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IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF OREGON

UNITED STATES OF AMERICA,

v.

DAN HEINE and DIANA YATES,

Defendants.

Case No. 3:15-cr-238-SI

OPINION AND ORDER ON 

OBJECTIONS TO EXPERT WITNESS 

TESTIMONY

Billy J. Williams, United States Attorney, and Claire M. Fay, Michelle Holman Kerin, and Quinn 

P. Harrington, Assistant United States Attorneys, UNITED STATES ATTORNEY’S OFFICE FOR THE 

DISTRICT OF OREGON, 1000 S.W. Third Avenue, Suite 600, Portland, OR 97204. Of Attorneys 

for the United States of America.

Jeffrey Alberts and Mark Weiner, PRYOR CASHMAN, LLP, 7 Times Square, New York, NY 

10036; Caroline Harris Crowne and Michael C. Willes, TONKON TORP, LLP, 1600 Pioneer 

Tower, 888 S.W. Fifth Avenue, Portland, OR 97204. Of Attorneys for Defendant Dan Heine.

Janet Lee Hoffman, Kelsey R. Jones, Andrew T. Weiner, Katherine Feuer, and Douglas J. 

Stamm, JANET HOFFMAN & ASSOCIATES, LLC, 1000 S.W. Broadway, Suite 1500, Portland OR 

97205; Matthew J. Kalmanson, HART WAGNER, LLP, 1000 SW Broadway, Suite 2000, Portland, 

OR 97205. Of Attorneys for Defendant Diana Yates.

Michael H. Simon, District Judge.

Defendants Dan Heine (“Heine”) and Diana Yates (“Yates”) are charged with conspiring

to commit bank fraud and making false bank entries, reports, and transactions during the time 

when they were the two most senior officers of The Bank of Oswego. A four-week jury trial is 

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set to begin on May 2, 2017. Pursuant to Rule 16 of the Federal Rules of Criminal Procedure, all

parties requested written summaries of the expert witness testimony that each party intends to 

present at trial. After those summaries were exchanged, the parties raised objections to some of 

the anticipated expert witness testimony. This Opinion and Order addresses the parties’ 

objections.

BACKGROUND

As alleged in the Indictment (ECF 1), Heine and Yates co-founded The Bank of Oswego 

(the “Bank”) in 2004. Based in Lake Oswego, Oregon, the Bank is a financial institution engaged 

in the business of personal and commercial banking and lending.1 Heine previously served as the 

Bank’s President and Chief Executive Officer (“CEO”). As President and CEO, Heine 

supervised and managed the Bank’s affairs and operations. Heine also was a member of the 

Bank’s Board of Directors (the “Board”). Heine left the Bank in September 2014. Yates 

previously served as the Bank’s Executive Vice President and Chief Financial Officer (“CFO”). 

As CFO, Yates was responsible for ensuring the Bank’s compliance with federal and state 

regulations. Yates also was the Secretary of the Board. Yates resigned from the Bank in 

March 2012 after disagreements with Heine.

Both Heine and Yates were responsible for ensuring that the Bank operated in a sound 

and safe manner and for keeping the Board informed about the Bank’s financial condition and 

the adequacy of the Bank’s policies, procedures, and internal controls. Additionally, Heine and 

Yates were members of the Bank’s Internal Loan Committee (the “ILC”). The duties of the ILC 

 

1 On August 12, 2016, the Bank sold loans and other assets to HomeStreet Bank. The 

Bank of Oswego continues to exist as a corporate entity, but has relinquished its banking charter 

and now operates as Oswego Resolution. ECF 481.

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included approving loans that were outside the authority of individual Bank loan officers, 

ensuring the quality of the Bank’s loan portfolio and minimizing risks in that portfolio. 

The Bank is subject to regular monitoring and examinations by the Federal Deposit 

Insurance Corporation (“FDIC”). For example, federal regulations require the Bank to file with 

the FDIC on a regular basis Consolidated Reports of Condition and Income for a Bank with 

Domestic Offices Only, commonly called “Call Reports.” A call report contains data about the 

Bank’s financial position and is divided into a number of schedules. One of these schedules, 

known as “Schedule RC-N,” requires disclosure of the correct value of outstanding loans.

On June 23, 2015, a federal grand jury returned a 27-count Indictment against Heine and 

Yates, alleging misconduct related to their activities with the Bank. The Indictment charges 

Heine and Yates with one count of conspiring to commit bank fraud, in violation of 18 U.S.C. 

§ 1349, and 26 counts of making false bank entries, reports, and transactions, in violation of 

18 U.S.C. § 1005. The Indictment alleges that beginning in September 2009, Heine and Yates 

conspired to defraud the Bank through materially false representations and promises. The 

Indictment further alleges that one of the purposes of the conspiracy was to conceal the true 

financial condition of the Bank from the Board, the Bank’s shareholders, the Bank’s regulators, 

and the public. According to the Indictment, Heine and Yates reported false and misleading 

information about loan performance, concealed information about the status of foreclosed 

properties, made unauthorized transfers of Bank proceeds, and failed to disclose material facts 

about loans to the Board, shareholders, and regulators.

The Indictment alleges the following five schemes to advance the conspiracy’s purpose 

of falsely creating a healthier appearance of the Bank’s finances than actually existed:

1. Payments Made on Delinquent Loans. Heine and Yates made payments, using 

Bank proceeds, on behalf of Bank customers who were delinquent on their loans. 

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The payments sometimes were made without the knowledge or consent of the 

Bank’s customer. The payments were made so that the delinquent loans would not 

appear in the Call Reports. On March 31, 2011, Yates transferred funds from a 

Bank customer’s business checking account to the customer’s personal loan 

account, which was delinquent, without the customer’s consent. Heine and 

Yates’s alleged practice of paying delinquent loans with Bank or other proceeds 

hid delinquent loans that otherwise would have been included in the Call Reports 

and reported to the Board.

2. Wire Transfer and Loan to Bank Customer M.K. Between July 2010 and 

September 2010, Heine and Yates permitted to be made an unsecured draw in the 

amount of $675,000 for Bank customer M.K. and then approved a $1.7 million 

loan for the benefit of M.K. in order to conceal the unsecured draw and to pay 

other Bank borrowers’ delinquent loans. Yates approved the unsecured draw.

3. Straw Buyer Purchase. From October 2010 through May 2011, Heine and Yates 

recruited a Bank employee, Daniel Williams (“Williams”), to facilitate a straw 

buyer purchase of real property located at 952 A Avenue, Lake Oswego, Oregon 

97034 (the “A Avenue Property”) for the purpose of concealing a loss to the 

Bank. Heine and Yates gave Williams two checks totaling $267,727.89 from the 

Bank’s cash account to purchase the A Avenue Property. Yates falsely 

represented in transactional documents that Williams funded the purchase 

personally.

4. Other Real Estate Owned (“OREO”) Properties Sold to Bank Customer R.C.

From March 2010 through June 2013, Heine and Yates removed two properties 

from the Bank’s OREO account after the properties were sold to a Bank borrower, 

R.C., even though the sales did not meet the requirements to remove the 

properties from the account. Heine and Yates did not require R.C. to make any 

down payment and provided R.C. with full financing from the Bank for both 

properties. As a result of the transactions, the properties were no longer reported 

on the Call Reports as OREO assets. On January 24, 2011, FDIC examiners 

questioned the validity of the removal of the properties from the Bank’s OREO 

account and advised Heine and Yates that the purchases did not meet the 

minimum equity requirements needed to remove the properties. Yates advised the 

FDIC examiners that R.C. was going to make down payments for the two homes, 

which would then permit the Bank properly to remove the properties from the 

OREO account. On January 31, 2011, Yates prepared two memos to each of the 

R.C. loan files that falsely stated R.C. was willing to make a 15 percent down 

payment on the properties. Heine and Yates represented that R.C. paid down 

payments for the properties, when in fact no payment was received by the Bank.

5. Misrepresentations to Shareholders. From September 2009 through 

September 2014, Heine and Yates caused the Bank to misrepresent to the Bank’s 

shareholders the Bank’s “Texas Ratio,” which is a measure of the Bank’s credit 

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troubles and potential for bank failure, thus misrepresenting the true extent of the 

Bank’s delinquent loans.

ECF 1 at 4-11, ¶¶ 13-26. The Indictment further alleges that Heine and Yates knowingly 

made 26 false entries in the books, reports, and statements of the Bank with the intent to injure 

and defraud the Bank. Heine and Yates allegedly did so by omitting material information about 

the true status and condition of loans and assets from the Call Reports and reports to the Board.

Id. at 12-14.

The Indictment also names Geoffrey Walsh (“Walsh”) as a person who played a role in 

the alleged conspiracy. Walsh previously was the Senior Vice President of Lending at the Bank. 

In May 2012, the Bank, acting through Heine, terminated the employment of Walsh for cause, in 

part based on Walsh’s alleged misconduct concerning lending practices. In July 2013, Walsh was 

indicted in a separate case and charged with conspiracy to commit wire fraud, wire fraud, and 

conspiracy to make false entries in bank records, among other charges. United States v. Walsh, 

Case No. 3:13-cr-00332-SI-1 (D. Or.) (“Walsh Criminal Action”). On July 22, 2015, Walsh 

pleaded guilty to certain charges alleged in a superseding indictment and second superseding 

information. In Walsh’s plea agreement, he accepted responsibility for his role in many of the 

same acts described in the Indictment against Heine and Yates. Walsh is awaiting sentencing.

STANDARDS

A. Pretrial Disclosure of Expert Testimony in a Criminal Case

Rule 16 of the Federal Rules of Criminal Procedure governs pretrial discovery in a 

criminal case by both the government and a defendant. Rule 16(a)(1)(G) states:

Expert Witnesses. At the defendant’s request, the government must 

give to the defendant a written summary of any testimony that the 

government intends to use under Rules 702, 703, or 705 of the 

Federal Rules of Evidence during its case-in-chief at trial. If the 

government requests discovery under subdivision (b)(1)(C)(ii) and 

the defendant complies, the government must, at the defendant’s 

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request, give to the defendant a written summary of testimony that 

the government intends to use under Rules 702, 703, or 705 of the 

Federal Rules of Evidence as evidence at trial on the issue of the 

defendant’s mental condition. The summary provided under this 

subparagraph must describe the witness’s opinions, the bases and 

reasons for those opinions, and the witness’s qualifications.

Fed. R. Crim. P. 16(a)(1)(G) (emphasis added). Rule 16(b)(1)(C) provides:

Expert Witnesses. The defendant must, at the government’s 

request, give to the government a written summary of any 

testimony that the defendant intends to use under Rules 702, 703, 

or 705 of the Federal Rules of Evidence as evidence at trial, if—

(i) the defendant requests disclosure under 

subdivision (a)(1)(G) and the government complies; or

(ii) the defendant has given notice under Rule 12.2(b) of an 

intent to present expert testimony on the defendant's mental 

condition.

This summary must describe the witness’s opinions, the bases and 

reasons for those opinions, and the witness’s qualifications.

Fed. R. Crim. P. 16(b)(1)(C). Rule 16(d)(1) provides, in relevant part:

Protective and Modifying Orders. At any time the court may, for 

good cause, deny, restrict, or defer discovery or inspection, or 

grant other appropriate relief. . . .

Fed. R. Crim. P. 16(d)(1). 

As explained by the Advisory Committee on Rules, the purpose of these provisions are

to minimize surprise that often results from unexpected expert 

testimony, reduce the need for continuances, and to provide the 

opponent with a fair opportunity to test the merit of the expert's 

testimony through focused cross-examination.

* * *

With increased use of both scientific and nonscientific expert 

testimony, one of counsel’s most basic discovery needs is to learn 

that an expert is expected to testify. . . . This is particularly 

important if the expert is expected to testify on matters which 

touch on new or controversial techniques or opinions. The 

amendment is intended to meet this need by first, requiring notice 

of the expert’s qualifications which in turn will permit the 

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requesting party to determine whether in fact the witness is an 

expert within the definition of Federal Rule of Evidence 702. Like 

Rule 702, which generally provides a broad definition of who 

qualifies as an “expert,” the amendment is broad in that it includes 

both scientific and nonscientific experts. . . . The rule does not 

extend, however, to witnesses who may offer only lay opinion 

testimony under Federal Rule of Evidence 701. Nor does the 

amendment extend to summary witnesses who may testify under 

Federal Rule of Evidence 1006 unless the witness is called to offer 

expert opinions apart from, or in addition to, the summary 

evidence.

Second, the requesting party is entitled to a summary of the 

expected testimony. This provision is intended to permit more 

complete pretrial preparation by the requesting party. For example, 

this should inform the requesting party whether the expert will be 

providing only background information on a particular issue or 

whether the witness will actually offer an opinion. . . .

Third, and perhaps most important, the requesting party is to be 

provided with a summary of the bases of the expert’s opinion. . . .

Fed. R. Crim. P. 16 advisory committee’s note to 1993 amendment (emphasis added).

B. Admissibility of Expert Testimony

The United States Court of Appeals for the Ninth Circuit has discussed the standard 

under which a district court should consider the admissibility of expert testimony. City of 

Pomona v. SQM N. Am. Corp., 750 F.3d 1036 (9th Cir. 2014). As explained by the Ninth Circuit:

Rule 702 of the Federal Rules of Evidence provides that expert 

opinion evidence is admissible if: (1) the witness is sufficiently 

qualified as an expert by knowledge, skill, experience, training, or 

education; (2) the scientific, technical, or other specialized 

knowledge will help the trier of fact to understand the evidence or 

to determine a fact in issue; (3) the testimony is based on sufficient 

facts or data; (4) the testimony is the product of reliable principles 

and methods; and (5) the expert has reliably applied the relevant 

principles and methods to the facts of the case. Fed. R. Evid. 702. 

Under Daubert [v. Merrell Dow Pharm., Inc., 509 U.S. 579 

(1993)] and its progeny, including Daubert II [Daubert v. Merrell 

Dow Pharms, Inc., 43 F.3d 1311 (9th Cir. 1995)], a district court’s 

inquiry into admissibility is a flexible one. Alaska Rent-A-Car, Inc. 

v. Avis Budget Grp., Inc., 738 F.3d 960, 969 (9th Cir. 2013). In 

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evaluating proffered expert testimony, the trial court is “a 

gatekeeper, not a fact finder.” Primiano v. Cook, 598 F.3d 558, 

565 (9th Cir. 2010) (citation and quotation marks omitted).

“[T]he trial court must assure that the expert testimony ‘both rests 

on a reliable foundation and is relevant to the task at hand.’” Id.

at 564 (quoting Daubert, 509 U.S. at 597). “Expert opinion 

testimony is relevant if the knowledge underlying it has a valid 

connection to the pertinent inquiry. And it is reliable if the 

knowledge underlying it has a reliable basis in the knowledge and 

experience of the relevant discipline.” Id. at 565 (citation and 

internal quotation marks omitted). “Shaky but admissible evidence 

is to be attacked by cross examination, contrary evidence, and 

attention to the burden of proof, not exclusion.” Id. at 564 (citation 

omitted). The judge is “supposed to screen the jury from unreliable 

nonsense opinions, but not exclude opinions merely because they 

are impeachable.” Alaska Rent-A-Car, 738 F.3d at 969. Simply 

put, “[t]he district court is not tasked with deciding whether the 

expert is right or wrong, just whether his testimony has substance 

such that it would be helpful to a jury.” Id. at 969-70. 

The test of reliability is flexible. Estate of Barabin v. 

AstenJohnson, Inc., 740 F.3d 457, 463 (9th Cir. 2014) (en banc). 

The court must assess the expert’s reasoning or methodology, 

using as appropriate criteria such as testability, publication in peerreviewed literature, known or potential error rate, and general 

acceptance. Id.; see also Primiano, 598 F.3d at 564. But these 

factors are “meant to be helpful, not definitive, and the trial court 

has discretion to decide how to test an expert’s reliability as well as 

whether the testimony is reliable, based on the particular

circumstances of the particular case.” Primiano, 598 F.3d at 564 

(citations and quotation marks omitted); see also Barabin, 740 

F.3d at 463. The test “is not the correctness of the expert’s 

conclusions but the soundness of his methodology,” and when an 

expert meets the threshold established by Rule 702, the expert may 

testify and the fact finder decides how much weight to give that 

testimony. Primiano, 598 F.3d at 564-65. Challenges that go to the 

weight of the evidence are within the province of a fact finder, not 

a trial court judge. A district court should not make credibility 

determinations that are reserved for the jury. 

Id. at 1043-44 (alterations in original).

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DISCUSSION

The government provided notice that it intends to call Paul Worthing as an expert witness

at trial. ECF 377. Mr. Worthing is an Assistant Regional Director of the FDIC. The government 

also provided notice that it intends to call Glenese Klein to present summary evidence at trial. Id. 

Ms. Klein is a Financial Forensic Accountant with the Federal Bureau of Investigation (“FBI”). 

In its notice, the government explained that although it does not designate Ms. Klein as an expert 

witness, in order to avoid any potential misunderstanding or confusion, the government is 

providing a summary of a portion of her expected testimony as well as a statement of her 

qualifications. Defendant Heine objects to the testimony of both Mr. Worthing and Ms. Klein 

and argues that their testimony should be precluded. ECF 407. Defendant Yates joins many of 

the objections of Defendant Heine and further argues that the testimony of Mr. Worthing and 

Ms. Klein, if allowed, should be limited. ECF 521; ECF 526. The government responded to these 

objections (ECF 534), and both Defendants replied. ECF 538 (Defendant Heine’s Reply); 

ECF 537 (Defendant Yates’s Reply). In subsection (A) below, the Court addresses Defendants’ 

objections to the government’s two disclosed witnesses.

Defendant Yates provided notice that she intends to call three people as expert witnesses 

at trial: Mark C. Riley; David S. Porter; and Dr. Daniel Reisberg. ECF 515 (amended notice); see 

also ECF 380 (original notice). Mr. Riley has worked in the banking industry, including as a 

former bank chief executive officer. Mr. Porter is a certified public accountant. Dr. Reisberg is 

the Patricia & Clifford Lunneborg Professor of Psychology at Reed College and has published 

extensively in the field of memory and cognition. Defendant Heine objects to the testimony of all 

three witnesses, Mr. Riley, Mr. Porter, and Dr. Reisberg. ECF 407 (objection to original notice); 

ECF 524 (objection to amended notice). Although the government initially gave notice of its 

intent to object to the testimony of these three witnesses (ECF 406), the government now objects 

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only to the testimony of Dr. Reisberg and has filed a motion in limine to exclude his testimony.

2

ECF 525. In subsection (B) below, the Court addresses Heine’s objections to Yates’s proposed 

expert testimony from Mr. Riley, Mr. Porter, and Dr. Reisberg and the government’s objection to 

Yates’s proposed expert testimony from Dr. Reisberg.

Finally, Defendant Heine provided notice that he intends to call Brian H. Kelley and John 

Lyngaas as expert witnesses at trial. ECF 378 (Lyngaas); ECF 379 (Kelley); ECF 516 (Kelley 

Amended Notice). Mr. Kelley has worked in the banking industry for more than 30 years. 

Mr. Lyngaas is a certified public accountant with more than 32 years of experience in the 

financial services industry. Although the government initially gave notice of its intent to object 

to the testimony of these two witnesses (ECF 406), the government now objects only to the 

testimony of Defendant Yates’s expert Dr. Reisberg. In addition, Defendant Yates offers no 

objections to the two expert witnesses proffered by Defendant Heine. Thus, the Court does not 

address further Defendant Heine’s notices regarding Mr. Lyngaas or Mr. Kelley.

A. The Government’s Proffered Witnesses

1. Paul Worthing, Assistant Regional Director, FDIC

According to the government’s summary of expert testimony, Mr. Worthing has been 

employed by the FDIC for more than 26 years, was appointed Assistant Regional Director in 

2010, currently oversees 81 FDIC-insured financial institutions in Alaska, Oregon, and 

Washington, and oversees examination operations for the Seattle and Portland offices. The 

government disclosures that Mr. Worthing will testify regarding, among other things: (a) the 

FDIC and its role and responsibilities; (b) the FDIC’s expectations regarding the responsibilities 

of chief executive officers, chief financial officers, and chief operations officers of financial 

 

2

The Court treats the parties’ objections as motions in limine and vice versa.

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institutions regulated by the FDIC; (c) “Safety and Soundness” examinations conducted by the 

FDIC; (d) Call Reports; (e) Other Real Estate Owned (“OREO”); and (f) a “Memorandum of 

Understanding” entered into between the FDIC and the Bank in 2010 and related supervisory 

next steps. ECF 377.

In his objections, Defendant Heine argues: (1) Mr. Worthing is unqualified to testify 

regarding certain accounting matters and matters concerning foreclosures; (2) Mr. Worthing’s 

proffered testimony “assumes the truth” of the allegations contains in the indictment; and 

(3) much of Mr. Worthing’s proffered testimony is irrelevant and unfairly prejudicial, requiring 

its exclusion under Rule 403 of the Federal Rules of Evidence. ECF 407. Defendant Yates joins 

many but not all of Heine’s objections. ECF 521.

Regarding Mr. Worthing’s qualifications, the government acknowledges that 

Mr. Worthing is not a certified public account but states that he was a commissioned bank 

examiner for the FDIC for more than 10 years before being promoted to his current supervisory 

position. ECF 534. The government adds that Mr. Worthing will explain that it takes 

approximately four to five years of on-the-job training to become a commissioned bank 

examiner. Further, before becoming a bank examiner with the FDIC, Mr. Worthing took many 

college-level accounting courses, passed an entry-level accounting examination, and received 

extensive additional accounting training before being permitted even to begin examiner training. 

He also was required to work in the field under other commissioned examiners and to 

successfully pass a certification test that included bank finances, Call Reports, and other 

regulatory documents. Mr. Worthing also is a member of the oversight body of the Federal 

Financial Institutions Examination Council (“FFIEC”), where he reviews the course and 

educational offerings provided to FDIC examiners. The Court finds that Mr. Worthing is 

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sufficiently qualified as an expert by knowledge, skill, experience, training, and education. See 

Fed. R. Evid. 702.

Regarding Heine’s argument that Mr. Worthing’s proffered testimony “assumes the 

truth” of certain matters alleged in the indictment, the government responds that an expert is 

permitted to render opinions based on hypothetical questions. Smolen v. Chater, 80 F.3d 1273, 

1288 (9th Cir. 1996) (“[T]he use of leading, hypothetical questions to elicit expert opinions is 

entirely appropriate.”); see also Fed. R. Evid. 703. Thus, Heine’s general objection is without 

merit. To the extent that Heine objects to the particular phrasing of a hypothetical question that 

may be put to Mr. Worthing, such an objection is premature.

Regarding Defendants’ argument that much of Mr. Worthing’s proferred testimony is 

either irrelevant or excludable under Rule 403 of the Federal Rules of Evidence, those arguments 

are without merit. The government asserts that Mr. Worthing’s testimony is relevant to prove 

Defendants’ alleged motivation to mislead as well as the materiality of Defendants’ alleged 

misrepresentations and omissions. The Court agrees.

Finally, Yates argues in her reply:

Expert testimony concerning Mr. Worthing’s expectations for bank 

executives in the performance of their duties does not make it more 

or less probable that Ms. Yates had the requisite knowledge or 

intent for the alleged crimes. Mr. Worthing’s proposed testimony 

will not inform jurors regarding Ms. Yates’s actual knowledge or 

intent, if any, as it relates to the charged conduct. Rather, it would 

create a false basis on which the jury may view Ms. Yates’s 

general performance as CFO through the lens of Mr. Worthing’s 

“expectations” and wrongly conclude that a failure to meet those 

expectations somehow equates to criminal culpability. See United 

States v. Wolf, 820 F.2d 1499, 1504–05 (9th Cir. 1987) (holding 

that the government’s use of regulatory standards to establish 

criminal culpability “impermissibly tainted” the prosecution’s 

case).

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ECF 537 at 4. This argument appears to be directed at two specific areas of proffered testimony 

from Mr. Worthing. First, the government states that 

Mr. Worthing will testify that Other Real Estate Owned (OREO) 

is, generally, foreclosed assets owned by a bank, why and where 

these assets must be disclosed in Call Reports and that a bank’s 

OREO provides regulators and others information about the bank’s 

financial well-being. Mr. Worthing will testify about the 

requirements for property to be designated as OREO and the FDIC 

qualifications for a financial institution to remove property as 

OREO. Mr. Worthing will opine that the transactions involving A 

Avenue and R.C., as described in the Indictment and both 

designated and removed as OREO, were not properly reported on 

The Bank of Oswego’s Call Reports, during the pertinent time 

periods. Specifically, the A Avenue property should not have been 

categorized as OREO at all as soon as the lender in first position 

foreclosed on the property, and the R.C. properties should not have 

been removed as OREO properties on the Bank of Oswego’s Call 

Reports when purchased by R.C. The bases of his opinions are 

FDIC rules and regulations, the Call Report instructions, 

accounting principles, such as Statement of Financial Accounting 

Standards No. 66 (“FAS 66”), and Mr. Worthing’s training and 

experience.

ECF 377 at 4-5 (emphasis added). Second, the government states that 

Mr. Worthing will also testify about the requirement to report loan 

delinquencies on Call Reports. Mr. Worthing will testify what 

types of loan delinquencies must be disclosed, where they should 

be disclosed on the Call Report, and that loan delinquencies 

provide information about the bank’s financial well-being. Mr. 

Worthing will opine that it is against FDIC rules, regulations and 

policy to omit loan delinquencies from the Call Report where, as 

described in the Indictment, the bank used money from other 

sources to make a payment against a customer’s loan to make it 

current, but in fact the borrower still owes those amounts to the 

bank. The basis of this opinion is FDIC rules and regulations, Call 

Report instructions, accounting principles, and Mr. Worthing’s 

training and experience.

Id. at 5 (emphasis added).

In United States v. Wolf, 820 F.2d 1499 (9th Cir. 1987), the Ninth Circuit reversed in part 

a criminal conviction on several counts of misapplying bank funds in violation of 18 U.S.C. 

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§ 656 and making false entries in bank records in violation of 18 U.S.C. § 1005, among other 

charges. During trial, a bank examiner called by the government testified that Federal Reserve 

Board Regulation O requires approval of a majority of a bank’s board of directors to approve 

loans made to bank officers. The indictment charged that Wolf committed a criminal act by 

failing to disclose on loan applications that he was the ultimate beneficiary on certain loans. The 

loan applications did not ask for such information and neither does any criminal statute. The 

government’s theory, however, was that Wolf committed criminal violations of Sections 656 

and 1005 by failing to disclose a material fact on a bank application. According to the Ninth 

Circuit, “the situation created a serious risk that the jury would find Wolf guilty of criminal 

misapplication and false entry because he failed to comply with Regulation O.” Wolf, 820 F.2d 

at 1505.

At oral argument, the government invited the Court to review United States v. Eriksen, 

639 F.3d 1138 (9th Cir. 2011), among other cases. In Eriksen, the Ninth Circuit noted that Wolf

addressed “the dangers of ‘bootstrapping’ a civil violation into a criminal one.” Eriksen, 639 

at 1149. The Ninth Circuit stated:

[In Wolf,] [w]e faulted the government for basing its 

misapplication charges on a civil banking regulation that imposes a 

duty on bank employees to inform the bank’s board of directors 

about the purpose of a loan. During Wolf’s trial, the government’s 

expert witness testified that the defendant’s failure to disclose he 

was a beneficiary of some of the loans he disbursed violated 

Federal Reserve Regulation O (12 C.F.R. § 215). We held that the 

references to the Regulation were impermissible:

Unlike references to [other civil violations which occurred 

during the trial], the references to Regulation O cannot be 

dismissed as being simply background information. The 

references were a key part of the government's case on the 

misapplication and false entry counts . . . .

To supply the missing element of the false entry and 

misapplication charges, the government turned to 

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Regulation O. Through its expert witness the government 

established that Regulation O imposed a duty on [the 

defendant] to inform the bank’s directors that he had an 

interest in the loans.... In sum, the government used 

Regulation O to supply a crucial element of the 

misapplication and false entry charges.

Eriksen, 639 F.3d at 1149-50. In distinguishing Wolf from Eriksen, the Ninth Circuit explained:

Thus, under the logic of Christo and Wolf, it is impermissible to 

use the violation of a civil statute to ipso facto “supply a crucial 

element” of a criminal offense.

Contrary to Christo and Wolf, the Plan Asset Regulation played an 

inconsequential or, more likely, no role in Defendants’

convictions.

Id. at 1150.

In the pending case, the Indictment charges Heine and Yates with conspiring to commit 

bank fraud in violation of 18 U.S.C. § 1349 and making false bank entries, reports, and 

transactions in violation of 18 U.S.C. § 1005. ECF 1. The government argues that it can prove 

these charges with evidence that Defendants knowingly made material misrepresentations and 

failed to disclose material information on the Bank’s Call Reports, among other places. In order 

to avoid the issues identified in Wolf, the jury will need to be carefully instructed that Defendants 

are not being criminally tried for violating FDIC rules, regulations, or expectations, but only for 

allegedly making false entries and reports and conspiring to commit bank fraud. Wolf does not 

require the exclusion of Mr. Worthing’s proffered testimony.

2. Glenese Klein, Financial Forensic Accountant, FBI

According to the government’s summary of expert testimony, Ms. Klein will not be 

offering any expert opinion testimony. Instead, she will present only summaries of voluminous 

documents, which is permitted under Rule 1006 of the Federal Rules of Evidence. She will 

present summaries that show, among other things, the dates that various transfers were made to 

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cover loan delinquencies by Bank customers, including from which accounts those transfers 

were made and to which accounts (or for whose benefit) those transfers were made, as set forth 

in the relevant documents received in evidence. Ms. Klein also will testify that according to the 

Bank’s Call Reports and other records, these loan delinquencies were no longer being reported

by the Bank. ECF 377. In other words, the summaries presented by Ms. Klein will “follow the 

money.” As explained by the Advisory Committee on Rules, the expert disclosures required 

under Rule 16 do not “extend to summary witnesses who may testify under Federal Rule of 

Evidence 1006 unless the witness is called to offer expert opinions apart from, or in addition to, 

the summary evidence.” Fed. R. Crim. P. 16 advisory committee’s note to 1993 amendment.

Among other things, Heine argues that a summary witness must lay a proper foundation 

to establish that the summary is accurate. The Court agrees. Heine also argues that for Ms. Klein 

to present a summary that purportedly shows that certain delinquencies were no longer being 

reported on the records of the Bank, she would need to review “every Bank of Oswego document 

in existence.” ECF 407 at 25 (internal 18). The Court disagrees. Heine’s objection goes to 

weight, not admissibility, and Defendants are free to inquire on cross examination what records 

Ms. Klein did not review and to argue during closing the implications of her responses.

The government, however, must disclose its summary exhibits to Defendants when the 

government discloses its trial exhibits not later than March 13, 2017. See ECF 434 at 4. These 

disclosures should be sufficiently annotated to enable Defendants to confirm or refute their 

accuracy. If either Defendant moves in limine to exclude any summary exhibit on the grounds 

that it is inaccurate, the Court will consider that argument and any related evidence presented by 

the parties at a pretrial conference. If no Defendant presents affirmative evidence that a particular 

summary entry is inaccurate, however, the Court anticipates receiving that summary in evidence, 

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and Defendants’ argument that the witness might not have reviewed every Bank document will 

be held simply to go to the weight of the summary exhibit and not to its admissibility.

B. Defendant Yates’s Proffered Witnesses

1. Mark C. Riley and David S. Porter

According to Defendant Yates’s amended notice, Mr. Riley will offer expert testimony 

regarding the characteristics of a “de novo community bank,” the norms of corporate governance 

(including the role of a Chief Financial Officer and other persons in management positions), 

Defendant Yates’s specific responsibilities and the responsibilities of other Bank officers given 

the Bank’s “organizational structure,” and his opinion that Defendant Yates’s performance as 

Chief Financial Officer was “consistent with professional standards for a person in her position 

under the circumstances.” ECF 515 at 2. In addition, according to Defendant Yates, Mr. Riley 

will testify about Bank operations, the responsibilities and duties of specific Bank officers related 

to the specific transactions that are the subject of the government’s allegations, the types of 

information that would be material to the Bank’s board, a bank’s regulatory compliance 

obligations and the role of the FDIC, appropriate measures of a bank’s financial health, 

applicable banking standards in relation to the specific transactions described in the Indictment, 

and the effect that a “rogue” bank official can have on a small community bank, including the 

“impact of Geoff Walsh’s fraud on the Bank of Oswego, its operation, and its officers and 

employees.” Id. at 5. The government does not object to this summary of expected testimony.

ECF 525.

Also according to Defendant Yates’s amended notice, Mr. Porter, a certified public 

accountant, will offer expert testimony regarding: the role of a Chief Financial Officer and the 

nature of the relationship between an officer of such an entity and that entity’s independent 

accountants; the role that the accounting firm Moss Adams placed in the performance of 

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Defendant Yates’s duties and for the Bank generally; the process through which a Chief 

Financial Officer gathers and receives financial information for the preparation of financial 

documents; how Defendant Yates gathered and received information for the preparation of 

financial documents; the internal controls within the Bank and their effect on financial reporting, 

appropriate measures of a bank’s financial health, the loan originations at the Bank, the 

appropriate accounting for the specific transactions described in the Indictment, and the general 

structure, operation, and hallmarks of a conspiracy to commit a financial fraud; and his opinion 

that Defendant Yates’s alleged conduct is “not indicative of such a conspiracy and does not 

follow the pattern expected in such a scheme.” ECF 515. The government does not object to this 

summary of expected expert testimony. ECF 525.

Defendant Heine objects to the testimony of both Mr. Riley and Mr. Porter. Heine argues 

that their testimony will “displace the jury’s function by improperly dictating the legal 

conclusion it should reach.” ECF 407; ECF 524. Heine also argues that the testimony of these 

two witnesses “improperly opines that Defendant Yates did not possess the requisite intent to 

commit the acts charged in the Indictment.” Id. According to Heine, this testimony would violate 

Rule 704(b) of the Federal Rules of Evidence. Among other cases, Heine relies upon United 

States v. Morales, 108 F.3d 1031 (9th Cir. 1997), which held:

A prohibited “opinion or inference” under Rule 704(b) is 

testimony from which it necessarily follows, if the testimony is 

credited, that the defendant did or did not possess the requisite 

mens rea.

Morales, 108 F.3d at 1037.

In response, Yates argues that neither Mr. Riley nor Mr. Porter will “provide any legal 

conclusions.” ECF 533 at 5. Instead, she analogizes the proffered testimony to expert testimony 

on the standard of care in negligence litigation, where experts routinely provide opinions both 

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about the standard of care and whether a defendant’s conduct fell above or below that standard. 

In addition, Yates assures the Court that neither Mr. Riley nor Mr. Porter will offer “testimony 

on Ms. Yates’s or Mr. Heine’s state of mind.” Id. at 7. With these acknowledgments and 

concessions, it is not the case that whether any Defendant did or did not possess the requisite 

mens rea will necessarily follow from Yates’s proffered expert testimony. Thus, Heine’s 

objections to the proffered testimony of Mr. Riley and Mr. Porter are not well taken.

2. Dr. Daniel Reisberg

According to Defendant Yates’s amended notice, Dr. Reisberg will offer expert 

testimony regarding the functioning of human memory. He will not, however, according to 

Defendant Yates, offer any opinions regarding the functioning of any particular witness’s

memory and “will not vouch for any particular witness or comment on his or her credibility.” 

ECF 515 at 14. Instead, describes Yates, “Dr. Reisberg’s testimony will be limited to general 

principles of human memory and cognition.” Id. Both the government and Defendant Heine 

object to this summary of expected expert testimony by Dr. Reisberg. ECF 407 (Heine’s 

objections to Yates’s original notice); ECF 524 (Heine’s objections to Yates’s amended notice); 

ECF 525 (Government’s motion in limine). Yates responded (ECF 533), and Heine and the 

government replied. ECF 540 (Heine); ECF 541 (Government). In addition, the Court allowed 

Yates to file a sur-reply, which she did. ECF 546 (Yates’s sur-reply).

The Court finds that Dr. Reisberg is qualified as an expert in the field of human memory 

and cognition. The Court is uncertain, however, whether and, if so, how Dr. Reisberg’s specific 

testimony in this case will be helpful to the jury. To be admissible, expert testimony must “help 

the trier of fact to understand the evidence or to determine a fact in issue.” Fed. R. Evid. 702(a).

Among other things, the trial court must be satisfied that the expert testimony is “relevant to the 

task at hand.” City of Pomona, 750 F.3d at 1043. In light of the generalities expressed in Yates’s 

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expert witness summary for Dr. Reisberg, the Court is unable to make this determination at this 

time.

Indeed, Yates appears to concede this point. According to Yates, 

Despite the government’s belief, Ms. Yates does not have the 

burden of naming each witness and fact that will be included in Dr. 

Reisberg’s testimony. Even if such a burden existed, compliance 

would be impossible: Ms. Yates does not and cannot know what 

the trial testimony will in fact be. For example, Ms. Yates does not 

know what out-of-court statements the government will introduce 

and how those declarants will testify in response. Ms. Yates 

similarly does not know which of her out-of-court statements the

government will seek to introduce at trial. Without this 

information, Ms. Yates is not obligated to foreshadow Dr. 

Reisberg’s exact testimony. Ms. Yates is, however, obligated to put 

the government on notice of Dr. Reisberg’s areas of testimony, 

qualifications, and how his testimony is potentially relevant. Ms. 

Yates has met this burden.

ECF 533 at 9-10 (emphasis added). The Court disagrees and notes that Rule 16(b)(1)(C) of the 

Federal Rules of Criminal Procedure states that a defendant must “describe the witness’s 

opinions.” Yates has not yet done so with sufficient detail to enable the Court to determine 

whether Dr. Reisberg’s testimony will be helpful to the jury in this case.

Rather than determine at this time, however, whether Dr. Reisberg may testify (and, if so, 

on what topics), the Court will defer its ruling until after a preliminary hearing has been held 

pursuant to Rule 104 of the Federal Rules of Evidence. Moreover, in light of Yates’s position 

that she “does not and cannot know what the trial testimony will in fact be” until after it has 

occurred, the Court will hold the preliminary hearing under Rule 104 during trial, after the 

government has rested its case, and out of the presence of the jury. Finally, because the Court 

will not determine whether and, if so, to what extent Dr. Reisberg may testify until sometime 

during trial, both the government and Defendant Heine are relieved of any obligation they may 

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have to provide any summaries of rebuttal expert testimony that may be offered solely to rebut 

Dr. Reisberg’s testimony. See Fed. R. Crim. P. 16(d)(1).

CONCLUSION

Heine and Yates’s objections to the government’s disclosed expert witnesses (ECF 407 

and ECF 521), Heine’s objections to Yates’s disclosed expert witnesses (ECF 407; ECF 524), 

and the government’s objections to Yate’s disclosed expert witness on memory and cognition, 

Dr. Reisberg (ECF 525) are resolved as stated in this Opinion and Order. Mr. Worthing, 

Ms. Klein, Mr. Riley, Mr. Porter, Mr. Kelley, and Mr. Lyngaas may testify at trial consistent 

with this Opinion and Order. The Court defers ruling on the proffered testimony of Dr. Reisberg 

until after the Court holds a preliminary hearing after the government rests its case at trial. As 

provided in the Second Trial Management Order (ECF 434), the deadline for filing rebuttal 

expert witness summaries remains as scheduled for February 27, 2017, although neither the 

government nor Defendant Heine is required to provide any summaries for expert witnesses 

whose testimony will be limited to rebutting the expert witness testimony, if allowed, of 

Dr. Reisberg.

IT IS SO ORDERED.

DATED this 2nd day of February, 2017.

/s/ Michael H. Simon

Michael H. Simon

United States District Judge

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