Case 1:09-cr-00142-LJO Document 42

Filed 08/12/09 Page 1 of 7

1 2 3 4 5 6 7 8 9 10

LAWRENCE G. BROWN Acting United States Attorney MARK E. CULLERS JAMES R. TERZIAN Assistant U.S. Attorney 2500 Tulare St., Suite 4401 Telephone: (559) 497-4000 Facsimile: (559) 497-4099

IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF CALIFORNIA UNITED STATES OF AMERICA, ) ) ) Plaintiff, ) ) v. ) ) ) MICHAEL S. IOANE, ) ) ) Defendant. ) ______________________________) Case No. 1:09-CR-0142 LJO GOVERNMENTS RESPONSE TO DEFENDANTS APPEAL OF MAGISTRATE JUDGES JULY 28, 2009 PRETRIAL RELEASE CONDITIONS Date: TBA Time: TBA Courtroom: Four Hon. Lawrence J. ONeill

11 12 13 14 15 16 17 18

Background 19 On April 9, 2009, the defendant was indicted for Conspiracy 20 to Defraud the Internal Revenue Service and four counts of 21 Presenting False and Fictitious Instruments or Documents 22 Purporting to be Actual Financial Instruments of the United 23 States. 24 actively conspired, instructed, encouraged, and informed other 25 individuals on how to submit false tax returns and other 26 financial instruments to the United States in order to avoid the 27 payment of taxes. 28 This was primarily done by the defendant It is the governments contention that the defendant

Case 1:09-cr-00142-LJO Document 42

Filed 08/12/09 Page 2 of 7

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

through his advocation of the formation of abusive trusts, which was marketed to others as being a way to avoid tax liability. It

is also the governments contention that the defendant conducted these illegal activities, in part, through the use of the internet and computers. On the day of his arraignment on the Indictment, April 10, 2009, and in light of the allegations in the indictment, the governments allegations, and upon the recommendations of Pretrial Services Officer Jacob Scott, various pretrial conditions were imposed on the defendant restricting his access, and use, of the internet and a computer. Specifically, the

defendant was prohibited from accessing the internet or possessing a computer at his residence unless approved by the Pretrial Services Officer. The defendant was also ordered on

home detention, and restricted to his residence unless otherwise approved by the Pretrial Services Officer. On May 14, 2009, the duty Magistrate, upon motion of the defendant, amended the defendants conditions of pretrial release. The court permitted the defendant limited access to a

computer and the internet for business purposes, with the proviso that computer monitoring software was to be installed to monitor defendants use of the computer. The court acceded to the

defendants request, in part, due to defendants representations that he needed access to the computer for: (1) his other legalrelated work (in order to stay updated on his other cases and to respond to e-filings); (2) to communicate effectively with his present counsel; (3) to work on the instant case, and (4) for his

-2-

Case 1:09-cr-00142-LJO Document 42

Filed 08/12/09 Page 3 of 7

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

wifes business.

The defendant was specifically instructed that

accessing the computer for tax-related purposes, or to give tax and/or trust advice, was prohibited and would be considered a violation. The court informed the defendant that a violation The court also terminated defendants

could result in detention.

home detention and imposed a curfew. Despite the courts concessions, and despite the clear directive of the court, the defendant chose to push the limits of his pretrial release. On June 29, 2009, Pretrial Services Officer Scott submitted a Violation Petition to the court which alleged that the defendant improperly operated and accessed a computer and the internet for purposes other than his business, his legal defense or his pending cases. Mr. Scott therefore recommended that

defendants pretrial release conditions be revoked and that he be detained. On June 30, 2009, Magistrate Judge Snyder modified defendants pretrial conditions of release to include no computers or access to the internet in the home, and home incarceration, pending an evidentiary hearing on the Violation Petition. On July 28, 2009, an evidentiary hearing was held before Magistrate Judge Dennis L. Beck. At this hearing, Pretrial

Services Officer Scott testified that the computer monitoring software installed by pretrial services on the defendants computer revealed that the defendant had accessed the internet for non-business purposes.

-3-

Case 1:09-cr-00142-LJO Document 42

Filed 08/12/09 Page 4 of 7

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 A.

Specifically, the defendant had viewed a speech on a website by a person who advocates the non-payment of taxes. Mr. Scott

also testified that he had viewed internet web sites that contained blogs which had specific information regarding the defendants pretrial release conditions and the status of his criminal case which was not a matter of public record. the blogs also mentioned Magistrate Snyder by name. One of It was Mr.

Scotts opinion that the only way such information could have been on the blog was for the defendant to have placed it there. However, Mr. Scott was not able to definitively attribute the contents of this blog to have been written by the defendant. Magistrate Judge Beck found the defendant in violation, and kept intact the conditions of release imposed by Magistrate Snyder on June 30, 2009. ARGUMENT The Current Conditions Are Proper in Light of the Defendants Repeated Violations. The applicable standard of review of a Magistrate

18 Judges determination regarding the conditions of a defendants 19 pretrial release conditions is de novo. 20 517 F.3d 1081, 1086-87 (9th Cir. 2008). 21 does not contest the finding that he was in violation. 22 he argues for modification of his conditions. 23 face the current conditions appear harsh, they are imminently 24 reasonable in light of the repeated violation conduct of the 25 defendant. 26 27 28 -4April 14, 2009: Pretrial Services Officer (PSO) Scott conducted a home contact with the defendant. Despite the April 10, 2009 Pretrial Order that the defendant not possess Such conduct has included the following: Although on their Instead, Notably, the defendant United States v. Hir,

Case 1:09-cr-00142-LJO Document 42

Filed 08/12/09 Page 5 of 7

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

a computer or access the internet, tow monitors, two keyboards and two laptops were found in defendants home and in his secondary residence. April 21, 2009 (10:23 a.m.): The defendant was told by PSO Scott to remove the computers from his primary and secondary residence. April 21, 2009 (2:30 p.m.): PSO Scott conducted another home visit. No computers were found in primary residence, but PSO Scott is unable to verify that there are no computers in the secondary residence due to defendants statement that he is unable to access the secondary residence. May 26, 2009: After the May 14, 2009 modifications of the conditions of his pretrial release, which included the proviso that the defendant only access sites related to work or his legal cases, PSO Scott receives a computer monitoring report indicating that the defendant accessed www.bostonteapartybook.com, www.defraudingamerica.com and www.unclefed.com. These websites contain tax protestor material. When confronted, the defendant said he did not remember accessing the sites, but, if he did, he was just browsing. June 8, 2009: PSO Scott learns that two articles (IRS Raids Home of Michael Ioane and Attorney Speaks Out on Corruption, Judges (posted by Michael Ioane))are posted on five different web sites. Defendant denies posting the articles. June 16, 2009: PSO Scott receives a computer monitoring report indicating the defendant accessed www.davechampion.net, which was a site that could be interpreted to support tax evasion. As can be seen from the above chronology, the defendant has taken the position that this is a shell game between himself and PSO Scott. No matter what the conditions, the defendant

maneuvers in such a way as to violate the conditions, then feigns ignorance (or work issues) when caught. The defendant cites United States v. Sales, 476 F.3d 732 (9th Cir. 2007), and United States v. Barsumyan, 517 F.3d 1154 (9th Cir. 2008) for the proposition that the magistrate court should have imposed the least restrictive conditions and that the

-5-

Case 1:09-cr-00142-LJO Document 42

Filed 08/12/09 Page 6 of 7

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

imposition of a ban on computer use was overly restrictive. cases can be distinguished from the case at bar.

Both

In Barsumyan, the defendant was convicted of possession of device-making equipment and was involved in a scheme to manufacture counterfeit credit cards. There was no evidence in

Barsumyan that the defendant had access to a computer to complete his crimes, and indeed the Ninth Circuit found that he was merely an intermediary between the victim and the co-conspirator who actually had computer access. In this case, the defendant is accused of committing crimes which involve the direct use of computers and the internet to spread his message regarding abusive trusts. In Sales, that defendant was convicted of counterfeiting U.S. Federal Reserve Notes and the evidence revealed that the defendant used a computer to scan images of the Notes. The Ninth

Circuit held that the breadth of the post-conviction supervised release condition that banned the defendant from the use of computers and the internet was overly broad since there was no evidence that the defendant utilized the internet to commit his crimes. In this case, the government contends that the defendant spread information about the abusive trusts through the internet, and indeed that the evidence produced in discovery reveals that the defendant communicated about the abusive trusts through the internet and e-mails. Therefore, a restriction on the use of the

internet in this case is entirely appropriate.

-6-

Case 1:09-cr-00142-LJO Document 42

Filed 08/12/09 Page 7 of 7

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

B. The Defendant Should Remain on Home Incarceration. In light of his admitted violation, the defendant fails to state a reason as to why home incarceration is overly restrictive. It is the United States position that the

defendant can find others to find other to check on his properties, including his wife. CONCLUSION In light of the foregoing, the United States respectfully requests that the Court deny defendants appeal of the Magistrate Judges July 28, 2009 pretrial release conditions.

Dated: August 12, 2009 Respectfully submitted, LAWERENCE G. BROWN United States Attorney By: /s/ Mark E. Cullers MARK E. CULLERS JAMES R. TERZIAN Assistant U.S. Attorneys

-7-