UNITED STATES DISTRICT COURT

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UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

_________________

United States of America, )

) No. 2:18-cr-00422-DJH

Plaintiff, )

)

vs. ) Phoenix, Arizona

) November 9, 2023

Michael Lacey, et al. ) 10:00 a.m.

)

Defendants. )

_____________________________ )

BEFORE: THE HONORABLE DIANE J. HUMETEWA, JUDGE

REPORTER'S TRANSCRIPT OF PROCEEDINGS

TRIAL - DAY 31 - A.M. SESSION

IN-COURT HEARING

Official Court Reporter:

Hilda Elizabeth Lopez, RMR, FCRR

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

401 West Washington Street, Spc 30

Phoenix, Arizona 85003-2151

(602) 322-7256

Proceedings Reported by Stenographic Court Reporter

Transcript Prepared by Computer-Aided Transcription

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A P P E A R A N C E S

For the Government:

UNITED STATES ATTORNEY'S OFFICE

By: Mr. Kevin M. Rapp, Esq.

Mr. Peter S. Kozinets, Esq.

Mr. Andrew C. Stone, Esq.

Ms. Margaret Wu Perlmeter, Esq.

Mr. Daniel Boyle, Esq. - Appears by Zoom

Mr. Joseph Bozdech, Esq.

40 North Central Avenue, Suite 1200

Phoenix, Arizona 85004

kevin.rapp@usdoj.gov

peter.kozinets@usdoj.gov

andrew.stone@usdoj.gov

margaret.perlmeter@usdoj.gov

For the Government:

UNITED STATES DEPARTMENT OF JUSTICE

By: Mr. Austin Berry, Esq.

1301 New York Avenue, NW, 11th Floor

Washington, DC 20005

austin.berry2@usdoj.gov

For the Defendant Michael Lacey:

LIPSITZ GREEN SCIME CAMBRIA, L.L.P.

By: Mr. Paul J. Cambria, Jr., Esq.

42 Delaware Avenue, Suite 120

Buffalo, NY 14202

pcambria@lglaw.com

For the Defendant Scott Spear:

FEDER LAW OFFICE, P.A.

By: Mr. Bruce S. Feder, Esq.

2930 East Camelback Road, Suite 160

Phoenix, AZ 85016

bf@federlawpa.com

- and -

KESSLER LAW OFFICE

By: Mr. Eric Walter Kessler, Esq.

6720 N. Scottsdale Road, Suite 210

Scottsdale, AZ 85253

eric.kesslerlaw@gmail.com

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For the Defendant John Brunst:

BIRD MARELLA BOXER WOLPERT NESSIM DROOKS

LINCENBERG & RHOW, P.C.

By: Mr. Gopi K. Panchapakesan, Esq. - Appears by Zoo

Mr. Gary S. Lincenberg, Esq.

1875 Century Park E, Suite 2300

Los Angeles, CA 90067

gpanchapakesan@birdmarella.com

glincenberg@birdmarella.com

For the Defendant Joye Vaught:

JOY BERTRAND, ESQ., L.L.C.

By: Ms. Joy M. Bertrand, Esq.

P.O. Box 2734

Scottsdale, AZ 85252

joy@joybertrandlaw.com

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P R O C E E D I N G S

(Proceedings commence at 10:00 a.m.)

THE COURT: Please be seated. All right. It appears

we have some clients, but not all. Is there any waiver of

client presence?

MS. BERTRAND: Your Honor, I waive my client's

presence. If the Court needs her, she's in our workroom.

THE COURT: All right. Who else? Mr. Eisenberg is

not present. Neither is his client. I'm assuming that's

because the allegations aren't impacting him.

I see Mr. Feder. The screen is blocking you, so I

know that you're here.

I'm going to try to make you do all of the talking so

I can preserve my voice.

First, let me ask, why do we have Notice of Appearance

today, a change?

MR. BOZDECH: Your Honor, AUSA Joseph Bozdech for the

United States. I entered an appearance in the eventuality that

Mr. Boyle would not be able to appear. I am the forfeiture

attorney here in the Phoenix office.

MR. FEDER: I'm sorry. I can't hear the gentleman.

MR. BOZDECH: I am the forfeiture AUSA here in the

Phoenix office. I entered an appearance just in case Mr. Boyle

was unable to appear this morning, in an abundance of caution,

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but I see we have Mr. Boyle by Zoom.

THE COURT: And who is the lead trial counsel on the

matter?

MR. BOYLE: That would be me, Your Honor, Mr. Boyle.

My apologies. I'm on the east coast for a family matter.

Mr. Bozdech volunteered and entered an appearance in case there

was a forfeiture matter I was not able to appear for. My

apologies, Your Honor. I will be back in court on Tuesday.

THE COURT: I want to first turn to the briefing that

I received last evening from Mr. Panchapakesan, as well as the

government, related to the issue of third-party interests. And

I did have a chance to look at the Ninth Circuit case that you

cited in your briefing, the Thompson case, and I don't find it

to be helpful or instructive on the procedural posture of how

the forfeiture proceeding should go because it doesn't tell me

that the jury was made to make the distribution determination

of the assets. It simply refers to the District Court having

made the finding.

And so I'm not persuaded by the District Court

decisions that you previously provided me in the Eastern

District of Louisiana, that was the Mefford case, because my

reading of the statute is that the determination for the jury

is a nexus determination. The rule clearly states that the

jury is to determine the nexus between the specific property

and the offense of conviction.

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In reading the statute in its totality, all parts

together, the eventual distribution or parsing out of

third-party interests or commingling of assets is in the

ancillary proceeding, and that would be the Court's

determination. So that's the way that I intend to proceed. So

the jury will only make the nexus determination as to any

counts that they come back on in terms of the forfeiture

allegation, and then we will set that aside and have the

ancillary proceeding to determine whether or not there are

other interests, including percentage interests of assets that

may be commingled by any of the defendants, and that's how we

will proceed.

There really is, we hunted high and low, really no

particularized guidance in the circuit, but again, my plain

reading of the statute is my guidepost, and so that's how we

will proceed.

Now --

MR. PANCHAPAKESAN: Your Honor, may I ask a clarifying

question on the process? So I understand the Court's ruling to

be that, for example, if there's a bank account worth a million

dollars in it and the government proves a nexus to like a

Travel Act conviction, for example, that the Court in the

ancillary proceeding would hear evidence as to the extent to

which there's a connection.

So for example, for example, the defendants would be

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permitted in that proceeding to make the argument that, well,

let's say hypothetically $10,000 of the account are proceeds

traceable to a crime of conviction, as I understand it, the

Court's view is that that determination that would be made at

that stage as opposed to the jury making it?

THE COURT: Yes.

MR. PANCHAPAKESAN: Okay. And just to make a record

on this, I know we filed briefing on this, and I understand the

Court's ruling, our position, Your Honor, is that this comes

down to what the word "nexus" means. And you know, that's not

defined in the statute, but there is, of course, case law, for

example, the Tyson Foods case we cite, which I think makes for

a common sense finding that if a jury is deciding nexus, that

we necessarily have to decide before finding a nexus that there

is some -- some quantum of connection, and so that's why we

think the jury ought to decide that issue.

There's a case, for example, we didn't cite this, it's

the District of Nevada case. It's a Ninth Circuit case, 2023

Westlaw, 426, 0922, U.S. vs. Hurdace, H-U-R-D-A-C-E. It's a

money judgement case and, of course, the money judgment, that's

something that will go to the Court, but it's a case where

Court notes that the government seeks criminal forfeiture of a

certain amount. And then the Court says, well, because the

government is only showing nexus on a lesser amount, that the

money judgement is for that lesser amount.

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And so my concern is here that where we're going with

the jury instead of a money judgment that would go to a judge,

I mean, it's logical that the jury would make that

determination of, has the government proved the full extent of

the nexus essentially that they are seeking to forfeit?

And then last note, Your Honor, is just appears that

the government in the first instance did not object to our

proposal. In the verdict form, for example, in some instances

in the jury instructions we included language like, "and if so,

to what extent should be forfeited," and the government had no

objection to that language. And so we assessed the bank

accounts where there is, I think, sort of a cleaner argument

about what proceeds are traceable, at a minimum the bank

accounts we think the jury is capable of making that

determination.

So that's our position, Your Honor.

THE COURT: Well, my recollection is I thought

Mr. Boyle did make an oral objection to it, the verdict form.

But in any event, you've made the record. And so I'll look at

that case, but I at this point am not persuaded that that is --

well, I'm persuaded that my procedure meets the contours of the

entire statute, and so that's how we will proceed.

Let me go through the proposed instructions, and I

think I sent you back, I may have sent you back the sort of

track change version, but I'm going to look at and use as my

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guidepost the government's 1935 filing because I, that's where

I made my notes, and you'll hopefully be able to follow along.

The first instruction is, of course, I removed

reference to the superseding indictment and Bill of

Particulars. There were none of those here. I removed the

last paragraph, "A copy of the forfeiture allegation," so on

and so forth, "will be given to you." And of course, in the

first paragraph we will have to potentially modify if there are

different verdicts that come out with regard to any of the

forfeiture allegations, the count references, in other words.

So we'll reserve that.

Is there any issue with regard to that?

MR. BOYLE: No, Your Honor.

MR. PANCHAPAKESAN: No, Your Honor, and obviously we

propose the redlines, which I know the Court will get to, but

we have no issues with respect to that.

THE COURT: We are keeping what is the government's

Proposed Instruction 2.

Any objection, Mr. Boyle?

MR. BOYLE: No, Your Honor.

MR. PANCHAPAKESAN: Your Honor, on 2, I think in our

redline we add a redline that says, "separate consideration to

defendant," and I don't think there was an objection to that

from the government.

THE COURT: I actually think the reason I did not

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adopt that is because it's referenced elsewhere.

MR. PANCHAPAKESAN: Okay. The only thing I would add,

Your Honor, on Instruction 1, is we included a reference to the

scope of Count 1, I believe that's a quote from the prior jury

instructions, and that's our request in that respect, and I

think that's my redline.

THE COURT: The only concern I had about that is it

references the scope of Count 1 but it doesn't for the other

counts. So my sense is if you're going to do that with one

count, it should also -- there should also be similar phrasing

for the other counts, and so that's why I took it out.

MR. PANCHAPAKESAN: And this may depend obviously to

what extent there are convictions. My understanding from

Mr. Boyle is that their forfeiture will proceed as to the -- as

to Count 1 so far as Travel Act is concerned. In other words,

if they are not getting a conspiracy conviction but were to get

on conviction on Counts 2 through 51, I think that might change

their approach. Mr. Boyle can speak to that.

For example, if the Court looks at sort of the

preamble of the first instruction, the only Travel Act count is

Count 1, and then 52, of course, is the money laundering

conspiracy, and then there are substantive money laundering

counts that I think apply to Mr. Lacey in property, so I think

that's how they parsed it out.

THE COURT: Well, again, here --

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MR. BOYLE: That's correct, Your Honor, and that's

reflected in the verdict form as well. It's largely the

conspiracies and then select subset of the substantive

transactional money laundering counts. So if there were not

convictions on the conspiracies, I think there would be

substantial modifications.

THE COURT: And I will leave you to do that. But

again, in these instructions it tells them to refer back to the

prior instructions, so they'll have those instructions as well.

So I don't want to encumber them with redundant instructions.

And so to the extent you think a preamble is necessary for a

description of Count 1, make it very brief, or for the other

substantive forfeiture counts.

MR. PANCHAPAKESAN: And as I understand Your Honor's

ruling, there will be no issue with us referring back to the

prior instructions then in dealing with the phase of the trial,

you know, in summation, for example, that there will be no

issue of referring back to --

THE COURT: Right. That's correct.

MR. PANCHAPAKESAN: -- what was instructed on.

THE COURT: All right. Now, with regard to the scope

here, consistent with my ruling, and then throughout I'm going

to remove references related to "and if so how much of that

property should be forfeited," and so --

MR. BOYLE: No objection, Your Honor.

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THE COURT: Yes. I'm going to adopt the Scope of

Jury's Determination as proposed by the government.

MR. PANCHAPAKESAN: Your Honor, and I would just note

objection on that, which I think I made already.

THE COURT: Yes. The Standard of Proof Instruction

Proposed 4, yours were the same, so I'm adopting that.

MR. PANCHAPAKESAN: Again, for the record, I would

note my objection again to the question.

THE COURT: Yes. Your reference to the amount of

property is removed, but otherwise the Standard of Proof is the

same as the government's.

The Preponderance of the Evidence I'm going to keep as

separate, and that is the government's proposed at

Document 1935, page 9.

MR. PANCHAPAKESAN: On this, Your Honor, the only

reason we included a new instruction is I think the Ninth

Circuit instruction is more generic preponderance instruction.

We pulled this out in certain instruction, which is specific to

forfeiture, sort of a follow-up on forfeiture trials. We

thought it was a little more accurate in our respect.

THE COURT: The Instruction 6 is the same, so I'll

adopt that. Reliance on Evidence Presented During Guilt Phase.

With regard to the proposed, government's Proposed

Instruction No. 7, again, removing references to the

superseding indictment, and so I'm going to adopt the

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defendants' at page 13.

MR. BOYLE: No objection, Your Honor.

THE COURT: Instruction No. 8, Multiple Bases, I'm

keeping that instruction. As I review it, it is the same as

defendants' Proposed No. 10.

MR. PANCHAPAKESAN: I think that's right, Your Honor,

then in our redline there were two instructions we proposed

before that. One was Separate Consideration and one was

Multiple Defendants, and I think the government had objection

to those.

MR. BOYLE: I think counsel is correct. We didn't

object, although I think the Court has already noted that the

defendants' issue is resolved in other instructions, but

neither of those instructions were objectionable by themselves.

THE COURT: All right. The proposed, government's

Proposed Instruction No. 9 at page 13, I feel like this is the

preamble that should perhaps go into that first instruction.

MR. BOYLE: We have no objection moving it, Your

Honor. We simply feel it's helpful to have an instruction that

gives them a basic instruction of what is forfeitable, but it

could be an instruction here or in the preamble, Your Honor.

Both would be perfectly acceptable.

MR. PANCHAPAKESAN: Our view on this, Your Honor, some

of these, some language I take issue with what is "shall

forfeit." I don't know that that's exactly right. I think it

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should say something like "may be required to forfeit." Like

the "shall" implies that, you know, a nexus, however, might be

requires forfeiture of the entire asset. And then this also, I

think, lacks the traceability language that's contained in the

relevant forfeiture statute.

THE COURT: Well, I'll get to that. So you would

prefer that it read, "may forfeit," or just "forfeit"?

MR. PANCHAPAKESAN: "May be required to forfeit to the

government."

THE COURT: Is there objection, Mr. Boyle?

MR. BOYLE: Your Honor, forfeiture is mandatory,

however, the nexus determination is the jury's question. So I

believe counsel's proposal of "may be required to forfeit" is

probably more accurate.

THE COURT: We will adopt that language.

And then as to defendants' No. 10, the Proceeds

Defined. So I removed all after the first sentence. And it

seems to be fairly cumbersome, and I think the rest of the

instructions cover that, and I don't know why those two

paragraphs are necessary.

Mr. Boyle.

MR. BOYLE: Your Honor, with respect to the last

paragraph, we do think it is necessary because the question of

an Eighth Amendment issue, whether something is the value of

property is greater than the -- than the excessive fines,

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that's explicitly a question for the Court. So we are trying

to make clear to the jury with this instruction. The question

for that is nexus. It's not a question of comparing the value

of a property to, say, what nexus they see. That's the sole

reason to avoid asking the jury to make a determination that is

squarely within the Court's jurisdiction.

THE COURT: Okay. Let me see if I understood what you

said. So you suggest keeping the last paragraph?

MR. BOYLE: Yes, Your Honor, the paragraph regarding

the present value. Because comparing the value to the amount,

I suggest goes towards an Eighth Amendment question for the

Court.

THE COURT: All right. We will keep the last

paragraph and remove the paragraph that begins, "Proceeds

remain proceeds."

Mr. Panchapakesan.

MR. PANCHAPAKESAN: Just so I understand, how does the

instruction read now?

THE COURT: So it will read, "Property subject to

forfeiture as proceeds of a Travel Act conspiracy means

property of any kind obtained directly or indirectly, as the

result of the commission of the offense giving rise to

forfeiture, and any property traceable thereto, and is not

limited to the net gain or profit realized from the offense.

The question of the present value of any property that

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constitutes proceeds, or was obtained with proceeds, is not

before you. If the property has the required connection to an

offense, it is subject to forfeiture whether or not its value

has changed."

MR. PANCHAPAKESAN: I think it would be, Your Honor,

you know, appears the government's support for this instruction

is like Seventh Circuit cases, Eighth Circuit cases. The

instruction we propose is actually the Seventh Circuit Model on

what "proceeds" means. It's not limited to the Travel Act or

any particular offense. "Proceeds" has sort of a wide

applicability. We think it's a simpler instruction as to what

proceeds are. And again, the amendment question I don't see as

a significant issue. I find it confusing.

THE COURT: So what I understand that you propose is

just taking out "of a Travel Act conspiracy" because then it

will read, "property subject to forfeiture means property of

any kind."

MR. PANCHAPAKESAN: Right. I think that's right,

because there may be multiple offenses. I mean, of course, it

depends if there's conviction, what it's on. If we are just

talking about Travel Act conspiracy, then it may make sense to

use that language, but if there's money laundering --

THE COURT: Well, I don't think there's a distinction

in either of the counts anyway, so I'm going to go ahead and

remove "of a Travel Act conspiracy."

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MR. PANCHAPAKESAN: Your Honor, I think we had a prior

instruction definition of "traceable to." It was our 11. I

think comes before this one.

THE COURT: Yes. I will talk to you about that in a

little bit. And I think I actually, well, I moved it in

placement. That's why I am not getting to it yet. But what I

did with regard to your Forfeiture based on Travel Act

Conspiracy, the proposed, government's Proposed Instruction 11,

is, and the defendants' is their Proposed Instruction 13, what

I did was -- it's not this one -- I thought I did that. Let's

see. I moved -- after the listing of property, it then

instructs the jury beginning to find any of the property

subject to forfeiture. What I did was I moved that to the

beginning in terms of the elements, the two elements that were

outlined by the defendants, and then I inserted the listing of

the property beginning with: As to Mr. Lacey. And so I think

it just reads better, gives them the instruction, tells them

the property to consider.

Is there an objection to that?

MR. BOYLE: No objection, Your Honor.

THE COURT: And I will note that the defendants'

redlines "seized from or restrained in," and there is no

objection to that? Mr. Boyle.

MR. BOYLE: My apologies, Your Honor, I didn't quite

understand. Is the Court's question, do we object to the

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removal of the "seized from or restrained in" language? We

won't object to that no objection, Your Honor.

THE COURT: So we have adopted those strikeouts as

well.

So your preamble, again, government's 12, Property

Subject to Forfeiture for Money Laundering Convictions, I mean,

I think you can do it one of two ways. You can have the

conspiracy on the Travel Act description proceed this

substantive property listing, and I think that probably would

be the better way, and then this money laundering paragraph

could proceed the substantive listing of the properties.

Does that make sense?

MR. BOYLE: Yes, Your Honor, I think that does make

sense and works, Your Honor.

THE COURT: And there was a scope, The Scope of

18 U.S.C. 982(a)(1) proposed by the government, was there

something similar to that by the defense, Mr. Panchapakesan?

MR. PANCHAPAKESAN: No, Your Honor. We objected to

this instruction in its entirety, and there were some

objections that we filed and included in the redline as well.

I mean, the short version of it is we think the "facilitation"

language is problematic because the statute does not use the

term "facilitate." It uses the term "involved in," and I'm not

familiar with the Ninth Circuit case that really defines

"involvement" in that manner.

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We cited a case, the Bital case, B-I-T-A-L, 76 F.

Supp. 2d 1063, which I think is a C.D. Cal case, it calls into

question the facilitation theory the government is pursuing.

My understanding of "involved in" would be an account that is

involved in the money laundering offense that has been charged.

And as to my client, for example, investment accounts he holds

or bank account he holds, those are not accounts that the

government included in the money laundering offenses as being

involved in the offense.

There's also some language about fees or commissions

paid to a money launderer. That's kind of confusing. I don't

know what that refers to. I don't think there's been evidence

of that, and so our view is this is just unnecessary and

confusing.

MR. BOYLE: From the government, Your Honor, the

statutory language says "property involved in such an offense

is forfeitable," and we believe the jury needs that term

"involved in" defined for them. This is our proposed

definition of "involved in," and the defendants haven't

proposed a competing definition. So I don't know how we can

give the jury no instruction as to what it means that property

is involved in a money laundering offense. It may have -- they

could have proposed edits to this or a competing instruction,

but they did not, so the jury is going to be, I submit, quite

confused as to what "involved in" means.

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MR. PANCHAPAKESAN: Your Honor, the first then is

"Money laundering property that was the subject to the

financial transaction that constituted the money laundering

violation," I don't think we have an objection to that. I

think that's essentially what "involved in" means. That's the

first line of their instruction.

MR. BOYLE: And Your Honor, I think we strongly

disagree with that. But again, there has to be a definition

for the jury as to what "involved in" means. Courts have held

that "involved in" is broader than "proceeds." So we submitted

briefing on this I think as well, but there is only one

instruction for the Court right now.

THE COURT: Is there evidence of "fees or commissions

paid," or are you going to present that?

MR. BOYLE: I don't believe so, Your Honor. This is

just a definition drawn from -- I believe this comes from

Mr. Cassella's treatise on the topic. If the Court is

concerned about that specific language "fees or commissions," I

wouldn't object to removing that language, Your Honor.

THE COURT: I don't think it's necessary to keep that

last paragraph in because there is going to be a separate

"traceable" definition, and this sort of characterized what

"traceable" means in a different way.

MR. BOYLE: Understood, Your Honor. We did not

originally include a "traceable to" definition. We included it

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in instructions like this. So if the Court is inclined to

include a separate "tracing" definition, I think the Court

could reasonably remove this paragraph. That's just not how we

laid out our instructions. So long as the jury is instructed

on "tracing," we wouldn't object to that.

THE COURT: And what about the last paragraph? It

seems redundant to another instruction.

MR. BOYLE: I think that's correct, Your Honor. It is

reflected in other instructions.

THE COURT: All right. So I will remove No. 3. I

will remove "the property that's traceable," and all after

that.

MR. BOYLE: No objection, Your Honor.

MR. PANCHAPAKESAN: I think I noted my objection with

the "facilitation" language.

THE COURT: The last instruction, the Forfeiture based

on Money Laundering Offenses, 982(a)(1), I'm going to do the

same thing that I did with the previous Travel Act forfeiture

instructions; that is, I'm going to move the paragraph at

Defendants' Proposed in Document 1940, page 27, at line 7, "In

order for you to find," and put that at the top followed by the

listing of the property and assets. So it will match the

previous one.

Is there an objection?

MR. BOYLE: If I may ask a question, Your Honor,

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'cause I am trying to follow along, I believe the defendants'

modified instructions specifically refer to a nexus. Is the

Court intending to include the specific "nexus" term? To be

clear, we don't object to moving the instruction. The nature

of my objection is simply because, as we noted in briefing, the

defendants drew their Model instructions from the Seventh

Circuit all instructions; however, they left out the Seventh

Circuit Model Instruction defining a nexus. So if we are going

to use the term "nexus" for the jury, we should include that

definition, because otherwise I think the jury is left without

instruction as to what a nexus is.

The government's instruction simply called it a

connection with, which I think is somewhat self-evident, but I

would object to giving them the term "nexus" without defining

it, Your Honor.

MR. PANCHAPAKESAN: Your Honor, I don't think we have

an objection to using the term "connection."

THE COURT: I'm not following where you're at.

MR. BOYLE: My apologies, Your Honor. I'm trying to

follow along.

THE COURT: In terms of, sorry, counsel. Let me -- so

I'm looking at your Proposed Instruction No. 14, beginning at

page 23, and I'm looking at page 26 and you say, "The

government contends that the property described above was

involved in, or traceable to, the money laundering violations

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for which one or more defendants were found guilty, and it is

therefore subject to forfeiture."

Then you are go on to say, "If you conclude that the

government has proved by a preponderance of the evidence that

the property listed above was involved in such offense, or

traceable to the violations, you must find that the property is

forfeitable."

I don't know in the Defendants' Proposed 1940 what

you're referring to in terms of their "nexus" reference. I

don't see it, unless I'm not reading from the same thing you

are.

MR. BOYLE: My apologies, Your Honor, it's possible I

got the wrong spot on the redline. Then I withdraw that

objection, Your Honor.

THE COURT: And so let me just be clear, you don't

object to the insertion of the language, "If you find from your

consideration," or, I'm sorry, it would start at line 7 of the

Defendants' Proposed Document 1940 at page 27, "In order for

you to find that the property is subject to forfeiture." I'll

say, "the following property," and then all after that, then

list the property.

Mr. Boyle.

MR. BOYLE: No objection, Your Honor. I just looked

at the language.

THE COURT: And the Special Verdict Form I'll keep.

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The "traceable" definition, I know I saw it in here, and I

intend to include it. I just -- I might have just moved it in

the redline, but I do intend to include the "traceable"

definition. I just can't find it off the bat, and it's a

fairly short definition.

MR. BOYLE: No objection, Your Honor. We are fine

with that instruction.

THE COURT: Oh, okay. So it would just state, "The

term 'traceable to' means that the acquisition of the property

is attributable to the offenses charged in," and we would have

to delineate the counts, as opposed to sources other than these

offenses.

MR. BOYLE: Yes, Your Honor. My only suggestion, I

believe this should probably go after the "proceeds"

definition, and it should refer only to Count 1 because

"traceable to," that language is used in the "proceeds"

definition. With respect to the money laundering counts, they

use the "involved in" language, which is different. So I

wouldn't want to confuse the jury as to which is "proceeds"

versus "involved in," but the language in the instruction is

not objectionable.

THE COURT: Do you agree with that, Mr. Panchapakesan?

MR. PANCHAPAKESAN: I think it should apply to both.

For example, 18 U.S.C. 982(a)(1), which is the forfeiture

statute tied to money laundering, says, "The Court, in imposing

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sentence on a person convicted of an offense in violation of

section 1956, 1957 or 1960 of this title, shall order that the

person forfeit to the United States any property, real or

personal, involved in such offense, or any property traceable

to such property."

And so there is traceability language in the

applicable money laundering forfeiture statute, so I think it

applies to both.

MR. BOYLE: That's a fair point, Your Honor. I agree

with counsel. That makes sense.

THE COURT: So why don't I do this: I'll include in

that in the money laundering instruction, "The real or personal

property was involved in or traceable to."

All right. That's all I have on the instructions.

Was there anything I missed?

MR. PANCHAPAKESAN: Your Honor, we proposed a First

Amendment instruction at the end, and the basis for that

instruction is it appears that the government's theory here on

forfeiture is that every adult ad on Backpage was in fact an

act for prostitution, and it's, therefore, all the proceeds are

tied to an offense, and we argue there is a First Amendment

presumption in that respect, and that the government has a

burden on overcome it, and that -- so we are trying to do so is

to discern the ads as opposed to the millions with respect to

which they are seeking forfeiture, and so we think that there's

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value in having that instruction here in the context of

forfeiture.

THE COURT: Mr. Boyle.

MR. BOYLE: Your Honor, we my apologies, Your Honor,

we object to that instruction. I think that was Document 1943

at page 9, but our summary is the jury has already been

instructed on the First Amendment, and there's no need for any

further instructions here. We also cited some case law that

their instruction, the case law underlying their instruction

was not applicable, and I -- we have a fairly lengthy response.

I refer the Court to that. Again, that's 1943 at 9, 10, 11,

but we don't believe this instruction is necessary.

To the extent the jury has already found the

defendants guilty of the relevant charges, the First Amendment

would not apply here.

THE COURT: And that's the way that I view it; that

they are looking at the particular counts, and they already

have a jury instruction on the First Amendment. And if there

is a conviction on any of those Travel Act counts, then they

have found that the First Amendment does not apply. And so to

insert a First Amendment instruction as to the totality of the

forfeiture, I think it would just confuse things, so I'm not

going to give it.

All right. Anything other that I missed with regard

to those jury instructions?

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MR. PANCHAPAKESAN: On my end, no, Your Honor.

THE COURT: Mr. Boyle.

MR. BOYLE: Nothing from the government. No, Your

Honor. Thank you.

THE COURT: All right. We will endeavor to perfect

those instructions and send the modified final draft to you.

We'll leave the spaces open where the respective potential

counts would be returned and that way we can insert those

immediately, and I think that's all I have with regard to it.

Oh, I did get the names of the two individuals you

intend to call, Mr. Panchapakesan. And I'm sorry if this is a

repeat question, those individuals were not on your original

witness list; correct?

MR. PANCHAPAKESAN: They were not, Your Honor, no.

THE COURT: Well, I'll have to then question the jury

at least as to those proposed witnesses in order to just get a

record whether or not anybody is familiar with them. Are they

local?

MR. PANCHAPAKESAN: They are both local, yes, Your

Honor.

THE COURT: All right.

MR. STONE: And --

MR. LINCENBERG: I had another point.

MR. BOYLE: Your Honor --

THE COURT: Wait. Mr. Boyle, go ahead.

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MR. BOYLE: Your Honor, those, as you noted, were not

disclosed. One of those witnesses has been in court for

virtually the entire trial, that will be Mr. Quigley. So we've

notified the defense that we may be raising an objection under

Rule 615 to having a witness testify whose watched the entire

case. We've notified them of that objection, and I think will

raise it if we do proceed to a forfeiture phase, Your Honor.

THE COURT: Is Mr. Quigley present?

MR. LINCENBERG: No. He has COVID.

THE COURT: All right. All right. Yes, well, raise

the objection sooner rather than later so I don't have to delay

proceedings.

MR. BOYLE: Will do so immediately, Your Honor.

THE COURT: All right. Mr. Stone.

MR. STONE: No, just that I think we're raising it. I

don't know if we need to do anything else. This is a witness

who has been here for the whole trial. The defense invoked

Rule 615, the rule of exclusion. It doesn't seem right that he

now should be testifying in trial.

MR. LINCENBERG: Well, if we call him, he is going to

be in the nature of a summary witness somewhat like government

agents, but the Court can address it at the time. We may not

need to call him, so we can deal with it.

THE COURT: Well, since the rule was invoked, I would

agree that it's improper to call somebody whose been sitting

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through the duration of the trial. And in particular, I notice

a number of people have been not only just attending the trial,

but also the arguments and rulings on the law, and so on and so

forth, and so I think it's entirely improper, and so that's my

preliminary ruling unless you give me some compelling reason.

But so as far as I can see, Mr. Quigley should not appear.

MR. LINCENBERG: I don't think we'll argue it right

now, Your Honor. If we feel the need to, then we'll argue it

later. We had a different issue we wanted to raise.

THE COURT: And what is that?

MR. LINCENBERG: Your Honor, we received last night

Jencks material from involving witness Quoc Thai. We had a

copy printed out. Perhaps I can provide it to the clerk and

maybe we can mark it for the record next in order so the Court

has a copy while I discuss it.

Do you have an exhibit number we can --

THE COURT: Do we have an alphabet particular exhibit

like A?

COURTROOM DEPUTY: Oh, the next number?

THE COURT: We can just temporarily assign it --

MR. LINCENBERG: We can even --

THE COURT: -- Exhibit A.

MR. LINCENBERG: So Your Honor, with regard to Exhibit

A, Exhibit A first consists of an e-mail from Mr. Stone

providing this to us yesterday at 5:30 p.m. The e-mail behind

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it is an e-mail from Quoc Thai discussing -- forwarding a copy

of this, and then there's a 91-page report which he and

apparently a Mr. Verzosa prepared, which is an asset tracing

document. This is clearly Jencks material that related to

Mr. Thai's testimony that was never provided, in violation of

Jencks, in violation of the Court's order at Docket 730 about

dates for disclosures and so forth.

And just to give the Court a brief overview of the

document, the document discusses several issues with respect to

creation of foreign entities with respect to purposes for the

foreign entities. There are statements by Mr. Ferrer to

Mr. Thai that are in there. This is a document that we would

have used in cross-examination both of Mr. Thai as well as of

Mr. Ferrer.

Just a couple of quick examples; for example, right

from the beginning Mr. Thai discusses this company, Posting

Solutions, and Mr. Ferrer's discussion of Posting Solutions

being a company that was created in, I think it was 2017. And

just as an example, if the Court recalls, a large part of the

government's argument was to talk about Mr. Brunst having this

big role in creating various entities, and being the officer,

the president of various entities and the like, part of our

response was talking about how his role -- that there were CFOs

at Backpage involved. Mr. Gage, for example, in the post-2015

period, and I think the Court recalls some of the arguments we

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gave in that regard.

The document from paragraph one talks about how

Posting Solutions, Michael Gage was the president, was involved

in the creation, was the sole signatory on the account. It's a

document we would have used probably with both witnesses to

explore that. There's other detail on Posting Solutions that's

discussed in both -- I went back and looked at the transcript

of Mr. Ferrer's testimony as well as this document, I won't go

through all the detail with the Court right now, but it's

relevant.

There is other issues, for example, there is

discussion about the credit card issues and the company

shutting them out because of bad press, and Mr. Ferrer's view

about this. This background testimony document would have been

relevant in our cross-examinations of these witnesses right on

point, and frankly also contradictory to some of the

statements --

THE COURT: Well, let me ask you, in your review of

that with regard to his view on the credit card issue, what was

it that he said that you thought is substantially different

than what he testified to?

MR. LINCENBERG: Well, some of it is not substantially

different from what he testified to. You know, you have to --

it has to be parsed out. But for example, Mr. Ferrer, it

contradicts some of the testimony he gave on cross. It would

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have allowed me to better establish that.

Also, when the Court precluded me from --

THE COURT: Like what? I just want an example.

MR. LINCENBERG: Okay. Let me give you an example I

was going to use. It happens to be popping into my mind. When

I was attempting to impeach Mr. Ferrer on document GLCF37, and

that document, if the Court may recall, was when the government

objected to as privileged, and we said this is material that

under the joint defense agreement was permissible for us to

use. The Court made -- the Court precluded me from getting

into that document. One of the bases is the Court said not

impeachment. Some of what is in this document is directly

contradictory to what Mr. Ferrer said in that.

There is testimony that this document has discussions

in it about Mr. Ferrer being the UBO, the ultimate beneficial

owner, of foreign entities, like Ad Tech BV, in connection with

Bank Frick, you know. The government tried to convey the

flavor that this was all a creation of the owners and so forth.

Certainly, you know, part of my cross-examination of Ferrer was

talking about how there were other reasons, reasons for these

foreign entities such as that were beneficial to him, such as

tax benefits, and the fact that you needed foreign entities in

order to get foreign bank accounts and the like.

It all relates to this: You know, we can do some

follow-up briefing on this if the Court is inclined to receive

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it. We got this last night in the middle of when we were going

through other things, but it certainly -- you know, Jencks is

not -- the issue of whether there's a Jencks violation seems to

me it's crystal clear with regard to Quoc Thai.

The issue as to whether this is also material that

should have been turned over because it was relevant

impeachment material, Ferrer, and potentially prior statements

required to be produced by Ferrer, might require further

evidentiary hearing. If the government comes back and says:

Well, you know, it's not technically required under 3500

because there is no reference to him adopting them. It's clear

from this document that Mr. Ferrer was working closely with

government agents in putting together tracing analyses, working

with them on their money laundering forfeiture analyses.

And very, very little that I can recall, barely

anything from the interviews we received from Mr. Ferrer, got

into any of this stuff, and yet it's clear that there is

lengthy documents of statements from Mr. Ferrer that are

relevant there.

So I can go on with other examples in here. I think

that obviously we're presenting to the Court a 91-page document

that the Court obviously hasn't had a chance to look at yet

that is a clear Jencks violation, and we believe there's other

discovery violations and some of which to flesh out. We might

need an evidentiary hearing.

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So as a remedy for this, Your Honor, first and

foremost we ask for a dismissal of the case. This is an

important discovery violation, and we believe that remedy is

appropriate. If and only if the Court doesn't give that

remedy, it should at a minimum completely strike the testimony

of Quoc Thai and any testimony that Ferrer gave relating to

wire transfers and money flow and the like.

And obviously the result of striking Quoc Thai's

testimony would clearly mean a dismissal of all of the money

laundering and forfeiture counts. There was zero evidence of

money flow or particular wire transfers other than the summary

documents that were introduced through Mr. Thai.

So that's what we would present to the Court and ask

for that relief.

MR. STONE: Your Honor, we disclosed this because

Quoc Thai is a potential witness and this was an e-mail that he

sent October 18th after he testified at trial.

With respect to the attachment, this was primarily

authored by Special Agent Lyndon Versoza. It is -- there's --

Mr. Thai contributed to it. That's stated in the e-mail, but

the primary author was Special Agent Versoza. It's listed as a

draft. It is analyzing primarily the bank docs, all of which

have been disclosed, and most of these 91 pages just trace bank

transactions that are from the underlying bank records that the

defendants have had for years.

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It really looks -- they basically are draft summary

exhibits. It's in similar format to the summary exhibits that

were used by Mr. Thai and that were produced that relate to

money laundering counts which, again, have been produced for

years.

These transactions relate more to forfeiture, relate

more to the seizure of the assets, and that's why, because it

was shared by Mr. Thai, it would fall under Jencks because it

might relate to his testimony related to forfeiture and all of

the tracing that relates to the seizure of these assets, but

because it was -- with respect to Mr. Ferrer, there's nothing

that would make this a statement adopted by Mr. Ferrer, so

that's not the case whatsoever.

In addition, much of the information that's here has

been included in seizure warrants and other warrants that have

been produced. So this is information that has been produced

previously within this case and within the litigation which

would include the civil forfeiture in CDC A.

So there's nothing new here. It's information related

to underlying bank records that defendants have had. It

primarily just traces those transactions. It was authored

primarily by a nonwitness, and it relates primarily to the

forfeiture aspect, which is why, because Mr. Thai sent the

e-mail because it relates to his potential testimony which

could come in the next week or so. That's why it was produced,

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Your Honor.

THE COURT: Very brief reply, please.

MR. LINCENBERG: Your Honor, first, counsel is looking

to downplay Mr. Thai's role in this. I mean, Mr. Thai's e-mail

says -- talks about this being a document that Lyndon, I

believe Lyndon is this guy, Versoza, Lyndon and I put together

years ago. The idea whether somebody was the main author or

not, this is Mr. Stone's representation, the two of them put it

together. It's Quoc Thai's document. He's their tracing guy.

This is a document from him.

You know, the fact that they have a draft stamp on it

doesn't make it any less a statement. They can keep a draft on

whatever they want. This is a document that was -- this is the

updated version of 11-4-2021. If there's a later version, we

should get that as well. This is a document. This is prior

statement from Mr. Thai.

And the last thing I would say is that this clearly

does contain Ferrer's statement. I will give the Court one

more example. This is at page 47 of the report where Ferrer is

talking about credit cards, cutting out because of the bad

press and so forth. He says that the entities, and he's

referring to entities that were created I think at the time of

the sale in 2015, said the entities existed for the sole

purpose of funneling to Backpage accounts otherwise prohibited

credit card payments for Backpage ads. I think he's also

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referring to Posting Solutions and Website Technologies, so not

just entities that were created then.

These are statements that Ferrer is making that were

the subject of a lot of cross-examination and testimony, and

this is their main witness. You have direct Jencks on

Quoc Thai. I believe it's Jencks with regard to Ferrer, and

clearly it's impeachment material. It's a discovery violation

and it's a very important one. And so we submit to the Court

that it's important for the Court to make such a finding. And

then if the Court needs further evidentiary hearing, we can do

that, but there should be a remedy with some teeth here.

THE COURT: Well, I am going to ask for further

briefing because it's a 91-page document, and the briefing is

going to do two things: Number one, the government is going to

point out what is it that was previously disclosed that is

referenced in here? As you say, if it was in warrants or other

documents that have been previously disclosed, then I want to

know that. That's related to the Jencks allegation.

Number two, if as you say there are statements that

contradict or could have been used as impeachment material, I

want you to point that out. I want you to bring to me whatever

the witness testimony was, whether it be Quoc Thai or

Mr. Ferrer, and I want you to then go through this 91-page

document and tell me how it is that it is impeachment and how

it would have made any potential outcome any different, and

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then I'll take a look at it and determine whether or not I need

an evidentiary hearing.

I think in terms of producing, I'm reminded that both

sides have late produced material throughout the course of the

proceedings. I have witnesses that appeared that weren't even

on our witness list from the defense. I mean, it really is one

of the most frustrating aspects of this entire case. No one

seems to adhere to deadlines, the rule as it's stated in the

federal rules, or my orders. So this really doesn't come as a

surprise, although it should be. Counsel of your caliber

should not be handing me documents late. There should be no

surprises. That's what disclosure is all about.

So your briefing will provide all of that, and --

MR. LINCENBERG: Your Honor, can I ask that the third

point be discovered in the briefing, which is that counsel

produce all e-mails between Quoc Thai and Ferrer or his counsel

and government counsel, as well as notes or e-mails summarizing

statements made to him by Ferrer?

THE COURT: On what basis?

MR. LINCENBERG: On the basis that it's relevant to

this Jencks material that was withheld.

THE COURT: Well, we don't know that. I don't know

it.

MR. LINCENBERG: Well, that's --

THE COURT: Unless you parse through it and looked at

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the record.

MR. LINCENBERG: That's why I asked that it be

produced in discovery. We know from the document that Ferrer

is talking to these agents about these issues --

THE COURT: I am not going to do that. I am not going

to do that at this juncture. If in your briefing I see some

reason for that to happen -- and I am not going to ask them to

duplicate what they've already produced to you. What I'm

asking for them to do is list out where it was it was produced,

what was relevant to whatever is in here, what they produced

that you already have notice of, and but I'm not going to do

that.

So what I would ask is no more than 20 pages each, and

you'll get that to me -- I would hope to have it by Monday,

Monday at noon, and I will look at it and see what happens

next. And that's all I'll take right now. All right. We are

adjourned.

I will note for the record that since Mr. Eisenberg is

the only counsel not present, that I will essentially make a

note that he's joining in on everything that we've discussed.

Unless there is an objection that he wishes to raise separate,

I will give him the ability to do that.

(Recess was taken at 11:11 a.m.)

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C E R T I F I C A T E

I, HILDA E. LOPEZ, 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 10th day of November,

2023.

s/Hilda E. Lopez_______

HILDA E. LOPEZ, RMR, FCRR

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