UNITED STATES DISTRICT COURT 

 FOR THE DISTRICT OF ARIZONA 

 _________________ 

United States of America, ) 

 ) 

 Plaintiff, ) CR-18-0422-PHX-SPL 

 ) 

 vs. ) Phoenix, Arizona 

 ) October 5, 2018 

Michael Lacey, ) 10:50 a.m. 

James Larkin, ) 

Scott Spear, ) 

John Brunst, ) 

Andrew Padilla, ) 

Joye Vaught, ) 

 ) 

 Defendants. ) 

 ) 

______________________________) 

 

BEFORE: THE HONORABLE STEVEN P. LOGAN, JUDGE 

REPORTER'S TRANSCRIPT OF PROCEEDINGS

HEARING ON PENDING MOTIONS - VOLUME II

(Pages 61 through 136, inclusive.) 

Official Court Reporter: 

Linda Schroeder, RDR, CRR 

Sandra Day O'Connor U.S. Courthouse, Suite 312 

401 West Washington Street, Spc. 32 

Phoenix, Arizona 85003-2151 

(602) 322-7249 

Proceedings Reported by Stenographic Court Reporter

Transcript Prepared by Computer-Aided Transcription

Case 2:18-cr-00422-DJH Document 348 Filed 10/19/18 Page 1 of 76
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A P P E A R A N C E S 

For the Government: 

 U.S. Attorney's Office 

 By: PETER SHAWN KOZINETS, ESQ. 

 ANDREW C. STONE, ESQ. 

 MARGARET WU PERLMETER, ESQ. 

 KEVIN M. RAPP, ESQ. (Telephonic) 

 40 North Central Avenue, Suite 1200 

 Phoenix, AZ 85004 

 U.S. Attorney's Office 

 By: JOHN JACOB KUCERA, ESQ. (Telephonic) 

 312 North Spring Street, Suite 1200 

 Los Angeles, CA 90012 

 U.S. Department of Justice 

 By: REGINALD E. JONES, ESQ. (Telephonic) 

 1400 New York Avenue NW, Suite 600 

 Washington, DC 20530 

For the Defendant Lacey: 

 Liptsitz Green Scime Cambria 

 By: PAUL JOHN CAMBRIA, JR., ESQ. 

 42 Delaware Avenue, Suite 120 

 Buffalo, NY 14202 

For the Defendants Lacey and Larkin: 

 Davis Wright Tremaine 

 By: ROBERT CORN-REVERE, ESQ. 

 1919 Pennsylvania Avenue NW, Suite 800 

 Washington, DC 20006 

 Davis Wright Tremaine 

 By: JAMES C. GRANT, ESQ. 

 1201 3rd Avenue, Suite 2200 

 Seattle, WA 98101 

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For the Defendant Larkin: 

 Bienert Miller & Katzman 

 By: THOMAS HENRY BIENERT, JR., ESQ. 

 WHITNEY Z. BERNSTEIN, ESQ. 

 903 Calle Amanecer, Suite 350 

 San Clemente, CA 92673 

 Schulte Roth & Zabel 

 By: SEETHA RAMACHANDRAN, ESQ. 

 919 Third Avenue, Suite 2013 

 New York, NY 10022 

For the Defendant Spear: 

 Feder Law Office 

 By: BRUCE S. FEDER, ESQ. 

 2930 East Camelback Road, Suite 160 

 Phoenix, AZ 85016 

For the Defendant Brunst: 

 Kimerer & Derrick 

 By: MICHAEL D. KIMERER, ESQ. 

 1313 East Osborn Road, Suite 100 

 Phoenix, AZ 85014 

 Bird Marella Boxer Wolpert Nessim 

 Drooks Lincenberg & Rhow 

 By: ARIEL A. NEUMAN, ESQ. 

 1875 Century Park E, Suite 2300 

 Los Angeles, CA 90067 

For the Defendant Padilla: 

 Piccarreta Davis Keenan Fidel 

 By: MICHAEL L. PICCARRETA, ESQ. 

 2 East Congress Street, Suite 1000 

 Tucson, AZ 85701 

For the Defendant Vaught: 

 Karp & Weiss 

 By: STEPHEN M. WEISS, ESQ. 

 3060 North Swan Road 

 Tucson, AZ 85712 

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Case 2:18-cr-00422-DJH Document 348 Filed 10/19/18 Page 3 of 76
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For Henze Cook Murphy, PLLC: 

 Mitchell Stein Carey Chapman 

 By: LEE DAVID STEIN, ESQ. 

 ANNE MICHELLE CHAPMAN, ESQ. 

 2 North Central Avenue, Suite 1450 

 Phoenix, AZ 85004 

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THE COURT: This Court will come to order. All

parties present when the Court last closed are present again.

Linda, thank you for helping us out this morning. 

I was looking at some of the information that was

placed on the record, and the attorney for Padilla, you

indicated that DWT needs to present the evidence related to the

First Amendment issues. My question is do you expect DWT to be

involved in examining witnesses or presenting evidence on First

Amendment or privacy related issues at trial?

MR. PICCARRETA: I don't expect that. We will present

the evidence at trial. The criminal trial lawyers will present

the criminal evidence at trial, but they will be involved in

the motion hearings and legal arguments related to it. At

least that's my understanding.

THE COURT: Okay. I appreciate that. Thank you very

much. All right. That takes us to the next motion. It's

government's motion to resolve attorney-client privilege

issues, which is document number 195. Mr. Stone, I'll give you

ten minutes on this.

MR. STONE: Thank you, Your Honor. The issue

presented on the government's motion to resolve the

attorney-client privilege is what privilege exists after a

corporation and the CEO of the corporation has pled guilty and

then waived that corporation's attorney-client privilege.

That's the issue that's presented to the Court. And

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Case 2:18-cr-00422-DJH Document 348 Filed 10/19/18 Page 5 of 76
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the practical import of that question is that there are

currently 10,733 e-mails that are segregated into the

government's filter review, which may or may not be privileged.

THE COURT: Well, let me ask you a question about

that, and I'll let you -- I'll give you some additional time.

Approximately how many of those privileged e-mails at issue

were found to be non-privileged by Judge Campbell's order? Do

you know?

MR. STONE: How many of those e-mails that are

currently segregated were found to be non-privileged?

THE COURT: Correct.

MR. STONE: Zero, in terms of the specific e-mails, is

my understanding, Your Honor. Because the e-mails that Judge

Campbell found to be non-privileged were then turned over to

the government.

THE COURT: Well, how many e-mails do you anticipate

are outside of the scope of Judge Campbell's order?

MR. STONE: So Judge Campbell's order deals with our

second independent reason why all these e-mails should be

turned over to the prosecution team. And that's a subject

matter waiver that Backpage has waived with respect to the

privilege.

Judge Campbell found a number of communications by

Backpage or between Backpage and its attorneys when they

included third-party PR firms, public relation firms, and Judge

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Campbell found that those particular e-mails were not

privileged.

Now, under the law, which is clear and I don't think

is in dispute here, is when a subject matter has been waived,

then all of the e-mails or all of the communications related to

that particular subject matter now no longer have the

privilege. And that makes sense because the attorney-client

privilege is set up to permit clients to engage in frank and

honest conversations with their attorneys. And when it doesn't

matter if a third party sees those communications, then there's

no reason for those communications to be kept secret to the

world.

So the subject matter -- and this is the second,

again, the second independent reason why these attorneys or

these communications and e-mails should be turned over to the

prosecution team -- is the subject matter as pointed out in the

government's papers are very broad.

THE COURT: I'm sorry. Speaking of your papers, why

is the order from the Washington State Court persuasive if none

of the privileged documents were actually disclosed?

MR. STONE: So that's the third independent reason,

Your Honor, and I would submit that that's not as strong as the

first two. So I wouldn't spend much time arguing about the

implied waiver that Backpage had when they had their in-house

counsel submit to a factual deposition up there. It was a

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30(b)(6) deposition in a civil case. They ended up settling

the case before the witness answered additional questions

that they had claimed the privilege.

THE COURT: Can't we distinguish that Washington case

from this case?

MR. STONE: Well, the way that it shakes out and the

way that the defendants have argued it is that, hey, look, that

was an implied waiver, and it never actually was effectuated,

so that shouldn't be of any import here.

THE COURT: Because it was never effectuated?

MR. STONE: Yes. But I would say the number one

reason why these e-mails should be turned over, Your Honor, is

because the CEO of the company that has also pleaded guilty has

waived the corporate privilege.

Now, I'm going to put a small timeline on the machine

here and see if we can get it.

THE CLERK: If you use the wheel at the top on the

front.

MR. STONE: Thank you.

THE COURT: All the way up top, silver. There you go.

MR. STONE: I appreciate it. So this is the primary

argument that I'd like to focus on, is the fact that Carl

Ferrer has been the owner of Backpage since April 22nd, 2015.

He has waived the corporate privilege, so that any

communications between Backpage and its attorneys no longer

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Case 2:18-cr-00422-DJH Document 348 Filed 10/19/18 Page 8 of 76
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exist. It doesn't have the privilege anymore.

And defendants have raised two arguments for why -- or

they've raised several arguments for why this doesn't -- that

this hasn't -- that the CEO's waiver of the privilege hasn't

actually effectuated the waiver.

The first is an argument that pertains to

communications pre-sale, before April 22nd, 2015.

Now, it's black letter law that when a company is

sold, the ability to assert or waive the privilege transfers in

the sale.

So at one point Backpage was owned by some of the

defendants. It's now owned by Carl Ferrer.

They talk about all the various holding companies and

things like that. I don't think that really matters. We're

talking about Backpage, the corporation here, that runs the Web

site that holds the privilege when they have communications

with its attorneys.

So the Supreme Court has made clear in Weintraub that

once the sale has occurred, the new owner can waive the

privilege. And that's what's happened here. And that's for 90

percent or over 90 percent of the communications all deal

pre-April 22nd, 2015. That's 9,405 documents that are in the

filter review right now are dealing with these pre-sale

communications.

The argument, as I best understand it from the

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Case 2:18-cr-00422-DJH Document 348 Filed 10/19/18 Page 9 of 76
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defendants on this issue, is that Mr. Ferrer didn't have the

ability to waive the privilege pre-sale because he wasn't the

owner, and he doesn't gain any rights post-sale because Village

Voice Holding Companies still -- they controlled the privilege

initially, and they can control it afterwards.

THE COURT: Mr. Stone, why shouldn't this Court just

go ahead and err on the side of caution and keep these specific

e-mail communications privileged?

MR. STONE: Because there's no need under the law or

under the facts of the case. There's just absolutely no need

for the e-mails that occurred pre-sale. Post-sale there's some

arguments that the defendants have made that sort of muddy the

waters, and we can talk about that. That's dealing with the

final 1,300 communications or so.

But pre-sale there just isn't a valid argument for why

the Court shouldn't issue an order that states that that

privilege has been waived and that the prosecution team is

permitted to review them, and they become part of the

discovery.

(Phone ringing.)

THE COURT: Hold on just a minute.

THE CLERK: There's feedback.

THE COURT: We need to hang it up. They must have it

on a speaker phone.

I'm sorry, Mr. Stone. Go ahead.

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MR. STONE: So taking --

THE COURT: Lisa, this is the reason why we won't

grant anymore requests to call in. This was a one-time thing.

Go ahead.

MR. STONE: Your Honor, taking defendants' argument to

its logical conclusion here, at one point the Village Voice

Holdings owned a lot of other entities beyond Backpage and

including a number of newspapers and publications, including

Village Voice in New York. They sold those -- They sold those,

as I understand it, 2012, 2013, to focus solely on the

ownership of Backpage.

THE COURT: Okay. I'm just a little -- I'm just a

little confused. When I read through document number 195

several times, I had some questions. But in light of what

happened in this courtroom earlier today, if the privilege has

been waived as to these privileged documents, doesn't that now

work against the government's argument about the

disqualification of DWT?

MR. STONE: No, Your Honor, because we're talking

about different privileges. We're talking about Backpage's

corporate privilege, and we're talking previously about Carl

Ferrer being represented individually by both law firms that we

had discussions about.

THE COURT: So it's the government's position that

disqualification is required and outside of the Court's

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discretion? You're not saying that?

MR. STONE: I'm sorry. I didn't track that. That

it's not required outside the Court's discretion?

THE COURT: Correct.

MR. STONE: I would say given the case law that we had

noted, that when there are issues that are raised, as in this

case, where you have -- .

(Phone ringing.)

THE COURT: Go ahead, Mr. Stone.

MR. STONE: In this case you have an individual who

has pled guilty whose personal attorneys represented him

previously and who then --

(Phone ringing.)

THE COURT: Just hang it up. This is disrupting the

hearing.

(Phone ringing.)

THE CLERK: I know. It won't hang up.

THE COURT: My apologies to all of you. I know your

time is incredibly valuable, and the United States Government

was requesting an opportunity to call in because I had moved

the hearing from the 4th to the 5th. And we certainly have

qualified counsel here today, two tremendous federal

prosecutors. But I wanted to allow some others to call in.

But it appears that we're having some technical difficulty, so

I apologize to everyone in the courtroom. Go ahead.

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MR. STONE: And the distinction that I was making,

Your Honor, is that with respect to this issue and to resolve

the attorney-client privilege, we're talking strictly about the

corporation's privilege. And before Mr. Kozinets was arguing

the disqualification motion, we're talking about the fact that

both law firms had represented Carl Ferrer individually,

including before the Senate in the PSI case. 

And that's the distinction, is that you would have

attorneys who helped prepare declarations over the years for

Mr. Ferrer, who then are going to help take part in factual

parts of this case, factual aspects.

Even this First Amendment motion that the defendants

keep raising that they're going to file eventually is going to

involve factual components. And certainly DWT, Davis Wright

Tremaine, has information based on its personal representation

of Carl Ferrer on those issues.

And so the cases that have been cited suggest that the

government needs to raise this to the Court because of the

potential conflict.

But here, in resolving the attorney-client privilege,

we're talking just about the corporation. And anything that

occurred pre-sale absolutely the Court should issue an order

that states those e-mails and correspondence do not have a

privilege that attaches to them.

Post-sale the argument is a little different. The

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argument that defendants assert suggests that from the moment

that the company was sold on April 22nd, 2015, from that moment

there was an oral agreement for joint representation between

and among Backpage, Mr. Ferrer, and at least Mr. Lacey and

Mr. Larkin and possibly others.

And that includes any representation from any attorney

for Backpage. That's what they've argued in their papers. And

then they point to three documents which are on the screen

here, this December 12, 2016, engagement agreement that's just

between DWT, Ferrer, Lacey, and Larkin, and then the common

interest and joint defense agreements, which has been

discussed, I think, quite a bit already.

But the change that occurred between these events,

between the sale and then 20 months later when these agreements

are memorialized, is that in September or October, 2016, the

California Attorney General filed criminal charges against

Mr. Ferrer, Mr. Lacey, and Mr. Larkin as individuals. And we

heard defense attorneys earlier today state that was -- those

were individually -- those were filed against those particular

individuals, which then led to all these joint representation

agreements.

THE COURT: So, Mr. Stone, based on the government's

understanding, doesn't the joint defense agreement cover

Ferrer's waiver of attorney-client?

MR. STONE: Well, we haven't seen any of these

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agreements. But there is an attachment -- I believe it's the

first attachment to the disqualification motion -- and in a

footnote Mr. Ferrer's attorneys quote a line from that

engagement letter which suggests -- or engagement agreement

which states that if there is a conflict, then Davis Wright

Tremaine, if there's a conflict between Backpage, Ferrer,

Lacey, and Larkin, then Davis Wright Tremaine can continue to

represent Backpage.

And those are common statements in engagement letters.

In my time in private practice we certainly had engagement

letters that would state that when it's joint representation,

if there's a conflict, then the law firm can continue to

represent the company.

But of course that's not what happened here. The

company has pled guilty, and Mr. Ferrer has pleaded guilty.

So the argument for the 1,300 communications that are

post-Backpage sale is that there were these joint

representation agreements that stretched to every single

attorney that communicated with Backpage and that they were

oral, and then they were memorialized by these agreements that

the government hasn't seen.

The government has a hard time believing that's the

case, but, again, we're in the dark because we haven't seen

these. They've been submitted to the Court in camera. But

importantly there are no communications in the government's

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filter review that postdate December, 2016.

So if the Court determines that really the beginning

of these joint representations occurred sometime around when

these -- when these agreements were memorialized, then the

Court would have no trouble issuing an order that every e-mail

that's in the filter review right now should be turned over to

the prosecution team for review and for disclosure.

I'll be happy to answer any questions, but I want to

keep it as brief as possible.

THE COURT: Mr. Stone, thank you for that. Lisa --

(The Court and Clerk confer off the record.)

THE COURT: Mr. Stone, the other lawyers that

represent the United States Government that are calling in on

the phone, do they have -- any of them have a speaking role?

MR. STONE: Yes, Your Honor. The only one who does is

Mr. Kucera, who is the forfeiture attorney out of the Central

District of California. And he would argue the forfeiture

motion that's pending before you.

THE COURT: Okay. I appreciate that. Thank you.

(Phone ringing.)

THE COURT: Lisa, maybe you can send an e-mail to

Sally, and she can come in here and figure this out.

(The Court and Clerk confer off the record.)

THE COURT: Is there any defense counsel that would

like to place something on the record as it relates to the

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government's motion to resolve attorney-client privilege,

document number 195? Sir, are you coming to speak for the

group?

MR. GRANT: I believe I am this time, Your Honor.

THE COURT: Outstanding. I'll give you five minutes.

Go ahead.

MR. GRANT: Thank you, Your Honor.

THE COURT: And, sir, for the record your name.

MR. GRANT: I'm sorry, Your Honor. Jim Grant on

behalf of Messrs. Larkin and Lacey.

I can't start without noting the irony of the

government's argument that we just heard the argument this

morning that said that my firm should be disqualified because

Mr. Ferrer had not waived attorney-client privilege. Now the

government is arguing that in fact he's waived all

attorney-client privilege.

And he uses that as a predicate for what I have to

suggest is a wholly unprecedented motion. In essence the

Court -- the government is asking the Court to say that all

privileges are waived as to all defendants without regard to

any specific communications, the context of those

communications, who was representing whom, who held the

privileges, and what the communications were.

I have never seen a case ever where that's ever been

permitted and certainly not based on a string of promises as

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what the government has offered here.

Again, we have to go back to understand exactly what

the relationship between the parties was, who held the

privileges, and at what periods of time.

And we've talked about some of this, and it's in the

papers, so I won't belabor it. But in fact up to the time of

the sale of Backpage in April of 2015, Village Voice Media

Holdings was the parent company. Village Voice Media Holdings

was the entity that hired, retained, and managed counsel.

Village Voice Media Holdings is the one that held the

privileges. To the extent that there were privileges with

Backpage, they were joint. But Village Voice Media Holdings is

the privilege holder. Village Voice Media Holdings exists

today and still holds all of those privileges.

At the point in time when Backpage is sold to

companies managed by Mr. Ferrer, from that point forward, now

the parties are governed by the joint representation

agreements.

Mr. Stone put up his timeline suggesting that the

agreement somehow didn't cover before December, 2016. Your

Honor, I suggest you read the agreements themselves.

Exhibit B to the declaration -- it's on the first

page -- exactly says that all the agreements covered the

existing understandings between the parties, and this was

merely memorializing them in writing.

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The law of the Ninth Circuit is very clear that a

joint defense or a joint representation agreement does not need

to be stated in writing. It can be oral. And in fact that was

always the case here. There always was an agreement later

memorialized in writing, which United States versus Gonzalez is

the case I was referring to.

So Mr. Ferrer can waive privileges that he holds. For

example, he can waive privileges for his personal

communications with Ms. Clarence and her firm or other

attorneys who represented him personally. That is not Davis

Wright. That is not any of the counsel that represented the

companies collectively and the parties collectively under the

joint representation agreements.

THE COURT: So it's the defendants' position that the

joint defense agreement prevents Ferrer from waiving

attorney-client privilege in his capacity as CEO of Backpage?

MR. GRANT: The agreement expressly says -- and I'm

referring to the joint representation agreement, which is the

Common Interest and Litigation Management Agreement,

Exhibit B -- expressly says that the parties hold the privilege

collectively, and no party, either Mr. Ferrer, nor

Backpage.com, nor any other corporate party that he owns, will

waive that privilege or disclose any privileged communications

to any other party. 

So for the period of time from when the sale occurs,

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Mr. Ferrer is contractually obligated. He's bound. He's

precluded. He cannot waive those privileges, because the

nature of the joint representation is that the parties

collectively share the privileges. They're working with their

common counsel. You have to share the privileges in order to

effectively represent them all jointly. And that's recognized

in the law as well. That's the nature of what a joint

representation is.

So you share those privileges among yourselves, but

you keep them secret, you keep them from disclosure to third

parties.

That's the distinction -- Let me go back. I'm saying

what he can waive.

So he could waive as to his communications with

Ms. Clarence. It's entirely unclear, based on what the

government has said, whether he's purporting to do that, he's

not purporting to do that. As Mr. Cambria points out, his

proffer agreement says he is; the government says he's not.

That's one of the issues for disclosure, and I think that's a

motion we'll come to in a bit.

He could also waive privileges as to his

communications with counsel after April 6 of 2018. That's the

period when he withdrew from the joint representation. And at

that point forward it's fair game for Mr. Ferrer as to his

personal attorneys or any other attorneys he retains at that

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point to waive those privileges.

But he cannot waive privileges that he did not hold.

And so for the period of time that Backpage.com was a

subsidiary of Village Voice Media Holdings, they collectively

held the privilege, or Village Voice Media Holdings actually

controlled the privileges, the parent.

Mr. Ferrer can't waive that privilege. He doesn't

have any right to do it. And that's established in the case

law.

If you take a look at the cases that the government

has cited, they all have to do with situations where you have

the subsidiary or the purchaser of the subsidiary suing the

former parent, and there's a dispute between them.

Courts have held in that consequence, because,

remember, all that privileged information is shared between the

parties before, one party can't prevent the other from waiving

the privilege. The privilege is basically open-ended between

those parties.

But the cases are also very clear that where you have

a parent and a subsidiary, even after a sale, in that

circumstance the privileged communications cannot be disclosed

to a third party unless all parties consent.

That's the nature of the privilege as well. And the

case law is very clear. The government miscited basically

three or four cases. If you go read them, they all hold that

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as to that third party, not in the inter -- it's called 

inter se or inter se circumstance, but as to third parties, the

privilege can't be waived unless there's consent of all.

So Mr. Ferrer cannot waive privileges as to

Backpage.com for the period that it was a subsidiary. He

doesn't hold that privilege singularly and doesn't have the

power to do it. And he cannot waive the privilege as to the

period of time, the subject of the joint representation

agreements. And, again, that's expressly called out in the

joint representation agreements.

I want to talk briefly about Judge Campbell's order

because the Court had asked a question about that. This,

again, is a wholly unprecedented idea. The notion that when

Judge Campbell entered his order holding that certain

communications were not subject to privilege and others were,

let me separate the two groups out. 

First of all, the government had challenged

communications with a Mr. Hemanshu Nigam. Mr. Nigam is an

attorney who was retained by Backpage or to work with Backpage

in connection with their moderation techniques. He formerly

was a board member of the National Center of Missing and

Exploited Children, NCMEC. He was recommended by NCMEC. They

brought him in to work on the best ways to make sure that they

moderated the content on the Web site.

THE COURT: I'm sorry, Mr. Grant. I need to just go

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back to -- I was looking at my notes about something that you

had just placed on the record a few minutes ago, and I just

need some clarification.

You made an argument about when Ferrer -- How do you

pronounce his name?

MR. GRANT: Ferrer.

THE COURT: When Ferrer as the CEO, he was 100 percent

owner of Backpage, and do you have anything to support the

proposition that he had no control over the company's

privileged communication? I mean, it seems incredible that he

would transfer -- I mean, wouldn't that go with the company? I

mean, what's the position on that?

MR. GRANT: So you're asking about the period of time

after Mr. Ferrer purchases the company? Is that -- Do I have

that right?

THE COURT: Yes.

MR. GRANT: After the time that he purchases the

company, he's now subject to the joint representation

agreements.

THE COURT: Right.

MR. GRANT: So to the extent that the company had

privileges before -- Let me take a step back. You've got to

look at the two different time periods. In the period that

Backpage is a subsidiary of Village Voice Media Holding, for

that period of time they hold privileges together. All right.

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So Mr. Ferrer purchases the interest in Backpage. This is

where the case law says that thereafter, although he's

purchased Backpage, he can't waive the privileged

communications that predate that purchase without the consent

of Village Voice Media Holdings. He doesn't have a unilateral

right to do it. 

Now, let me shift to the post-sale period.

After Mr. Ferrer purchases Backpage or his companies

do, now he enters into the joint representation agreement.

And in large measure, Your Honor, the nature of the

relationships and management of litigation and counsel and the

like didn't change. They were memorialized. They were written

down now in an agreement as opposed to the nature of the

parent/subsidiary relationship, but in that agreement --

THE COURT: So are you saying the transfer of those

rights would not be included in the purchase --

MR. GRANT: No, I'm not saying that. I'm not saying

that the transfer of rights as to attorney-client privilege

didn't pass to Backpage in the purchase. It did. That's fine.

But the problem is that those rights were jointly held with

Village Voice Media Holdings before. They continued to be

jointly held by Village Voice Media Holdings thereafter. And

the law is clear, very clear that Backpage could not

unilaterally waive the privilege for those jointly held

privileges. That's the difference.

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Does that respond to your question?

THE COURT: Yes. Go ahead. You have another minute.

MR. GRANT: All right, Your Honor. Thank you. As to

Judge Campbell's order, this again is a wholly unprecedented

concept. Judge Campbell, as I said, held that the privilege

claims were appropriate as to Mr. Nigam and his work. He was

acting as an attorney. And some 300 or so documents he said

should not be produced. It held that -- He held that

communications having to do with public relations firms,

between attorneys and public relation firms, that those were

not properly withheld as privileged, and he required that they

be produced.

We produced those documents. We object to his ruling,

but we produced the documents in good faith, as is the standard

rule when a Court compels you to produce documents and says

you've waived privilege as to those documents, fair enough. We

abide by the Court's decision.

But what the government's trying to say now is that

because those documents had to be produced, that thereby

constitutes a subject matter waiver of anything mentioned in

any regard in those documents. That is not the law, Your

Honor.

The subject matter waiver concept only applies in a

circumstance where a party affirmatively uses attorney-client

communications in a case, for example, for their tactical

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advantage. Say I have this attorney-client communication, and

I want to use it because I think it advantages me in this case.

When a party does that, courts have held in some circumstances

that then the fairness principle applies. You can't waive as

to a certain communication and try to take advantage of that

and not waive as to subject matter.

Courts are very careful with that, though, as to what

that subject matter is. That's not what happened here. This

is not a circumstance where Backpage or Village Voice Media

Holdings or any party voluntarily disclosed these materials.

It was because Judge Campbell directed that we had to disclose

these materials. 

And that is the full extent of the -- I don't want to

exactly call it a waiver of privilege. But the extent of what

needs to be produced is what has been produced.

If you were to take this concept and say that if this

Court were to compel production of specific documents, that

order then thereby takes any subject matter in those documents

and means that's a blanket waiver as to the subject matter. No

one would ever be in a position to safely or carefully be able

to make privilege claims. You'd always be at risk. But if

you're wrong, the Court's then going to say all your privileges

are waived. That's not the law, Your Honor.

As I said, there are further issues here that are part

of this motion having to do with the request for disclosure

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from the government and process for how the Court properly

should address these privilege issues. We've asked, for

example, that the Court simply halt this taint team review

process and allow the parties a fair opportunity for us to

understand what the government has actually done, what kind of

communications they've actually had, what perhaps has already

been disclosed, what communications there have been with

Mr. Ferrer in that regard, what communications there have been

with third parties now as well.

That's the nature of the relief we requested. It's in

our reply brief, I believe, on the last section. I'm happy to

address that as well, but I think my minute was up about three

minutes ago.

THE COURT: I think it's also sufficiently pled.

MR. GRANT: Thank you, Your Honor.

THE COURT: Mr. Stone, I'll give you a few minutes.

THE CLERK: Do it now?

THE COURT: Whenever.

THE CLERK: Because it might ring.

MR. STONE: Thank you, Your Honor. Just two quick

points. 

The first one is I think the Court was right to be

confused about when someone purchases a corporation, that the

attorney-client privilege wouldn't transfer. And I think

Mr. Grant conceded that it would. But he suggested that there

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were jointly held privileges there, meaning that the Village

Voice Holdings -- because that was the parent company --

jointly held privileges with Backpage pre-sale. And so

post-sale it still had those privileges, which is analogous to

saying Village Voice Holdings, which once owned the Village

Voice, the publication in New York, the newspaper, that after

that sale occurred in 2012 or 2013, any time that Village Voice

was in a dispute at some point, Village Voice Holdings could

say, no, we have the joint privilege here too, so you can't --

you can't waive or assert any privilege with respect to any

corporate communications without us saying it as well or

without us agreeing to it as well.

It's confusing, I think, at that point, Your Honor.

So, again, with respect to any pre-sale

communications, that waiver is clear. Those are gone.

And the second point is that it seems to me that

defense counsel confused the waiver question on the Judge

Campbell ruling. It's not that it was a third-party disclosure

because the Court ordered Backpage to turn over the documents.

It was that Backpage turned over the documents to the

third-party public relations firm in the first place. That's

where the subject matter waiver occurred. It didn't occur

after the Court issued an order. I mean, I think it's clear

that it occurred because they gave it to these third parties

who aren't protected by the privilege. Once you do that,

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there's a subject matter waiver, and case law is clear that

they don't get to then assert the privilege on those issues.

Thanks, Your Honor.

THE COURT: Thank you very much.

That takes us to the next motion. It's a defense

motion. It's defendants Lacey and Larkin's cross-motion to

obtain discovery and address privilege issues, which is

document number 235. And 235, it appears, serves as both the

response to document number 195 and as a separate cross-motion.

Which defense counsel plans to argue?

Sir, I know your name, but for the record, if you

could place it on the record again please.

MR. CAMBRIA: Yes, Your Honor. Paul Cambria.

Mr. Grant got to some of this. Our position is that Mr. Ferrer

has waived in writing his personal lawyer-client relationship.

We said that.

However, another layer of waiver can be had as a

result of discussions or subjects that he has taken up with the

various government authorities. And they've disclosed to us

that he's agreed to be debriefed by Texas, California, and the

federal government, and that supposedly there's a supplemental

cooperation agreement.

Our position is the record needs to be clear as to all

of the subjects that he has also discussed with those entities

because each and every one of those would constitute another

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layer of waiver. And without privileges, there's no basis for

the disqualification.

As to what Mr. Grant said concerning jointly held

privileges, we also need to know and we need discovery of all

the subjects that he has taken up with these various entities

to determine whether or not he has attempted to waive a

privilege that he has no right to waive.

THE COURT: Well, sir, let me ask you this: What

evidence do the defendants believe might be recovered as it

relates to this requested discovery?

MR. CAMBRIA: Well, what we need to know first is what

subjects he's discussed with the government. And then once we

determine what the subjects are, we can then come back to the

Court with your permission obviously and say, Your Honor, he

had no right to discuss these; this is privileged information;

it's now been acquired by the government; and then we discuss

what the remedy would be.

THE COURT: Well, in the government pleadings, they

provide information about the filter team process that they

have in place. What specific concerns do the defendants have

about this filter team?

MR. CAMBRIA: Well, a couple of things there. First

of all, you know, the government has asked that we trust, if

you will, the filter process. And some courts have indicated

that that isn't an appropriate situation, that masters should

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be appointed or magistrates should supervise, and obviously

that is a consideration, and we've raised it.

Kind of the ironic part about that is when we talked

about limited involvement, law only, of Davis Wright Tremaine,

for example, not cross-examination counsel -- the same thing

with Henze Cook -- the government says, well, how can we trust

that you're going to keep those things separate? At the same

time their position is but you can trust that we'll keep

separate the taint team from the prosecution team. I would

think we should both have the same consideration there.

THE COURT: But you're not seeking -- you're certainly

not seeking this information to pursue any civil litigation

against Ferrer, are you?

MR. CAMBRIA: No, no, no, no. What we're trying to do

is determine whether or not subjects have been discussed with

the government or other third parties that Mr. Ferrer had no

authority to waive the privilege on because it was jointly held

or it wasn't his at all. And we know that he's been debriefed

by at least three agencies. And so we need to know what those

subjects were.

And once we know those subjects, then we can come back

to this Court and say, for example, he discussed this, however

he did not have the authority to waive those privileges, and

for that reason whoever has been exposed to that information,

we now ask the Court for an appropriate remedy. So we need to

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know, first of all, all the things that he's discussed

subject-wise so that we can make that determination and also to

have another layer of waiver. Obviously everything he's

discussed with third parties he's waived.

THE COURT: I appreciate that.

MR. CAMBRIA: Thank you.

THE COURT: Is there any argument from the government?

MR. KOZINETS: Just a moment, Your Honor.

THE COURT: Sure.

MR. KOZINETS: Your Honor, I couldn't --

THE COURT: I'm sorry. Before you start, I just have

a question for you. Has this investigation team been reviewing

this privileged material during the time that this motion's

been pending, do you know?

MR. KOZINETS: I do not know. Do you mean the taint

team?

THE COURT: Correct.

MR. STONE: No, Your Honor. There was a letter, I

believe, by Mr. Piccarreta in May that suggested that they had

issues with the government's filter team. At that point we

ceased all activity with the filter team in preparation for the

Court resolving it. And that's why we brought some of these

motions here today, Your Honor.

THE COURT: And obviously that was May of 2018 of

course?

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MR. STONE: Yes, Your Honor.

THE COURT: Go ahead.

MR. KOZINETS: Your Honor, I'm prepared to address

this discovery request as it relates to the disqualification

issues, if Your Honor would like to hear about that.

THE COURT: Sure, go ahead. You have two minutes.

You can use it whatever way you would like to.

MR. KOZINETS: Okay. Thank you, Your Honor. It's our

position we think it's clearly laid out in our response brief

to the defense motion for discovery on Carl Ferrer's

attorney-client privilege that that request is really

immaterial and irrelevant. It's irrelevant and immaterial

because the attorney-client privilege is limited in scope.

It's an evidentiary privilege. 

But the disqualification issue involves these ethical

rules that cast a far broader net and apply to all confidences,

whatever their source, that relate to a client representation. 

So this notion of did he waive privilege in a

corporate capacity, in a personal capacity, that is all truly

irrelevant. And, moreover, it's irrelevant because ethical

Rule 1.9(a) also protects the undivided duty of loyalty that

these attorneys continue to owe to Mr. Ferrer. And that has

been reaffirmed in numerous cases that we've cited in our

brief, including the Trone case from the Ninth Circuit, the

Fawell, Touchcom, and Selby cases as well. 

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In the T.C. Theatre case, the foundational case that

the Arizona appellate courts have recognized as the seminal

case in the area of ER 1.9(a), in that case T.C. Theatre held

that a lawyer's duty of absolute loyalty does not end with his

retainer, but it continues.

So for all of those reasons, we respectfully submit

that these issues really don't impact the disqualification.

They pertain to determination of the extent to which the

corporation waived the privilege and document review issues but

not to disqualification.

THE COURT: Thank you very much.

MR. KOZINETS: Thank you.

THE COURT: Is there anything else from the defense on

the motion that we've been discussing?

MR. CAMBRIA: Your Honor, Paul Cambria again. May I

just respond to that last comment that he made?

THE COURT: Go ahead.

MR. CAMBRIA: Where he says that the -- it's not

relevant to disqualification, as I indicated, 1.9 itself

requires the presence of a confidence. The ethics opinions

that they rely on require the presence of a confidence. The

Supreme Court of Arizona requires the presence of a confidence.

So all those things are clearly not just relevant but the most

relevant. Thank you.

THE COURT: Thank you. That takes us to the next

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motion, which is defendant Lacey's motion for disclosure of

documents related to Carl Ferrer's waiver of privilege as to

material to disqualification, which is document No. 202.

Who would like to argue that one, or would you like to

just rest on the pleading?

And, sir, again, since we have so many lawyers in the

courtroom, if you could tell us who you are.

MR. GRANT: This is Mr. Grant again, Your Honor. And

I have to confess I'm not real good with docket numbers, so I'm

not sure which one we're on. Mr. Cambria just argued the

motion as to disclosure related to the disqualification motion.

THE COURT: Right, the cross-motion to obtain

discovery and address the privilege issues.

MR. GRANT: Okay. I believe most of his comments were

directed towards the issue of the privilege issues. There

additionally is a cross-motion is a little bit broader than

that, and Mr. Cambria touched on it, but there are some other

issues there as well. I'm happy to address those.

THE COURT: Do you want to go back to that one? 

MR. GRANT: I guess I am going back, Your Honor. I

apologize. It's my docket numbers I'm not sure what 180 is

versus --

THE COURT: I'm sure you have people in the back of

the courtroom keeping track of all of this. Maybe they can,

you know, pass you some notes or something so when we have a

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listing of all the documents, that would be helpful. But go

ahead.

MR. GRANT: I confess my flaw, Your Honor.

THE COURT: That's all right.

MR. GRANT: Just as to the issue of the cross-motion,

Mr. Cambria pointed out the need for information concerning 

Mr. Ferrer's actual waivers is pretty patent here, because it's

not clear the government even understands what privileges he

had to waive or didn't waive. I won't belabor that. 

But additionally here, from what we've seen of the

government's misunderstandings of the privileges and apparent

cooperation with plaintiff's counsel with Backpage in various

civil litigation, there's a lot more that we've suggested

disclosure should be provided as to.

For example, Mr. Ferrer's declaration that was

submitted by the government in fact discusses his

communications with counsel, my firm. That raises issues and

concerns about exactly what the government has been doing and

disclosing.

Then I mentioned briefly as well that Mr. Ferrer's

counsel sends this unsolicited letter on April 24 of 2018 to

courts across the country apparently trying to create or

generate some sort of issue about disqualification of counsel.

We believe and have good reason to believe in coordination with

the government we need disclosures and discovery as to that.

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We also know plaintiff's counsel in various cases have directly

coordinated with the government, and we've seen it. We've seen

the meetings.

So there are a fair number of communications here that

we need the government to disclose to us so we can understand

exactly what they've been doing and coordinating both as to

privilege but also as to otherwise taking advantage of or

potentially prejudicing the defense.

The government's communications with the plaintiff's

counsel in the various civil cases, Your Honor, is not

privileged. They can't claim that that's in some fashion

material information that cannot be disclosed. And we're

certainly entitled to that information, not to sue Mr. Ferrer,

but for purposes of defense of the various cases and for

purposes of the possibility that there are other remedies that

should be appropriate here for whatever has been disclosed.

So, Your Honor, that's part of what our motion is on

the cross-motion side of this. It has to do with coordination

with Backpage, a recent stay motion that was filed in the

District of Florida, another one that was filed in Texas court,

all of which have the hallmarks or earmarks of having been

provided by the government, not by Backpage. 

So we need to understand those things, because

obviously the government's efforts towards the defendants,

whether it's here in this court or it's in ancillary

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proceedings, that potentially prejudice their interests is

relevant for purposes of the defense of this case. That's all

I wanted to add, Your Honor.

THE COURT: Thank you very much.

MR. GRANT: Thank you.

THE COURT: Mr. Stone.

MR. STONE: Very briefly, Your Honor.

THE COURT: I'm sorry. Just one moment. Lisa.

THE CLERK: It dropped again.

THE COURT: The call dropped again?

THE CLERK: She's calling back again.

THE COURT: We'll try to reconnect once they get back

on.

Mr. Stone, go ahead.

MR. STONE: Just want to push back on just a couple of

issues. One is this idea that was raised now and then earlier

this morning that the government is using these civil cases as

a stalking horse somehow and that the government was behind a

sua sponte order in a Washington State Court to disqualify the

counsel here.

Some of the attorneys that we're talking about here

represent victims, victims that are identified or at least that

are part of the indictment, the superseding indictment. And as

Your Honor's well aware, victims have statutory rights here,

and certainly there will be conversations between victims and

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their attorneys and the government attorneys.

The only other issue is related to this filter team or

taint team. This is something that has been signed off by two

different magistrate judges on search warrants that they signed

orders. So defendants cite cases that suggest the government

just can't go out and set up a filter team without any

supervision. But here we don't have that because we have this

Court and two different magistrate judges giving authority for

the government to do what it did with respect to the filter

team.

So if there are no other questions, we'll rest on the

papers.

THE COURT: Thank you very much. I'll go back to the

defendant Lacey's motion for disclosure of documents related to

Ferrer's waiver of privilege as material to disqualification.

Is there any other defense counsel that wanted to place an

argument on the record?

It appears to be sufficiently pled, but I'll allow you

to argue if you would like to. Anyone? Is there anything the

government would like to place on the record as it relates to

that issue?

MR. KOZINETS: Your Honor, the Alexander case figures

into that pleading, and if I may, I'd like to address that and

one or two other issues.

THE COURT: Well, let me ask the government is the

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government aware of any information or documents that have not

already been submitted to the Court such as the proffer

agreement that would be helpful in determining the validity of

this waiver?

MR. KOZINETS: No, Your Honor.

THE COURT: That takes us to the defendant Padilla's

motion for itemization of Brady/Giglio material, which is

document number 273.

MR. PICCARRETA: Thank you, Judge.

THE COURT: You're welcome.

MR. PICCARRETA: Mike Piccarreta on behalf of 

Mr. Padilla. Judge, I know you've probably heard thousands of

motions for disclosure of Brady material, and I'll try and

briefly explain why this case is a little bit different.

The government in this case has provided us -- and

I'll ballpark it -- ten and a half million documents. 99.99

percent of them are really irrelevant to most anything other

than a business running a business. They have also -- we've

asked for them to provide us some of the hot documents. By hot

documents, supposedly the important ones. We've received

some of those. We've asked for the advertisements on all the

documents mentioned in the indictment. We've received some of

those.

So if you try and walk in our shoes a little bit,

there is insufficient time even if it would be beneficial to go

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through this thing document by document. The government has

these on a Relativity program. And they have offered a

suggestion how we can purchase a similar program at government

expense. And we're going to look into that.

THE COURT: I'll tell you what. I know this is --

I've certified it as a complex case. Do you believe that if I

provided the defendants with more time to review this

discovery -- it obviously is voluminous -- do you think that

would resolve this issue that concerns you?

MR. PICCARRETA: Well, it won't reserve this issue,

and I think we may at some point ask for more time. But this

issue -- Here's the issue. I'm not asking them to go through

ten and a half million documents, find the Brady material, hand

it over to me, and do all of the work.

THE COURT: Well, sir, let me do this. And my

apologies for interrupting you. I'll just ask the government

have you separately identified or classified any of this as

exculpatory information?

MR. KOZINETS: My understanding is that in the

production to the defense, that we've provided them with

electronically searchable documents that --

THE COURT: That's not an answer to my question.

MR. STONE: I'll just add is that it's a little

unclear what the exculpatory material would look like. Now,

certainly they have raised some issues that, hey, they've

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received awards from various law enforcement officials. There

was some communications and some relationships with Backpage

and various other organizations in terms of the National Child

Exploitation Center, NCMEC. They responded to subpoenas when

subpoenas were provided and things like that. That's all -- I

don't think they need us to show them those documents. I mean,

that's something they're very familiar with. They cite them

back to us in a lot of the various pleadings.

Now, what's at issue in this case -- and let's set

aside this First Amendment issue that they have raised because

that's a legal issue that the Court will rule on at some

point -- is a factual issue. Did they know that the vast

majority of these advertisements that went up on this Web site

were for prostitution.

So that is what is clearly articulated in the

90-plus-page superseding indictment. And there's lots of

material that's given as support for that. And I think as

Mr. Piccarreta is going to get to, some of those documents have

already been turned over with respect to the superseding

indictment. And there are others that we were turning over,

and I think today there's a disclosure.

So there's a continuing disclosure from the government

to defense on all these particular issues. But with respect to

Brady or exculpatory, we're unsure what that would look like,

Your Honor.

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MR. PICCARRETA: Judge, I just don't think they

answered your question. We've cited in our pleadings that

they --

THE COURT: No. Actually I think they did. They

didn't drill down to answer my specific question. But I think

Mr. Stone -- and correct me if I'm wrong -- has basically said

they've turned over a lot of information, and whatever you

believe you can use to defend your clients is in that

information. But they don't have a specific log that they can

outline this is why we believe your client's guilty, and these

are the areas in the ten million documents that you need to

specifically look at. I might be wrong.

MR. STONE: The only quibble I would have with that,

Your Honor, is that I think we have provided and are providing

that latter part. The -- With respect to each specific

defendant, here are the documents that relate to your

defendant, why we think the allegations and the facts support

the charges in the superseding indictment.

What they have asked for is the converse of that,

which is give us all the documents that help our clients that

would be Brady material or possibly Giglio. And that's where

the government's having difficulty identifying those documents,

because we're not sure what those particular documents would

look like.

THE COURT: So it's your position that you don't know

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if it exists.

MR. STONE: We don't know, and certainly we wouldn't

want to be in a position to give our best guess only to have

them then do their due diligence, because they have to because

that's what they're required to as criminal defense attorneys,

and then turn around and say you missed all these other

documents that we think we can use.

THE COURT: If you do have exculpatory information,

I'm sure it's your position that you'll turn that over

immediately.

MR. STONE: 100 percent. The exculpatory material is

absolutely going over to the extent there is anything

exculpatory. And we are doing our review as required under

Brady, Giglio, and Rule 16 to determine what we might have in

our investigative files, and that's going over. What they're

arguing, I believe, is we need to look at what's already been

turned over and then identify a list of Brady documents.

THE COURT: And just to make sure we're clear --

Mr. Stone, thank you for that -- it's my understanding from

your document number 273 that you're seeking an order from me

requiring the government to produce an itemized list of

exculpatory documents present in the discovery provided to all

of the defendants.

The government's position from their response appears

to be that they provided voluminous discovery and that the

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government, you argue, has declined to offer the defendants a

little of Brady material present in the discovery. And

accordingly you move for an order requiring the government to

identify the Brady evidence for the defendants, which you

believe is supported by precedent. Is that a good summary of

your position?

MR. PICCARRETA: It's a little more. No. As I

understand -- I'm not asking them to affirmative -- Well, they

have Brady obligations no matter what.

THE COURT: Right.

MR. PICCARRETA: And they've just affirmed in court

they're aware of it; they're going to give it to us 100

percent. 

What I'm asking: Under the Department of Justice

manuals and memorandums, one of which came out after the

Stevens case, which the Court may be familiar with, U.S.

Attorneys, any investigators were instructed to do certain

things.

And they were instructed that when they review a case,

the agents or the U.S. Attorneys are to go through the

disclosure, and if they locate certain exculpatory materials,

certain Brady materials to segregate them, and not just throw

them in with 10.4 million documents, because that's like a

needle in the haystack. What I'm asking --

THE COURT: So again, Mr. Stone, if you have

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exculpatory documents, you will pull them out and let them know

you need to be aware of this document? Or is it your argument

from your pleading that the government has produced the

discovery in an industry standard searchable format, and the

defense is required to find whatever they can use to help their

clients?

MR. STONE: The problem is, Your Honor, is that we

don't know what to look for necessarily in terms of what they

can use at trial and what their defenses are. I mean, we've

heard about the First Amendment. We understand that one.

But anything would be at trial, because the First

Amendment is not going to be at trial presumably if we get to a

trial. And so we have given these documents --

Now, this isn't 30 years ago where there's 50 boxes of

documents that have been handed over.

THE COURT: So you can't go through ten million

documents and just parcel out everything that you believe might

be favorable or helpful to the defense?

MR. STONE: We don't believe that we have the

obligation to do so. And clearly the case law would support

that. In all circuit court cases they have found that the

government doesn't have that specific obligation.

MR. PICCARRETA: And I'm saying, Judge, if they do

that, what they're instructed to do under the justice

department manual and memorandums, if they have pulled out

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documents, if in the course of their investigation preparing

Carl Ferrer for trial, which I can't imagine you wouldn't say,

"We found these 12 e-mails. What's the story with that?

What's the story with that? We're concerned about that," that

is what has to be produced. 

I'm not asking them to start from scratch and go

through it. But if they do conduct, in the course of their

investigation -- They've had it for five years. And so I'm

assuming, if they're looking for bad stuff, and it's the

largest investigative force, I've been told, of the cases in

the district, that I would think the FBI agent would pull out

some documents and go "Hey, what about these? We'd better be

concerned about them." 

If they do that, if they have pulled out documents, if

there is a chance it's exculpatory, that's what I want

produced. Not do our work for us.

And one of the things that brought up the motion is

when I read the Department of Justice manual and the

memorandums.

THE COURT: I'm sorry. My apologies again for being

rude. Can you provide me with some authority that would give

me an opportunity to order something so extraordinary? Because

if the United States Government has said we have ten million

documents, we've given everything in the case over to the

defense, if you don't find what exculpates your client, are you

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then saying it would be -- it was their responsibility for not

notifying you of what you should have known to help your own

client? If they handed it over, wouldn't you agree it's your

responsibility to go through everything?

MR. PICCARRETA: It depends. What their

responsibility is if they become aware -- that's my

distinction -- in the course of their preparing for trial and

preparing for the investigation or having scores of agents and

investigators go through the 10.4 million documents, then I

would presume that in the course of that, they did what they

were supposed to do according to the manual and pulled out

some.

THE COURT: Now, when you say if they're aware, are

you basing your argument on the fact that this is complex

litigation, ten million documents? Would you be making the

same argument if they gave you a thousand pages of discovery?

MR. PICCARRETA: No. And the cases, I've cited the

Court the case of -- Here's where it ends up. It's within the

District Court's discretion as a matter of trial management and

what they call fundamental fairness to order the government to

produce certain things.

And what the cases also say is that --

THE COURT: My apologies again. Has the United States

Government made it through the ten million documents in the

case?

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MR. STONE: Well, as what's done in this day and age

is that we have it in searchable form, and there's keyword

searches and things like that. Now, my understanding, in terms

of a lot of the documents, were from servers that were taken

from the Philippines, is that right, and there's -- and we have

that information. It's in our possession. And we handed it

over to the defense exactly how --

THE COURT: I'm sorry. You said they were taken from

the Philippines? Is that what you said?

MR. STONE: CoStar, CoStar, which is a company that

Backpage used there that was -- had an association with

Backpage. And there were servers taken out of the Philippines

that the government has in its possession and has turned those

over just as we have it. So --

THE COURT: Thank you.

MR. PICCARRETA: And, Judge, what they have given to

us as-is is useless. It is only if you can afford to use the

Relativity program, which we've received estimates to load and

search, assuming you had the time to look at 10.4 million,

price range is anywhere from $400,000 to $450,000 to $800,000

to do that, not including the lawyer time to look at it.

So we are in a situation where, A, the government, you

know -- it's a multi-prong attack -- seized the money, give

them the disclosure in an unusual format. To make it usable

they have to spend $400,000 to $800,000 of money that they

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won't give us. And we're sort of at a loss on it. Now, the

government has made --

THE COURT: Do you really think that was a tactical

decision made on the part of the government?

MR. PICCARRETA: Well, subtract the motive. I think

it was definitely a tactical thing to a multi-prong attack to

seize assets of the defendants, to render them impecunious, to

disqualify the most qualified counsel, to give us disclosure,

which is, you know, they just gave it to us, but that would

cost hundreds and hundreds of thousands of dollars. Forget

about the motive. It's the same thing like disqualification.

The result is one, two, three punch of devastating

that impacts the Sixth Amendment. And I've said in the

pleadings I'm not, you know, we can all form our opinions. I

don't want to start making accusations. But there's a pattern

of behavior that severely prejudices the defendant's Sixth

Amendment rights.

At what point does it come to the point where we stand

before you and make a motion to dismiss, which is coming. The

other thing is the seizure of trust accounts of David Wright

Tremaine and another law firm.

THE COURT: But you're certainly not making an

argument that the United States Government is engaging in some

form of prosecutorial misconduct?

MR. PICCARRETA: I'm not making that argument at this

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time. All I'm saying is we have these one, two, three, four

incidents. My eyes are open. We'll see how the case

progresses.

But at some point if there's enough that I say I

believe in good faith that we've now got four instances, and

let's say we move to five or six or seven, I definitely will

bring it to the Court's attention. I'm not sure what time --

right now what remedy I'd ask, because it depends on the

circumstances. All I'm saying is there's been a one, two,

three, four punch that has attempted to impact our Sixth

Amendment rights.

And with this issue on the Brady material, there have

been courts -- I cited them right in the pleadings -- that

district court judges, you know, for trial management say, no,

government, you've got to itemize the Brady material. Other

courts have said, no, defense, you do it yourself.

There's a circuit court for Skilling, the famous Enron

case, and they said in that case because the government

provided the hot docs, which they're in the midst of doing, but

also gave them a list of documents relevant to the defense,

that there was no harm.

And the government keeps pointing to their indexes

when they gave us the documents. Let me show you by way of

example. You see the thing at the top of the page there?

That's the index for 10.4 million documents, the

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things with the bullet points. And the only reason I'm showing

it to you is they've pointed out how they've been giving us

indexes with the stuff and how that ameliorates it. So that's

the index for 10.4 million documents.

THE COURT: I'm sorry. Where do you --

MR. PICCARRETA: Right where I have the pink stick-em

next to it. There's a list of bullet points.

THE COURT: Right.

MR. PICCARRETA: That's the index that the government

refers to in their pleadings as support of, "Well, we've given

you documents. And not only that, we've given you an index on

it. What are you complaining about?"

And I just want the Court to be aware of when we say

index, you know what we're talking about. We're not talking

about index with any detail. We're talking about eight or nine

bullet points for 10.4 million documents.

And I'll show you I summarized the rest of the indexes

for the second disclosure, the third disclosure, and the fourth

disclosure.

Just so the record's clear on it, you know, the second

disclosure had two bullet points, the third had one, and the

fourth had four, and the top had, I think, eight.

So that's the index that they're using to support

their argument on providing this.

But, Judge, I just think you have to -- I would

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request you do this. I would like you to say, government,

you're ordered to itemize the Brady material and provide it to

the defendants as you become aware of it. And that way you're

not requiring them to search all the documents.

But in the course of preparing the case -- and they've

been investigating this for five years -- and under their

obligations, which are in the pleadings under Department of

Justice manual and the Stevens memorandum, put duties on U.S.

Attorneys to go through the documents and pull out the Brady

material.

THE COURT: Just one minute. Mr. Stone, is this

possible?

MR. STONE: Well, it seems to me --

THE COURT: If you have any of your FBI agents behind

you, you can certainly ask. 

MR. STONE: Well, I already did confer with the two

agents that we have here as to the question of as the agents

are going through the material, have they pulled anything out

with the idea that, hey, this is exculpatory. We don't have

any of that. So that's the short answer. It sounded like

Mr. Piccarreta was saying as they go along, they may have

identified some documents that would go towards Brady or

exculpatory; we just want a list of those documents. We don't

have those. So any order would require us to go through the

ten million documents.

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THE COURT: Well, you said that you talked to your

agents about this issue. And obviously you've been a federal

prosecutor for a long time. That's your responsibility. They

don't have law degrees. Well, some of them do. But they don't

have Bar cards where a defense counsel can call the State Bar

or file a document that says, hey, this lawyer engaged in

prosecutorial misconduct. 

So is it enough that they tell you, hey, we have this

document that might qualify under what you told us to pull out,

or is that your responsibility?

MR. STONE: Your Honor, I think I was just parroting

Mr. Piccarreta's request when he was suggesting that agents are

going through the material. But, no, it speaks just as well to

the attorneys and what our review that we have done

collectively, the prosecutors on this case, is that we have not

identified or segregated a document or a subset of documents

that would be identified as Brady.

THE COURT: But if you do find some, the defense is

asking if you could put them on notice of what they are and

where they can find them within the ten million documents that

you've provided to them. Is that possible?

MR. STONE: If we come across documents that fall into

Brady or exculpatory, just to identify those to the defendants,

we could do that, Your Honor.

THE COURT: Thank you very much. Would that satisfy

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the defense, Mr. Piccarreta?

MR. PICCARRETA: Well, I'd say --

THE COURT: The problem you have now is you don't know

what you don't know.

MR. PICCARRETA: Yeah. And I don't know what they're

doing. But I think minimally that order, you know, should be

there. I mean, here's the thing. Here's our difficulty too is

the lack of funds to do what's needed with the Relativity

program. But the government has suggested -- and I assume they

won't oppose it -- that we will be able to get these funds from

the government to do that.

So I might --

THE COURT: Well, I'll tell you what. For the record

tell me about that. How does that work?

MR. PICCARRETA: Well, can I let someone else tell you

who's had responsibility for that?

THE COURT: Absolutely. Sir, I know your name, but

for the record, if you could place it on the record again.

MR. WEISS: I will. Thank you, Your Honor. Steve

Weiss representing Joye Vaught. Just recently I followed up --

followed up on a statement made at Page 12 and over into 13 by

the government's filing document 294. And it was their

response to Mr. Piccarreta's motion for Brady and Giglio

material. 

And what they say is that under the Criminal Justice

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Act, we could apply for funds sufficient to be able to do the

search that is required. So having gotten the citation, I

looked at the judicial guidelines. And in fact there are funds

available for litigation support in this area. And that

applies even to defendants who are able to retain counsel.

THE COURT: That's not only for indigent defendants.

MR. WEISS: It's not. Even if you're able to retain

counsel, you can obtain these funds. And there's a process by

which you have to go through.

And it seemed to me, frankly, reading all these

guidelines and trying to put them together and see how they

work, it seemed to me that this might be an onerous process.

And I wanted to see how it practically worked. So I was able

to gain the name of somebody who is supposedly the person in

the know.

And I was able to talk with her very briefly -- she

was in an airport getting ready to leave -- and discussed it

with her and came away with the impression that we can do this

by filing the appropriate application with all of the necessary

numbers that it's going to take, which are pretty extraordinary

numbers.

THE COURT: Did you talk to this person about the

amount of documents? Did you mention the ten million document

number and that we've had someone estimate that it could cost

anywhere from $400,000 to $800,000?

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MR. WEISS: I don't remember if I actually talked

about ten million documents, but I believe I did. But I know

for a fact that I said the price for just the litigation

support services could be as much as close to a million

dollars. And I'm not sure if that's even accurate because the

support services in and of themselves are very expensive, and

then there's the whole process of attorney time to go through

the documents.

There is in fact -- and I have the notation here -- a

national center that does -- gets involved in this process and

will coordinate. And you have to coordinate with them in terms

of putting this application together.

My information right now is rather sketchy beyond the

fact that it looks like it's doable. But it's a process that

could take a little time, because it eventually, I believe, has

to be approved by -- It has to go up the ladder.

THE COURT: It's approved by me but ultimately the

Ninth Circuit. 

MR. WEISS: There's a particular judge in the Ninth

Circuit --

THE COURT: Ikuta.

MR. WEISS: Okay. And so that's the process. That's

all I know right at this moment. I just learned this

information, say, within the last three days. That's all I

have.

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THE COURT: Thank you very much.

MR. PICCARRETA: And, Judge, I guess, in conclusion, I

think that we would need a court order on this just so there's

no confusion. And I would request that the court order read

that if -- that the government, if it locates, in the course of

its preparation, Brady or Giglio materials, that it is to turn

it over to the defense within ten days. And I think that at

least for the moment will take care of it. And we'll see where

we go with the litigation support. But for us it's really

difficult on it.

THE COURT: I'm sorry. Just one moment.

Mr. Stone, again, what do you think about that, sir?

MR. STONE: I don't think we need an order that

requires us to do what we need to do under the law and Rule 16.

MR. PICCARRETA: I found that orders sometimes get

more results and avoids disputes later.

THE COURT: So you just don't trust the government?

MR. PICCARRETA: No. Well, nothing personal, but

it's -- I'd like to have an order in case there is

non-compliance. It's not just me complaining about a general

obligation. It's me complaining about there was a court order.

And I think it's appropriate in this case just due to the

volume of materials. And here today they espouse a theory of

general knowledge that if they have general knowledge that

third parties are prostitutes, that that forms the basis of

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prosecution, which, by the way, isn't the law.

But it's helpful to hear that, because now we

understand a little bit more of it. But I think really what

will also help is they've agreed to get us the stuff that's

mentioned in the indictment and the very advertisements that

are mentioned in the indictment. It was promised to us -- It's

been promised to us they'd put it in the pleading we would get

it in two to four weeks, which is, like, now.

And getting those items would at least, as soon as

possible, which they've agreed, would be a beginning to help

understand where we believe the case has gone awry in the

analysis. And it will also help us when we bring the motions

for you to discuss the issue of generalized knowledge versus

specific knowledge.

And I think where this is going to come up, Judge, is

when they are preparing witnesses for trial and they're putting

together their exhibits is, especially with Mr. Ferrer, is --

because Mr. Ferrer may have statements that he made in e-mails

that contradict what he's saying now. And that's when the

Giglio obligations will kick in as the agents scurry through

all the disclosure and find things that might conflict with

this current version of events.

So, in summary, I think if the Court would order them

to, you know, any documents that come to their awareness,

provide them within ten days after locating Brady and Giglio

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material, that would be fine for now, Your Honor.

THE COURT: Counsel, wouldn't you also have that

extraordinary motion in your back pocket to exclude evidence

based on disclosure failures or motions to dismiss based on the

government's failure to disclose certain evidence?

MR. PICCARRETA: It would depend. It depends on the

circumstances. If there's something that they're not aware of

and we're not aware of, that's a different issue.

THE COURT: Because they're giving you ten million

documents. And if they can cull through the documents and show

me this was handed to them in 10,000 documents, then you won't

win on either one of those issues.

MR. PICCARRETA: Yeah. It avoids disputes. It avoids

appeals. It avoids litigation.

THE COURT: Okay. I appreciate all of that.

Mr. Stone, is there anything else you or co-counsel

would like to place on the record about this issue?

MR. STONE: The only thought I have is I don't think

we need an order at this juncture. I think we're back before

Your Honor on a status conference later this month, and we

might be able to talk about discovery issues in more detail.

That might be a better venue to chat about this in --

THE COURT: And I, quite frankly, I don't know if

the -- I think we have it set right now for January of 2020.

Is that correct?

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MR. STONE: That's the trial date, yes, Your Honor.

THE COURT: I don't -- Is that realistic?

MR. STONE: Well --

THE COURT: I mean, ten million documents?

MR. STONE: I think the one thing that is clear, Your

Honor, is that defense does need to have access to a database

where they can search through these documents. We have

provided the information as it's always provided in these big

cases and has been for a decade or so.

THE COURT: Have you had many cases with ten million

documents? I know you tried a case in here that was 70 or 100

counts. I can't recall what case it was. But was that case --

MR. STONE: That was the Audette case, Your Honor.

THE COURT: Was that at least a million documents?

MR. STONE: I don't think that was a document

intensive case, and certainly other cases that our office does,

they vary. But in terms of this case, there's a huge amount of

documents. No one's disputing that. Ten million is a lot. We

saw in civil litigation that amount of documents. And how

they're produced in civil litigation is in this format so that

the other side can plug it in to a Relativity or a Concordance,

and then they can search. That's what needs to happen here.

THE COURT: Thank you.

MR. PICCARRETA: What the courts look at is the civil

case is sort of on equal footing, you know, AT&T is suing

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Mountain Bell or something like that.

THE COURT: You have the resources to have a team of

individuals, dozens of individuals looking through ten million

documents.

MR. PICCARRETA: And we don't have that team, and the

funds have been seized, where it will at least make a step

forward toward that team. So that's creating some of the

difficulty. Where it is now, I don't think the January 2020

date is realistic if you just even think about looking at those

documents, apart from digesting them.

And that's why it's going to be important as we narrow

the government's theory of prosecution, that might narrow the

field of documents.

I do have one experience. I had a case with about two

or three million documents and had a seven- to eight-month

trial in state court. And that that took a few years from

arraignment to trial.

THE COURT: I appreciate that. That takes us to the

last issue that we have this morning. And, Mr. Stone, this is

the issue that the lawyer from out of town is going to argue?

MR. STONE: Mr. Kucera out of the Central District of

California, yes, Your Honor.

THE COURT: Thank you very much.

MR. KUCERA: Yes, Your Honor. I'm on the line. John

Kucera on behalf of the United States.

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THE COURT: Sir, how do you spell your last name?

MR. KUCERA: K-u-c, as in cat, e-r-a.

THE COURT: Sir, I'm just going to ask you to, since

we have a bit of --

We have some attorneys walking out of the courtroom in

open session. Mr. Stein? 

MR. STEIN: Yes, sir.

THE COURT: Are you leaving us?

MR. STEIN: I was planning to, Your Honor. I didn't

think this issue affected us. If you'd like me to stay, I'm

happy to stay.

THE COURT: No. I just -- We usually don't have

lawyers just walking out, but you two both have a wonderful

weekend, and I appreciate you coming in. Thank you. Is there

anybody else that wants to walk out?

MR. KUCERA: To be fair, Your Honor, I get that a lot.

THE COURT: Sir, go ahead. This is the government's

application for an order regarding criminal forfeiture of

property in government custody, which is document number 282.

Sir, do you have any arguments you would like to place

on the record? I thought all the motions in this case have

been sufficiently pled, but I'll allow you to argue.

Did we lose him again?

THE CLERK: No. Mr. Kucera, are you there? I guess

not.

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THE COURT: Mr. Stone or Mr. Kozinets, do either one

of you know the arguments that your co-counsel from California

is trying to advance?

MR. STONE: No, Your Honor.

THE CLERK: Mr. Kucera?

MR. BIENERT: Judge, we might be able to solve the

problem.

THE COURT: Go ahead. And, sir, again, I know your

name, but for the record.

MR. BIENERT: Sure, Your Honor. Thomas Bienert on

behalf of Mr. Larkin. And I think other defendants have joined

this. The one thing I do want to point out is if Your Honor

remembers what this particular issue is in the pleadings, it's

a request by the government that you in essence address this

now. And our position is we've got a judge in California,

Judge Klausner, federal judge, who is already in the midst of

addressing it. 

And the only thing I would say is given the technical

difficulties we're having, to the degree that Your Honor might

have to move this, I would just suggest -- and I realize I'm

the only one speaking. Government is present, but Mr. Kucera

is not apparently on the phone. But it's in the pleadings that

this is pending in California.

THE COURT: I just need to know if the hearing that

was scheduled for 24 September in the Central District, if it

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went forward or not. 

MR. BIENERT: That's what I was going to advise you,

Your Honor. He took it under submission, and so he told us we

didn't need to come for oral argument. He took all the papers.

And we expect that he'll be issuing an order. So I would just

suggest that if there's a delay, we just push this back until

after we hear from Judge Klausner.

THE COURT: Thank you very much.

THE CLERK: Are you there, Mr. Kucera? Mr. Kucera?

MR. KUCERA: Yes, I'm here.

THE COURT: Mr. Kucera, we keep losing you. Are you

on a hard line or cell phone?

MR. KUCERA: I'm on a hard line, Your Honor. I'm at

my office calling from my desk.

THE COURT: Okay. We have an echo in the courtroom.

It seems to be from my end, but go ahead.

MR. KUCERA: I can be very brief, Your Honor. Aside

from the pleadings, the only thing new to add is the factual

development that a week ago today last Friday, the government

filed civil forfeiture cases in all of the -- pertaining to all

of the assets that are presently before this Court relating to

the protective order.

Today we are amending those complaints and also

including all of the other assets that the United States has

sought to forfeit in this entire matter, both civilly and

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criminally. So complaints have now been filed on all the

assets that the government is seeking to forfeit at this point.

The government's position is that the defendants'

motion in California is best described as one pursuant to 

Rule 41(g), which is a return of property. To the extent that

this Court in Arizona believes that there's any forum shopping,

again an allegation the government denies, but to the extent

Court believes that that is even optically a problem --

THE COURT: Okay. Hold on. Hold on just a minute.

Why should this Court issue an order on the same warrants upon

which the challenges are pending in another court?

MR. KUCERA: Because, Your Honor, these assets are

being sought pursuant to criminal forfeiture as well as civil.

And I believe it is almost always the case that criminal is

leading the charge on how these cases get resolved.

THE COURT: So you agree that I should stay this

motion until it's resolved in the Central District of

California?

MR. KUCERA: No, Your Honor. The government's

position is -- To be fair, Your Honor, the government's

position is that this is not technically a necessary motion,

that the government already possesses these assets and does not

need this sort of comfort order. I mean, it's more than a

comfort order but this sort of housekeeping order that

clarifies that these assets are also being sought and deserve

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protection in the Arizona court pursuant to the indictment and

the forfeiture allegations that were filed along with that

indictment.

But now that there is a -- that there are criminal --

there are civil cases filed in California, the government will

seek to stay the case in California, which makes everything --

everything thereafter should be held, should be done -- As soon

as the government gets that motion granted, everything

thereafter should be done in Arizona.

And any motions that defendants want to make should be

made there, and the government would of course not object to

any appropriate and renewed motions before the Court in

Arizona.

THE COURT: Is there any defense counsel that would

like to place a position on the record?

MR. BIENERT: Yes, Your Honor. Obviously we have

briefed -- Thomas Bienert again for Mr. Larkin. Obviously we

have briefed this subject. Every now and then, Your Honor,

while you're in the business with your clerks of going through

reams of paper and carefully trying to figure out,

intellectually decide the law, et cetera, the easiest thing is

to step back from what's really going on.

The government's position in this case is that it was

able to ex parte, without any of our knowledge, seize over 

$100 million of our various clients' assets as of April, six

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months ago.

And it's current position, now that we've challenged

the seizures and the place they seized them, because we say it

was an illegal seizure marred by misconduct, their position is

we need to wait until after the trial, which at best would be

in January of 2020 -- and as Your Honor indicated, there's so

many documents and things in this case, it may not even happen

then -- before we can even get a hearing that is adversarial to

decide whether they could take our hundred million dollars. I

would submit that at a ninth grade civics class lesson, that

position is offensive to what we all know is our system of due

process.

But as is usually the case, there is case law that

gives us the answer. And as we point out in footnote two of

document 304, this is a First Amendment case.

The First Amendment clause is very clear. You are not

allowed to seize pretrial proceeds or materials from First

Amendment matters without a full evidentiary hearing.

The Fort Wayne Books case, Supreme Court case law says

that and in particular the Adult Video Association versus Reno

case sums it up: "The First Amendment will not tolerate such

seizures until the government's reasons for seizure weather the

crucible of an adversary hearing."

We've been trying to get an adversary hearing for six

months when the government had an affirmative obligation to tee

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one up. It didn't.

We teed one up, because not only are we entitled to a

hearing, but we believe they misled the judges in California

into getting the ex parte warrants.

As I stand here now, six months into it, Mr. Kucera

and the government still will not address the issue of our

adversary hearing here. And I'll be honest with Your Honor.

From my client's standpoint, it doesn't matter whether some guy

kicked his door in at night and took his assets or whether

somebody used a fraud scheme or whether somebody purportedly

with government paper allowing an ex parte seizure did it.

We're entitled to a hearing to see if under the First Amendment

and under the laws that seizure weathers the crucible of an

adversary hearing. 

And the government is going through, I would submit, a

circular, misleading argument to try to enable themselves to

keep these things without our constitutionally entitled hearing

by kind of playing us off one another.

THE COURT: Let's do this. What relief are you

requesting? Obviously you see what the government's filed.

What is the defense requesting?

MR. BIENERT: What I'm ask requesting from Your Honor

is that you deny the motion to make an order with no hearing

that they can unilaterally hold onto our assets until our trial

is over, because that's in essence what their application to

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you is, and that you, among other reasons, recognize that this

very issue is before Judge Klausner in the Central District of

California where he has our paperwork on the evidentiary

aspects and has indicated to us that he will issue a ruling.

Stated another way, bedrock law says the government

cannot take my property without an adversarial hearing that

tests by a judge or a proper tribunal whether they can

pretrial. It's never happened. 

And what the government is doing is a little sleight

of hand, is the only place they purported to properly seize our

property was the ex parte warrants in California that we're

challenging. But they now say because we came in and added

them as a notice provision forfeiture count in an indictment,

we can now just keep them without a hearing.

The bottom line is the government can't keep our

assets pretrial without an evidentiary hearing where we have a

chance to participate to establish to the appropriate court

that they have shown that the assets in question are likely

from or the probable cause that they were obtained from a

criminal act and that there is tracing that shows that each of

the dollars or equivalence of dollars that they took goes back

to the alleged criminality.

That has never happened. We're entitled to it. And

as is laid out -- I don't know if Your Honor saw it, because we

put at least our first salvo, the filing in California, we made

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an exhibit to our filing here.

We have laid out the various ways that the ex parte

application process was improper. But what's more troubling is

what is textbook, hornbook law is we have a right to a prompt

hearing on this.

And what's really weird about this, Your Honor -- I've

been doing this 32 years; I've never seen it -- this is an

ongoing deprivation. From the day the government seized our

first dollar, we were entitled to a prompt hearing. And we

still don't have it.

And the government's in essence telling you rubber

stamp that we can keep this until sometime in 2020. And if we

lose the case, okay, well, we agree they get their stuff back

two years later, having been deprived of it all. And if we win

the case, we have a right to then establish and trace it to

the allege -- to the crimes that if they won, they have won.

That's crazy.

So we would ask that Your Honor just decline their

motion, to make a ruling on this issue and allow the process to

work in front of Judge Klausner where it sits.

THE COURT: Thank you very much. Is there anything

else from the government?

MR. KUCERA: Just briefly, Your Honor. This is the

first I'm hearing about any type of misconduct. Obviously any

specific allegation the government would be interested to hear

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and have an opportunity to defend themselves.

THE COURT: I'm sorry. Whoa. Whoa. Whoa. Stop.

Stop. Stop. That's one of the problems that we have when we

have someone calling in telephonically. There's a brief echo.

So I need you to talk really slow so our court

reporter can pick up everything that you say, and we can all

understand what you're saying. Can you do that?

MR. KUCERA: Certainly.

THE COURT: Go ahead.

MR. KUCERA: Okay. I'm just trying to understand

whether I was being accused of misconduct. If I am, I think

that, you know, I should probably have an opportunity to flesh

that out with defense counsel at some point.

But more to the point on the motion, one of the

perverse things about defense position is they're asking for a

hearing, and they've cited no law that gives them the right to

a hearing. They're making noises about the First Amendment,

but they're making no distinction between the proceeds of

criminal activity and something more akin to like a prior

restraint. The government is not seeking to prohibit any type

of First Amendment activity. It is seeking the proceeds of

criminal acts.

The other -- The motion that defendants have filed in

California state no basis for their motion other than relying

on one case, a case, Roth. And, perversely, Roth is pursuant

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to the section of the Code at 853(e) that is before Your Honor

21 U.S.C. 853(e).

That's where Roth gives you the opportunity for a

hearing. So the hearing they're requesting is possible under

the law in Arizona, but no such hearing has any foundation in

law in the civil cases in California.

Potentially they might have a Monsanto, an opportunity

for a Monsanto or/and Jones-Farmer type hearing where they can

say that they need this money in order to pursue their criminal

defense.

But those cases require that defendants first come

forward with some evidence that they have no other funds that

have not been sought pursuant to forfeiture or have not been

seized.

We have negotiated with defense counsel and given them

exactly that opportunity outside of litigation to come forward

and provide us with any evidence that suggests that they no

longer have any funds to be able to defend themselves.

They've declined to do so, saying that it was

inappropriately seeking discovery from the defense.

So in the government's motions in California, we've

set forth that if they wanted to seek any motion to be heard

pursuant to Monsanto or some other articulable basis under the

law, the government would of course proceed. But they've not

enunciated anything like that.

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The one case that they have cited to show that they

get a hearing in court is Roth, and that case shows that they

should be seeking that hearing in front of this Court in

Arizona.

I will also note that under Monsanto, the protective

order that the government is seeking is considered to be

mandatory if the government makes its showing that these assets

are potentially subject to dissipation, that there's probable

cause to show that, and Moffitt, a Fourth Circuit case, shows

that a bill of particulars attached to an indictment is a

sufficient showing of probable cause to do just that. 

Admittedly, there is not Ninth Circuit precedent, Your

Honor. That being said, the government did more than simply

have a bill of particulars in this case. It presented

evidence, substantial evidence, to the grand jury tying the

assets to the criminal act.

THE COURT: Is there anything else from the

United States that's present here in Arizona?

MR. KUCERA: Nothing else, Your Honor.

MR. STONE: No, Your Honor.

THE COURT: Is there anything from any defense

counsel?

That's a negative response from all the defense

counsel.

All of the motions are taken -- I'm sorry, sir.

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Did --

Sir, for the record, I know who you are, but there's

a lot of you.

MR. BIENERT: Thomas Bienert. I'll close with this.

All the things he just said he didn't brief for you. They're

briefed in California. I could go on in a lot of ways to

respond to this, and I have Ms. Ramachandran, who's an asset

forfeiture specialist who could respond to it. 

It hasn't been briefed. I would submit that Your

Honor should not regard -- make any decisions on this on things

that weren't even briefed and that based on what's in front of

you, you should decline to take any action until we get a

ruling from Judge Klausner.

THE COURT: The hearing's adjourned. Everyone, have a

wonderful long weekend.

MR. KUCERA: Thank you, Your Honor.

(Proceedings recessed at 12:36 p.m.)

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Case 2:18-cr-00422-DJH Document 348 Filed 10/19/18 Page 75 of 76
 136

UNITED STATES DISTRICT COURT

C E R T I F I C A T E

I, LINDA SCHROEDER, do hereby certify that I am duly

appointed and qualified to act as Official Court Reporter for

the United States District Court for the District of Arizona.

I FURTHER CERTIFY that the foregoing pages constitute

a full, true, and accurate transcript of all of that portion of

the proceedings contained herein, had in the above-entitled

cause on the date specified therein, and that said transcript

was prepared under my direction and control.

DATED at Phoenix, Arizona, this 6th day of October,

2018. 

 s/Linda Schroeder 

 Linda Schroeder, RDR, CRR 

 

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Case 2:18-cr-00422-DJH Document 348 Filed 10/19/18 Page 76 of 76