Professional Documents
Culture Documents
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Texas Bar No. 0278000
bill@boyd-veigel.com
RUSS A. BAKER
Texas Bar No. 24045440
russ@boyd-veigel.com
BOYD-VEIGEL, P.C.
P.O. Box 1179
McKinney, Texas 75070
Telephone: 972-562-9700
Telecopier: 972-562-9600
Attorneys for Armstrong
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF CALIFORNIA
SAN FRANCISCO DIVISION
UNITED STATES OF AMERICA
Plaintiff
v.
CONNIE C. ARMSTRONG, JR.
Defendant
No. CR 94 276 PJH
DEFENDANT ARMSTRONGS MOTION
FOR DISCOVERY IN SUPPORT OF 28
U.S.C. 2255 MOTION
Armstrong requests an order from this court permitting limited discovery in support of
his pending 28 U.S.C. 2255 motion.
ARGUMENT
A habeas petitioner, unlike the usual civil litigant in federal court, is not entitled to
discovery as a matter of ordinary course. See Harris v. Nelson, 394 U.S. 286, 295 (1969). In
Harris, The Supreme Court held that where specific allegations before the court show reason to
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ARMSTRONGS MOTION FOR DISCOVERY PAGE 1
believe that the petitioner may, if the facts are fully developed, be able to demonstrate that he is
... entitled to relief, it is the duty of the court to provide the necessary facilities and procedures
for an adequate inquiry. 394 U.S., at 300. Habeas Corpus Rule 6 is meant to be consistent
with Harris. See ADVISORY COMMITTEES NOTE ON HABEAS CORPUS RULE 6, 28 U.S.C., p. 479.
Leave of court is required to invoke discovery in a 2255 proceeding and may be granted only
for good cause. See RULES GOVERNING 2255 CASES, Rule 6(a). Petitioner bears the burden
of demonstrating good cause and must allege some material fact to trigger the courts discretion
to grant leave for discovery. See Bracy v. Gramley, 520 U.S. 899, 908-09 (1997). Discovery is
not required if the habeas petition plainly warrants dismissal. See Mayle v. Felix, 545 U.S. 644
(2005). Here, Armstrong suggests that the Mayle v. Felix threshold has been met because this
Court has issued a show cause order.
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At the onset, Armstrong notes that the governments response to this Courts show cause
order failed to address almost all of the Brady violations raised in his 2255 motion. These
violations include:
a) Failure to produce documents showing that the operation of Armstrongs
company was the subject of a prior, exculpatory investigation;
b) Failure to produce documents showing that the 36 audio tapes produced at the
close of trial were actually prepared at the request of the prosecution of this case, contrary to the
express oral representations of AUSA Yamaguchi and the affidavit of SA Hatcher that the tapes
concerned an unrelated investigation;
1
and
1
In its response, the government seems to misconstrue this point as a re-litigation of the
judges evidentiary and continuance rulings on this topic. Armstrong apologizes for any
confusion. To the contrary, the issue is not whether the judge abused his discretion in ruling on
the record before him. Rather, the issue is would the judge have ruled differently if he knew the
tapes in question actually concerned Armstrongs prosecution in this case and were obtained at
the express instruction of AUSA Yamaguchi.
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ARMSTRONGS MOTION FOR DISCOVERY PAGE 2
c) Failure to produce documents concerning the alignment between the bankruptcy
trustee for Hamilton Taft and the governments prosecution team.
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Armstrong requests discovery on these matters as detailed and particularized below.
However, should the Court, having reviewed the evidence already in the record and having
considered the lack of response from the government, be prepared to grant the relief requested
under section 2255, Armstrong withdraws this discovery request as moot.
Concerning item (a), the prior investigation, Armstrong received documents through
FOIA referencing this investigation. [Exhibits p, 1-6, 7]. The documents show that the
investigation closed without a finding of wrongdoing. [Exhibits p, 8-9]. Although this prior
investigation occurred before Armstrongs ownership, a partial FBI 302 shows that cash flow
patterns analyzed in the prior investigation were the same as those occurring while Armstrong
controlled the company. [Exhibits pp. 10-12]. Fortunately, the failure to disclose a prior
favorable investigation is an oddity, but the Fifth Circuit nonetheless had the recent opportunity
to consider the matter in U.S. v. Fernandez.
2
There, a unanimous panel analyzed an undisclosed
investigation under the three familiar factors of Brady. The panel found that the fact of the
investigation was actually well-known during trial with only the results of the investigation
remaining undisclosed. The panel further found that the district judge conducted an in camera
review of the results and found no exculpatory material. Based upon these findings, the panel
held that no Brady violation occurred. Here, of course, the prior Hamilton Taft investigation was
clearly exculpatory yet was never disclosed to Armstrong. Further, the instant situation is more
troubling from a policy perspective because, unlike the Fernandez investigation that looked for
conduct which violated a known law, the inquiry here turned on whether known conduct could
2
559 F.3d 303 (5th Cir. 2009).
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ARMSTRONGS MOTION FOR DISCOVERY PAGE 3
be interpreted as violating a yet-unknown law. [Exhibits p. 13-17; opinion letter stating at page
16 that no case law, regulation, or statute addressed this situation]. Accordingly, Armstrong
requests un-redacted copies of all memoranda, reports, transcripts of oral statements, financial
statements, and other such similar documents which concern the instigation, scope, conduct and
results of the investigation referenced in the letter shown on Exhibit pages 8 and 9.
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Concerning item (b), the audio tapes, an FBI memo received years after conclusion of the
trial shows that AUSA Yamaguchi authorized SA Hatcher to conduct the undercover recording
operation. [Exhibits, p. 18.] This directly contradicts both the sworn affidavit of Hatcher
[Exhibits, p. 19-22] and the express assurances of AUSA Yamaguchi, both oral and written, to
the trial judge and to the Ninth Circuit. Additional documents reveal that the Dallas FBI office
provided significant investigatory support to its San Francisco colleagues. [Exhibits, pp. 23-24;
25; 26].
When the state, through an act of flagrant prosecutorial misconduct,
precludes the introduction of evidence that, had it been admitted, would
undermine the courts confidence in the outcome of a criminal proceeding, it
substantially increases the possibility that a fundamental miscarriage of justice
the conviction of an innocent individualhas occurred. Even more so if the state
by that egregious misconduct precludes the holding of the evidentiary hearing
itself.
Smith v. Baldwin, 510 F.3d 1127, 1156 (9th Cir. 2007)( Reinhardt, J., in dissent). Here,
the trial court relied upon the false representation of the AUSA and the FBI on this important
evidentiary matter. Absent a stipulation from the government that this conduct occurred and was
materially harmful to the defense, Armstrong requires the discovery of certain documents to
expand the 2255 record. Accordingly, Armstrong requests un-redacted copies of all memoranda,
reports, transcripts of oral statements, telephone logs and summary reports, and other such
similar documents flowing between the San Francisco and Dallas offices of the FBI (including
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ARMSTRONGS MOTION FOR DISCOVERY PAGE 4
responsive documents sent by or to the prosecuting AUSA) where the subject of the document
was Armstrong or the company Hamilton Taft.
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Concerning item (c), the alignment between the prosecution and the bankruptcy trustee,
Armstrong requires documents to prove the facts that are suggested by documents in his
possession. As shown by the record in the trial court and the pleadings on file in this habeas
matter, the law of the case issue was significant to all parties. Armstrong certainly argued for
the instruction and the government conceded its materiality with the statement that the requested
instruction would amount to a gutting of the governments case. [Exhibits, pp. 28-30 at 29.]
While the parties utilized the term law of the case in describing the requested instruction, that
doctrine is not fully on point.
In an odd procedural conundrum, the trial judge hearingand the appellate court
reviewingboth Armstrongs criminal matter and the Hamilton Taft bankruptcy case were the
same. Even so, they were two different causes, thus making a law of the case application
difficult if not impossible. In short, Armstrong had no standing to contest the actions in the
bankruptcy case or its appellate proceedings, even though these proceedings directly impacted
his criminal prosecution.
Armstrong respectfully requests that this Court remain mindful that the Ninth Circuit
reversed the trial court and entered a ruling supporting Armstrongs contention in the criminal
matter. While a petition for rehearing was pending, the parties settled their dispute.
3
In response
to motions by the parties, the Ninth Circuit vacated its opinion, thus reinstating the trial courts
orderan order that had been held erroneous. This vacatur is expressly prohibited by Supreme
3
As additional evidence of the materiality of the bankruptcy proceeding to the criminal
prosecution, AUSA Yamaguchi actually authored an amicus brief urging rehearing by the Ninth
Circuit. [Exhibits, pp. 38-39].
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Court precedent barring vacatur by reason of settlement. But Armstrong had no direct
mechanism to address this issue because he was not a party and lacked standing.
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The documents received by Armstrong after trial reveal that the doctrine of collateral
estoppel was available to him in the trial court. Under collateral estoppel, once a court has
decided an issue of fact or law necessary to its judgment, that decision may preclude relitigation
of the issue in a suit on a different cause of action involving a party to the first case. San Remo
Hotel, L.P. v. City and County of San Francisco, Cal., 545 U.S. 323, 336 (2005). In briefing to
the trial court, the government argued that it was not a party to the bankruptcy case and should
not be bound by its holding. However, the government did not reveal its close alignment with
the bankruptcy trustee.
Evidence delivered to Armstrong after trial shows that the government and the
bankruptcy trustee were in privity, thus opening the door for a collateral estoppel argument that
was otherwise unavailable. [Exhibit, p. 31, showing that counsel for the trustee met with AUSA
Yamaguchi to discuss prosecution strategy; pp. 33-35, detailing an FBI meeting at the offices
of the trustee; and pp. 36-37, containing a partial FBI 302 where a witness told the FBI
interviewer that the trustee was doing your work.] Courts are no longer bound by rigid
definitions of parties or their privies for purposes of applying collateral estoppel or res judicata.
Tahoe Sierra Preservation Council, Inc. v. Tahoe Regional Planning Agency, 322 F.3d 1064,
1082 (9th Cir. 2003). In light of documentation showing the trustees participation in the
governments prosecution strategy and assertions that the trustee was doing the work of the FBI,
Armstrong asserts a particularized need for documentation concerning the linkage between the
4
He did, however, try. [Exhibit, pp. 40-41, docket sheet in the bankruptcy matter; and
pp. 42-47, Armstrongs Motion to Recall Mandate to the Ninth Circuit.] The recall motion
overviews the Supreme Court precedent prohibiting vacatur under these circumstances.
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ARMSTRONGS MOTION FOR DISCOVERY PAGE 6
trustee and the prosecution team to conduct a privity analysis for collateral estoppel purposes.
Accordingly, Armstrong requests un-redacted copies of all memoranda, reports, transcripts of
statements, telephone logs and summary reports, and other such similar documents that touch on
the topic of meetings between the FBI, the AUSA, and the Hamilton Taft bankruptcy trustee
where the topic of the meeting was either Armstrong or Hamilton Taft.
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Finally, Armstrong requests discovery on whether his prosecution was improperly
instigated. In its response, the government calls Armstrongs arguments conclusory. The
remedy for a conclusory statement is the discovery of facts sufficient to plead with particularity,
and Armstrong shows good cause for the Court to order this discovery. It is axiomatic that most
of the relevant proof in such situations will be in the governments hands. See Wayte v. U.S.,
470 U.S. 598 (1985) (Marshall, J., dissenting); see also Alderman v. United States, 394 U.S. 165
(1969) ([D]isclosure must be made even though attended by potential danger to the reputation
or safety of third parties or to the national securityunless the United States would prefer
dismissal of the case to disclosure of the information).
Here, documents delivered to Armstrong after trial disclose the involvement of
Representative Pelosi in his prosecution. [Exhibits, pp. 48-51.] Shortly after the prosecution
launched its investigation, FBI Deputy Director Larry Potts sends a status report to Howard
Baker, then a director of Federal Express,
5
and copies the report to staff members of Pelosi and
Senator Boxer. [Exhibits, p. 52]. This memo is the only communiqu produced which reveals
contact between Mssrs. Baker and Potts. All documents initiating the involvement of Mr. Potts
were withheld from Armstrongs FOIA production, as were the follow-up reports promised in
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While the memo was sent to Baker, no corporate officer of Federal Express was on the
distribution. As a Delaware corporation, a Federal Express director is very different from a
corporate officer who would actual run the company. See generally In re Bridgeport Holdings,
Inc., 388 B.R. 548 (Bankr. D. Del. 2008)
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ARMSTRONGS MOTION FOR DISCOVERY PAGE 7
the Potts memo. Armstrong is entitled to discovery on the question of whether pressure from
political leaders deprived him of his right to a disinterested prosecutor. See Clearwater-
Thompson v. Michael A. Grassmueck, Inc., 160 F.3d 1236, 1237 (9th Cir. 1998)(It is
fundamental that the prosecutor of a criminal charge be disinterested. Where that is not the case,
a judgment of conviction is to be reversed without the need of showing prejudice.)
Accordingly, Armstrong requests un-redacted copies of all memoranda, reports, transcripts of
oral statements, telephone logs and summary reports, and other such similar documents flowing
between the San Francisco office of the FBI, main justice, Howard Baker, and any elected
official or staff member of an elected official (including without limitation the persons copied on
the April 3 Potts memo) where the subject of the evidence is Hamilton Taft or Armstrong.
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SUMMARY
[W]here specific allegations before the court show reason to believe that the petitioner
may, if the facts are fully developed, be able to demonstrate that he is ... entitled to relief, it is the
duty of the court to provide the necessary facilities and procedures for an adequate inquiry.
Harris v. Nelson, 394 U.S. 286, 300 (1969); see also RULES GOVERNING 2255 CASES, Rule
6(a)(adopting the Harris standard as the test for good cause.) Armstrong therefore requests an
order from this Court compelling the government to produce:
a) un-redacted copies of all memoranda, reports, transcripts of oral
statements, financial statements, and other such similar documents which concern
the instigation, scope, conduct and results of the prior Hamilton Taft
investigation;
b) un-redacted copies of all memoranda, reports, transcripts of oral
statements, telephone logs and summary reports, and other such similar
documents flowing between the San Francisco and Dallas offices of the FBI
(including responsive documents sent by or to the prosecuting AUSA) where the
subject of the document was Armstrong or the company Hamilton Taft;
c) un-redacted copies of all memoranda, reports, transcripts of
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ARMSTRONGS MOTION FOR DISCOVERY PAGE 9
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statements, telephone logs and summary reports, and other such similar
documents that touch on the topic of meetings between the FBI, the AUSA, and
the Hamilton Taft bankruptcy trustee where the topic of the meeting was either
Armstrong or Hamilton Taft; and
d) un-redacted copies of all memoranda, reports, transcripts of oral
statements, telephone logs and summary reports, and other such similar
documents flowing between the San Francisco office of the FBI, main justice,
Howard Baker, and any elected official or staff member of an elected official
(including without limitation the persons copied on the April 3 Potts memo)
where the subject of the evidence is Hamilton Taft or Armstrong.
Armstrong respectfully requests that this Court order production of the requested
discovery items.
DATED: August 13, 2009
Respectfully submitted,
/s/ Bill Boyd
BILL BOYD
u.s. Department of Justice
Federal Bureau of Investigation
In Reply, Please ReIer t.o
FIle No
Mr. william T. Mc Givern
united states Attorney
Northern District of California
450 Golden Gate Avenue
P.O. Box 36055
San Francisco, California 94102
450 Golden Gate Avenue
San Francisco, CA 94102
February B, 1991
yt ,( ''''''! liI.'6enhtJ/
II nYlDIIIYt{J '1
th11
/1'!uM/ ')7l'N/U
Vi,,1 /til II/If} flo,) '1 htloJ tJ .
Attn: Mr. Michael Yamaguchi
Assistant u.s. Attorney
r'
Re: Chip Armstrong, dba
Hamilton Taft and
company
#1 Market
Spear Tower
San Ca 94105
Fraud by Wirer
Tax raud
00: San Francisco
Dear Mr. Me Givern:
Our office is SUbmitting the following information to
you for a prosecutive opinion as to 'whether a violation of
Federal Law has taken place.
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Enclosures
The San Francisco Division first became cognizant of
the existence of Hamilton Taft and Company in August of 1988 when
I interviewed at our office. I I was
the co-founder of Hamilton Taft and the other founder was one, -
I I who founded the company in ,1979. For your
information
r
Hamilton Taft is a service company which provides. a
tax paying service on behalf of their clients. Hamilton Taft and
Company collects money from their clients and in turn
pays their clients various and local income
1 - Addressee 'nn,O '""\ I fJt, 1
1 - 196A-2868 I \ , 1/ 'V
PKM/sgc
(2)
b7C
U.S. Department of Justice
Federal Bureau of Investigation
In Reply, Please ReIer to
FIle No
Mr. william T. Mc Givern
united states Attorney
Northern District of California
450 Golden Gate Avenue
P.O. Box 36055
San Francisco, California 94102
450 Golden Gate Avenue
San Francisco, CA 94102
February B, 1991
yt ,If '''Ildl
II nYlDN"" '1thT7/1'JUM/ m""o
IVI .j.,oJ 1 hr/ol d
Attn: Mr. Michael Yamaguchi
Assistant U.S. Attorney
Re: Chip Armstrong, dba
Hamilton Taft and
Company
#1 Market "Plaza,
Spear Tower
San Frqncisco, Ca 94105
Possi91e Fraud by Wire,
Tax raud
00: San Francisco
Dear Mr. Mc Givern:
Our office is submitting the following information to
you for a prosecutive opinion as to 'whether a violation of
Federal Law has taken place.
\
i
o
--, 9"fj-
./q/LI- q,?..Jc,-:" I""
b7C
Enclosures
The San Francisco Division first became cognizant of
the existence of Hamilton Taft and Company in August of 1988 when
l interviewed at our office. I I was
the co-founder of Hamilton Taft and the other founder was one, .
I I who founded the company in 1979 For your
information, Hamilton Taft is a service company which provides. a
tax paying service on behalf of their clients. Hamilton Taft and
Company collects money from their clients and in turn
pays their clients various and local income
1 - Addressee 'nl\\ 0 ""\ I fJt. - 1
1 - 196A-2B6B ru I \ '1/ 'V
PKM/sgc
(2)
b7C
Exhibits to Motion for Discovery - Page 1
taxes. Unemployment taxes and other various tax liabilities are
also paid by Hamilton Taft. When a company becomes a client of
Hamilton Taft, it notifies Hamilton of the companies payroll
dates, pertinent payroll information, the state in which the
company is required to pay taxes and the type of taxes which need
to be paid and on what dates. Hamilton collects monies from
these various clients and in turn pays the clients tax obligation
whether they be local, county, state and/or federal income taxes,
unemployment taxes and/or other tax liabilities.
b7C I I advised that when a client company enrolls
with Hamilton Taft, the company notifies Hamilton of its payroll
dates, pertinent payroll information the state in which the
company is required to pay taxes and the type of taxes which need
to be paid. The company then remits to Hamilton Taft on a timely
basis its payroll tax liability. The client company will also
remit funds to Hamilton Taft which would be used to pay the
aforernentionedtax liabilities. Historically the funds were
either wired to a Hamilton Taft Impound Account each time a
payroll is paid by the company or Hamilton Taft gains access to
the companies account by a depository transfer check.
Hamilton Taft was also responsible for filing all
applicable federal, state, county and local tax filing
information on behalf of its client and pay their various taxes
as they become due for the service Hamilton Taft charges its
clients a fee based on the number of times a client renders a
payroll and the number of areas taxing agencies which have to be
ultimately paid. Hamilton Taft also receives the interest in
which it can generate on the funds its clients deposit with it.
All this information is revealed to the client prior to a
contract being entered into by the client and Hamilton Taft.
This is also done orally by Hamilton Taft's sales
representatives.
As Hamilton Taft grew, the company became concerned
with what its liability may be with the funds they were
collecting on behalf of their clients. Because of this internal
concern in 1981, the firm contacted Baker and McKenzie Attorney's
at Law, 555 California street, San Francisco, California, 94104
and requested that this firm provide Hamilton with an opinion of
the characterization of the funds it was holding on behalf of its
clients for tax payments.
On October 29, 1981, Baker and McKenzie issued an
opinion that basically stated that at the time a payroll is
rendered, that is paid by the employer, the funds representing
the withheld taxes belong to the federal government. The
employer becomes a trustee for those funds and as such the duties
and responsibilities of a trustee are mandated under common law.
2
taxes. Unemployment taxes and other various tax liabilities are
also paid by Hamilton Taft. When a company becomes a client of
Hamilton Taft, it notifies Hamilton of the companies payroll
dates, pertinent payroll information, the state in which the
company is required to pay taxes and the type of taxes which need
to be paid and on what dates. Hamilton collects monies from
these various clients and in turn pays the clients tax obligation
whether they be local, county, state and/or federal income taxes,
unemployment taxes and/or other tax liabilities.
b7C I I advised that when a client company enrolls
with Hamilton Taft, the company notifies Hamilton of its payroll
dates, pertinent payroll information the state in which the
company is required to pay taxes and the type of taxes which need
to be paid. The company then remits to Hamilton Taft on a timely
basis its payroll tax liability. The client company will also
remit funds to Hamilton Taft which would be used to pay the
aforernentionedtax liabilities. Historically the funds were
either wired to a Hamilton Taft Impound Account each time a
payroll is paid by the company or Hamilton Taft gains access to
the companies account by a depository transfer check.
Hamilton Taft was also responsible for filing all
applicable federal, state, county and local tax filing
information on behalf of its client and pay their various taxes
as they become due for the service Hamilton Taft charges its
clients a fee based on the number of times a client renders a
payroll and the number of areas taxing agencies which have to be
ultimately paid. Hamilton Taft also receives the interest in
which it can generate on the funds its clients deposit with it.
All this information is revealed to the client prior to a
contract being entered into by the client and Hamilton Taft.
This is also done orally by Hamilton Taft's sales
representatives.
As Hamilton Taft grew, the company became concerned
with what its liability may be with the funds they were
collecting on behalf of their clients. Because of this internal
concern in 1981, the firm contacted Baker and McKenzie Attorney's
at Law, 555 California street, San Francisco, California, 94104
and requested that this firm provide Hamilton with an opinion of
the characterization of the funds it was holding on behalf of its
clients for tax payments.
On October 29, 1981, Baker and McKenzie issued an
opinion that basically stated that at the time a payroll is
rendered, that is paid by the employer, the funds representing
the withheld taxes belong to the federal government. The
employer becomes a trustee for those funds and as such the duties
and responsibilities of a trustee are mandated under common law.
2
Exhibits to Motion for Discovery - Page 2
In addition various state and federal law mandates how a trustee
needs to act in his capacity as a trustee.
Although Hamilton Taft is not the employer but an
independent agent, it was the opinion of Baker and McKenzie that
the funds are still trust funds and the holder of these funds
(Hamilton Taft) still bears the responsibility of a trustee.
...::
::l
r
()
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When interviewed by the Federal Bureau of Investigation
(FBI) in August of 1988, I I went so far as to stat,e that some <:i::i:::-
individuals representing clients have stated that the collected
funds need to be put in a bank account separate from other funds
of that particular entity. In during his tenure at lJ
Hamil ton Taft, Hamil ton ,Taft considered themselves to be trustees "'-t..it
, for those funds on behalf of the various taxing agencies. :L:"t>:;;
. i.'
By way of background information, I I stated that in
August of 1984, Hamilton Taft was sold to the Cigna.Corporation
the large insurance conglomerate out of Philadelphia,
Pennsylvania and Hartford, Connecticut. At that time, Hamilton
Taft had approximately 900 corporate clients and was -handling on
'"a daily basis, approximately $100,000,000 in client deposits.
"'.
According to a personality conflict developed
b7C between himself and one formally Executive Vice
President of cigna W 0 was placed by that corporation
as the person in charge of Hamilton Taft's operation. Because of
I
tbe persynality differences landl lonel I
Jwas appointed as President of Hamilton Taft.
Shortly after leaving ,Hamilton Taft in the latter
of ,1stated he became aware th.at Hamilton Taft stc;rted 1
to lose approx1mately $100,000 per month. He noted that whlle he (.
was President of Hamilton Taft, that the company although not
highly profitable, was able to stay in a slight profit position.
He understands that Hamilton Taft hired another President but'the
company continued to lose, money in C.igna and soon thereafter
began to look for a buyer for Hamilton "Taft. In December of
1987, Maxphrama Incorporated of Dallas, Texas paid $500,000 to
Cigna Corporation as a down payment for the purchase of Hamilton
Taft. On February 29, 1988, Maxphrama Incorporated completed 'its
purchase of Hamilton Taft from Cigna Corporation. / .
____ stated to onel I former Executive
Vice President in charge of operations for Hamilton Taft provided
him with the foregoing information. r--1allegedly toldl Ion
February 27,1988 I ! transfer
$5,000,000 by wire transfer to a brokerage house in New
Louisiana called the Howard Wiel Labluisse Friedricke Investment
Security Incorporated. I that this wire
transfer was td'"purchase a Treasury B111 at 5 1/2% interest. rI
allegedly asked I Iwhy she was purchasing a Treasury" Birr--
3
In addition various state and federal law mandates how a trustee
needs to act in his capacity as a trustee.
Although Hamilton Taft is not the employer but an
independent agent, it was the opinion of Baker and McKenzie that
the funds are still trust funds and the holder of these funds
(Hamilton Taft) still bears the responsibility of a trustee.
".
'.
\;. ..:::
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c.. 'l;.
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When interviewed by the Federal Bureau of Investigation
::" (FBI) in August of 1.988, I I went so far as to state that some
"':. individuals representing clients have stated that the collected
,: funds need to be put in a bank a'ccount separate from other funds .,...
:-\. ';:" of that particular entity. In addition, during his tenure at :i;.
Hamilton Taft, Hamilton ,Taft considered themselves to be trustees '-..I...Q?,i
-'. for those funds on behalf of the various taxing agencies.
,
Byway of background information, I I stated that in
August of 1984, Hamilton Taft was sold to the Cigna.Corporation
the large insurance conglomerate out of philadelphia,
Pennsylvania and Hartford, Connecticut. At that time, Hamilton ,..r'
Taft had approximately 900 corporate clients and was handling on
"a daily basis, approximately $100,000,000 in client deposits.
According to a personality conflict developed
b7C between himself and one formally Executive Vice
President of cigna w 0 was placed by that corporation
as the person in charge of Hamilton Taft's operation. Because of
I
the persynality differences between I I and I loneI I
was appointed as President of Hamilton Taft.
-----
Shortly after leaving Hamilton Taft in the latter
of 1985, I Istated he became aware that Hamil ton Taft started I
to lose approximately $100,000 per month. He noted that while he ('
was President of Hamilton Taft, that the company although not
highly profitable, was able to stay in a slight profit position.
He understands that Hamilton Taft hired another President but'the
company continued to lose money in C.igna and soon thereafter
began to look for a buyer for HamiltonTaft. In December of
1987, Maxphrama Incorporated of Dallas, Texas paid $500,000 to
Cigna Corporation as a down payment for the purchase of Hamilton
Taft. On February 29, 1988, Maxphrama Incorporated completed 'its
purchase of Hamilton Taft from Cigna Corporation. '
I stated to onel I former Executive
Vice President in charge of operations for Hamilton Taft provided
him with the foreqoin: information. r--1allegedly toldl Ion
February 27,1.988 thatC I I transfer
$5,000,000 by wire transfer to a brokerage house in New
Louisiana called the Howard Wiel Labluisse Friedricke Investment
Security Incorporated. I that this wire
transfer was to' purchase a Treasury Blll at 5 1/2% interest. rI
allegedly asked I Iwhy she was purchasing a
3
fLit, Ii fJk t dlnJ 0fd /;(JJ
(J W has /&../-l,,{/ nJ I IS IIJIJ c.J
d."pbdJ....? /w //JO!; ! !d,/.,[
aJtfo/f ;t:;'; til IhJ r:.p j/
J I
Exhibits to Motion for Discovery - Page 3
with such a short yield period, I I would not respond to
Mayl s question and just told him to do it. c::::::J told! I that
the $5,000,000 was funds which were put on
deposit with Hamilton Taft. at the time the
transfer was made, Hamilton Taft did not have any funds of its
own.
hJ--l
:--\"'"
In order to assist you in preventing your opinion from 7 fs
a historical point of Yle are enclosing a copy of the actual r
FD-302 noting interview Of, Iwith appropriate copies of -J '1\
documents provided byl to our agent. --/-t
G
__I noted that the form 8-K report which,. was filed in -'-'.
the Securities Exchange Commission (SEC) by Maxphrama for the
purchase of Hamilton Taft, Maxphrama states it has used a
$5,000,000 Treasury Bill to secure a promissory note which funds
were used to conclude the of Hamilton Taft from Cigna
Corporation. According tal Itold him that these funds
had been transferred to brokerage firm from customer funds
in the custody of Hamilton Taft. According toL' . also
advised thatl
J
; - Ihad directed him to wire transfer $50,000
in an unrelated transaction.
b7C
b7C
I was also interviewed in December of
1988. by Hamilton Taft as Treasurer-
Manager of the firm. I I is a Certified Public Accountant
(CPA) having become a CPA in the state of :': t986.
I Ibasically stated that shortly after became
President of Hamilton Taft, she told him t a sewall e making
the day to day investment decisions regarding the funds of
Hamilton Taft. She instructed him not to make any investment
unless she okayed them. He explained to her that any monies
collected from the clients only had a two or three day "window"
during which they could be invested prior to having to be paid to
taxing entities. Thereafter, all investments he made, other than
into commercial paper, were done at the direction L
I I In connection with his responsibilitiesC:
assist in the preparation of the monthly financial statements for
Hamilton Taft. Each month a meeting would be held to discuss a
just completed financial statement for the previous month. At
the close of such a meeting in April, 1988, after the close of
the April financial statements,l lstated that he had a
conversation with in her office. During this
conversation was bragging on the financial strength of
Maxphrama an ow axphrama was in the process of purchasing C &
H Nationwide Incorporated, a specialized trucking company.
Apparently, in order to herr statements and the
strength of Maxphrama, she showedL _ the Hamilton financial
statement which listed Hamilton Taft's assets in excess of
30,000,000. r Ifinancial picture was quite different than
the financial statements which he had prepared for Hamilton from
the month of April, 1988. x -,
i,"'" t"'"'' ''''U' k'" '.' I
b7C
b7C
with such a short yield period, I I would not respond to
May's question and just told him to do it. c:::Jtold! I that
the $5,000,000 was funds which were put on
deposit with Hamilton Taft. Ithat at the time the
transfer was made, Hamilton Taft did not have any funds of its
own.
noted that the form a-K report which. was filed in -"',
the Securities Exchange Commission (SEC) by Maxphrama far the \
purchase of Hamilton Taft, Maxphrama states it has used a \
$5,000,000 Treasury Bill to secure a promissory note which funds u
i
were used to conclude the of Hamilton' Taft from Cigna
Corporation. According to 1 Itold him that these funds
had been transferred to brokerage firm from customer funds
in the custody of Hamilton Taft. According to L' . I also f
advised that 1-; . Ihad directed him to wire transfer $50,000 i
in an unrelated transaction. !
In order to assist you in preventing your opinion from 7 ..,f,.
a historical point of are enclosing a copy of the actual r - ,
FD-302 noting interview of, Iwith appropriate copies of -J
documents provided by' to our agent. -,,/'r (>,
(:!l.
'-'
!,
l was also interviewed in December of
1988. by Hamilton Taft as Treasurer-
Manager of the firm. I I is a Certified Public Accountant
(CPA) having become a CPA in the state of ta:if:rnia t986.
I Ibasically stated that shortly after became \<
President of Hamilton Taft, she told him t a s e weu e making
the day to day investment decisions regarding the funds of
Hamilton Taft. She instructed him not to make any investment
unless she okayed them. He explained to her that any monies
collected from the clients only had a two or three day "windowll
during Which they could be invested prior to having to be paid to
taxing entities. Thereafter, all investments he made, other than
into commercial paper, were done at the direction :D L
I In connection with his responsibilitiesC: .Jwould
assist in the preparation of the monthly financial statements for
Hamilton Taft. Each month a meeting would be held to discuss a
just completed financial statement for the previous month. At
the close of such a meeting in April, 1988, after the close of
the April financial statements, I lstated that he had a
conversation with in her office. During this
conversation was bragging on the financial strength of
Maxphrama an ow axphrama was in the process of purchasing C &
H Nationwide Incorporated, a specialized trucking company.
Apparently, in order to her, statements and the
strength of Maxphrama, she showedL _ the Hamilton financial
statement which listed Hamilton Taft's assets in excess of
30,000,000. r Ifinancial picture was quite different than
the financial statements which he had prepared for Hamilton from
the month of April, 1988. -{t7,:,:
"'t.'.:' """... 4
Exhibits to Motion for Discovery - Page 4
FEDERAL BUREAU OF INVESTIGATION
Precedence: PRIORITY
To: San FranC1SCO
Date: 02/10/1997
Attn: SA Will Hatcher
From: Sacramento
Contact: IA I
Approved By:
Dra.fted By: Iepg
Case ID #: 196D-SF-93255
Title: CONNIE CHIP ARMSTRONG, JR.;
I IFormerly dba
HAMILTON-TAFT COMPANY
FBW (D) i MF; ITSP
00: SF
synopsis: Caples of FD-302s and inserts enclosed from Sacramento
flle 196B-1364.
Reference: 196D-SF-93255 Serial 124
/23/86
6
4 - 6/18/86
5/86
8/7/86
on 9/17/86
7
/25/87
7
Enclosures: FD-302 of
"FD-302 of
FD-302 of
FD-302 of
Insert at:.
FD-302 of
FD-302 of
FD-302 of
FD-302 of
FD-302 of
FD-302 of
Ion 2/19/86
Ion 3/12/86
Ion 5
Ion 6/19/8
Euaene reaon from 5/1
Ion 6/2
Ion
I
Ion 3131/8
Ion 3
Ion 4/7/8
Details: A review of closed Sacramento flle 196B-1364 revealed
the above enclosed FD-302s and inserts .
1 III. Conclusion
2 For the foregoing reasons, the government respectfully
3 submits that the motion to dismiss be denied and that the Court
4 deny the request to make In re Hamilton Taft & Co. the law of the
5 case.
6 DATED:
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
November 5, 1996 Respectfully submitted,
YAMAGUCHI
.. __
RONALD D. SMETANA
Special Assistant U.S. Attorney
J
GOVERNMENT'S OPPOSITION TO ARMSTRONG'S
MOTION TO DISMISS AND/OR REQUEST FOR
PRETRIAL INSTRUCTION 12
HOnlG1
1 III. Conclusion
2 For the foregoing reasons, the government respectfully
3 submits that the motion to dismiss be denied and that the Court
4 deny the request to make In re Hamilton Taft & Co. the law of the
5 case.
6 DATED:
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
November 5, 1996 Respectfully submitted,
YAMAGUCHI
.. __
RONALD D. SMETANA
Special Assistant U.S. Attorney
J
GOVERNMENT'S OPPOSITION TO ARMSTRONG'S
MOTION TO DISMISS AND/OR REQUEST FOR
PRETRIAL INSTRUCTION 12
HOnlG1
Exhibits to Motion for Discovery - Page 30
Memorandum
To
From
SAC, San Francisco ((Q(,J}-SF-Cf1}S"5)(P) 3/8/92
I b7C
Subject Connie Chip Armstrong, et al
dba, Hamilton Taft and Company, et al
San Francisco, Ca.
FBW (B); Mail Fraud, Bankruptcy Fraud, (A);
OO:SF
712
On the afternoon of March 5, 1992 a meeting was held at
the office of AUSA Michael Yamaguchi to discuss __
strategy in the above referenced matter. Present
ESQ. representing the bankruptcy trustee. Also present was Mr.
Ronald Smetana, Deputy Attorney General, Major Fraud unit of the
california state Attorney General's office. SA's will Hatcher and
re resented the FBI.
i u.
J
-, .
iJ{'! i.e. J
;oA-
(I) It-SF-cr)aS,
(
I
Oa I - J
b7C I
/C) lL1l (.! t:-::: ?h
lVIemorandum
To
From
SAel San Francisco ((C'f(,I}-SF-Q'rJ..s5)(P) Dole 3/8/92
I b7C
Jr....
Subject Connie Chip Armstrong, et al
dba, Hamilton Taft and Company, et al
San Francisco
l
Ca.
FBW (B); Mail Fraud, Bankruptcy Fraud, (A);
OO:SF
On the afternoon of March 5, 1992 a meeting was held at
the office of AUSA Michael Yamaguchi to discuss
strategy in the above referenced matter. Present
ESQ. representing the bankruptcy Also present was Mr.
Ronald Smetana, Deputy Attorney General, Major Fraud unit of the
california state Attorney General's office. SA's will Hatcher and
I represented the FBI.
_
-J.-:-.,,1,',.' ,'", ","""', f,) . - >. r (;)0/:. 1 '
>,tV]
iJA r.
f'h-
(I) {q, Pr-SF-'1Yd.S,
(
I
JJ., I - -")
b/C I
/C7 I L1 l 1/ e-::- r,-- ?rl
Exhibits to Motion for Discovery - Page 31
2
On February 27, 1992 the accountant for the trustee
finished his second interim report for the bankruptcy which
includes among other thing a tracing of over $4,000,000 directly
into the pockets of Armstrong himself. The report cites payments
by Armstrong using Hamilton Taft funds to a stripper' and the use
of over $225,000 to purchase Dallas Cowboy "skyboxes
lt