ask you a general question, and then I'll

ask you a specific question.

In general, when your clients give you materials to

prepare a tax return, are there -- you get W-2s, right?

MR. COLE: Objection, your Honor.

THE COURT: Objection sustained.

BY MR. HENDERSON:

Q. Let's go to Mr. Beavers' return.

You received documents from Mr. Beavers in 2006 to

help you prepare his return, correct?

A. Yes, I did.

Q. And tell us in general what you can recall receiving from

the commissioner for 2006?

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Achusim - direct by Henderson

1021

A. I received W-2, K-1, W-2G, 1099-R, and 1099, I believe,

and, gee, I'm trying to see what else.

MR. S. ADAM, JR.: Excuse me, your Honor, could we

just have the witness move the microphone closer? We can't

hear.

THE COURT: Yes.

THE WITNESS: Sorry.

BY MR. HENDERSON:

Q. So you said you received from the commissioner W-2s, K-1s,

W-2Gs, 1099-Rs, 1099s?

A. Right, believe so.

Q. Do you recall receiving anything else from him for 2006?

A. Gee, if I look at the return, I can tell. Whatever I

received was used to prepare the tax return.

MR. HENDERSON: Your Honor, permission to publish the

2006 return?

MR. COLE: No objection.

THE COURT: Granted.

BY MR. HENDERSON:

Q. Mr. Achusim, that's the return that you prepared?

A. Right.

Q. Okay. And let's look at the second --

A. Yeah.

Q. -- page if you would, please.

A. Look -- this is the correct page.

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Achusim - direct by Henderson

1022

Q. Do you need to see the second page to see what else you

received to prepare the return?

A. No, this is the page.

Q. That's enough?

A. W-2, 1099, 1099 -- 1099-R, 1099 from -- and W-2Gs for this

particular one I'm looking at.

Q. Now, so you used the documents that the commissioner gave

you to prepare that return?

A. Yes, I did.

Q. Do you remember approximately how many attachments there

were, you know, meaning the W-2s, the K-1s, the W-2Gs, the

1099s, do you remember how many there were?

A. The W-2Gs there's quite a good number, so I can't remember

by count, but I know all this listed here I got, but I don't

know -- as far as 10 W -- as far as W-2G is concerned, I don't

know the number offhand. I have to count.

Q. Was it kind of like a stack sort of like this?

A. Right, right.

Q. So you got a stack of stuff like this and some other stuff

as well?

A. Right, yes.

Q. Now, do you remember whether or not each and every one of

the documents that the commissioner gave you were opened or

unopened?

A. Gee, I can't -- I can't say for sure they are opened or

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Achusim - direct by Henderson

1023

not opened. But generally some -- I receive documents from

clients, some are in the original third-party envelopes and

some are opened.

MR. COLE: Your Honor, government objects to this.

THE WITNESS: Oh, I'm sorry.

THE COURT: The objection is sustained.

BY MR. HENDERSON:

Q. So you don't remember whether or not the ones that you got

from Mr. Beavers were open or unopened?

A. No, I don't.

Q. Okay. So whether they were opened or unopened, at some

point, you opened them all to use them for the return,

correct?

MR. COLE: Objection.

BY THE WITNESS:

A. Yes.

THE COURT: Objection is sustained.

BY MR. HENDERSON:

Q. Did you use the documents that the commissioner gave you?

A. Of course. Yes, I did, yeah.

Q. And why did you use the documents?

A. Because I have to rely on the documents to prepare the

return.

Q. Now, what does it mean that you have to rely on the

documents to prepare the return?

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Achusim - direct by Henderson

1024

MR. COLE: Objection.

THE COURT: Objection to the form of the question is

sustained.

BY MR. HENDERSON:

Q. Did you use the documents to prepare the return?

A. Yes, I did.

Q. Well, what does it mean to use the documents to prepare a

return?

MR. COLE: Objection.

THE COURT: Form of the question, sustained.

BY MR. HENDERSON:

Q. Did you prepare the return?

A. Yes, I did.

Q. How did you prepare the return?

A. I used the documents I was given, entered them in my

system and then produced the tax return.

Q. So when you say you used the documents to enter numbers

into the system, why don't you break that down for us and

explain what you mean by that.

MR. COLE: Objection.

THE COURT: I actually thought he testified to this

once already. I thought he said -- I think I'm hearing the

same testimony.

MR. HENDERSON: Then we'll move through it a little

bit more briefly.

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Achusim - direct by Henderson

1025

BY MR. HENDERSON:

Q. How do you use the documents to prepare the return?

MR. COLE: Objection.

MR. HENDERSON: Judge, this is two days ago. We're

just trying to get back up to speed.

THE COURT: I think he said what he did is he took

documents and entered numbers.

BY MR. HENDERSON:

Q. So you take the numbers off the documents that you're

given and enter those into the computer?

A. Right.

Q. And then that's what's used to generate the 1040?

A. Right.

Q. And is it your expectation that the documents that you're

given are accurate?

MR. COLE: Objection.

THE COURT: You're talking about he's treating them

on the assumption that they're accurate?

MR. HENDERSON: Yes, Judge.

THE COURT: Ask him if he assumes they're accurate.

BY MR. HENDERSON:

Q. Do you assume that the documents that you get are accurate

when you use them to prepare the return?

A. Yes, I do.

Q. And as far as you know, were they accurate?

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1026

MR. COLE: Objection.

THE COURT: Sustained.

MR. HENDERSON: No further questions, your Honor.

MR. COLE: May I have one moment, your Honor?

(Counsel conferring.)

MR. COLE: Your Honor, I have no questions.

THE COURT: You can step down.

(Witness excused.)

MR. GOLDSTEIN: Your Honor, may we have a sidebar?

THE COURT: Absolutely.

(Proceedings heard at sidebar:)

THE COURT: Off the record.

(Discussion held off the record.)

THE COURT: Okay.

MR. SOROSKY: Well, there are some exhibits, your

Honor. I think we can work that out.

THE COURT: Right. Yes, you can. Are you done?

MR. SOROSKY: What? Are we done?

Well, I shocked you once --

THE COURT: Yeah.

MR. SOROSKY: -- so the team says I should do it

again.

THE COURT: Yes.

MR. SOROSKY: And I think we're done with our case.

We rest.

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1027

THE COURT: You're done? Okay. I'm going to send

the jury out because I have to tell them because it's his

decision.

Okay.

MR. GETTER: Off the record.

(Discussion held off the record.)

THE COURT: We'll take a break.

(Proceedings heard in open court:)

THE COURT: We're going to take a short break now.

COURT SECURITY OFFICER: All rise.

(Jury exits courtroom.)

THE COURT: Please be seated.

Counsel approach.

Apart from straightening out exhibits, is there

anything else?

MR. GOLDSTEIN: As far as what we spoke about at

sidebar?

THE COURT: Yeah.

MR. GOLDSTEIN: We'll be resting, your Honor, apart

from exhibits.

THE COURT: Apart from exhibits.

MR. GOLDSTEIN: Correct.

THE COURT: So in a moment or two, I will enter an

order that the defense rests subject to offering further

exhibits.

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1028

I need to speak to the defendant.

MR. GOLDSTEIN: Certainly. Do you want him to

approach?

THE COURT: Yeah, please.

Commissioner Beavers, I understand from what your

lawyer says that it is your decision not to take the witness

stand in your own defense, is that true?

THE DEFENDANT: That's correct, your Honor.

Will you speak a little louder so I can hear you?

THE COURT: Okay.

THE DEFENDANT: Will you speak a little louder so I

can hear you?

THE COURT: Oh, yeah, sure.

THE DEFENDANT: All right.

THE COURT: The reason you're called up here is

generally defendants don't get to make a lot of decisions, the

lawyers do, but one of the decisions which the law vests

entirely in the defendant is the decision whether or not to

testify in his or her own defense, so the decision whether or

not to testify is yours to make.

Do you understand that?

THE DEFENDANT: That's a decision I made, your Honor.

THE COURT: Okay. And did you make this after full

consultation with your attorney?

THE DEFENDANT: I didn't hear you.

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THE COURT: Did you make that decision after fully

consulting with your attorney on the decision?

THE DEFENDANT: Yes, I did, yes.

THE COURT: And that's still your decision now?

THE DEFENDANT: That's still my decision not to

testify.

THE COURT: Thank you.

THE DEFENDANT: Okay.

MR. SOROSKY: Your Honor, there is one point we would

like to make for the record.

Your Honor's decisions in not allowing the

accountant, Mr. Gershinzon, to testify strongly affected the

decision made by the defense and the defendant that he should

not testify because the defendant had planned to testify with

the thought that the -- and belief that Accountant Gershinzon

would be able to testify to certain facts and beliefs and

opinions, and that the defendant planned to testify thereafter

with the support and buttress of Mr. Gershinzon's expert

testimony.

And by the Court not allowing Mr. Gershinzon to

testify to the facts that we were precluded from testifying

to -- and there's no need to -- to repeat those now -- this

not only -- this was controlling in Mr. Beavers' final

decision not to testify, and we believe that your Honor's

rulings concerning Mr. Gershinzon also affected and deprived

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Mr. Beavers of his opportunity to testify before the jury, and

for that reason, we think --

THE COURT: I think it is very clear that my decision

which with some exceptions stopped any further testimony,

because the witness did testify at some length, is an issue

that you are not waiving for any purposes at all, and unless

the government has anything further to say --

MR. GETTER: On that particular issue, no, your

Honor, we don't.

THE COURT: Okay. That's fine.

Exhibits, you want to do exhibits now?

MR. SOROSKY: Exhibits.

MR. S. ADAM, JR.: Yes, we've got to have this.

(Counsel conferring.)

MR. S. ADAM, JR.: Yes, your Honor, we move into

evidence or we ask your Honor if we can strike the identifying

marks and move into evidence I think it's Defendant's No. 1.

I think that's what this was.

MR. GETTER: Judge, the only -- I'm sorry.

THE COURT: Go ahead.

MR. GETTER: The only issue I have is we need an

opportunity to check these against the returns to make sure

these are --

THE COURT: Is that it? Is that all you're offering?

MR. GOLDSTEIN: There are additional. We'll get the

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paper documents.

THE COURT: Tell you what to do. I'll come back here

in ten minutes, and you'll tell me what you're doing about

exhibits, but I still have one last question. Are you going

to call anybody in rebuttal?

MR. GETTER: Yes.

THE COURT: Okay. So we'll proceed with that, but we

should get done with your exhibits.

MS. KAESEBERG: Just so the Court is aware, I did

file a couple of defendant's jury instructions and objections,

so if you want to take a look at those, that may make things

easier as well.

THE COURT: Do I have them?

MS. KAESEBERG: I'm not able to get a paper copy once

I'm here in the building, but they're filed online.

THE COURT: We'll find them. We'll be back in

15 minutes.

COURT SECURITY OFFICER: All rise.

(Recess from 2:24 to 2:49 p.m.)

THE COURT: Please be seated.

Exhibits?

MR. GOLDSTEIN: Yes, your Honor.

Oh, exhibits. We have for defense Beavers Exhibit

Check 3374, Beavers Exhibit Check 522, Beavers Exhibit Check

523 that we are asking to admit. We've spoken to the

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government. I believe since there was, in essence, rebuttal

evidence corresponding these exhibits, they are going to admit

other exhibits as well. We have no objection to that.

MS. HAMILTON: That's right.

THE COURT: Okay.

MR. GOLDSTEIN: There was, I believe we marked it as

Beavers Exhibit just No. 1, which were the stack of W-2Gs. I

don't know if the government's reached a position.

MS. HAMILTON: We're in the process of still

reviewing those. We've never seen them before, so I think

what we're trying to do is check and make sure that --

THE COURT: Fine.

MS. HAMILTON: All right.

THE COURT: What else on exhibits? Are we done with

exhibits?

MR. GOLDSTEIN: Done with exhibits.

THE COURT: Okay. What's next?

MS. HAMILTON: I think there's some issues on the

instructions.

MR. GOLDSTEIN: Oh, yeah. Before we --

THE COURT: What about rebuttal?

MS. HAMILTON: We do have a witness on rebuttal.

MR. COLE: We do have one rebuttal witness, your

Honor. He is an attorney with the IRS. He's going to testify

about just the factors the IRS considers --

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THE COURT: Time? How much time?

MR. COLE: Short. Ten minutes.

THE COURT: Short.

MR. COLE: 15 minutes, very short.

THE COURT: Okay.

MR. GOLDSTEIN: Your Honor, as I understand, this

individual will offer some expertise as rebuttal. We have

been provided this individual's CV. We have been provided a

summary of an interview that they had with him.

We haven't been provided in any documentation his

opinions, the bases for his opinions, anything as far as

Rule 16.

Based on that and comparing our expert and what the

rigors he had to go through as far as his testimony, we would

ask to voir dire this witness outside of the presence of the

jury before he testifies before the jury.

THE COURT: Sure.

MR. GOLDSTEIN: Thank you.

THE COURT: It's not going to take very long.

MR. GOLDSTEIN: And then I think we have jury

instructions issues.

MS. BONAMICI: And, your Honor, it helps us a little

bit to have each of those same instructions that we've made.

THE COURT: We are getting to that point in the day

where I think it would be difficult to have the case argued,

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but maybe not. So my question is how long? How much time

does the government want?

MS. HAMILTON: For the opening closing argument, my

argument is an hour and some change, not more than an hour and

15.

THE COURT: For the defense?

MR. S. ADAM, JR.: About an hour and a half, your

Honor.

THE COURT: Okay. We're going to argue it tomorrow.

MS. HAMILTON: Okay.

THE COURT: So what we're going to do is deal with

the rebuttal, the voir dire and then if the voir dire is

successful from the government's point of view, we'll have the

testimony, then I am sending the jurors home and finish with

the discussions and whatever final list there is on exhibits.

Sound okay with everybody?

MS. HAMILTON: Yes, your Honor.

(Pause.)

MR. COLE: Your Honor, there's one other issue that

occurred to me. I think you had indicated before that you

were going to instruct the jury to disregard some part of

their expert's testimony and strike some part of the testimony

dealing with his opinion that certain transactions were loans.

THE COURT: Write it out so that I don't make errors

in telling this, and it will give the defense a chance to

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1035

look.

MR. COLE: Okay. We can do this overnight for

tomorrow morning?

THE COURT: Yeah.

MR. COLE: Okay.

(Pause.)

MR. COLE: Your Honor, our expert is ready to do the

voir dire.

THE COURT: Bring him in.

MR. COLE: Say that again?

THE COURT: What?

MR. GOLDSTEIN: I'm sorry?

THE COURT: I said have him come in.

MR. COLE: He's here.

THE COURT: Face me and raise your right hand.

(Witness sworn.)

THE COURT: Please be seated.

Give me one minute.

(Pause.)

THE COURT: Okay.

DAVID WEINER, GOVERNMENT'S REBUTTAL WITNESS, DULY SWORN,

VOIR DIRE DIRECT EXAMINATION

BY MR. COLE:

Q. Can you please state your name and spell it.

A. My name is David Weiner, W-E-I-N-E-R.

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1036

Q. Mr. Weiner, where do you work?

A. I'm an attorney for the Internal Revenue Service.

Q. And before I get into your jobs with the IRS, can you just

tell the jury, or I guess this case the Court, your

educational background?

A. I have a Bachelor of Science in accounting from the

University of Illinois. I have a JD from the Chicago Kent

College of Law. I'm a CPA, and I'm an attorney licensed in

Illinois and Arizona.

Q. And how long have you been a CPA?

A. Since 1978.

Q. What part of the IRS do you work in?

A. Well, I work in the office of chief counsel, but

specifically, I work in the office of tax exempt and

government entities.

Q. And how long have you worked in the office of chief

counsel?

A. Since 1994.

Q. What's your title?

A. My title now is senior counsel.

Q. And since when did you have that title?

A. Since December of 2007.

Q. And what, can you just tell the Court what your job

actually entails?

A. My job entails trying cases in tax court and advising

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1037

agents who need legal assistance on their cases.

Q. So prior to being a senior counsel, what was your position

with the IRS?

A. I was a docket attorney. I did the same work, but on

smaller cases.

Q. And when did you join the office of the chief counsel?

A. In either late 1993, early 1994.

Q. And what did you do prior to that?

A. Prior to that, I was an appeals officer for the IRS.

Q. What does that mean?

A. After somebody is audited and doesn't agree with the

results of the audit, there's an administrative appeal, and as

an appeals officer, my job was attempting to -- to attempt to

settle that case prior to litigation.

Q. And how long were you in appeals?

A. I believe approximately seven years.

Q. And so prior to being in appeals, what did you do?

A. Prior to that, I was a revenue agent for the Internal

Revenue Service, and I audited small businesses.

Q. Now, in preparation for your testimony today, you did not

review any records of the -- of any of the campaign

committees; is that correct?

A. I did not.

Q. Now, in your work with the IRS, do you have occasion to

consider whether the transfer of money is considered a loan or

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1038

is considered to be income?

A. I have.

Q. How often does that come up?

A. Over the last several years, I've had approximately a

hundred cases involving that issue.

Q. Okay. Now, can you in general describe for the jury what

is income?

A. Well, income is everything you receive unless there's a

specific exemption or exception in the Internal Revenue Code.

Q. And what about a loan? Can you describe what a loan

means?

A. Well, a loan is not income because there's an obligation

to repay the loan.

Q. Now, is this obligation to repay the main distinction

between something that's income, a transfer that's income and

a transfer that's a loan?

A. Yes, it is.

Q. Now, at what point is this obligation to repay considered?

A. At the time that the transfer is made, at the time that

the borrower receives the money.

Q. Now, can you describe what facts you would look at to

determine whether a transfer of money was, in fact, a genuine

loan or was income?

A. Well, there's several facts that I've looked at in the

cases that I've worked on. The first fact that I usually look

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1039

for is whether or not there's a written note.

Q. Why is that important?

A. It shows evidence that there's an obligation to repay the

loan.

Q. What other factors?

A. I'm also going to look at whether or not there's some

allowance for the payment of interest.

Q. What does that mean?

A. Well, since the borrower's using the lender's money, a

genuine loan often has the borrower paying for the right to

use the lender's money.

Q. What about -- what other facts would you look at?

A. I'd also look at whether there's a repayment schedule.

Some -- some document that would show dates and amounts that

are going to be repaid on the loan.

I also am going to look at if there are actual

repayments.

Q. What type of repayments are you talking about?

A. Well, I think I'm talking about any repayments, but

specifically I'd like to see repayments of the specific loan

amount.

Q. Okay. You've talked about a note, repayment schedule,

interest and actual repayments. Are there other facts that

you would look at?

A. Well, I also like to see how the lender enters the loan on

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1040

its books and records. I want to see that the lender is

actually treating it as a loan on its books, so there's some

entry that shows that it's a loan.

Q. Okay. Well, what other factors would you look at?

A. Well, I also want to look at how the parties treat the

transaction. I want to make sure that, especially to the

extent that the borrower doesn't repay the loan, that the

lender is going to try to enforce repayment.

Are there demand notes? Are there, excuse me, demand

letters? Is there a lawsuit? If there's no hope of ever

getting repayment, has the loan been forgiven? Have the

documents been filed with the IRS showing that there's been

loan forgiveness? I'm looking at those kinds of documents as

well.

Q. Now, how does it matter if the same party is both sides of

the transaction? Do you know what I mean by that?

A. Yes, I understand.

Q. Is that considered -- one of the considerations?

A. Well, it's something to consider. I think that if you

have the same party on both sides of a transaction, you need

to scrutinize the transaction a little more carefully.

I think you're still looking at the same factors, but

you may need a little more evidence to show that it's a loan

if you have the same parties on both sides of a transaction.

MR. COLE: One moment, your Honor.

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1041

(Counsel conferring.)

MR. COLE: That's all.

THE COURT: Voir dire.

VOIR DIRE CROSS EXAMINATION

BY MR. HENDERSON:

Q. Mr. Weiner, my name is Victor Henderson. How are you

doing this afternoon?

A. Good. How are you?

Q. I'm doing great.

So you're both a CPA and an attorney, correct?

A. Yes.

Q. Now, I've had an opportunity to look at your resumé or CV,

and you graduated from law school in 1981, correct?

A. Excuse me?

Q. You graduated from law school in '81?

A. In '81, yes.

Q. And you started working for the IRS in '84, correct?

A. That's correct.

Q. What did you do between '81 and '84?

A. I was working for a small accounting firm.

Q. Okay. Which firm was that?

A. It was called Barry Steiner, Ltd.

Q. You worked for Barry?

(Laughter.)

BY THE WITNESS:

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1042

A. No, I didn't work for this Barry.

BY MR. HENDERSON:

Q. Oh, okay. But you worked at a CPA firm.

A. I worked at a CPA firm doing accounting and tax work.

Q. And were you an auditor as well?

A. I was not an auditor at that firm. We didn't do audit

work.

Q. And beyond those three years, you've worked for the IRS.

A. Yes.

Q. Consistently since that time.

A. Yes.

Q. Okay. And one of the things that you spoke with Mr. Cole

about was that you were an appeals officer, correct?

A. I was, yes.

Q. And as an appeals officer, you negotiated settlements on

tax cases prior to litigation, correct?

A. Yes.

Q. So by virtue of the fact that there was litigation, it

meant that there were times when the IRS and the taxpayer did

not agree on how a certain transaction should be treated; is

that correct?

A. That's correct.

Q. And so, therefore, they went to a place called tax court.

A. Yes.

Q. Okay. And the IRS won those cases sometimes, correct?

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1043

A. Sometimes we win; sometimes we lose.

Q. And sometimes you lose, right?

A. Yes.

Q. Which means that there's a gray area sometimes when it

comes to how you treat taxes, isn't there?

A. Yes.

Q. Okay. So it's not just black and white.

A. It's not always black and white.

Q. It's not always about just adding numbers and adding

figures, correct?

A. That's correct.

Q. And then when you became a CPA, you learned about concepts

and theories, correct?

A. Yes.

Q. And you learned about, for example, about the matching

principle, right?

A. Yes.

Q. What's the matching principle?

A. The matching principle, at least there's a goal in

accounting to match expenses with the year that the income is

going to be reported and recognized in income.

Q. And there are other principles as well that you have to

apply either as a CPA or as a tax agent, correct?

A. Yes.

Q. So it involves quite a bit of interpretation.

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1044

A. Yes, it does.

Q. Okay. When did you first get involved in this particular

case?

A. Last Friday.

Q. So after the case started, the government lawyers came to

you?

A. Actually, I don't think I spoke to any of the government

lawyers in this case until this week, but I spoke to at least

some of the -- at least one revenue agent last Friday.

Q. But in terms of the lawyers themselves, they didn't even

get to you in until this week; is that correct?

A. That's correct.

Q. Okay. And you met with them last night.

A. I met with them on the phone last night.

Q. Did you meet with them in person?

A. For a short time, yes.

Q. And you met with them the night before.

A. Again, I think on the phone, but not in person.

Q. So really your work on this case just started this week,

right?

A. Yes, it -- yes.

Q. Okay. Now, you indicated that you did not review any tax

records; is that correct?

A. That's correct.

Q. And you did not review any campaign records; is that

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1045

correct?

A. That's correct.

Q. Okay. So you have not had an opportunity to look at the

books and records of the campaign to make your own

determination as to whether or not some of the transactions

were loans or income; is that correct?

A. I have not.

Q. And you also told us that the tax code says that there's

income, but then it makes exceptions, correct?

A. Yes.

Q. Okay. And one of those exceptions is whether or not a

transaction is a loan, right?

A. Well, that's not actually in the Internal Revenue Code.

Q. Well, it's actually referred to as debt forgiveness?

A. Debt forgiveness is in the code, but whether or not

something is a loan and not income is really outside of the

Internal Revenue Code. It's just not income because there's

an obligation to repay.

Q. And I know you don't have it in front of you, but how does

the tax code define income? It says XYZ is income except,

correct?

A. I believe the term is that income is from all sources

derived unless otherwise provided for.

Q. And what are some of those otherwise provided for?

A. Gifts are not income. Inheritances are not income.

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1046

Employer provided health insurance is not income.

Q. And loans are not -- generally not considered income, is

that correct?

A. Loans are not income.

Q. So if I were hypothetically to -- or, for example, when

you buy a house and you borrow money from the bank, the money

that you borrow from the bank does not go on your 1040; is

that correct?

A. That's correct.

Q. Okay. And if I go to a buddy of mine and borrow $2,000, I

don't list that $2,000 on my tax return as income; is that

correct?

A. That's correct.

Q. Okay. Now, you spoke, too, about the fact that -- you're

familiar with the term closely held business?

A. Yes.

Q. Okay. And that's not an anomaly under the tax code,

right?

A. It is not.

Q. Okay. And so, therefore, there are revenue agents who at

times have to spend time looking at closely held businesses,

right?

A. Yes.

Q. Because the documents and the way that the transactions

are accounted for are not the same as they would be in the

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1047

arm's length transaction, correct?

A. Okay.

Q. Would you agree --

A. Yes.

Q. -- or disagree?

A. That's possible.

Q. And would you also agree that small businesses tend not to

have as elaborate accounting systems as larger businesses; is

that correct?

A. Again, that's possible, yes.

Q. In your experience, is that true?

A. In my experience, there are all kinds of accounting

systems out there, and some businesses are better at it than

others.

Q. But would you agree with me as a general rule that Fortune

500 companies, for example, have more elaborate accounting

systems than some business that has gross revenues of a

hundred thousand dollars or less?

A. I'd be speculating, but I guess the answer is yes.

Q. And so in response to a question that Mr. Cole asked you,

you said that you would look for certain documents to

determine whether or not something was a loan, right?

A. Yes.

Q. And you said you would look for a note, correct?

A. Yes.

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1048

Q. Payment of interest, right?

A. Yes.

Q. A repayment schedule?

A. Yes.

Q. Loan repaid?

A. Yes.

Q. Okay. Let me take loan repaid off of it.

If there is no written note, that doesn't mean

automatically that it's not a loan; is that correct?

A. That's correct.

Q. Okay. And if there is no payment of interest, that does

not automatically mean there's not a loan; is that correct?

A. That's correct.

Q. Because sometimes people can get interest-free loans,

correct?

A. Absolutely.

Q. And not all loans are documented; isn't that correct?

A. Not all loans are documented, that's correct.

Q. But, in fact, it could be a loan, it's just not a

documented loan, correct?

A. Correct.

Q. All right. And so if there was a demand letter, then that

might indicate, for example, as you said, that there was a

loan; in other words, pay me back the money that I asked for,

correct?

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1049

A. Yes.

Q. Okay. And would you agree or disagree that smaller

businesses tend not to keep records the same way larger ones

do?

A. I guess so.

Q. Okay. Because there's like a cost/benefit analysis to

recordkeeping, isn't there?

A. Well, the IRS requires a certain level of recordkeeping.

You have to at least meet the minimum.

Q. And when that doesn't happen, then the taxpayer gets an

opportunity to go and meet the IRS to discuss whatever

concerns the IRS has about the tax formation, correct?

A. As I've seen in my career, when somebody doesn't have

adequate records, we often consider penalties.

Q. Okay. And last but not least, the government lawyers

asked you to do some research into this -- the pension payment

made by the commissioner, correct?

A. I wasn't asked to do research on this issue.

Q. You didn't take a look at Internal Revenue Code 404 and

Internal Revenue Code 414(h)(1)?

A. Oh, you're talking about the pension issue --

Q. Yes.

A. -- as opposed to -- yes, I did do some research on the

pension issue.

Q. Okay. And so when they told you what the issue was, you

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had to go look in the books, right?

A. No, I knew what the answer was. I just wanted to confirm

what I believed the answer was.

Q. So you went to the tax code to confirm your belief of what

you thought the answer was?

A. Yes.

Q. And as we indicated earlier, not all CPAs or not all

lawyers would always agree on what the answer is to a

particular tax problem; is that correct?

A. It depends on the tax issue; but, yes, there are times we

don't agree.

MR. HENDERSON: Okay. Thank you.

MR. COLE: Your Honor, I just probably want to ask

him a couple follow-ups on that pension issue just to put in

the record what his opinion on that is.

THE COURT: Okay.

VOIR DIRE REDIRECT EXAMINATION

BY MR. COLE:

Q. Do you have opinion as to whether or not the defendant --

the check from the campaign account to the pension fund was

deductible to the defendant?

A. My opinion is that the check paid from the campaign fund

to the City of Chicago pension fund was not deductible.

Q. Should the City of Chicago have taken it out of the W-2

wages that it paid to the defendant?

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1051

A. No.

Q. Can you just explain why not?

A. The only time salary on a W-2 would be reduced for pension

contributions is if the pension contribution is paid by what's

called salary reduction, and under 401(k) or in the weird,

limited case of a -- of a municipal employer, there's

something called a pick-up under 414(h)(2), and I don't know

if the City of Chicago has made an election to have a

414(h)(2) pick-up, but that would be another case where salary

could be reduced for a pension contribution. But a

contribution by a participant to the plan would not cause the

W-2 wages to be reduced.

MR. HENDERSON: Your Honor, we're not going to object

to this line of questioning for voir dire; but we were

prevented and prohibited from going into this line of

questioning with Mr. Gershinzon, so we're working under the

assumption that this is not a line of questioning that the

government will be able to go into especially on rebuttal.

MR. COLE: No, we are staying far away from this,

your Honor. We just wanted to put this in the record.

THE COURT: Sure, that's fine.

BY MR. COLE:

Q. And was there a time in the past when such a contribution

would have been deductible?

A. Well, the law changed in 1986, so prior to that law change

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1052

in 1986, there was a limited deduction allowable under

Section 219 of the Internal Revenue Code for voluntary

employee contributions. That was repealed in 1986.

Q. So for over 25 years, that has not been deductible?

A. That's correct.

(Counsel conferring.)

BY MR. COLE:

Q. Now, I'm going to go back to the loan issue.

You named certain factors that you would consider in

determining whether a transfer was a genuine loan or income.

Remember that?

A. Yes.

Q. Okay. Now, have you been called upon to look at those

factors in the context of a claim by a taxpayer that a certain

transfer was a loan?

A. I have.

Q. How often would that come up?

A. In the last several years, maybe about a hundred times.

MR. COLE: I have no other questions, your Honor.

VOIR DIRE RECROSS EXAMINATION

BY MR. HENDERSON:

Q. Mr. Weiner, the first thing Mr. Cole asked you, and I

listened to your answer carefully, you told Mr. Cole that in

your opinion, the $68,000 was not something that should have

been deductible from wages; is that correct?

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1053

A. Yes.

Q. Okay. But when you use the term opinion, does that

recognize that another CPA or another attorney might view that

same transaction differently?

A. I reviewed the law on this issue, and that's my opinion of

how the transaction would be taxed based upon how I see the

code sections.

Q. Okay. But my question is does your opinion also take into

account that another tax professional or an attorney or CPA

might have a different view of how that transaction should be

handled?

A. Somebody could have another opinion.

Q. As it relates to the $68,000 payment to the City, do you

have an opinion as to whether or not that payment should have

been reflected on the W-2?

MR. COLE: You mean the payment to the pension fund?

MR. HENDERSON: Yes, I'm sorry. The payment to the

pension fund.

BY THE WITNESS:

A. Could you clarify that question?

BY MR. HENDERSON:

Q. There was a $68,000 check that came from the commissioner,

and it went to his pension fund.

A. Yes.

Q. Okay. And that $68,000 went into his account, correct?

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1054

A. Yes.

Q. At some point, should that $68,000 have been reflected on

the W-2?

A. The answer is no.

Q. Okay. Should the $68,000 have been reflected on a 1099-R?

A. Again, you're going to have to clarify that question.

Q. Money went into the pension account, correct?

A. Yes.

Q. Should the pension people ever communicate to let me start

off with the IRS that that money is in the account at any

time?

A. Again, I'm not -- I'm not sure I -- I think I understand

what you're saying. I'm not sure that I understand the way

you're asking it.

Q. Well, let me ask it another way.

A. But, I guess, I believe what you're asking, and I probably

should never do this as a witness, at the time when

distributions are made from the plan --

Q. Yes.

A. -- those employee contributions which were not previously

deducted should be reflected as the nontaxable portion of

those distributions, and there are several methods under

Section 72 that allow for determining what portion of those

distributions are taxable and which portions are not taxable.

Q. So then at some point then when the 68,000 starts coming

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1055

out, it gets reflected on a 1099-R, correct?

A. I believe there's a box on the 1099-R for employee

contributions, but I don't recall that for sure.

Q. Okay. And so, therefore, as you said on the 1099-R,

there's a box that says distributions and then there's a box

that speaks to the taxable portion of the distribution, right?

A. Yes.

Q. So is it your opinion then that the $68,000 -- if it was a

loan, would the $68,000 have been taxable in 2006?

Assuming it was a genuine loan, would the $68,000

have been taxed in 2006?

A. Assuming it was a genuine loan, it would not have been

includable in income in 2006.

Q. All right. Now, let's go to whether or not it was income.

Assuming it was income in 2006, should it have showed

up on the 1040?

A. Yes.

Q. Where?

A. Other income.

Q. All right. Should it have also showed up someplace else

on the 1040?

A. I don't believe so.

Q. So -- well, now, what you said is that the taxpayer -- so

your position is that the taxpayer would have paid the taxes

on 2006 and not when the money was distributed in later years?

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1056

A. If the $68,000 was not a loan, it was includable in income

in 2006.

When the defendant later receives a distribution from

the pension plan, that portion that's a return of that $68,000

would not be includable in income.

Q. Are you familiar with -- you and Mr. Cole talked about a

1986 law, I guess it was TEFRA?

A. I don't believe that was the TEFRA. That was the Tax

Reform Act of 1986.

Q. Which act was '86?

A. It's just called the Tax Reform Act of '86. I believe

TEFRA was in 1982.

Q. Okay. So with the '86 law change, do you know whether or

not that law was intended to capture the transaction that

Mr. Beavers was involved in in 2006, whereby he was allowed to

do a catch-up for his pension?

A. Well, I'm a little uncomfortable with the use of the term

catch-up because that's a term of art in the Internal Revenue

Code, and this is not a catch-up contribution.

This was, as I understood from reading the letter

from the City, this was a purchase of past service credits.

Q. Well, by definition, whatever took place in 1986 was not

intended to address what transpired with the commissioner in

2006. Wouldn't you agree with me on that?

A. I would not agree with you.

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1057

Q. Okay. But by definition, whatever took place in 1986 was

taking -- taking into account what had transpired before that

law was passed, don't you agree?

A. Well, prior to 1986, certain types of transactions caused

a tax deduction; and after 1986, they would no longer be

allowed a deduction.

Q. And it's not your position that whatever the legislators

did in 1986 was meant to capture by definition what the

commissioner was able to do in 2006. That's not what you're

saying, are you?

A. What I'm saying is that after 1986, a voluntary employee

contribution would not be deductible.

Q. And all employee contributions are not voluntary. Would

you agree or disagree?

A. Well, I'm not sure I agree -- I'm not sure I understand

the question.

Q. Well, you just said -- used the term voluntary employee

contribution, right?

A. Well, for example, in the City pension, every employee's

required to make a 6.5 percent contribution out of salary.

That is not voluntary. You must make that contribution.

Q. So -- so then you agree with me then that all -- all

employee contributions to pension plans are not voluntary,

correct?

A. I would agree that not all -- not all employee

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1058

contributions are voluntary.

Q. And sometimes even the tax experts have a challenge

figuring out what's voluntary and what's involuntary; is that

correct?

A. Again, you're asking me to speculate, so, yes, I suppose.

Q. Well, voluntary is a term of art in the context of how

it's used in the Internal Revenue Code, correct?

A. Yes.

MR. HENDERSON: Okay. No further questions.

MR. COLE: Just a little bit, your Honor.

FURTHER VOIR DIRE REDIRECT EXAMINATION

BY MR. COLE:

Q. I think you had said before with respect to an earlier

question by Mr. Henderson that someone could have a different

opinion about the deductibility of the $68,000?

A. I guess somebody could have a different opinion. I don't

believe that that would be a proper opinion.

Q. So this is not a gray area, is it?

A. No, it is not.

Q. It's black and white?

A. Yes.

Q. It's not deductible?

A. It is not deductible.

FURTHER VOIR DIRE RECROSS EXAMINATION

BY MR. HENDERSON:

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1059

Q. Two final questions: Number one, the area that we were

just talking about, is that something that you would expect

the average taxpayer to understand and know?

MR. COLE: I'm going to just object.

THE COURT: Sustained.

BY MR. HENDERSON:

Q. Is that something that you, based on the documents and

records that you've reviewed in your discussions with the

government, is that something that you believe that

Mr. Beavers should know?

MR. COLE: Same objection.

THE COURT: Sustained.

BY MR. HENDERSON:

Q. Is the tax treatment that you just talked about in

Section 401 and 401 -- 401 and 404, is that an everyday,

plain-vanilla tax transaction?

MR. COLE: Objection.

THE COURT: Sustained.

BY MR. HENDERSON:

Q. In fact, what you're talking about is actually rather

complex, isn't it?

MR. COLE: Objection.

THE COURT: Sustained.

BY MR. HENDERSON:

Q. One last line of questioning.

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1060

You seem to -- or at least my impression was that

you're not completely comfortable with the term voluntary

versus involuntary versus -- in the context of contributions

to employee pensions; is that correct or is that incorrect?

MR. COLE: Objection.

BY THE WITNESS:

A. That's incorrect.

BY MR. HENDERSON:

Q. Okay. But you do recognize that not all contributions

again are voluntary, correct?

A. I recognize that some contributions are not voluntary.

Q. And last but not least, you do agree with the general

principle that income from a taxpayer should not be taxed --

the same income should not be taxed two times. Do you agree

with that?

A. I agree with that.

Q. So, therefore, if, for example, if --

MR. HENDERSON: You know, I'll withdraw that. I'm

going to strike that last question.

Thank you, Judge.

THE COURT: We're going to line the jury up.

MR. COLE: Can I -- can we have a moment, your Honor,

just to discuss?

THE COURT: Yes, you can have a moment, but I would

like to see you and Mr. Henderson at the side off the record.

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1061

(Discussion held off the record at sidebar.)

COURT SECURITY OFFICER: All rise.

(Jury enters courtroom.)

THE COURT: Please be seated.

For the defense?

MR. SOROSKY: Your Honor, ladies and gentlemen of the

jury, at this time, the defense would rest.

THE COURT: Do you have any rebuttal?

MR. COLE: Yes, your Honor. The government has a

rebuttal witness.

THE COURT: Would you stand, please.

(Witness sworn.)

THE COURT: Please be seated.

You may begin.

DAVID WEINER, GOVERNMENT'S REBUTTAL WITNESS, DULY SWORN,

DIRECT EXAMINATION

BY MR. COLE:

Q. Can you please state your name and spell it.

A. My name is David Weiner, W-E-I-N-E-R.

Q. Mr. Weiner, can you please tell the jury where you work?

A. I am an attorney for the Internal Revenue Service.

Q. And before I get into your job at the IRS, I want to just

have you tell the jury what your educational background is.

A. I have a Bachelor of Science in accounting from the

University of Illinois. I have a juris doctor from the

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1062

Chicago Kent College of Law. I am a CPA, and I am a licensed

attorney in the states of Illinois and Arizona.

Q. How long have you been a CPA?

A. Since 1978 or 1979. I don't remember the exact date.

Q. Okay. How long have you worked for the IRS?

A. I've worked for the IRS for 29 years, beginning in 1984.

Q. So what part of the IRS do you work in now?

A. I currently work in the office of chief counsel of the

IRS. And specifically, I work in the office of tax exempt and

government entities.

Q. How long have you been in the office of chief counsel?

A. Since 1994.

Q. And what's your current title there?

A. My current title is senior counsel.

Q. How long have you been a senior counsel?

A. Since December of 2007.

Q. Can you tell the jury what you do for the IRS as senior

counsel?

A. As a senior counsel, I try cases in tax court. If there's

a tax controversy, I represent the IRS in tax court.

I also provide advice to agents who are working on

cases. If they have any legal issues, they'll come to me for

advice.

Q. So by trying cases in tax court, does that mean you're

normally the one asking the questions?

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1063

A. I'm normally the one asking the questions, yes.

Q. So prior to being a senior counsel, what title did you

have?

A. Before that, I was just an attorney for the IRS.

Q. And what were your responsibilities as an attorney?

A. They were the same, although I tried smaller cases back

then.

Q. Did you still give advice?

A. I still gave advice to agents.

Q. And prior to being an attorney, what did you do at the

IRS?

A. Prior to being an attorney, I was an appeals officer for

the IRS.

Q. And what does that mean?

A. As an appeals officer, my job was to take cases where

taxpayers had been audited and didn't agree with the results

of the audit. I would attempt to settle the case short of

litigation.

Q. How long -- when did you start your work as an appeals

officer?

A. I was an appeals officer from 1987 until I became -- went

to the counsel office in 1994.

Q. And prior to being an appeals officer, what did you do?

A. Prior to being an appeals officer, I was an agent, an

internal revenue agent. I audited small businesses for

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determining their proper tax liability.

Q. Now, prior to your testimony here today, did you review

any campaign records of any of the three campaign committees?

A. I did not.

Q. And when was the first time you became involved in this

case?

A. I received a call from an agent Friday evening, talking

about this case.

Q. Okay. So, now, in your work with the IRS, do you have an

occasion to consider whether the transfer of money is a loan

or is income?

A. I have, yes.

Q. How often does this come up?

A. In the last few years, I've had maybe a hundred cases

involving that issue.

Q. Now, can you just in general describe for the jury what is

income?

A. Well, the Internal Revenue Code says that income is

everything that you receive unless there's some specific

exception in the Internal Revenue Code.

Q. Now, what is a loan?

A. Well, a loan is not income because there's an obligation

to repay the loan.

Q. Now, is this obligation to repay the main distinction

between income and a loan?

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A. Yes.

Q. Now, at what point is this obligation important?

A. Well, you're going to look -- you look for the obligation

to repay the loan at the time that the loan is made, at the

time that the borrower receives the funds.

Q. Now, can you tell the jury what evidence you would look at

to determine whether a transfer of money was, in fact, a

genuine loan?

A. Well, there's several factors that I would look to. The

first is I would look to whether or not there's a written

note.

Q. Now, why is a note important?

A. Well, a note's going to evidence -- is going to show that

there is, in fact, an obligation to repay the loan.

Q. Does the note have to be written by a lawyer on a piece of

paper, or can it be just scribbled on a napkin?

A. It can be on any kind of piece of paper. I think you can

even go to a form store and buy a note.

Q. Okay. So a note is one, one piece of evidence you would

look to. What other evidence would you look to?

A. Some payment or allowance for interest to be paid.

Q. What does that mean?

A. Well, since the lender -- since the borrower's using the

lender's money, often the borrower will pay for the right to

use that money, and so that's evidence of a loan, or one --

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1066

one factor in looking at a loan.

Q. What are other factors?

A. A repayment schedule, something showing when payments are

going to be made. Actual repayments.

Q. So let me stop you there.

A. Okay.

Q. So you mentioned a note?

A. Yes.

Q. You mentioned interest to be paid.

A. Yes.

Q. A repayment schedule.

A. Yes.

Q. And then the fourth one you mentioned was actual

repayments.

A. Actual repayments, yes.

Q. What type of repayments are you talking about?

A. Well, again, if we're looking at facts showing whether or

not this is a genuine loan, payments on the actual loan would

be what I would hope to find if I wanted -- if -- to show that

it's a loan, but repayments are repayments.

Q. Okay. So what about other factors?

A. Well, I'd like to see how the lender puts the loan on its

books and records. How does it treat the loan? Does it show

that this borrower owes money?

Q. So let me just stop you there. So in this case, you

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understand that the transfers at issue come from the campaign

committee to the defendant; is that correct?

A. Yes.

Q. So who would be the lender here whose books you would look

at?

A. I'd like to look at the campaign fund's books and records

and see how the transactions are indicated, are shown in the

campaign fund's books.

Q. In other words, look to see whether it's called or treated

as a loan --

A. Yes.

Q. -- is that correct?

Okay. What other evidence would you look to?

A. Well, one thing I would look to is how the parties treat

the transaction.

Q. What does that mean?

A. And what I'm really looking for is if the borrower doesn't

repay the loan, what does the lender do? Does the lender send

a demand letter, demanding repayment?

If the borrower doesn't pay, does -- does the lender

sue?

If the loan can't be repaid, does the lender forgive

the loan and file the proper documents with the IRS saying the

loan's been forgiven?

Does -- and maybe even does the borrower treat on its

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records that it has a loan?

Q. Now, does it matter whether the -- if the same party or

entity is on both sides of the transaction?

A. Well, since this is a factual question, if you have the

same party on both sides of a transaction, you just have to

give the transaction a little more scrutiny. You need to be a

little more careful in looking at all the facts to make sure

that it is, in fact, a loan because you got the same party on

both sides.

MR. COLE: One moment, your Honor.

(Counsel conferring.)

MR. COLE: I have no other questions, your Honor.

CROSS EXAMINATION

BY MR. HENDERSON:

Q. Mr. Weiner, again, my name is Victor Henderson. Let me

ask just a few questions.

Number one, I've had an opportunity to review your

resumé, curriculum vitae, and it indicates that you were at

one time a certified public accountant, correct?

A. I was -- I am -- I am still a certified public accountant.

I -- my license in the State of Illinois is now on inactive

status.

Q. Okay. And so you are not a -- currently, you're not

currently a licensed CPA; is that correct?

A. I am not currently a licensed CPA in Illinois.

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Q. Okay. And so because you are not currently licensed in

this state, right now, you don't have the ability to issue,

for example, an audit opinion; is that correct?

A. That's correct.

Q. And so there are things that a licensed CPA can do that

you can't do, correct?

A. Well, I believe that's about the only thing that a

licensed CPA can do that I can't do.

Q. And a licensed CPA would also be able to conduct an audit,

right?

A. A certified audit? Yes.

Q. Yes. And that's not something that you can do, correct?

A. Well, yeah -- yes, that's correct. I believe -- part of

your first question as well.

Q. But there are things that a licensed CPA can do that you

cannot do; is that correct?

A. That's correct.

Q. All right. And you've been with the IRS for approximately

the last 25 years?

A. 29 years.

Q. Okay. And you do not prepare returns in connection with

your duties at the IRS, at least not for taxpayers; is that

correct?

A. I do not prepare returns.

Q. And in answer to some of the questions that Mr. Cole asked

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you, you were at one point an appeals officer, correct?

A. I was.

Q. And so an appeals officer hears disputes between a

taxpayer and a lower-level IRS agent, correct?

A. That's correct.

Q. And so if the low-level IRS agent and the taxpayer have a

dispute on how, for example, a 1040 or how something in the

1040 should be handled, then when you were the appeals

officer, they could come up and talk to you, correct?

A. That's correct.

Q. And you did that for about seven years?

A. I believe that's correct, yes.

Q. Okay. And in that process, sometimes you agreed with the

person you were supervising; is that correct?

A. I -- I was -- I don't supervise the agent.

Q. Okay. Well, then when you had the appeal, sometimes you

agreed with the position of the agent, correct?

A. That's correct.

Q. And sometimes you agreed with the position of the

taxpayer, correct?

A. Yes.

Q. So the agent was not always right, correct?

A. The agent was not always right.

Q. And then after you left and became -- left as an appeals

officer, you then started litigating cases in tax court,

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correct?

A. That's correct.

Q. And where is the tax court?

A. The tax court is actually in Washington, D.C., but it

travels around the country, comes to Chicago maybe three, four

times a year.

Q. And what happens in tax court is that taxpayers then have

disputes with the IRS, correct?

A. That is correct.

Q. And there is a judge who rules on for one party or the

other; is that correct?

A. That's correct.

Q. And the issues that are raised in tax court tend to be

bigger, correct?

A. Yes.

Q. And they tend to be more complicated, correct? As a

general rule.

A. As a general rule, yes.

Q. Okay. And sometimes the IRS wins, right?

A. Sometimes the IRS wins.

Q. And sometimes they lose, right?

A. And sometimes the IRS loses.

Q. So the IRS is not always right, correct?

A. The IRS is not always right.

Q. Now, Mr. Cole asked you questions about what a loan looks

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1072

like, correct?

A. Yes.

Q. And you talked about how there might be a loan agreement,

correct?

A. Yes.

Q. But it's not always necessary to have a loan agreement in

order to have a legitimate loan. Would you agree with me?

A. Yes, I agree with you.

Q. Okay. And then Mr. Cole asked you about whether or not

there was a document that reflected if interest was going to

be paid on the loan.

Do you remember that?

A. Yes.

Q. Okay. And it's not always necessary to have interest on a

loan for a loan to be legitimate. Would you agree with me?

A. I would agree with you.

Q. And, in fact, it's not unusual for there to be things

called no-interest loans, correct?

A. There are such things as low-interest -- no-interest

loans.

Q. No-interest loans and low-interest loans, right?

A. Yes.

Q. And in this particular case, you did not have an

opportunity to review the books and records of the campaign,

is that correct?

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1073

A. That's correct.

Q. So you don't have an opinion about whether or not there

was a loan in this particular case, correct?

A. I do not have an opinion on that.

Q. Because you didn't see the books and records.

A. Correct.

Q. And you didn't speak to any of the campaign people, right?

A. I did not.

Q. And as a matter of fact, the first time you spoke to the

government lawyers was just two or three days ago, right?

A. That's correct.

Q. So after this case started, then they called you.

A. Yes.

Q. Did you speak to Agent Ponzo as well?

A. I did not.

Q. Now, you also --

A. Excuse me a second.

I was on a phone call two nights ago where he might

have been present. It was -- there were a lot of people on

the call. He may have been one of the people on the other

side.

Q. So a couple of nights ago, a lot of the government lawyers

and Mr. Ponzo were on the telephone talking to you?

A. Yes.

Q. And they were asking you about tax transactions?

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A. They were.

Q. Just two nights ago.

A. Yes.

Q. And before that, you weren't involved in this case, were

you?

A. That's correct.

Q. Now, you also talked about a document that speaks to when

a loan, for example, is created, and so you'd want to look at

the time of the transaction to see whether or not there was a

document evidencing that transaction, correct?

A. That's correct.

Q. But isn't it also true that sometimes documents can arise

much later to evidence a transaction?

A. They could, but I don't think that they would be as

reliable as loans on contemporaneous -- documents that are

contemporaneous with the time the payment is made.

Q. Well, it may be preferable to have a document created at

the loan -- at the time the loan is made, but it's not

mandatory, right?

A. It's not mandatory.

Q. In fact, it's not mandatory to have a document evidencing

the loan at all; is that correct?

A. That's correct.

Q. Okay. And so sometimes loans get converted; isn't that

true?

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A. Yes.

Q. Sometimes loans are forgiven?

A. Sometimes loans are forgiven.

Q. And sometimes later on in the transaction, it may be

determined that interest should be applied, correct?

A. That's possible, yes.

Q. Oh, and it's also possible that later on in the

transaction the parties decide that there's not going to be

any interest at all, right?

A. They might decide that.

Q. Right.

So in other words, what happens at the time of the

transaction can change over time, correct?

A. It could.

Q. Okay. Now, Mr. Cole asked you something about repayments.

Do you remember that?

A. Yes.

Q. And would it be fair to say that income is the thing that

most of us get when we go to our jobs?

A. Yes.

Q. And at the end of the year, our employers give us W-2s,

right?

A. Yes.

Q. And the W-2s reflect the income that we got during the

course of the year, right?

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A. Yes.

MR. COLE: Your Honor, I'll object.

THE COURT: Objection is sustained.

BY MR. HENDERSON:

Q. Generally speaking, people don't take the income that they

got from their job and give it back to their employer,

correct?

MR. COLE: Objection.

THE COURT: Objection is sustained.

BY MR. HENDERSON:

Q. Income and loans are different, right?

A. Yes.

Q. Loans you pay back, right?

A. You're supposed to pay them back.

Q. And income you don't pay back, right?

A. Yes.

(Counsel conferring.)

BY MR. HENDERSON:

Q. And you would agree with me that at the end of the day,

the real question about whether or not something is a loan is

the intent of the parties.

Would you agree?

A. Yes.

MR. HENDERSON: Okay. No further questions.

MR. COLE: I have no questions, your Honor.

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THE COURT: You may step down.

(Witness excused.)

MR. GETTER: Judge, we have a couple of exhibits that

we need to --

THE COURT: Apart from exhibits?

MR. GETTER: Sorry?

THE COURT: Apart from exhibits?

MR. GETTER: Yes.

THE COURT: Are you resting?

MR. GETTER: Oh, no, no, no, I'm sorry. I

misunderstood you. Apart from the exhibits, we have nothing

further.

THE COURT: Any surrebuttal?

MR. S. ADAM, JR.: We do not, your Honor.

THE COURT: Both sides have rested. You've now heard

all of the evidence you're going to hear in this case. I'm

going to ask you to come back tomorrow morning at

9:00 o'clock.

What you will hear when you come here tomorrow

morning is the closing argument of the parties, after which I

will instruct you.

I know I've emphasized this to you before, but again

I'm emphasizing to you to avoid any contact with any kind of

news reports regarding this case. This is particularly true

because all of the evidence is in, and sometimes there tends

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to be more coverage when this occurs, sometimes not, but you

should be very vigilant to avoid any contact with news

reports.

With that, I will see you in the morning.

COURT SECURITY OFFICER: All rise.

(Jury exits courtroom.)

THE COURT: Please be seated. We'll resume the

instruction conference.

After the instruction conference, we will hear what I

believe will be the customary motion by the defense.

(Pause.)

THE COURT: Okay. We'll begin with the government's

modified jury instruction, and there some stuff we have to go

back to.

MS. BONAMICI: That's right, your Honor.

THE COURT: The first is 8, which I'm assuming is

given unless the defendant objects.

MS. KAESEBERG: No. No objection.

THE COURT: Then a related issue -- oh, 11's

withdrawn.

MS. BONAMICI: Right.

THE COURT: 12 is withdrawn --

MS. BONAMICI: That's correct.

THE COURT: -- I'm assuming.

13. This is a fill in the names.

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MS. BONAMICI: It is a fill in the names, but also,

your Honor, in this particular case, I mean, we would have to

look back over the testimony to be sure, but it doesn't

really -- I don't believe that any opinions were actually

offered by these experts. They gave testimony on these

subjects.

I think the -- I think the instruction is still

important to give because it advises the jury that they don't

have to accept the testimony of an expert simply because he

had --

THE COURT: The testimony's fine because to the

extent that there's an opinion lurking there, the testimony is

all we need.

So we have to insert names. We have to strike

"opinions and". I'm striking "opinions" throughout which

leaves me with only one question.

In the first sentence it's "about" and then in

brackets specify the subject, and I think when we said we have

heard a witness, I think we need more than one name.

MS. BONAMICI: Right.

THE COURT: Okay. So let's see if we get -- I

don't -- you don't have to prepare this immediately, but who

are the names we are talking to -- about?

MS. BONAMICI: David Weiner, W-E-I-N-E-R.

MS. KAESEBERG: And Barry Gershinzon. I think it's

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G-E-R-S-H-I-N-Z-O-N.

MR. GOLDSTEIN: Correct.

THE COURT: Anybody else?

MS. BONAMICI: No, your Honor.

THE COURT: Specify the subjects.

MS. BONAMICI: Well, that's a little confusing now.

THE COURT: Well, my one theory is just eliminate it.

Forget specify the subjects. Who gave testimony. You do not

have to accept this witness's testimony.

MS. BONAMICI: Sounds good to me.

MS. KAESEBERG: The only issue is that then it sort

of -- I think when you list the subjects, it's identifying

that they were -- I mean, the purpose is because it's an

expert witness who's testifying about a particular subject.

Otherwise, without that clarification, I think it just pulls

special attention and undue emphasis on those witnesses

without, I think, the jury understanding -- I mean, why name

only those witnesses? Why not every witness?

THE COURT: And what subjects would you specify?

MS. KAESEBERG: Accounting principles, tax

principles, if you want to keep it general, or we can just

omit the entire instruction.

MS. BONAMICI: Maybe this is something that we should

try to hash out briefly and see if we can come up with

something and then submit it to you tonight. Does that seem

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reasonable? I feel like it -- I feel like it would be

appropriate to look back over the testimony.

THE COURT: Yeah, or you could simply say about

taxation.

MS. BONAMICI: Okay.

THE COURT: And use something simple like that, but

think about it --

MS. BONAMICI: Okay.

THE COURT: -- and come in. We will again meet

early.

MS. BONAMICI: Okay.

THE COURT: So 13, fill in names is okay.

Passing over everything until we hit 17 -- no,

passing over that. That was granted. I gave that. I'm

giving that instruction, but it's over objection.

MS. KAESEBERG: Right.

MS. BONAMICI: I think we go to 20 now, Judge.

THE COURT: 20 was withdrawn by the defense or not?

MS. BONAMICI: We held it, but we will withdraw it at

this time.

THE COURT: Withdrawn.

This is the instruction that says, "For the purpose

of Count 1, the government does not have to prove"?

MS. BONAMICI: Yes.

THE COURT: Sole purpose?

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MS. BONAMICI: Yes.

THE COURT: So this instruction is withdrawn?

MS. BONAMICI: Yes.

THE COURT: Okay. 21.

MS. BONAMICI: Is this the one you were going to

review, Judge?

THE COURT: I took a very brief look at this on

the -- on the computer. I think -- I think I'm likely to give

it, but I can't tell you until tomorrow morning.

MS. KAESEBERG: Okay.

THE COURT: Okay. 22 is given without objection.

23 is given without objection.

24 is given without objection.

25 there's an issue about modifying it.

MS. BONAMICI: There is an objection by the

defendant. They had talked about possibly offering a

substitute, but they've elected not to do that. They just

rested on objection.

THE COURT: So this is okay?

MS. KAESEBERG: We're objecting to it based on --

THE COURT: In principle as opposed to giving me an

alternative.

MS. KAESEBERG: Correct.

THE COURT: Because you're entitled to do that.

MS. KAESEBERG: Correct.

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THE COURT: Let me read it again.

Given over objection.

26. There was an issue about modifying this.

MS. BONAMICI: Yes, your Honor. Instead the

government elects to withdraw it.

THE COURT: Say that again to me?

MS. BONAMICI: We're electing to withdraw the

instruction.

THE COURT: 26 is withdrawn.

Is this fine with everybody?

MR. GOLDSTEIN: Yes.

MS. KAESEBERG: Yes.

THE COURT: 26A.

MS. BONAMICI: I'm sorry, your Honor. I just want to

make sure that we've got the numbering right.

THE COURT: Okay. 26 is the one that begins with:

"Money spent by a political organization, committee or fund

for an exempt function does not constitute taxable income."

MS. BONAMICI: That's the one that we're withdrawing,

and the income one is the one you're giving over objection.

THE COURT: Right, 26A.

MS. KAESEBERG: So 26A we've requested in our filing

on Page 4, it's Defendant's Instruction No. 2, a modification

where we propose that the language from Tufts versus the

language we cited as our Instruction No. 2 is an exact quote

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from that Supreme Court case.

Our request is that that paragraph that we suggested

replace the first paragraph of the Government's 26A, and then

we do not object to the government's second paragraph.

THE COURT: Okay. So these are our two

competing candidates.

MS. BONAMICI: Well, except that theirs also would

have the second paragraph of the government's attached.

THE COURT: Right.

MR. GOLDSTEIN: Correct.

THE COURT: We understand that.

MS. BONAMICI: Okay.

THE COURT: When a tax -- this is the government's --

"When a taxpayer receives a loan, he incurs an obligation to

repay that loan. Because of that obligation, proceeds of a

genuine loan do not constitute income. The transfer of money

from one party to another constitutes a genuine loan only if

the parties to the transaction intend that the person who

received the money be genuinely obligated to repay it."

A prize for most times used a single word in an

instruction.

MS. BONAMICI: Oh, no, I'm sure we can find something

to beat that.

THE COURT: The defense version: "When a taxpayer

receives a loan, he incurs an obligation to repay that loan at

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some future date. Because of that obligation, the loan

proceeds do not qualify as income to the taxpayer."

Principally that eliminates the "genuine."

MS. KAESEBERG: Right.

THE COURT: Then the government's is: "The transfer

of money from one party to another constitutes a genuine loan

only if the parties to the transaction intended the person who

receives the money be genuinely obligated to repay it."

When -- and the government says: "When he fulfills the

obligation" -- the government.

The defense says: "When he fulfills the obligation,

the repayment of the loan likewise has no effect on his tax

liability."

And then the agreed-to language is: "In determining

whether the defendant has received particular funds as a loan

or as income, you should consider all the surrounding facts

and circumstances."

Okay. The government can speak first.

MS. BONAMICI: Your Honor, can I -- I'm going to

begin at the end of the defendant's proposed substitute

Paragraph 1.

The government objects to including the phrase "when

he fulfills the obligation. The repayment of the loan

likewise has no effect on his tax liability."

There's no reason to include that information. The

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question here is whether certain transfers of money were

loans, not whether certain paybacks should be taxed or not

taxed. That gets us off on a completely different track, and

it's not appropriate to be included in what we're really

serving here is a definition of loan.

MS. KAESEBERG: We would agree to remove that last

sentence.

THE COURT: Yeah.

MS. KAESEBERG: We just weren't sure of the exact --

THE COURT: Yeah, that's fine. Okay. So now we're

down to --

MS. BONAMICI: Your Honor, I have another objection

to the substitute.

THE COURT: Yeah, I thought you would.

MS. BONAMICI: Okay.

THE COURT: But what we're down to, there's agreement

of about the first 14 words of both instructions.

MS. KAESEBERG: Yes.

MS. BONAMICI: The first 14 words of the

government's.

THE COURT: Okay. So the contrast is: "When a

taxpayer receives a loan, he incurs an obligation to repay

that loan," which is identical language to the defense

language. The defense adds "at some future date."

MS. BONAMICI: That's right. The government objects

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to that. In the context of the case that it's removed from,

that the date was established and this was just talking. It

didn't have any significance.

But in this case, that language tends to suggest that

there doesn't have to be any set date, any schedule of

payments or anything else, and suggests even further that

those facts are irrelevant, which is not accurate.

THE COURT: So you're objecting to their instruction?

MS. BONAMICI: I'm objecting to -- yes, "at some

future date." I thought that's what we're talking about.

THE COURT: Isn't there an argument that you might

want that instruction since nobody ever set a date?

MS. BONAMICI: Well, if we change the word to "at a

future date," the government would not object. It's the

"some" that we're having a problem with. It's too amorphous.

THE COURT: At a future date? Yes? No? Maybe?

MS. KAESEBERG: We were quoting the exact language

from the Supreme Court, so this is the exact definition

offered by the Supreme Court -- or the language offered by the

Supreme Court, so our position is that it should remain the

same.

MS. BONAMICI: The only thing I would say about that,

your Honor, is that it's frequently the case that language

from a case doesn't make very good jury instruction.

THE COURT: "A future date" is better for a variety

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of reasons, not the least of which is some repayment dates are

based on events which don't have a specific date attached to

them.

MS. KAESEBERG: I think our position would be if the

language is going to be changed from -- from the Tufts case,

that we would just rather omit that part of the sentence. So

we could just agree on those first 14 words and have a period

there and just take out that last clause of the sentence then.

MS. BONAMICI: I think -- I now am convinced that

since they offered that great language that "at a future date"

would be better for the reasons you may have been suggesting.

THE COURT: How about "in the future"?

MS. BONAMICI: In the future?

THE COURT: "When a taxpayer receives a loan, he

incurs an obligation to repay that loan in the future."

MS. BONAMICI: I think that that -- again, that

sounds a lot more like the "some" language. It's too

amorphous. It's too out there.

MS. KAESEBERG: But I think that is what -- I mean,

that's what Tufts says; so that may not necessarily fit their

fact pattern, but that doesn't mean that that's what the

instruction needs to be.

This is the exact language from Tufts. It's an

accurate statement of the law. So to put "a future date" does

the opposite and makes it a much more narrow definition. So I

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think to stay true to this Supreme Court decision and what

this actually means, then it should either be removed or it

should be either "at some future date" or I agree with "in the

future."

THE COURT: There's also "at some time in the

future."

MS. BONAMICI: "Some time in the future."

THE COURT: The reason I'm concerned about date is

there really is no date here.

MS. KAESEBERG: I think we'd be okay with "at some

time in the future."

THE COURT: Or I can make it very precise, "When a

taxpayer receives a loan, he incurs an obligation to pay that

loan later."

MS. KAESEBERG: I'm sorry?

MR. GOLDSTEIN: Later.

THE COURT: Later.

MS. KAESEBERG: Later?

THE COURT: I'm not -- it does seem to work, but it's

too fraught with danger.

MS. BONAMICI: I think at this point if we're going

to continue to use that mushy language, we'd prefer to go back

to our proposal because the mushy language is just -- it's not

appropriate.

MR. GOLDSTEIN: Which one? Which original?

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THE COURT: When a taxpayer receives a loan, he

incurs an obligation to repay that loan, period.

MS. BONAMICI: Correct.

MS. KAESEBERG: Okay.

THE COURT: Okay.

Okay. The second sentence. "Because of that

obligation," which is the same in both.

MS. BONAMICI: Actually, it's "this" in the

defendant's formulation.

THE COURT: What?

MS. BONAMICI: The defendant's formulation uses the

word "this" rather than "that." It's critical, Judge.

THE COURT: Do you like "this"?

MS. BONAMICI: I think "that" is better, but believe

me, this is not where we're going to hang our hat.

THE COURT: Right.

MS. BONAMICI: "That" is better than "this."

THE COURT: "Because of this or that obligation" --

MS. BONAMICI: Do you care?

THE COURT: -- "the loan proceeds do not qualify as

income to the taxpayer," and the government's version is:

"Because of this or that obligation, proceeds of a genuine

loan do not constitute income."

MS. BONAMICI: We can -- as long as genuine appears

somewhere, we don't need it in that sentence, Judge.

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MR. GOLDSTEIN: I think we've narrowed the issue. I

object.

THE COURT: So "that obligation" is actually better

grammatically.

MS. BONAMICI: What? I'm sorry?

THE COURT: "That," I'm using "that."

"Because of that obligation, proceeds of a loan do

not constitute income" as opposed to "loan proceeds do not

qualify as income to the taxpayer."

MS. KAESEBERG: Right, that's fine.

THE COURT: Which one?

MS. KAESEBERG: We're fine with that, as long as

"genuine" is gone.

THE COURT: So yours?

MS. BONAMICI: Yes.

THE COURT: Then this is the government's extra

language: "The transfer of money from one party to another

constitutes a genuine loan only if the parties to the

transaction intend that the person who receives the money be

genuinely obligated to pay it."

I'm striking the "genuine" because you don't need it

there. Where you need it is "who receives the money be

genuinely obligated to pay repay it."

MS. BONAMICI: That sounds fine.

THE COURT: So now the proposal on the table is:

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"The transfer of money from one party to another constitutes a

loan only if the parties to the transaction intend that the

person who receives the money be genuinely obligated to repay

it."

MS. KAESEBERG: We'd still object to the use of

"genuinely." I don't think it requires a descriptive word for

"obligated." I think if the statement reads "obligated to

repay it" without genuinely that that's sufficient, and also

in line with Tufts, the Supreme Court case, so --

THE COURT: So the only issue is "genuinely" there.

MS. KAESEBERG: Correct.

MR. GOLDSTEIN: Correct.

MS. BONAMICI: Your Honor, the government would

simply offer that this is the meaning of Tufts, that this --

the one sentence or paragraph that's been pulled from Tufts

does not reflect the full meaning of the case. The case is

all about the difference between a genuine loan or a bona fide

loan and a sham loan.

This is -- to include the language that the money be

genuine -- or that the person be genuinely obligated to repay

it is to accurately reflect what that case stands for, and

it's an important piece.

MS. KAESEBERG: Would you like a response on that?

THE COURT: Did Tufts use the word "genuine"?

MS. BONAMICI: I think they used "bona fide."

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MS. KAESEBERG: I actually don't think they did.

No, but I did do a search on the case earlier to the

extent that I could on my computer, and I don't believe they

used bona fide or genuine.

The quote that is on our proposal is the exact quote,

and clearly they could have used it throughout the case, but I

did do a search for the word "bona fide" or "bona" or

"genuine" in my file in my computer in the entire case of

Tufts, and it did not come up.

MS. BONAMICI: Then perhaps I'm thinking about Tide.

I mean, I looked at many, many cases.

THE COURT: There are two other words.

MS. BONAMICI: What are they?

THE COURT: Well, "truly" is one. "Legally" is

another.

MS. BONAMICI: Okay.

MS. KAESEBERG: It just seems like if what the jury

is told is that the transfer of money from one party to

another constitutes a loan only if the parties to the

transaction intend that the person who receives the money be

obligated to repay it, that is sufficient. That's an accurate

statement of the law from the Supreme Court case, and to add

"genuinely" in there just adds an extra level that just isn't

necessary.

MR. GOLDSTEIN: Obligation I think includes

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genuineness to it.

THE COURT: Yeah.

MR. GOLDSTEIN: You wouldn't be obligated if it was

disingenuine, if it was not bona fide, whatever term you use.

The definition of obligation really includes genuine.

MS. BONAMICI: Another option would be "actually."

THE COURT: What?

MS. BONAMICI: "Actually"? I'm struggling. I'm

looking for something, but what we want to get to --

THE COURT: Is anybody going to object to the use of

the word plural parties --

MS. KAESEBERG: I thought about it.

THE COURT: -- in the instruction?

MS. KAESEBERG: I thought about it.

MS. BONAMICI: They shouldn't.

THE COURT: Okay. I have another slightly different

version, and I'm leaving the adjective out for a second. I

will come to the -- I'm going to use the word "actually" just

for the hell of it. It runs this way:

"When a taxpayer receives a loan, he incurs an

obligation to repay that loan. Because of that obligation to

repay, proceeds of a loan do not constitute income if, and

only if, the person who receives the money is actually

obligated to repay."

I think it works better as one sentence. Whether the

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words could be improved, I'm open to suggestion.

MS. BONAMICI: Are you taking out the rest -- the

rest of the last sentence? Because --

THE COURT: Yes, yes, yes.

MS. BONAMICI: Well, we would object to that because

it is important that the parties to the transaction, that both

sides of the transaction intend that the person who receives

the money be obligated to repay it. That's a portion of the

legal requirement.

And that's particularly important in a case such as

this one, where the defendant sits on both sides of the

transaction.

MS. KAESEBERG: If it matters to your Honor, I think

we would also prefer the old language as opposed to your --

THE COURT: Which old language?

MS. KAESEBERG: To keep the extra sentence in there

instead of --

THE COURT: "The transfer of the money from one party

to another constitutes a loan only if the parties to the

transaction intend that the person who receives the loan

be" -- do we need "genuine"?

MS. BONAMICI: Pardon?

THE COURT: Do we need "genuine"?

MS. BONAMICI: As opposed to "actually"?

THE COURT: "Actually" or nothing.

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MS. BONAMICI: "Actually" would be fine.

MS. KAESEBERG: I don't actually think we need any of

them. I mean, I don't -- honestly, the case that this comes

from, which is a Supreme Court case, specifically uses the

word "obligated."

Obligated has a meaning. It's very clear what that

meaning is, and to add an adjective in front of it, a

descriptor, just is not necessary and I do think goes beyond

what is actually required that the government prove, so to

speak.

MS. BONAMICI: I'm making -- here's what I think.

We're struggling with this so much, I think it would be useful

if I pulled these cases and pulled some more cases and see if

I can find some language. And since we've got some issues

that we need to address in the morning, I would propose that

we come back to you with something.

MS. KAESEBERG: I mean, I think we all agree that

Tufts is the leading Supreme Court case on this issue. All

we're really arguing about is "genuinely" and --

MS. BONAMICI: We're also arguing about whether one

particular paragraph of Tufts should be used as an

instruction, whether something else is needed to convey the

importance of the case, which is why I think it would be

useful to --

THE COURT: Okay, you can do that, although the word

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that I think is best for the prosecutor, which the defense

will object to, instead of "genuinely," "clearly."

MS. BONAMICI: "Clearly."

MS. KAESEBERG: Well, what is -- okay.

THE COURT: It means that -- clearly basically says

it's not vague, it's not uncertain.

MS. BONAMICI: Right. That's what we're -- it's not

vague.

THE COURT: So see what you can find.

MS. BONAMICI: Okay.

THE COURT: Since we're down to one word.

MS. BONAMICI: That sounds good.

THE COURT: Of many.

Okay.

MS. BONAMICI: We have one more instruction, and that

is the defendant's --

THE COURT: Wait, but I want to go back -- no, we

don't have to go back.

MS. BONAMICI: I'm sorry?

THE COURT: I was going to go back to Defendant's

No. 1. We can do Defendant's No. 1 any time.

MS. BONAMICI: But I think that's all we have left.

THE COURT: What?

MS. BONAMICI: I believe that is all we have left.

Am I wrong?

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THE COURT: That's already what?

MS. KAESEBERG: I think that's the only outstanding

instruction.

MS. BONAMICI: That's the only --

THE COURT: Wait, wait, wait.

MS. BONAMICI: I think --

THE COURT: You're right. You're right. So that's

the only one left.

Just let me go back here.

MS. KAESEBERG: So what we've provided is the

good-faith instruction, the exact language from the pattern

instruction that follows the 7212 elements instruction and the

7

th Circuit pattern instructions, and it's the exact language

that's in the pattern instructions, and we believe it should

be given.

THE COURT: Okay. Okay, the government can be heard

on this.

MS. BONAMICI: We object to the use of this

instruction in this particular case, given the evidence that's

been presented at this trial. There is no evidence that -- of

any kind of objectively reasonable belief.

This would just be making up issues that are not

represented by the facts; and, of course, the 7

th Circuit has

urged the court to refrain from giving unnecessary

instructions because they become confusing.

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The issue of good faith is treated specifically and

expressly in a good-faith instruction given with respect to

Counts 2, 3 and 4, the false statements. That deals with the

issue of whether the defendant believed in good faith that the

statements that were made on the returns were true, which is

really the only kind of gray-area, disagreement-type issue

that's present on our evidence.

THE COURT: Did you say we have a good-faith

instruction?

MS. BONAMICI: We do. Where is that?

MS. KAESEBERG: I believe it's Instruction 23, which

is Page 26 of the modified, which is -- the instruction that

they've given does follow the 7206 instructions also in the

pattern instructions.

So, you know, I think our position is that -- and

maybe I should ask a question. Would you object if we removed

the sentence "This is so, even if defendant's belief is not

objectively reasonable"?

MS. BONAMICI: We object because the way -- we think

that the issue of good faith, the idea -- on these facts and

this evidence, the issue of good faith is necessarily

incorporated in the elements instruction in Government

Instruction No. 18, and there is no possible way that the jury

could find good faith on the part of the defendant and also

find that the defendant committed the charged offense. It's

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not possible.

And in that kind of context, the courts have held

over and over again good-faith instruction is not necessary.

We would say that it's -- with no facts really to support it,

it's completely confusing.

The instruction he believes in good faith that he is

acting within the law or that his actions complied with the

law. I mean, what -- what precisely would that go to in the

context of the 7212? I mean, he either did the things that we

charge him with doing in the 7212 count or he didn't. It's

not really a matter of good faith.

And because the issue of good faith is dealt with

someplace else, you know, albeit with respect to the willfully

instruction, the concept is there, and obviously that's going

to be -- we can tell already those are the arguments that are

going to be made by the defense now that the jury isn't going

to be able to consider it.

Judge, the mere fact -- I think that defense is

putting too much weight on the mere fact that this instruction

is offered, you know, as one of the instructions that may be

given in a 7212 case.

THE COURT: And you're offering it to 2, 3 and 4?

MS. BONAMICI: I'm sorry?

THE COURT: You're offering it for 2, 3 and 4?

MS. BONAMICI: Yeah.

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MS. KAESEBERG: A somewhat different -- I mean, here

the issue is that the mental state required in Count 1 is

knowingly and acting corruptly. So good faith is inconsistent

with acting corruptly, and I believe I've stood before you in

a previous case, you've given that exact instruction on a

corrupt state of mind requirement.

You know, I think one problem is if the good-faith

instruction is given after Counts 2, 3 and 4 and not after

Count 1 where it does apply and it is a pattern instruction,

it makes it appear as though good faith is not relevant to or

is not a defense to that first count and it absolutely is.

And we do not agree with the government in that -- in their

argument that there is no evidence of that in the record,

which there is, and we're entitled to the instruction.

If the government would like -- we'd be happy to

modify this to a more, you know, palatable phraseology if

that's what they're looking for, but --

MS. BONAMICI: You know, here's the problem, Judge.

I mean, this is something, you're right, we did talk about

this before, all of us together, but the problem with good

faith is that it's a term that really has no meaning, and what

this instruction has attempted to do and would be appropriate

under certain facts, I suppose, although I honestly can't

think of what they would be, is to put some meat on the bones

of the concept of good faith, and that's why they add he

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cannot be said to have acted corruptly or with a purpose to

obtain an unlawful benefit for himself or someone else even if

his belief, whatever belief that might have been -- or his

belief that he complied with the law.

I mean, the nature of the charges in this case

present the jury with a question: Did he act in a way that --

where he intended to get a benefit that he was not entitled to

under the law? Did he act corruptly? That's the question

that's presented.

The elements instruction clearly gives the jury a

choice between those two things. There's not a third choice.

There's not -- this doesn't add anything to the elements

instruction on the facts of this case.

MS. KAESEBERG: I mean, our position is that it

actually -- it does. I mean, the elements instruction does

not incorporate a good-faith element. The Instruction 18,

which is the elements instruction, just, you know, recites the

mental states required, which are knowingly and then, you

know, Paragraph 4 is the defendant acted corruptly, that is,

with the purpose to obtain an unlawful benefit for himself.

So it's almost like the government wants it both

ways, where they get that definition in this elements

instruction; but then when it can be used as a contrast to

good faith, you know, in the good-faith instruction, all of a

sudden it's inappropriate to have that definition there?

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I guess I'm just confused. There is sufficient

evidence in the record to support this instruction. It's a

pattern instruction, and it belongs in these instructions.

And we are happy to go back and do a modified

instruction if there's particular language that's offensive --

THE COURT: Where's your good faith?

MS. BONAMICI: Pardon me?

THE COURT: What number is your good faith?

MS. BONAMICI: This one? It's under 7212.

THE COURT: What number instruction?

MS. BONAMICI: Oh, I'm sorry. My good faith is 23 I

think we said.

MS. KAESEBERG: Yes.

THE COURT: So you're doing good faith for -- to

cancel willfulness --

MS. BONAMICI: Correct.

THE COURT: -- on 2, 3 and 4.

MS. BONAMICI: Correct, because as a factual matter,

the defendant's theory is that he --

THE COURT: Wait a second.

MS. BONAMICI: The defendant believed that the items

were loans and did not need to be reported.

MS. KAESEBERG: I mean, Count 1 incorporates the same

facts as Counts 2, 3 and 4. I mean, Count 1 is the corrupt

endeavor count, so if you could have good faith on the filing

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of the false tax returns on 2, 3 and 4, then the same facts

apply to the corrupt endeavor, at least with respect to those,

you know, the checks and the particular facts. It's

applicable here.

MS. BONAMICI: That's an argument for not including

it, I think, your Honor, because that means it's covered.

THE COURT: Speak a little louder.

MS. BONAMICI: Pardon me? I would say that's an

argument for not including it because that means the concept

is covered.

MS. KAESEBERG: But the Instruction 23, the good

faith that's currently in the instruction specifically

outlines that it applies only to Counts 2, 3 and 4, which then

the inference there is that it does not apply to Count 1. So

good faith does not have anything to do with Count 1.

That's not the law. That's not what the pattern

instructions are.

THE COURT: I think maybe the government is right

because of the phrasing of the elements, but we can talk about

this in the morning. Somebody can bring me cases.

MS. BONAMICI: Okay.

THE COURT: And, obviously, the government is correct

with respect to 2, 3 and 4, but that has to do with the

structure of 2, 3 and 4, which is largely creating a piece of

paper.

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MS. KAESEBERG: Largely what, your Honor?

THE COURT: Largely creating a piece of paper. The

offense is committed actually by writing stuff down and

sending them in --

MS. BONAMICI: Right.

THE COURT: -- in which case if you have a good-faith

belief that this stuff's okay --

MS. KAESEBERG: I think a lot of that --

THE COURT: I admit it's not as easy a fit, but you

can both talk about it.

MS. KAESEBERG: Okay.

MS. BONAMICI: Okay.

THE COURT: Okay. I think we can deal with the rest

of this in the morning except for the motion.

Want to make a brief statement as to why I should

pitch this case out now?

MS. KAESEBERG: Yes, and you should, your Honor. I

would just like to point your attention towards a few cases,

if I could just very quickly recite some cases.

And, you know, we obviously understand that the Court

must view the evidence in the light most favorable to the

government. However, the standard is not so heavily weighted

in favor of the prosecution that in ruling on this motion, the

Court must blindly and uncritically accept that every

inference the prosecution argues can reasonably be drawn from

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the circumstantial evidence in the record.

The 7

th Circuit has held that the court -- this Court

must enter judgment of acquittal if the trier of fact is

called upon to choose between reasonable probabilities of

equal weight, one innocent and the other guilty.

And there's been at least one district court which

has held that the Court has a duty to direct an acquittal

where there's equally strong inferences to innocence as there

is to guilt.

You know, the evidence here that's come out is that

Mr. Beavers, you know, we would argue did not act knowingly,

corruptly or willfully as required -- you know, the government

is required to prove. You know, we could go through all of

the evidence, but just to point out a few highlights, you

know, what has come out is that 86 percent of the $200,000

from the checks that were written out to Mr. Beavers were

repaid or accounted for.

A lot of his own money was taken out at the casinos.

It was not just checks that were cashed. There's no evidence,

as alleged in the indictment, that Mr. Beavers caused any

campaign staff to maintain false or misleading records if you

pay attention to Ms. Coleman's testimony.

So viewing the evidence in the way that you must

right now, which is in the light most favorable to the

government, I think there's still an equal probability of

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innocence here as there is of guilt; and based on the fact

that you must find intent that Mr. Beavers knowingly,

corruptly and willfully acted, that doesn't exist. And, you

know, the evidence of innocence is just as strong as what the

government has presented, and because of that, you have a duty

to direct an acquittal in this case.

THE COURT: The government want to make a response in

the next two minutes or so?

MR. GETTER: Sure, Judge. I'll make it faster than

that.

There are essentially three buckets to the 7206(1)

charges: First the $68,000 pension check; second, the hundred

checks to Mr. Beavers from the campaign; and, third, the Cook

County contingency fees -- expense accounts, rather.

With regard to the $68,000 check, the defense's

primary defense is that this is a loan. The evidence that the

government has put forth shows clearly that there is no

indication that this money was a loan. There's no record that

it was a loan. There's no indication of repayment prior to

the time the defendant filed his 2008 tax returns in April

of 2009.

The check, the pension check -- excuse me -- the

campaign check to the pension fund benefited the defendant

personally, and there's no campaign-related -- no conceivable

campaign-related expense that could be associated with that

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check.

The money was clearly converted to the defendant's

use, and it was not reported on his 2006 tax return.

As far as the hundred checks are concerned, in

response to defense counsel's argument that Mr. Beavers was

not the one who was controlling what was going on, in fact,

the evidence showed to the contrary.

Mr. Beavers was the chairman of the campaign funds.

Mr. Beavers was the one who the treasurers went to to ask for

explanations for these checks. He's the one that wrote the

checks. He's the one that cashed the checks. He's the one

that used the cash. He's the only one who knew what happened

to the money,

So to the extent that there was any -- there were

shenanigans, for lack of a better word, with the check stubs,

it's on account of Mr. Beavers. And when Ms. Coleman said

that -- you know, when Ms. Coleman testified, she made it

clear. The last question that she was asked was did

Mr. Beavers ever tell you it was a loan, and she said no.

So Ms. Coleman did the best she could. She was in a

difficult situation. She was having to deal with the fact

that she wasn't given full information by Mr. Beavers, and the

evidence suggests that it was because Mr. Beavers didn't want

the records to show what he was actually using the money for.

As far as the Cook County contingency funds are

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concerned, Mr. Beavers admitted in both of the expense reports

that he filed with the County Board that he used the money

personally, and he -- his blank expense reports are proof of

the fact that there were no campaign-related, or not campaign

necessarily, or office-related expenses associated with those

checks. He used the money for himself, and it wasn't reported

on his 2006, '7 or '8 tax returns.

For all those reasons, Judge, the 7206(1) counts,

there's more than enough evidence to survive this motion.

As far as the 7212 count is concerned, again, I go

back to the fact that Mr. Beavers was the one who had all the

information about the checks. He's the one that knew where

the money was going.

When -- the evidence shows that when the treasurers

were filling out these -- these check stubs, they would do it

based on what Mr. Beavers told them. What's significant is

even when they're reimbursement -- check stubs that say

reimbursement on them, it says reimbursement per check, for

instance, 3664.

That check stub had to have been blank at the time

Mr. Beavers wrote the check because check 3664 didn't exist at

that point. So the check stubs were left blank because

Mr. Beavers didn't know how he wanted to characterize these

checks later on.

So Mr. Beavers knew what he was doing with the money

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and looked for ways to mischaracterize those checks in order

to evade detection and prevent the IRS, or anyone else for

that matter, from knowing what was done with the cash from the

campaign funds.

The most telling example, though, the fact that

Mr. Beavers knew exactly what was going on and caused this

activity to occur was the April 15th, I believe, 2008 letter

that Mr. Beavers signed to Andy Nauman at the Illinois State

Board of Elections, where, in responding to Mr. Nauman's

request for information about the $18,000 that was reimbursed

to the campaign, Mr. Beavers said that this was for campaign

expenses.

The records clearly showed that that money was used

for gambling. It was a lie he told him. So there is plenty

of evidence here to show through the blank stubs, through the

purported reimbursements, through the check stubs attributed

to invoices that weren't incurred until ten months later, that

Mr. Beavers was personally enjoying the use of his money. He

converted it to his dominion and control and then later tried

to come up with rationales to justify and conceal his use of

the money.

THE COURT: Your motion for judgment of acquittal is

entered and continued. I always like to see what the jury

thinks first.

See you in the morning. We have -- I thought we had

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a third issue here. Yeah, we do.

Defense Instruction 1, 21 and 26A are what's left for

tweaking, I think.

MS. BONAMICI: And 13. We were going to come back

with a determination about what to do about the testimony --

what the testimony was regarding.

MR. GOLDSTEIN: Regarding the experts.

THE COURT: Oh, regarding the experts, right.

MS. BONAMICI: And we were also to prepare for your

review an instruction regarding striking the experts.

THE COURT: Right.

MS. BONAMICI: So I have five things on my list.

THE COURT: So what are your numbers?

MS. BONAMICI: What are my numbers? I didn't write

them down by number.

The Defense 1.

THE COURT: Right.

MS. BONAMICI: Government 13, Government 21,

Government 26A.

THE COURT: Right.

MS. BONAMICI: And then the new instruction.

And then I did want --

THE COURT: What new instruction?

MS. BONAMICI: Striking the opinion testimony of the

expert. Remember we were going to do that.

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THE COURT: Right, right, right, okay.

MS. BONAMICI: That doesn't have a number.

And I did want to ask, your Honor, if you would -- if

you will request that the government prepare the clean set or

will you do that in chambers? I don't remember, I'm sorry.

THE COURT: Clean set from you.

MS. BONAMICI: Okay.

THE COURT: You're closer.

MS. BONAMICI: Okay. Fine.

THE COURT: Anything else we have to do?

MR. GOLDSTEIN: Your Honor, I have one issue

concerning the jury. I don't know if you want to do it at

sidebar. We do just have the parties here in court right now.

THE COURT: Yeah, there's nobody else here.

MR. GOLDSTEIN: We had discussed a few days back

regarding some potential jurors as to the potential issues. I

thought where we left is it was you were going to inquire of

the jurors as to their particular issues. I believe it was

No. 19 as well as No. 29.

Actually, I apologize, I believe it was 22 and 19.

THE COURT: I believe -- yeah, those -- the only

thing is no one raised the issue.

MR. GOLDSTEIN: Okay.

THE COURT: They -- you know, there was some talk

about it. They may have spoken to Ted or Ted may have

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overheard them, but then no one ever asked.

The only person who ever asked was Jessica Maya, and

I told her I wasn't going to excuse her and I told her why,

and I told her in the presence of counsel for defense, one for

defense and one for the prosecution, because I didn't want the

juror to start blaming either lawyer.

So they never asked. And if they don't ask, I don't

pursue it any further because my experience has been is that

people frequently start talking about I want to go home, I

want to do this, I want to do that, and then the case grabs

them.

So what I've heard in the beginning just never came

down to -- nobody ever asked. And the one that I would have

been willing to consider was the one who had exams at school,

and she never asked.

MR. GOLDSTEIN: But there was no inquiry, I guess?

THE COURT: No, we made no inquiry at all of her.

MR. GOLDSTEIN: You mentioned there was a discussion

with Ms. Maya?

THE COURT: That's the one --

MR. S. ADAM, JR.: I was there.

THE COURT: -- he was there.

MR. GOLDSTEIN: Okay. Sorry.

THE COURT: He knows absolutely everything.

MR. GOLDSTEIN: You can't trust anything.

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(Laughter.)

MR. S. ADAM, JR.: We have to be alone for you to say

that about me, Judge.

(Laughter.)

MS. HAMILTON: That's under seal.

MS. BONAMICI: We assume that the person with exams

got them rescheduled.

THE COURT: Yeah, that's what I'm assuming; but my

experience is if it really matters to somebody, they say it.

And I've had a few occasions where somebody said it because it

really mattered to them, and they said it with regret because

the case had gotten to them.

MR. S. ADAM, JR.: Right.

THE COURT: And they didn't want to leave, but they

had to leave.

And, first of all, if you get a juror like that, you

know that their need to leave is quite sincere. But it

doesn't happen very often, and anything -- any case that gets

more or less done within two weeks is -- people work through

it somehow. Maybe the lawyers have a little trouble.

Anything else?

MR. GETTER: Judge, we have received requests for

exhibits. Specifically some of the summary charts which I

know we raised the other day but your Honor told us to hold

off because I believe Mr. Ponzo was still on the stand.

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THE COURT: Do you care?

MR. GOLDSTEIN: No, we do not.

THE COURT: Sure.

MR. GETTER: The charts are fine? Okay.

I assume at this point everything that's been

admitted and published is okay?

THE COURT: Everything has been admitted -- did I

have anything left over?

MR. GOLDSTEIN: Actually, we did have the exhibits

regarding the defendant. I believe we have agreements on the

defense exhibits. It's those -- it's Beavers Exhibit No. 1,

which is a series of W-2G slips, as well as Beavers Exhibit

Check 3374, Beavers Exhibit Check 522, Beavers Exhibit Check

523.

The government in their redirect admitted other

documents that we have no objection to, and they can label

them for the record.

MR. GETTER: Specifically, Judge, we put a label on

this, 7th Ward -- Government Exhibit 7th Ward 2005 Checks,

which include the checks and the check stubs from the 7th Ward

Democratic Organization, Check 1793, 1794, 1795, as well as

the 7th Ward Democratic Organization D-2 for the reporting

period second half of 2005 filed January 21, 2006. We have a

label on it Government Exhibit D-2, 7th Ward-2.

If it's okay with your Honor, we would just take this

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and stick it into the 7th Ward Democratic binder that's

already in evidence.

MR. GOLDSTEIN: That's fine.

MR. GETTER: And we would just change the cover sheet

to include that D-2. It's not listed there now.

THE COURT: That's fine. Anything else?

(Defendant Beavers Exhibit No. 1, Check 3374, Check 522

and Check 523 were received in evidence.)

(Government Exhibit 7th Ward 2005 Checks and Government

Exhibit D-2 7 Ward-2 were received in

evidence.)

MR. GOLDSTEIN: What time tomorrow?

THE COURT: 9:00 o'clock, and if they all get here,

I'm going to try very hard to start at 9:00 o'clock.

MR. GETTER: Thank you.

(Court adjourned, to reconvene at 9:00 a.m. on 3/21/13.)

CERTIFICATE

I certify that the foregoing is a correct transcript from

the record of proceedings in the above-entitled matter.

/s/Kathleen M. Fennell March 21, 2013

 

Kathleen M. Fennell Date

Official Court Reporter

Case: 1:12-cr-00124 Document #: 124 Filed: 04/03/14 Page 125 of 125 PageID #:1775