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Investigation and Prosecution of a Complex Financial Case Ivan Orton Senior Deputy Prosecuting Attorney Economic Crimes Unit King County Prosecuting Attorney.

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Presentation on theme: "Investigation and Prosecution of a Complex Financial Case Ivan Orton Senior Deputy Prosecuting Attorney Economic Crimes Unit King County Prosecuting Attorney."— Presentation transcript:

1 Investigation and Prosecution of a Complex Financial Case Ivan Orton Senior Deputy Prosecuting Attorney Economic Crimes Unit King County Prosecuting Attorney

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3 Today’s Agenda Background on two recent cases that went to trial Background on two recent cases that went to trial Discuss the challenges these cases presented when preparing for trial Discuss the challenges these cases presented when preparing for trial Demonstrate how evidence was produced at trial Demonstrate how evidence was produced at trial

4 CASES The jail bookkeeper who embezzled from work release inmates The jail bookkeeper who embezzled from work release inmates The plundering of Frances Taylor’s assets The plundering of Frances Taylor’s assets

5 Jail Bookkeeper Former jail bookkeeper charged with stealing from inmates Posted by Jennifer Sullivan A former bookkeeper at the King County Jail was charged Monday with 22 counts of second- degree theft for allegedly stealing money from inmates who were serving their time on work release, according to charging documents filed in Superior Court.

6 William Findley

7 State Auditor’s Report

8 Process $ $

9 Bookkeeping

10 Check for Cash Scheme Unrecorded inmate check would be included in deposit Unrecorded inmate check would be included in deposit Equal amount of cash would be removed from deposit Equal amount of cash would be removed from deposit Oh, if it were only that simple Oh, if it were only that simple

11 Auditor Identified 66 Such Transactions in Audit Period (one year) I eliminated all that were not pristine examples I eliminated all that were not pristine examples Left with 39 Left with were beyond the statute of limitations 17 were beyond the statute of limitations The other 22 were charged The other 22 were charged

12 Here Was My Problem How in the world can I present this to a jury so they will How in the world can I present this to a jury so they will Understand it Understand it Not be totally bored Not be totally bored

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15 Citizenship Award

16 Legal Theory

17 Three Theories of Theft By Deception By Deception By Taking By Taking By Exertion of Unauthorized Control By Exertion of Unauthorized Control

18 Exertion of Unauthorized Control Having any property or services in one's possession, custody or control Having any property or services in one's possession, custody or control to secrete, withhold, or appropriate the same to his or her own use or to the use of any person other than the true owner or person entitled thereto as bailee, factor, lessee, pledgee, renter, servant, attorney, agent, employee, trustee, executor, administrator, guardian, or officer of any person, estate, association, or corporation, or as a public officer, or person authorized by agreement or competent authority to take or hold such possession, custody, or control

19 Essence Hold property in a capacity which limits your authority Hold property in a capacity which limits your authority Exceed that authority Exceed that authority

20 Capacity Most Common Capacities in Elder Fraud Cases Most Common Capacities in Elder Fraud Cases Attorney (Power of Attorney) Attorney (Power of Attorney) Other Listed (Guardian, Trustee) Other Listed (Guardian, Trustee) Agreement Agreement Crucial Concept of Fiduciary Crucial Concept of Fiduciary

21 A Lawyer Will Always Object

22 Any Kind of Objection

23 POA - What’s the Law Power of Attorney A person acting under authority of a Power of Attorney does not have the power to make, amend, alter or revoke the principal’s wills, and does not have the power, unless specifically provided otherwise in the document, to make gifts of property owned by the principal. RCW

24 POA - What’s the Law Power of Attorney An attorney-in-fact is an agent to whom the principal has given authority to act in his or her stead for the purposes set forth in the power of attorney. In that role, the agent becomes a fiduciary who is bound to act with the utmost good faith and loyalty and to fully disclose all facts relating to his interest in and his actions involving the affected property; the agent must also deliver all benefits derived from or inuring to the property from the agent's breach of the fiduciary relationship to the principal. Bryant v. Bryant, 125 Wash.2d 113, , 882 P.2d 169 (1994) Crisman v. Crisman, 85 Wash.App. 15, 22, 931 P.2d 163 (1997) (citing Moon v. Phipps, 67 Wash.2d 948, 956, 411 P.2d 157 (1966)). In re Estate of Palmer, 145 Wash.App. 249, 263, 187 P.3d 758 (2008)

25 POA - What’s the Law Power of Attorney Inherent in the fiduciary relationship between principal and attorney-in-fact is the duty to account for the assets managed by the attorney-in-fact. Crisman v. Crisman, 85 Wash.App. 15, 22, 931 P.2d 163 (1997) In re Estate of Palmer, 145 Wash.App. 249, 264, 187 P.3d 758 (2008)

26 TRUSTEE - What’s the Law As used in these instructions, the word “trust” means a fiduciary relationship in which one person holds the property of another person, subject to the obligation to keep or use that property for the benefit of the other person. As used in these instructions, the word “trustee” means the individual who holds the trust property for the benefit of the other person. Restatement of Trusts, Second, § 2 Bogert, Trusts and Trustees, 2nd Edition § 1

27 What is a Fiduciary A fiduciary relationship exists where confidence is reposed on one side and resulting superiority and influence on the other. Any person whose relation with another is such that the latter justifiably expects his welfare to be cared for by the former occupies a fiduciary position. Tucker v. Brown, 199 Wash. 320, 331, 92 P.2d 221 (1939) Salter v. Heiser, 36 Wn.2d 536, 551, 219 P.2d 574 (1950) Moon v. Phipps, 67 Wn.2d 948, 955, 411 P.2d 157 (1966) Liebergesell v. Evans, 93 Wn.2d 881, , 613 P.2d 1170 (1980) Restatement of Contracts, §472(1)(c), & Comment C at 898 (1932)

28 Where does Fiduciary Concept Fit Many of the named relationships (attorney, agent, trustee, executor, administrator, guardian) explicitly carry with them a legal fiduciary duty. Many of the named relationships (attorney, agent, trustee, executor, administrator, guardian) explicitly carry with them a legal fiduciary duty. Even if not acting in one of these capacities, one can have an in-fact fiduciary relationship. Even if not acting in one of these capacities, one can have an in-fact fiduciary relationship. A fiduciary has certain limits on their authority. A fiduciary has certain limits on their authority. If one hold property by agreement, as a fiduciary, the limits on a fiduciary define the scope of authorized control If one hold property by agreement, as a fiduciary, the limits on a fiduciary define the scope of authorized control Exceeding that authority, in the right amount and with the requisite intent to deprive, is theft Exceeding that authority, in the right amount and with the requisite intent to deprive, is theft

29 Fiduciary Law A fiduciary, in handling another’s (the principal’s) property, must exercise the utmost good faith, disclose fully all facts relating to his interest in and his actions affecting the property involved in the fiduciary relation, and must use his principal’s property solely for his principal’s benefit. Moon v. Phipps, 67 Wn.2d 948, , 411 P.2d 157 (1966)

30 Fiduciary Law A fiduciary may not exert undue influence over the other party in the fiduciary relationship in order to obtain a gift from the person. Doty v. Anderson, 17 Wn. App. 464, 471, 563 P.2d 1307 (1977)

31 Fiduciary Law Whether a gift to a fiduciary is the product of undue influence is a factual question to be determined in light of the following factors: the donor’s age and mental condition; the donor’s age and mental condition; her prior intentions and concerns as to the disposition of her property, her prior intentions and concerns as to the disposition of her property, the size of the gift and the financial condition in which it leaves the donor; the size of the gift and the financial condition in which it leaves the donor; her knowledge and understanding of the terms of the gift, and her knowledge and understanding of the terms of the gift, and the presence or absence of independent advice to the donor prior to the gift. the presence or absence of independent advice to the donor prior to the gift. McCutcheon v. Brownfield, 2 Wn. App. 348, , 467 P.2d 868 (1970)

32 Fiduciary Law Fiduciary duties do not arise when the agent learns of his legal obligations arising from the agency relationship. Rather, a fiduciary relationship arises when the agent exercises dominion and control over the principal's property sufficient to alienate the principal's right to the property. Crisman v. Crisman, 85 Wash.App. 15, 22, 931 P.2d 163 (1997) (citing Moon v. Phipps, 67 Wash.2d 948, , 411 P.2d 157 (1966)) In re Estate of Palmer, 145 Wash.App. 249, 263, 187 P.3d 758 (2008)

33 Fiduciary Law These instructions were given in the Tyrone Dash case These instructions were given in the Tyrone Dash case CAUTION: These instructions are an issue on appeal CAUTION: These instructions are an issue on appeal Well... Maybe not so much Well... Maybe not so much

34 Issues on Appeal The Fiduciary Instructions The Fiduciary Instructions The “Good-Faith-Claim-of-Title” Defense The “Good-Faith-Claim-of-Title” Defense The Frances Taylor Videotape and the Confrontation Clause The Frances Taylor Videotape and the Confrontation Clause The “Aggravating Factors” instruction (the Bashaw issue) The “Aggravating Factors” instruction (the Bashaw issue) The Statute of Limitations Issue The Statute of Limitations Issue

35 The Fiduciary Instructions Defense Argument: Unprecedented to use Law from Civil Cases as basis for Criminal Instructions Defense Argument: Unprecedented to use Law from Civil Cases as basis for Criminal Instructions Assault Assault Living with a Prostitute Living with a Prostitute Proximate Cause Proximate Cause Securities Fraud Securities Fraud theft theft

36 The “Good-Faith-Claim-of-Title” Defense Defense Argument: It’s Good-Faith-Claim-of- Right or Entitlement, not Title Defense Argument: It’s Good-Faith-Claim-of- Right or Entitlement, not Title Look at the word Look at the word Self Help is Not Included Self Help is Not Included Scenario intended for Scenario intended for

37 The Frances Taylor Videotape and the Confrontation Clause Crawford and the Change in the Law in 2004 Crawford and the Change in the Law in 2004 Defense: This is Testimonial Defense: This is Testimonial Me: Footnote 9 in Crawford Me: Footnote 9 in Crawford Court: Was She a Witness for You? Court: Was She a Witness for You? I-5 North/I-5 South, 5 th Ave. S/5 th Ave. N. I-5 North/I-5 South, 5 th Ave. S/5 th Ave. N. Subsequent cases all involved truth of matter asserted Subsequent cases all involved truth of matter asserted

38 The “Aggravating Factors” instruction (the Bashaw issue) 9 months later 9 months later Unanimity Unanimity Waived? Waived? Lots of Questions but Hands are Tied Lots of Questions but Hands are Tied

39 The Statute of Limitations Issue Why do Prosecutors only Make Love from the Bottom Position? Why do Prosecutors only Make Love from the Bottom Position? Statute of Limitations Statute of Limitations Continuing Crime Continuing Crime Didn’t ask that Jury be Instructed they Must Find at Least One Criminal Act within Statute of Limitations Didn’t ask that Jury be Instructed they Must Find at Least One Criminal Act within Statute of Limitations

40 The Concern: Good Shape on First Three Issues Good Shape on First Three Issues Might Lose on Bashaw Issue, but... Might Lose on Bashaw Issue, but... Great Risk of Reversal on Statute of Limitations Issue Great Risk of Reversal on Statute of Limitations IssueBUT If We Could Win the First Three Issues it Would Be a Major Victory If We Could Win the First Three Issues it Would Be a Major Victory

41 The Decision (Monday) Reversed on Statute of Limitations – Remanded for a New Trial Reversed on Statute of Limitations – Remanded for a New Trial Bashaw – Deferred to Supreme Court Bashaw – Deferred to Supreme Court Decided Confrontation Issue on Narrow Grounds But Badmouthed our Theory (5 th Ave. S.) Decided Confrontation Issue on Narrow Grounds But Badmouthed our Theory (5 th Ave. S.) Completely Ignored Important Issues of Fiduciary Instructions and Claim of Title Issues Completely Ignored Important Issues of Fiduciary Instructions and Claim of Title Issues Meeting Tomorrow to Decide Meeting Tomorrow to Decide

42 Organization Bates Stamp? Bates Stamp? Index to Bates (Outline rather than specific documents) Index to Bates (Outline rather than specific documents)

43 Master the Detail

44 Bank Transactions

45 Credit Card Transactions

46 Here Was My Problem How in the world can I present this to a jury so they will How in the world can I present this to a jury so they will Understand it Understand it Not be totally bored Not be totally bored

47 William Findley Trial Four Auditors involved Four Auditors involved Two on Maternity Leave Two on Maternity Leave Two had left the Auditor’s Office and couldn’t be located Two had left the Auditor’s Office and couldn’t be located

48 William Findley Trial Even if I could find them: Even if I could find them: How would I use the Audit Report How would I use the Audit Report It was almost incomprehensibly complex It was almost incomprehensibly complex As with most audit reports, it identified system weaknesses that allowed thefts to go undetected As with most audit reports, it identified system weaknesses that allowed thefts to go undetected

49 William Findley Trial Other Witnesses Other Witnesses Findley Supervisor who detected initial problem Findley Supervisor who detected initial problem Her Supervisor who referred to auditor Her Supervisor who referred to auditor Internal Investigations Sgt who compiled material for auditor Internal Investigations Sgt who compiled material for auditor Successor II Sgt who received audit report and reviewed it Successor II Sgt who received audit report and reviewed it

50 William Findley Trial One Week Before Trial – An Epiphany One Week Before Trial – An Epiphany There were four documents for each transaction There were four documents for each transaction History of Drawer Report History of Drawer Report Deposit Slip Deposit Slip Item in deposit, not in Report Item in deposit, not in Report Inmate account Inmate account These four documents, when understood, largely spoke for themselves These four documents, when understood, largely spoke for themselves How could I introduce and explain these documents? How could I introduce and explain these documents? How could the jury keep track when shown 39 x 4 (156) individual documents? How could the jury keep track when shown 39 x 4 (156) individual documents?

51 William Findley Trial The answer to the first question was Michael Maude The answer to the first question was Michael Maude The answer to the second question was: The answer to the second question was: Give the jury a roadmap Give the jury a roadmap The old shampoo instructions “Lather, Rinse, Repeat”, i.e. The old shampoo instructions “Lather, Rinse, Repeat”, i.e.

52 Explain Explain Explain Explain Explain Explain Explain

53 Work from the Simple To the Complex

54 Johnson Manufacturing 1019 Oct. 15, 2010 Pay to KC Work Release_______________ $ One Hundred & 00/100____________ __ Dollars Bank of America 19/2 Memo: Bob Smith Jim Johnson, Sr. Smith Construction 3088 Oct. 14, 2010 Pay to KC Work Release_______________ $ Two Hundred & 00/100____________ __ Dollars Chase Manhattan 24/3 Memo: Bob Smith Charles Smith Currency Coins: ___19/2__ ____100.00__ ___24/3__ ____200.00__ _________ ____________ __________________ Total $ Arnold Grocery 3088 Oct. 14, 2010 Pay to KC Work Release_______________ $60.00 Sixty & 00/100____________ __ Dollars Key Bank 72/19 Memo: James Evans Robert Arnold __$100.00___$ 40.00_ 72/ Total $400.00

55 Sgt. Maude Had reviewed audit report Had reviewed audit report Had examined the documents for each transaction and had recreated each transaction Had examined the documents for each transaction and had recreated each transaction Together with other witnesses, could lay foundation for each document Together with other witnesses, could lay foundation for each document Could explain each transaction Could explain each transaction

56 Road Map

57

58 Explain Went through each transaction in the same order Went through each transaction in the same order With Same Questions With Same Questions Hands on for jury Hands on for jury

59 History of Drawer =$1,680

60 Deposit Slip

61 Missing Cash $1,680 -1,241 $ 439

62 Unrecorded Item on Deposit Slip Missing Cash $1,680 -1,241 $ 439

63 Lather, Rinse, Repeat 39 times 39 times By about the 5 th or 6 th time some jurors were there before I was By about the 5 th or 6 th time some jurors were there before I was Carnac Carnac

64 Result? Guilty of all 20 counts (we dismissed two) Guilty of all 20 counts (we dismissed two) Sentenced in February Friday Sentenced in February Friday Our recommendation: 22 months Our recommendation: 22 months Defense recommendation: 90 days Defense recommendation: 90 days Sentence: 22 months Sentence: 22 months

65 Tyrone Dash Trial

66 Master the Detail Remember the spreadsheet of bank and credit card records Remember the spreadsheet of bank and credit card records That’s got to be accurate That’s got to be accurate Don’t give the defense a foothold Don’t give the defense a foothold

67 Simplify

68 Give the Jury Enough to Calculate the Answer Themselves if They Want To But don’t force them to review the detail

69 First Key is Frame of Reference Jury Can Always come back to Timeline Timeline Pictures of Property Pictures of Property Pictures of Key Checks Pictures of Key Checks Pictures of Victims Pictures of Victims

70 TIMELINE YearEvent Jan 2000Dash Initial Involvement May 2000$150,000 mortgage through Bank of America on Frances’ personal residence Jul 2000Dash Largely Assumes Control of Frances' Finances Jul 2000$300,000 Frontier Bank Construction Loan Jan 2001$170,000 Frontier Bank Construction Loan Mar 2001Church Removed from Control over Frances’ Assets Jul 2001Last of Frances' Salomon Smith Barney Investment Account Exhausted Nov 2001Cash Value of Frances' Jackson Nat'l Life Insurance Policy Spent Jan 2002Dash Obtains Power of Attorney for Frances Mar Bellevue E. Apartment Sold for $500,000 Jun 2002$217,500 World Savings Bank Loan on Personal Residence (refinance of Bank of America mortgage) Mar 2003$200,000 loan on 310 Bellevue E. Apartment Jul 2003$297,500 Ameriquest Loan on Personal Residence (refinance of World Savings Bank mortgage) Oct Bellevue E. Apartment Sold for $800,000 Apr 2004$324,000 Ameriquest Loan on Personal Residence (refinance of earlier Ameriquest mortgage) Apr 2005Dash Removed from Control of Frances' Finances

71 Pictures of Property

72 Second Key is Summaries Summaries of “selected” transactions Summaries of “selected” transactions For example, not all withdrawals, just withdrawals to defendant For example, not all withdrawals, just withdrawals to defendant

73 Summaries of selective transactions – just withdrawals to the Defendant

74 Summarize all but highlight a few Summarize all credit cards, but group by categories and emphasize categories Summarize all credit cards, but group by categories and emphasize categories Use in cross ex Use in cross ex Use in closing Use in closing Give jury the full doc but do their work for them Give jury the full doc but do their work for them

75 Summarize in Imaginative Ways - ATM Withdrawals.xls - ATM Withdrawals.xls - ATM Withdrawals.xls - ATM Withdrawals.xls - ATM-Cash Advance Calendar.xls - ATM-Cash Advance Calendar.xls - ATM-Cash Advance Calendar.xls - ATM-Cash Advance Calendar.xls

76 Summarize in Striking Ways

77 Think About Distributing to Jury

78 Sometime One Summary can Tell the Whole Story

79


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