eidson appealate brief may 2016

7/26/2019 Eidson Appealate Brief May 2016

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No. 14-10141 & 14-10196[consolidated]

IN THE UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

UNITED STATES OF AMERICA, ))

Plaintiff-Appellee, ))

v. ))

DERIAN EIDSON, ))

Defendant-Appellant. ))

_______________

APPELLANTS OPENING BRIEF

_______________

Appeal from the United States District Court

for the Eastern District of California

No. 2:11-cr-234-TLNHonorable Troy L. Nunley, United States District Judge

BECKY S. JAMES (CA Bar # 151419)E-mail: [email protected] W. ROSEN (CA Bar # 294923)E-mail: [email protected] & ASSOCIATES11999 San Vicente Blvd., Suite 240

Los Angeles, California 90049Telephone: (310) 492-5104Facsimile: (310) 492-5026

Attorneys for Defendant-AppellantDERIAN EIDSON


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TABLE OF CONTENTS

Page

TABLE OF CONTENTS ............................................................................................ i

TABLE OF AUTHORITIES ...................................................................................... v

INTRODUCTION ....................................................................................................... 1

ISSUES PRESENTED ................................................................................................ 1

JURISDICTIONAL STATEMENT ........................................................................... 3

BAIL STATUS ........................................................................................................... 3

STATEMENT OF THE CASE ................................................................................... 3

I. Statement of Facts Relevant to the Charges of Conviction ............................. 4

A. The Build-Up to the Settlement Conferences ............................................ 4

B. Settlement Conference on February 17, 2009 ............................................ 8

C. Settlement Conference on March 2, 2009 ................................................15

II. Procedural History .........................................................................................20

A. Pretrial Proceedings ..................................................................................20

B. Trial Proceedings ......................................................................................22

1. The Governments Case ......................................................................22

2. Defense Request to Play Whole Recordings Under Rule of

Completeness .......................................................................................23

3.

Ms. Eidsons Case ...............................................................................24

4. Motion for Acquittal, Jury Instructions, and Verdict ..........................25

C. Sentencing Proceedings ............................................................................25

SUMMARY OF ARGUMENT ................................................................................29


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ARGUMENT ............................................................................................................32

I. The Government Failed to Present Sufficient Evidence that Ms. Eidson

Participated in any Money Laundering Conspiracy or Attempted

Money Laundering (Counts 18 and 19) .........................................................32

A. Standard of Review ..................................................................................32

B. Ms. Eidsons Participation in Negotiations Over a Potential Buyout

of an Equity Interest of a Privately Held Company Does Not

Constitute Attempted Money Laundering as Defined under

1956(a)(1) .................................................................................................33

1. The Government Failed to Prove Financial Transaction as

Defined Under the Statute ...................................................................34

2. There is No Evidence, Nor Could the Government Present Any

Evidence Due to its Orchestrated Sting, that the Charged

Attempted Money Laundering In Fact Involves the Proceeds of

Specified Unlawful Activity ..............................................................37

3. The Evidence Falls Far Short of Establishing Beyond a

Reasonable Doubt that Ms. Eidson Had Any Knowledge of the

Specified Unlawful Activity of the Charged Bankruptcy Fraud

and Concealment of those Proceeds ....................................................38

4. The Government Failed to Prove that the Purpose of the

Purported Financial Transaction was Designed to Conceal the

Nature of the Proceeds from Any Unlawful Activity or that Ms.

Eidson Knew that the Purpose was Designed for that Very

Reason .................................................................................................43

C. The Government Also Failed to Prove Ms. Eidson Conspired with

Mr. Zinnel to Commit Money Laundering ...............................................48


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D. Even if the Government Could Establish that a Financial

Transaction Occurred and Ms. Eidson Had the Requisite

Knowledge and Intent, the Government did not Meet Its Burden in

Proving Ms. Eidson Took a Substantial Step in Her Attempt to

Launder Money.........................................................................................49

II. The District Court Erred in Denying the Defendants Motion to Dismiss

Effecting a Constructive Amendment with the Governments Evidence

of Its Sting Operation.....................................................................................52


B. The Government Effected a Constructive Amendment of the

Charging Indictment .................................................................................52

III. The Jury Instructions Impermissibly Invited the Jury to Convict Ms.

Eidson on the Legally Invalid Theory that the Simple Transfer of

Cash Can Constitute a Money-Laundering Offense................................56


B. The Jury Instructions Were Misleading and Negated the Required

Elements of Money Laundering in Violation of 1956 ..........................57

C. The Instructional Error Was Prejudicial ...................................................60

IV. Several Evidentiary Errors Also Require Reversal .......................................61


B. The District Court Improperly Refused to Exclude Evidence of

Settlement Negotiations in Violation of Federal Rule of Evidence

408 ............................................................................................................61

C. The District Court Erred in Admitting Prejudicial Legal Conclusions

by Legal Experts .......................................................................................68


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D. Admitting Only the Governments Desired Snippets of Ms. Eidsons

Meetings with Mr. Radoslovich Over Objection and Request to

Admit the Whole Recordings Requires Reversal .....................................69

E.

If Each Error Alone Does Not Require Reversal, the CumulativeEffect Certainly Does ...............................................................................73

V. Ms. Eidsons 121-Month Sentence is Procedurally and Substantively

Unreasonable .................................................................................................74

A. Standard of Review and Applicable Legal Standards ..............................74

B. Over Objection, the District Court Erroneously Assumed the

Calculation of Ms. Eidsons Loss Amount was $4,000,000 with

Absolutely No Analysis or Consideration of Evidence that

Establishes the Value of the Attempted Laundered Funds was at

most $350,000 ..........................................................................................75

C. The District Court Clearly Erred in Applying the Sophisticated

Laundering Enhancement, Resulting in Impermissible Double

Counting ...................................................................................................79

D. Ms. Eidsons 121-Month Sentence Was Substantively

Unreasonable ............................................................................................82

CONCLUSION .........................................................................................................84


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TABLE OF AUTHORITIES

Page(s)

Federal Cases

Beech Aircraft Corp. v. Rainey,488 U.S. 153, 172 (1988) .....................................................................................69

Gall v. United States,552 U.S. 38 (2007) ...............................................................................................74

Jackson v. Virginia,443 U.S. 307 (1979) .............................................................................................33

Regalado Cuellar v. United States,

553 U.S. 550 (2008) ................................................................................ 33, 44, 47Rhoades v. Avon Prods.,

504 F.3d 1151 (9th Cir. 2007) .............................................................................61

Rita v. United States,551 U.S. 338 (2007) .............................................................................................74

Smith v. United States,586 U.S. ___, 133 S. Ct. 714 (2013) ....................................................................48

Staples v. United States,511 U.S. 600 (1994) .............................................................................................39

Stirone v. United States,361 U.S. 212 (1960) ...................................................................................... 52, 53

Thomas v. Hubbard,273 F.3d 1164 (9th Cir. 2001) .............................................................................73

United States v. Adamson,

291 F.3d 606 (9th Cir. 2002)......................................................................... 52, 56

United States v. Aguilar,80 F.3d 329 (9th Cir. 1996) ..................................................................................38

United States v. Akintobi,159 F.3d 401 (9th Cir. 1998)................................................................................36


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United States v. Allison,86 F.3d 940 (9th Cir. 1996) ........................................................................... 76, 77

United States v. Anderson,371 F.3d 606 (9th Cir. 2004)............................................................. 35, 36, 42, 55

United States v. Bakhit,218 F.Supp.2d 1232 (C.D. Cal. 2002) .................................................................76

United States v. Barona,56 F.3d 1087 (1995) .............................................................................................58

United States v. Bennett,621 F.3d 1131 (9th Cir. 2010) .............................................................................32

United States v. Brown,880 F.2d 1012 (9th Cir. 1989) .............................................................................40

United States v. Cantrell,433 F.3d 1269 (9th Cir. 2006) .............................................................................78

United States v. Carty,520 F.3d 984 (9th Cir. 2008) (en banc) ........................................................ 74, 75

United States v. Castellini,392 F.3d 35 (1st Cir. 2004) ..................................................................................56

United States v. Cedeno-Perez,579 F.3d 54 (1st Cir. 2009) ..................................................................................44

United States v. Chin-Sung Park,167 F.3d 1258 (9th Cir. 1999) .............................................................................80

United States v. Choy,309 F.3d 602 (9th Cir. 2002)......................................................................... 59, 60

United States v. Collicott,92 F.3d 973 (9th Cir. 1996) ........................................................................... 61, 70

United States v. Contra Costa County Water Dist.,678 F.2d 90 (9th Cir. 1982) ..................................................................................62


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United States v. Cortes,757 F.3d 850 (9th Cir. 2014)................................................................................57

United States v. Davis,2009 U.S. Dist. LEXIS 102559 (E.D. Pa. 2009).......................................... 66, 68

United States v. Davis,596 F.3d 852 (D.C. Cir. 2010)...................................................................... 65, 66

United States v. Deeb,175 F.3d 1163 (9th Cir. 1999) .............................................................................56

United States v. Doss,630 F.3d 1181 (9th Cir. 2011) .............................................................................52

United States v. Doxie,2014 U.S. Dist. LEXIS 109131 (N.D. Ga. 2014)......................................... 63, 64

United States v. Estacio,64 F.3d 477 (9th Cir. 1995) ..................................................................................36

United States v. Faulkenberry,614 F.3d 573 (6th Cir. 2010)......................................................................... 44, 47

United States v. Frederick,78 F.3d 1370 (9th Cir. 1996)................................................................................73

United States v. Freeman,498 F.3d 893 (9th Cir. 2007)................................................................................74

United States v. Frega,179 F.3d 793 (9th Cir. 1999)................................................................................57

United States v. Garcia-Emanual,14 F.3d 1469 (10th Cir. 1994) .............................................................................45

United States v. Garrido,713 F.3d 985 (2013) .............................................................................................57

United States v. Harper,33 F.3d 1143 (9th Cir. 1994)................................................................................51


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United States v. Hassan,578 F.3d 108 (2d Cir. 2008) .................................................................................37

United States v. Hays,

872 F.2d 582 (5th Cir. 1989)................................................................................66

United States v. Hirsch,100 U.S. 33 (1879) ...............................................................................................48

United States v. Hofus,598 F.3d 1171 (9th Cir. 2010) .............................................................................57

United States v. Hubbard,96 F.3d 1223 (9th Cir. 1996)................................................................................48

United States v. Jenkins,633 F.3d 788 (9th Cir. 2011)............................................................. 34, 35, 36, 76

United States v. Katakis,800 F.3d 1017 (9th Cir. 2015) .............................................................................33

United States v. Knapp,120 F.3d 928 (9th Cir. 1997)................................................................................60

United States v. Kubick,205 F.3d 1117 (9th Cir. 1999) ...................................................................... 80, 81

United States v. Lam Thanh Pham,545 F.3d 712 (9th Cir. 2008)......................................................................... 74, 78

United States v. Leichtnam,948 F.2d 370 (7th Cir. 1991)................................................................................53

United States v. Lloyd,807 F.3d 1128 (9th Cir. 2015) ...................................................................... 73, 74

United States v. Lo,231 F.3d 471 (9th Cir. 2000)................................................................................33

United States v. McAllister,747 F.2d 1273 (9th Cir. 1984) .............................................................................39


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United States v. Melchor-Lopez,627 F.2d 886 (9th Cir. 1980)................................................................................48

United States v. Montoya,945 F.2d 1068 (9th Cir. 1991) ..............................................................................61

United States v. Nelson,66 F.3d 1036 (9th Cir. 1995)................................................................................51

United States v. Ness,565 F.3d 73 (2d Cir. 2009) ............................................................................ 44, 49

United States v. Nevils,598 F.3d 1158 (9th Cir. 2010) (en banc) .............................................................33

United States v. Nielsen,371 F.3d 574 (9th Cir. 2004)................................................................................74

United States v. Olson,925 F.2d 1170 (9th Cir. 1991) .............................................................................52

United States v. Ortega,203 F.3d 675 (9th Cir. 2000)................................................................................57

United States v. Otis,127 F.3d 829 (9th Cir. 1997) (per curiam)...........................................................59

United States v. Pazsint,703 F.2d 420 (9th Cir. 1983)......................................................................... 53, 54

United States v. Pierre,254 F.3d 872 (9th Cir.2001) .................................................................................57

United States v. Rahseparian,231 F.3d 1257 (10th Cir. 2000) .............................................................. 38, 40, 41

United States v. Richardson,658 F.3d 333 (3d Cir. 2011) .................................................................... 44, 45, 46

United States v. Ripinsky,109 F.3d 1436 (9th Cir. 1997) .............................................................................35


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United States v. Ripinsky,20 F.3d 359 (9th Cir. 1994) ..................................................................................56

United States v. Skeddle,176 F.R.D. 254 (N.D. Ohio, 1997) ......................................................................64

United States v. Stapleton,293 F.3d 1111 (9th Cir. 2002) .............................................................................57

United States v. Stein,37 F.3d 1407 (9th Cir. 1994)................................................................... 38, 60, 61

United States v. Sullivan,522 F.3d 967 (9th Cir. 2008)................................................................................32

United States v. Taylor,716 F.2d 701 (9th Cir. 1983)................................................................................49

United States v. Turman,122 F.3d 1167 (9th Cir. 1997) .............................................................................38

United States v. Vallejos,742 F.3d 902 (9th Cir. 2014)................................................................... 61, 69, 70

United States v. W. Coast Aluminum Heat Treating Co.,265 F.3d 986 (9th Cir. 2001)................................................................................76

United States v. Wallace,848 F.2d 1464 (9th Cir. 1988) .............................................................................73

United States v. Ward,747 F.3d 1184 (9th Cir. 2014) ...................................................................... 52, 53

United States v. Wilkes,662 F.3d 524 (9th Cir. 2011)................................................................................34

United States v. Yossunthorn,167 F.3d 1267 (9th Cir. 1999) ................................................................ 49, 50, 70

United States v. Zolp,479 F.3d 715 (9th Cir. 2007)................................................................................76


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Williams v. First Nat. Bank,216 U.S. 582 (1910) .............................................................................................62

Yates v. United States,354 U.S. 298 (1957) .............................................................................................57

Statutes

18 U.S.C. 1956 .............................................................................................. passim

18 U.S.C. 1957 ............................................................................................... 49, 53

18 U.S.C. 3553(a) .................................................................................................75

U.S.S.G. 2B1.1 ......................................................................................................76

U.S.S.G. 2S1.1 ............................................................................................... 76, 79

Federal Rules

Fed. R. Evid 408 ......................................................................................................62

Fed. R. Evid. 106 .....................................................................................................69

Ninth Circuit Jury Instructions

Ninth Cir. Model Crim. Jury Instr. 8.147 ................................................................59

Other Authorities

U.S. Attorneys Manual,Criminal Resource Manual 2127 .........................................................................55


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INTRODUCTION

Defendant-appellant Derian Eidson was an attorney who now finds herself

serving over 10 years in prison for two counts of money laundering offenses based

on her representation of co-defendant Steve Zinnel in what she thought were

settlement negotiations to resolve the termination of a business relationship. The

jury did not find Ms. Eidson to have knowingly participated in the underlying

unlawful activity of bankruptcy fraud with Mr. Zinnel, as the jury acquitted her on

one count and deadlocked on all others. Nevertheless, the jury convicted Ms.

Eidson of conspiring to and attempting to launder the proceeds of bankruptcy

fraud, based on a government sting set up to look like settlement negotiations.

The governments case againstMs. Eidson was improperly charged and

insufficiently proven. Ms. Eidson had no knowledge that she was participating in a

conspiracy to launder the proceeds of specified unlawful activity, nor was that her

purpose. Her convictions were obtained through a legally flawed theory and

critical instructional and evidentiary errors. Neither her convictions nor her 121-

month sentence can stand.

ISSUES PRESENTED

1. Whether the evidence was insufficient to support Ms. Eidsons

convictions for conspiracy and attempt to launder money based on her


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negotiations, as an attorney representing her client, aimed at settling a

dispute over the terms of a buyout of private equity shares.

2. Whether the government constructively amended the indictment by

charging the offense of actual money laundering under 18 U.S.C.

1956(a)(1), when its case at trial was based on an alleged sting that

should have been charged under 18 U.S.C. 1956(a)(3).

3. Whether the jury was misinstructed that a simple transferof cash can

constitute money laundering.

4. Whether evidentiary errors require reversal, either individually or

cumulatively, including:

a. Whether the district court erred in admitting evidence of settlement

negotiations, the lynchpin of the governments case against Ms.

Eidson, in violation of Federal Rule of Evidence 408.

b. Whether the district court erroneously allowed Ms. Eidsons

purported opposing counsel in the negotiations (who was in fact

acting as a government informant at the time) to offer expert legal

opinions.

c. Whether the district court erred in allowing the government to

introduce snippets of the recorded settlement negotiations without

allowing the defense to introduce other portions that would have


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prevented the jury from being misled by the governments

presentation.

5. Whether Ms. Eidsons 121-month sentence was procedurally and

substantively unreasonable.

JURISDICTIONAL STATEMENT

Pursuant to 18 U.S.C. 3231, the district court had jurisdiction over this

federal criminal proceeding. This Court has jurisdiction over this appeal under 28

U.S.C. 1291 and 18 U.S.C. 3742(a). The district court entered its judgment

and commitment order on April 16, 2014. (ER146.) Ms. Eidson filed her timely

notice of appeal on April 18, 2014. (ER475.)

BAIL STATUS

Ms. Eidson is in federal custody, serving the 121-month sentence imposed in

this case.

STATEMENT OF THE CASE

Derian Eidson participated in two settlement conferences, which she thought

were her and another lawyers efforts to resolve the dispute that had arisen between

her client, Steve Zinnel, and Tom Wilbert. What resulted were her convictions for

Counts 18 and 19 of the Superseding Indictment: Money Laundering Conspiracy

and Attempted Money Laundering. The government alleged that Ms. Eidson and

co-defendant Zinnel conspired to commit money laundering and that Ms. Eidson


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attempted to launder money up to $4,000,000 when she engaged in the settlement

negotiations to secure an equity buyout of Done Deal, Inc. and Mr. Zinnel from

System 3, Inc. The counts are premised on Ms. Eidson being aware of Mr.

Zinnels concealment of assets in his bankruptcy proceedings. But Ms. Eidson was

tried and acquitted of aiding and abetting in the charged pre-petition bankruptcy

fraud and mistried due to a hung jury on several other counts including post-

petition bankruptcy fraud, money laundering, and transactions in criminally

deprived property.

I.

Statement of Facts Relevant to the Charges of Conviction1

A. The Build-Up to the Settlement Conferences

In the early 2000s, Derian Eidson began a long-distance relationship with

Steve Zinnel. (ER964.) At around the same time, in 2001, Mr. Zinnel entered into

a business formation agreement with his brother, David Zinnel, and Thomas

Wilbert, with whom Mr. Zinnel had been friends for decades and worked together

in the past. (ER519; 1337-40.) They formed an S-corporation System 3, a public

infrastructure construction firm. (ER520; 1337-40.) They agreed in 2001 that Mr.

Wilbert would be the sole shareholder initially and Mr. Zinnel would contribute

$600,000 in capital and start out with no share ownership. (ER519-20; 1337-40.)

1A detailed factual background to the overall case against both Ms. Eidsonand Mr. Zinnel is in Mr. Zinnels opening brief.


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The agreement provided that the following year in 2002, Mr. Zinnel would own

49%; in 2003, 48%; in 2004, 47%; and in 2005, 46%. (Id.) David Zinnel would

end up with an 8% ownership in 2005. (ER1337-40.) Ms. Eidson was not part of

the discussions that led to System 3s formation. (ER697-99.)

Mr. Wilberts understanding of the business formationagreement was that

once System 3 had sufficient funds, Mr. Zinnel would get back his initial

investment, plus interest, and any remaining equity would be distributed

thereafter. (ER526.) The relationship, according to Mr. Wilbert, was that Mr.

Zinnel was to be a silent partner. (ER527.) Evidence also showed that Mr. Zinnel

did consulting work for System 3, including reviewing financials of the company

on a monthly basis. (ER669.) And Ms. Eidson provided legal services for

System 3. (ER724.)

In 2004, Ms. Eidson formed Done Deal, Inc. Mr. Zinnel is mentioned

nowhere in the Articles of Incorporation, and he never obtained any interest in

Done Deal. (ER942.) Ms. Eidson and Mr. Zinnel were employees of Done Deal

and on payroll. (ER1533-47.) On October 4, 2004, Ms. Eidson opened up a bank

account for Done Deal, and on February 22, 2005, Mr. Zinnel was authorized as a

signer on the account and issued a debit card. (ER929.) Also in 2004, Mr. Zinnel

assigned his interest in System 3 to Done Deal. (See ER773.) The year-end

financials for 2003 show System 3 as pretty shaky, and Mr. Zinnel and Ms.


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Eidson determined that approximately $30,000 was fair consideration for the

assignment. (ER1469.) Mr. Zinnel would send invoices to System 3 for any

services provided to be paid to Done Deal. (ER501-02.)

By May of 2008, Mr. Wilbert informed Mr. Zinnel (not for the first time)

that he desire[d] to terminate [their business] relationship. (ER1564.) Ten days

later, Mr. Wilbert provided Mr. Zinnel a settlement offer, with a buyout offer of

$3,944,799.00. (ER1565.) In that e-mail correspondence, Mr. Wilbert stated that

he would like to get this resolved sooner than later since the agreement included

a confidentiality provision, which means we cant discuss its details. Mr.

Wilbert concluded, This helps everyone out. (Id.)

In mid-June, Mr. Wilbert sent Mr. Zinnel revisions to the offer and informed

Mr. Zinnel that his attorney Frank Radoslovich advised [him] not to pay out any

more amounts until this [offer] is signed,and that he was taking his

recommendation, no further payments will be made until this document or

something very close is executed. (ER1571.) Ms. Eidson took no part in those

settlement discussions.

At some point in 2008, Mr. Wilbert became a confidential informant for the

FBI. (ER648.) On November 13, 2008, Mr. Wilbert received a letter from the

U.S. Department of Justice confirm[ing] that [he] is not a target in the bankruptcy

fraud investigation that relates to transactions between Mr. Wilbert and Steven


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Zinnel. (ER1548;see also ER539-94.) Mr. Wilbert arranged a meeting with Mr.

Zinnel at a Starbucks in December, 2008, and agreed to consensual monitoring of

that meeting. (ER359; 1584.) Not surprisingly, Mr. Wilbert and Mr. Zinnel did

not come to an agreement.

Mr. Wilbert had Mr. Radoslovich prepare a settlement agreement, but Mr.

Zinnel did not find it agreeable and a response agreement was then provided to Mr.

Wilbert. (ER1461.) After Mr. Wilbert received the response agreement, he

refused to communicate any further with [Mr. Zinnel] and said Talk to Frank

[Radoslovich]. (Id.) Mr. Radoslovich also had been contacted by the

government through Mr. Wilbert. (ER830-31.) He met with the FBI and attended

a meeting a few months before Mr. Wilbert received the letter informing Mr.

Wilbert that he was not a target. (ER831-32.)

After Mr. Wilberts apparent refusal to communicate with Mr. Zinnel, Mr.

Radoslovich and Ms. Eidson began correspondences over the matter. In a letter on

February 3, 2009, Ms. Eidson informed Mr. Radoslovich that she had been

retained to represent the interests of Steve Zinnel and Done Deal, Inc., Mr.

Zinnels assignee, as it pertains to discontinuing the business relationship with

System 3, Inc. (ER1419.) She also inquired as to who Mr. Radoslovich

represent[ed] in this matter and requested that Mr. Radoslovich advise [her] of

[his] clients position in this matter. (ER1419.) The two arranged to hold a


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settlement conference on February 17, 2009, though unbeknownst to Ms. Eidson,

the conference would never settle anything and instead Mr. Radoslovichs office

would be wired by the FBI with an agent attending the meeting.2 (ER838.)

B. Settlement Conference on February 17, 2009

At the beginning of the conference, Mr. Radoslovich acknowledged that Ms.

Eidson had sent [him] a letter saying you know, like you wanted to know what

our position was and we kind of went back and forth. (ER1458.) Ms. Eidson

explained her understanding of the formation of System 3, but stated that she did

not know who drafted the agreement. (ER1459.) She further detailed that over

time there were periodic distributions and some consulting work done. She

then informed Mr. Radoslovich that in 2004, Mr. Zinnel assigned his interest to

Done Deal and from 2004 until roughly last March there were periodic

distributions. (ER1459.) As to Mr. Zinnels consulting work, Ms. Eidson

understood that he received and reviewed the financials, and had been provided a

laptop with a specific program so that he could perform his financial consulting

2Mr. Radoslovich explained he agreed to assist the government in its stingagainst Ms. Eidson and Mr. Zinnel because Mr. Wilbert, wanted us to cooperate,mandated that we cooperated. He just wanted to cooperate with everything wasvery, very scared. So thats why I did it, because he wanted me to cooperate and Iwas his lawyer. (ER838.)


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for the company. (ER1459.) Shefurther understood that Mr. Zinnel was a

consultant employee to System 3 before and after the assignment (ER1486.)

Mr. Radoslovich questioned why Mr. Zinnel would care about this

settlement if [h]e sold his interest in July of 2004 for around $30,000 pursuant to

some agreement. (ER1462.) Ms. Eidson corrected him that Mr. Zinnel had not

soldhis interest, but that he assignedit to Done Deal, and that it was an

assignment in the sense that [Mr. Zinnel] remained involved in doing System

Threes financials, providing consulting work for System Three. (ER1463.)

The proposed settlement by Mr. Zinnel and Done Deal terminated his

consulting agreement. (Id.) According to Ms. Eidson, she understood that Mr.

Zinnel and Mr. Wilbert had a verbal agreement concerning Mr. Zinnels consulting

and that Mr. Radoslovichs office prepared [a written agreement] in like

December of 2007, but that it bounced around and nothing came of it, that it

was[nt] executed. (Id.) Ultimately, it was Ms. Eidsons understanding that

there was a consulting agreement from pretty much the outset. (Id.)

In an apparent attempt to resolve the competing agreements, Mr.

Radoslovich stated that Mr. Wilberts proposed agreement flat out mention[s] that

theres this business formation agreement of October 3rd 2001 and that [System 3]

want[s] to buy out whatever interest is in the formation agreement, and asked,

What is the difficulty in tying in this [in] your proposed version the settlement


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agreement and mutual release with some recitals that there was a written

agreement in October back in 2001, October 3rd 2001, that there was an assigned

to Done Deal at or about July 2004? Ms. Eidson responded, Well I guess you

can but that wasnt the original agreement. (ER1463-64.) Her understanding

that all along, you know, that distributions would be characterized as consulting

fees and expensedby System Three as such. (ER1465.)

As to any agreement, Mr. Radoslovich stated that weve become, you

know, really concerned because how do you get around two major issues. The

first one is theres an ex-wife. (ER1466.) The second major issue, according to

Mr. Radoslovich, was the bankruptcy issue. (Id.) Mr. Radoslovich explained:

Whether or not this company was assigned or his rights were assigned to Done

Deal , [t]heres none of those assets disclosed in the bankruptcy. (Id.) Ms.

Eidson responded that it was her understanding that the assignment was made

more than a year before the bankruptcy and that [w]ell [Mr. Zinnel] might [have

a problem], but questioned why would System Three have a problem since

System Three doesnt have any control over what [Mr. Zinnel] would or wouldnt

list in the bankruptcy schedules. (Id.) Ultimately, Ms. Eidson proclaimed that

she is not a bankruptcy attorney and that she would have to take a look at the

potential problem that Mr. Radoslovich identified. (Id.)


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When Mr. Radoslovich continued to press that System 3 is not disclosed

and that System Three or any prior involvement [Mr. Zinnel] had in System Three

are not disclosed in the bankruptcy. (ER1467.) With no knowledge, Ms. Eidson

stated she would take [his] word for it. (ER1468.) Mr. Radoslovich nonetheless

continued to press Mr. Zinnels problem and stated that it looks to us [the

bankruptcy fraud is] still ongoing and asked, How do you come up with a way to

do this in a way that doesnt defraud the bankruptcy trustee? Ms. Eidson again

replied that she did know that; ultimately, that may be of great concern to Steve

than [sic]. (ER1468.)

Ms. Eidsons position at the settlement conference was that she was trying

to figure out whatwhat is the true exposure to Mr. Wilbert and how they could

craft an agreement thats agreeable. (ER1468.) Mr. Radoslovich then berated Ms.

Eidson:

[W]e can sit here, you can come up with these solutions thatsays Oh, Steve will hold us harmless from whatever. I mean pickitwhatever civil liability that might be out there. But weve stillgot a major problem with a potential criminal issue. I mean, I meanarent you concerned about that? I mean that kind of blows my mind.In the event that, for example, somebody finds out or theres somesort of, you know, I dont know, the U.S. Attorney or the bankruptcy

trustee or somebody decides to prosecute it. I mean they havetheres a press release like they did a couple years ago. This is like ahigh profile thing for them, okay? I mean, how can you possibly

protect us against that?


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(ER1469.) Puzzled, Ms. Eidson replied: I dont know what potential charges are

you talking about? What criminal issue are you referring to? (ER 1469.) Mr.

Radoslovich ultimately suggested that theres a potential (inaudible) just blowing

up the entire bankruptcy. And if they blow up the entire bankruptcy then all the

creditors come back in your life and, you know, the government can do things like,

you know, try to get a restitution or something. (ER1469.) Given that she had

been inquiring about Mr. Wilberts potential exposure, Ms. Eidson responded,

Again Im not understanding how if Tom or System Three is not party to the

bankruptcy how they could be exposed to any liability for bankruptcy fraud.

(ER1469.) Ms. Eidson ultimately stated, Im not a bankruptcy attorney so I think

those are Steve Zinnels issues of what he disclosed in bankruptcy and what he

didnt disclose. (ER1472.)

Mr. Radoslovich also discussed the issue concerning Mr. Zinnels divorce,

and whether the ex-wife could come after System 3 if she found out about Mr.

Zinnels interest. To that, Ms. Eidson replied that Mr. Zinnel and his ex-wifes

community property ceased before the date Mr. Wilbert and Mr. Zinnel entered

into their business formation, and that that should not be a problem. (ER1475.)

Even so, Mr. Radoslovich suggested that they still might have problem if the

divorce might not be over. (ER1475.)


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With Mr. Radoslovichs proposed risks, Ms. Eidson questioned what

kind of protections would be necessary then to eliminate the perceived risk you see

on behalf of Tom and System Three? (ER1476.) Mr. Radoslovich suggested that

with some fraud allegation that the legal risk of entering a transaction would

just be extraordinary, to which Ms. Eidson replied, I dont believe that there was

any fraud committed here. I dont. And I certainly dont believe that, you know, I

think that is problematic I guess if someone makes an allegation against Steve for

fraud that, you know, it doesnt look good for Tom because there were

distributions made and, you know, they did business for five or six or seven years.

(ER1476.) Mr. Radoslovich then acknowledged Mr. Wilberts prospective tax

problem, as he would take distributions as he was the sole shareholder and he

would pay the taxes on them; how do we make up that tax trail? (ER1476.)

Per Ms. Eidsons understanding, the distributions received were

consulting fees under the consulting agreement between Mr. Wilbert and Mr.

Zinnel. (ER1477.) In the end, Ms. Eidson reiterated that she did not believe there

was any fraud intended and that the inconsistency on paper, I think, you know,

Tom didnt want thecommunity to know that Steve was involved in the business

because it would have been a liability to him due to a bonding companys

judgement against Mr. Zinnel. (ER1477.)


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At one point, Mr. Radoslovich point blank asked, [W]as that the plan? Was

the plan to do it, you know, to do bankrupt a year after Done Deal? (ER1480.)

Ms. Eidson stated no, that she did not believe that had anything to do with it, but

rather, with what happened with [Mr. Zinnels] creditors. (ER1480.) Thereafter,

Mr. Radoslovich decided, I dont think Zinnel has the ability to protect us I just

dont think he does. This is not like Were buying out a shareholder so were

going to hold you harmless in the event someone slips and falls on our premises.

This is a little different. To that, Ms. Eidson explained that she wasnt as aware

of what [he] see[s] as perceived risks, because Tom and Steve had an agreement

and for years and years and years Tom operated System Three pursuant to that

agreement so then now at this point to say Oh Steve, it was all you and you need

to fix it for me doesnt make sense. (ER1481.)

Ms. Eidson then proposed, So I guess what were coming down to then, is

there a way to end the business relationship where we are both serving our clients

as well as the system and not perpetrating a fraud, because that certainly is not my

intent either. Mr. Radoslovich then asked if Mr. Zinnel would ever consider

going back to the bankruptcy court and like amending the schedules and disclosing

it and coming clean with the whole thing. She replied that she thought thats a

good idea and that thats something for me to talk to him about. (ER1482.)


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While Mr. Radoslovich did not think this is in Zinnels vocabulary,he

recommended that he should seriously think about dropping (inaudible) and

walking away from this dispute. (ER1490.) He acknowledged, however, that Mr.

Zinnel can litigate and we can see how that all shakes out, or these guys can try to

figure out something that might be legally acceptable. Ms. Eidson agreed, stating,

And thats our jobs. (ER1490.) As expected, Ms. Eidson and Mr. Radoslovich

did not come to an agreement, and Mr. Radoslovich asked, Do you want to talk

again? (ER1492.) Ms. Eidson agreed.

C. Settlement Conference on March 2, 2009

Ms. Eidson and Mr. Radoslovich again met at his office on March 2, 2009,

to continue what Ms. Eidson thought were settlement negotiations. She first stated

that she kind of had some follow ups after the first meeting. She began with

discussing Done Deals proposed settlement and reiterated that it was initially

taken from the proposed settlement agreement that your office had tendered.

(ER1499.)

The parties discussed Mr. Zinnels prospective issues concerning his

divorce, which Ms. Eidson confirmed that all property acquired by Steve Zinnel

after the date of separation is separate property. And the date of separation was

December 99. (ER1499.) Ms. Eidson then recollected about the bankruptcy

issues that [Mr. Radoslovich] raised last time, and explained that what led Mr.


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Zinnel to bankruptcy was [t]he judgment [that] was 1.2 million dollars.

(ER1500.) Her understanding was that that could be a potential exposure and

that she would entertain, you know, agreeing to indemnify Tom for, you know, to

that amount. (ER1501.)

To tie up any loose ends from the prior meeting, Ms. Eidson restated

particular compromises: [A]gain, like I said last time, I have no problem doing

two things. Onediscussing the assignment in the settlement agreement. Done

Deal as the assignee of Steve Zinnel and twohaving Steve provide you with

something under penalty of perjury that he, you know, will make no ownership

in System Three. (ER1502.) Ms. Eidson did not bring a copy of the assignment,

however, because she did not have Steve Zinnels permission to bring it, but she

reaffirmed, repeating Mr. Radoslovich, that [t]here is a straight up normal

document. (ER1502.)

The third issue Ms. Eidson raised was Mr. Radoslovichs concerns to do

with potential criminal liability of either Tom or System Three. (ER1506.) Ms.

Eidson then stated, I dont know why criminal liability of Steve Zinnel would be

an issue to resolving the matter with System Three. (ER1506.) While Mr.

Radoslovich stated, Its not potential criminal liability of anybody, he again

raised what he perceived as Mr. Zinnels bankruptcy fraud due to his omission on

his schedules and asked if Ms. Eidson had spoken to Mr. Zinnel about that, if


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there [is] anythinganything developed from that? (ER1506-07.) Ms. Eidson

replied that she shared that information and left it at that, but you have raised

that. (ER1507.)

In response to Mr. Radoslovichs statement that Mr. Zinnel would not

reopen his bankruptcy, Ms. Eidson replied that it may open a big can of worms

because part of what youve got to understand with your clients interest as well is

that Tom has been paying money all along, so hes already the potential issue for

what could happen in the future of any kind of buyout at this pointwhether its

the consulting agreement or an ownership agreementToms been for [five] years,

paying money to Done Deal. So that part, I dont how to get him out of at this

point if. (ER1507.) [I]f someone puts a spotlight on thisthis is kind of

how Im seeing it is that all these issues pre-exist the buyout agreement. All of

these issues Tom and System Three are going to have to deal with if somebody

goes digging aroundtheyre going to have to deal with the last four or five years

or seven years, whatever, of conduct to justify regardless of whether theres a

buyout agreement or not. (ER1508.) She ultimately stated that if Mr. Wilbert

goes back on his word Mr. Zinnel will litigate, even though she is trying like

crazy to avoid that because [she] do[es not] believe thats in anyones best

interest. (ER1508.) To that end, Ms. Eidson had been trying like crazy to figure


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out how, you know, for Tom to keep his word to Steve about dissolving the

business relationship. (ER1508.)

In this meeting, however, Ms. Eidson became more stern in her attempts to

resolve the dispute. She first explained to Mr. Radoslovich, Well heres really

what it comes down to. What it comes down to is that for five or seven years Tom

and System Three have made some choices in record keeping and representations

to third parties that may or may not have been honest [to] [b]onding companies,

banks, the IRS. Secretary of State. (ER1513.) She then further stated, I dont

know, you know, what kind of representations [by Mr. Wilbert] were made to the

banks when he got the Porsche or when he bought the building on the houses [sic]

that were purchased in Texas. (ER1513.) And while Mr. Radoslovich took it as,

[W]hat Im hearing is like if [Mr. Wilbert] doesnt do a deal with Steve or you

that basically Steve or you are going to blow the whistle to these various people

the bonding companies, and banks and IRS and everything else? (ER1513.) Ms.

Eidson replied that she did not want that to happen, but those issues pre-date the

dissolution of their business relationship. (ER1513.) She would, however,

certainly advise [Mr. Zinnel] against [reporting]. (ER1514.) [A]ll [Ms. Eidson]

[was] saying is that this hole was dug. (ER1514.) Ms. Eidson ultimately

informed Mr. Radoslovich that she does not have control over what other people

do. [She] can only advise. (ER1515.)


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Mr. Radoslovich asked, Well, so if Im going to communicate a message to

Tom, what should I tell him? (ER1515.) Ms. Eidson replied:

If Tom were my client as best as I can say to you. If Tomwere my client I would say Theres some decisions that were made

before I got involved in the case about some representations that weremade to employees about the form of this business or whatever.During that time there was also an oral consulting agreement. So ifyou want to terminate your relationship with Steve, you can either doa termination of ownership interest which has not been disclosed, ordo a termination of consulting agreement. And then everyone walksaway with bad decisions that were made beforecant really bechanged at this point, you know, everyone has followed through with

what they agreed to. Thats what I would say.

(ER1515; GX 2306.) Mr. Radoslovich asked, And if he says no, then what

happens? (ER1515.) Ms. Eidsons prediction would be litigation. (ER1515.)

The parties again did not reach an agreement. Mr. Radoslovich concluded

the meeting with:

Think about the security issue and again think about the, youknow, hitting the books on this potential criminal issue, because itsvery scary. And I dont know how I mean securing the amount ofmoney in the face of that is a big issue. But, again, we still have these

we still have the basic issues of like I mean I really need to getlike a, I would say like a lengthy opinion letter from you. And thenIll stand back and Ill look at it rationally and see if that if it holdswater.

(ER1519.) Mr. Radoslovich then stated, [T]he only reason that Im involved in

this is to try and get the deal done without it getting uglier. (ER1519.) No further

settlement conferences were held.


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II. Procedural History

On June 8, 2011, the grand jury returned an indictment charging Mr. Zinnel

and Ms. Eidson with various counts of bankruptcy fraud, both pre-petition and

post-petition, in violation of 18 U.S.C. 152(7) and 152(1); conspiracy to commit

money laundering in violation of 18 U.S.C. 1956(h); money laundering in

violation of 18 U.S.C. 1956(a)(1)(B)(i); and transactions in criminally derived

property in violation of 18 U.S.C. 1957. (CR 1.) The grand jury returned a

superseding indictment on December 8, 2011, preserving the original counts

against Mr. Zinnel and Ms. Eidson, and adding two additional charges of

conspiracy to commit money laundering (Count 18) and attempted money

laundering (Count 19) against Ms. Eidson. (ER179-204.)

A. Pretrial Proceedings

Ms. Eidson and Mr. Zinnel filed several pre-trial motions. Ms. Eidson filed

a motion to dismiss Counts 18 and 19, and Mr. Zinnel filed his motion to dismiss

Counts 18 and 19 or to sever, which Ms. Eidson joined. (CR78, 80, 81.) As to the

motions to dismiss, the parties ultimately contended that Counts 18 and 19 must be

dismissed because the settlement negotiations that took place were a government

set-up and the government cannot create a false conspiracy to just try to produce

admissions. (CR80.) The parties also moved to dismiss the counts, arguing the

bulk (if not all) of the evidence against Mr. Zinnel and Ms. Eidson as to the counts


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is subject to exclusion under Rule 408, as discussed in a companion motion.

(CR77.) Ms. Eidson and Mr. Zinnel also filed a motion to suppress the recordings

of the settlement conferences, arguing that Rule 408 precluded its admission.

(CR79.)

The government opposed the pretrial motions on March 29, 2012, April 2,

2012, and April 5, 2012. Ms. Eidson and Mr. Zinnel filed their replies on May 17,

2012. Thereafter, the district court held a hearing on the parties pretrial motions

on May 24, 2012.

In denying the parties motion to suppress the recordings under Rule 408,

the district court presumed Ms. Eidsons guilt:

[Rule] 408 was designed to deal with settlement discussionsthat were between parties at arms length who were actually trying toresolve a case. Here youve got discussions that involved an attorney,

but the settlement was, at least according to the government, part of aconspiracy or shakedown. So it really wasnt truly a settlement that408 contemplated.

(ER2-3.) And the district court, echoing the governments argument, determined:

The fact that you have an attorney involved in it, if that werethe case, thats all you would ever have to do is put an attorney in theroom, and there would never be any conspiracy, any type of wirefraud or shakedown or any type of extortion because the attorney was

there.

(ER3.) Yet, the district court made no finding under any burden of proof, much

less considered whether Ms. Eidson was in fact part of a conspiracy or

shakedown. (ER3.) Instead, the district court assumed that the business


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activities that [Mr. Zinnel and Ms. Eidson] were involved in was what is illegal,

regardless if a legitimate settlement ofa dispute between parties that were

involved in business activities occurred, which may be true. (ER4-5.) The

district court then denied the parties motions to dismiss Counts 18 and Count 19

and motion to severbased on the district courts conclusions as to the parties

motion to suppress. (ER11, 12-13.)

B. Trial Proceedings

Before trial, the parties filed several motions in limine. The parties again

raised the Rule 408 issue, arguing that, as an evidentiary matter, Rule 408

precludes admission of the recordings. (See CR171.) The district court again

denied the requests. On the eve of trial, the government provided the defense

financial summaries it intended to present to the jury. Both Ms. Eidson and Mr.

Zinnel objected to this late disclosure, as it did not provide them any opportunity to

evaluate the governments proposed financials and have an accounting expert

review the summaries for accuracies, omissions, or misleading placement of

expenses and sought a continuance. The district court overruled theparties

objection and denied the request to continue. (See 07/01/2013 RT 57-65.)

1.

The Governments Case

Trial began on July 1, 2013. The trial was aimed at Mr. Zinnel. Almost all

testimony, percipient and expert, was directed at proving the charged conduct


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against Mr. Zinnel. Many witnesses testified that they did not know Ms. Eidson or

that they rarely talked with Ms. Eidson. (See, e.g.,ER344.)

In an attempt to connect Ms. Eidson to Mr. Zinnels alleged criminal

conduct, the government introduced into evidence various banking activity related

to Ms. Eidson, such as her ownership in the Done Deal checking accounts and the

fact that she endorsed several checks from System 3 that were deposited into Done

Deals bank account. (See, e.g.,ER571, 582.) But to the extent Mr. Zinnel was

engaged in criminal activity, the government presented no direct evidence that Ms.

Eidson knew or ever became aware of the underlying transactions that resulted in

payment to Done Deal. Indeed, Mr. Zinnel sent the Done Deal invoices to System

3. (ER579.) And though the government presented evidence that System 3

deposited money directly into Ms. Eidsons client trust account,it was Mr. Zinnel

who directed the deposit, and no evidence was presented that Ms. Eidson

instructed or even condoned Mr. Zinnels actions. (ER563-65;see also ER718-

19.)

2. Defense Request to Play Whole Recordings Under Rule of

Completeness

The primary evidence that the government presented against Ms. Eidson was

the recordings of her statements and responses to Mr. Radoslovich during the

settlement conferences, and Mr. Radoslovichs testimony of his apparent

understanding of those statements and responses. Given the importance of the


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recordings, and especially after Mr. Radoslovichs testimony in which he

summarized the settlement conferences, Ms. Eidson moved the district court to

include the whole recordings under Rule 106, the rule of completeness. (ER847-

48.) Ms. Eidson explained the governments presentation was misleading as [t]he

government has merely played a snippet where there is a discussion which they are

claiming sounds like a threat. (ER857.) The district court denied Ms. Eidsons

request; it limited its analysis to whether the played portions of the recordings

demonstrated that [Ms.] Eidsonwas attemptingmerely attempting to avoid

litigation, and concluded that the portion that has been playedto the jury

captures that. And whats also clear on the tapes that have been played for this

jury is that defendant Eidson was interested in avoiding litigation. (ER859-60.)

3. Ms. Eidsons Case

Ms. Eidson presented a defense limited to character witnesses, who testified

to Ms. Eidsons charitable nature who would loan friends money to achieve or

maintain professional aspirations, (ER973-74; 978-79), and that the most important

thing to Ms. Eidson is her children and friends, (ER979.) On cross-examination,

the government took the opportunity to confirm it was Ms. Eidson on the

recordings, to which the character witness stated that the voice on the recordings

was hers. (ER975-76; 982.)


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4.

Motion for Acquittal, Jury Instructions, and Verdict

Before the case was submitted to the jury, Ms. Eidson and Mr. Zinnel moved

for acquittal under Rule 29, which the district court denied. (ER989-90.)

Thereafter, the district court heard argument concerning proposed jury instructions.

As to the money laundering instruction, the defense objected to the governments

proposed instruction because it is a very specific charge and must be the proceeds

from bankruptcy fraud. And the proceeds are money that was part of the

bankruptcy estate. (ER979.) The district court denied the defense objection, only

stating: The Court is going to give governments proposed jury instruction

number 41 in its entirety. (ER983.)

After seven days of testimony and four days of jury deliberation, the jury

returned a verdict of not guilty as to Count 1, pre-petition bankruptcy fraud against

Ms. Eidson, and deadlocked on Counts 2-6 and 13-16. The jury found Ms. Eidson

guilty only of Counts 18 and 19, the charges related to her participation in the

sting settlement negotiations.

C. Sentencing Proceedings

The probation office filed its final PSR on January 30, 2014. The probation

office recommended that the loss amount be calculated at the amount of

$4,000,000, (see PSR 10-13, 19), and recommended a number of enhancements:

sophisticated money laundering; abuse of a position of trust; and obstruction of


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justice. The recommended total offense level was 31, which placed her sentence at

a Guidelines range of 108 to 135 months; the probation office recommended 121

months. The government and Ms. Eidson filed their objections to the PSR and

sentencing position on February 14, 2014. (ER298.)

Ms. Eidson first contended that, given the recommended enhancements have

a disproportionate impact, the district court must find by clear and convincing

evidence that the enhancements apply, and made several objections to the PSR.

(ER297-98.) She objected to the loss amount, contending, Because the [purported

intended loss] occurred in the context of a negotiation, it is incorrect for the court

to find a $4,000,000 intended loss. No attorney would have expected to get

$4,000,000 under these circumstances; in general, no attorney walking into a

negotiation expects to get their opening bid. (ER298.) She also objected to the

sophisticated money laundering enhancement because the PSR improperly

base[d] the enhancement upon conduct separate from counts 18 and 19, (ER299),

and that applying sophisticated money laundering here would be double counting

because the governments basis is consistent with the actions of an attorney and

the skills employed by an attorney, (ER1304.) And she objected to the abuse of

position of trust enhancement, (ER300), and to the obstruction of justice

enhancement as well, (ER296-97, 301).


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On the eve of Ms. Eidsons sentencinghearing on March 3, 2014, the

government filed a supplemental sentencing memorandum in support of its

position that Ms. Eidsons sentence be enhancedby her alleged obstruction of

justice. (CR318.) As scheduled, the sentencing hearing occurred on March 4,

2014. The district court ruled on forfeiture and then began Ms. Eidsons

sentencing proceeding. The district court first noted that it would apply the clear

and convincing standard as to the loss amount, but that the other enhancements

would be found by preponderance of the evidence. (ER1160.) The district court

then began to rule on Ms. Eidsons objections to the PSR. After overruling one

objection, it arrived at Ms. Eidsons objection toparagraph 15, the factual basis of

obstruction of justice. Ms. Eidson had received the governments supplemental

memorandum at 4:30pm the day before, and the district court ultimately continued

the sentencing hearing. (ER1168-69.)

On April 2, 2014, the district court proceeded with Ms. Eidsons sentencing.

After reviewing the evidence concerning the obstruction of justice enhancement,

the district court overruled Ms. Eidsons objection. Even though the district court

stopped the sentencing proceedings at paragraph 15 at the prior sentencing hearing,

the government nonetheless informed the district court that its memory was that

we got all the way up to paragraph 27. (ER1302.) What resulted was a


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confusing proceeding, in which it is unclear whether the district court sufficiently

ruled on Ms. Eidsons objections.

The district court ultimately overruled Ms. Eidsons objections to the abuse

of position of trust enhancement, but also apparently overruled Ms. Eidsons

objection to sophisticated money laundering enhancement in ruling on the abuse of

position of trust enhancement. (See ER1307-09.) The district court had not gone

over the loss amount at the prior hearing, but the parties nonetheless stated that

they believe[d] we did. (ER1310.) The district court stated that it was just

making sure that weve gone over each of these because they are important ones

here, and stated that it does overrule that objection. (ER1310.) The district

court followed: Clearly, the evidence adduced at trial showed that the defendant

Eidson was seeking a $4 million buyout that she wished paid to Done Deal, not to

Zinnel himself. In the Courts estimation, that was part of the broader scheme to

launder money Zinnel received from System 3. (Id.)

The district court determined Ms. Eidsons offense level was 31 and

recognized the Guideline range was 108 to 135 months. (ER1313.) The district

court stated that it intended to sentence Ms. Eidson to 120 months, and allowed the

parties to make further argument.

The district court sentenced Ms. Eidson to 121 months. In sentencing Ms.

Eidson, the district court repeatedly scolded her for being an attorney. The district


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court first stated, I dont think its really enough to say, well, you know, well, the

defendant Eidson was in love, and she did what she did out of love. Shes an

attorney. Shes an officer of the court. Shes an extension of this very same

institution that she stands before right now. (ER1324.) As to 121 months, the

Court concluded: I dont think, quite frankly, there is any significant difference

between a sentence of, what, 108 months, nine years, versus a sentence of 121

months, which is a year and a month more than that sentence. I dont think there is

any significant difference there. But quite frankly, in the Courts estimation 121

months is appropriate. (ER1327.) Ms. Eidson timely appealed her conviction and

sentence.

SUMMARY OF ARGUMENT

Ms. Eidson was erroneously convicted of conspiracy to commit money

laundering and attempted money laundering for representing her co-defendant, Mr.

Zinnel, in what she thought were two settlement negotiations of a buyout of his

interest in System 3. The government failed to present sufficient evidence as to

any of the elements of money launderinga financial transaction or monetary

transaction affecting interstate commerce, knowledge that the funds at issue

represented the proceeds of unlawful activity, and a transaction done with the

purpose of laundering the proceeds of specified unlawful activity. Moreover, the

government failed to prove an agreement between Ms. Eidson and Mr. Zinnel to


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commit money laundering to support the conspiracy charge, or a substantial step to

support the attempt charge. Perhaps most fundamentally, the government failed to

prove any transaction that in fact involve[d] the proceeds of specified unlawful

activity because the supposed negotiations would never have led to money

changing hands, much less laundering of that money, but were instead only a

government sting.

Congress has enacted a specific provision applicable to government stings:

18 U.S.C. 1956(a)(3). However, Ms. Eidson was not charged under that

subsection. The government instead charged Ms. Eidson with conspiracy and

attempt under 18 U.S.C. 1956(a)(1) and 1957. The governments proof of its

sting effected a constructive amendment of the indictment, as neither the grand

jury nor the petit jury found, or could have found, the required elements under 18

U.S.C. 1956(a)(3) that the government agent, Mr. Radoslovich, made an

adequate representation that the funds at issue were the proceeds of bankruptcy

fraud, and that Ms. Eidson specifically intended to conceal the proceeds of Mr.

Zinnels bankruptcy fraud.

Several trial errors also require reversal. First, the district court gave

erroneous jury instructions that invited the jury to convict Ms. Eidson on an invalid

legal theory based on the governments proposed instruction that the[t]he simple

transfer of cash from one person to another may constitute a money laundering


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offense. (ER1023.). Over objection, the district court erroneously admitted

excerpts of recordings of the settlement negotiations in contravention of Federal

Rule of Evidence 408, which generally precludes, for sound policy reasons, the

introduction into evidence of offers to compromise disputed claims. The district

court also admitted in error legal conclusions by attorney-witnesses, including Mr.

Radoslovich. And in denying Ms. Eidsons request to play the whole recordings of

the settlement negotiations pursuant to the Rule of Completeness, the district court

permitted the government to admit misleading and incomplete excerpts that

allowed the jury to convict Ms. Eidson, in what was, at best, a very close case.

While each error alone certainly warrants reversal, taken together the cumulative

effect requires reversal.

Finally, the district court committed multiple errors in sentencing Ms.

Eidson. First and most fundamentally, the district court erroneously calculated Ms.

Eidsons loss amount at the exorbitant amount of $4,000,000, where no evidence

supported such a calculation, and in fact evidence overwhelmingly established a

much lower amount of no more than $350,000. The district court also

impermissibly double counted when it applied the sophisticated money laundering

enhancement, silently overruling Ms. Eidsons objection and basing the

enhancement on its findings for the abuse of position of trust enhancement. And

even if the district court had not made significant procedural errors, the sentence


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was nonetheless substantively unreasonable, as 121 months is far greater than

necessary to meet the goals of sentencing for Ms. Eidsons conduct in carrying out

two settlement negotiations on Mr. Zinnels behalf.

ARGUMENT

I.

The Government Failed to Present Sufficient Evidence that Ms.

Eidson Participated in any Money Laundering Conspiracy or

Attempted Money Laundering (Counts 18 and 19)

No matter which way the government argues its case, the evidence cannot

sustain Ms. Eidsons money laundering convictions for the alleged illegal activity

that occurred in 2009, three years after the bankruptcy court discharged Mr.

Zinnels debt. First and most fundamentally, Ms. Eidsons negotiation of a

business buyoutthe only conduct supporting Counts 18 and 19does not

constitute money laundering as defined under 18 U.S.C. 1956(a)(1). But even if

the governments faulty theory could survive scrutiny, the government nonetheless

failed to present sufficient evidence on every element of the charged offenses. The

Court must therefore vacate Ms. Eidsons convictions.

A. Standard of Review

A claim challenging the sufficiency of the evidence supporting an element

of an offense is reviewed de novo. United States v. Bennett, 621 F.3d 1131, 1135

(9th Cir. 2010) . The Court employs a two-step inquiry for challenges to

convictions based on sufficiency of the evidence. See United States v. Nevils, 598


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F.3d 1158, 1164 (9th Cir. 2010) (en banc). First, a reviewing court must consider

the evidence presented at trial in the light most favorable to the prosecution.Id.

(citingJackson v. Virginia, 443 U.S. 307, 319 (1979)). Second, the reviewing

court must determine whether this evidence, so viewed, is adequate to allow any

rational trier of fact to find the essential elements of the crime beyond a reasonable

doubt.Id.(emphasis and alteration omitted) (quotingJackson, 443 U.S. at 319).

More than a meremodicum of evidence is required to support a verdict,id.

(quotation omitted), and insufficient evidence occurs where the evidence of the

crime itself was attenuated,United States v. Katakis, 800 F.3d 1017, 1027 (9th

Cir. 2015);see also United States v. Lo, 231 F.3d 471, 477 (9th Cir. 2000).

[E]vidence is insufficient to support a verdict where mere speculation, rather than

reasonable inference, supports the governments case, or wherethere is a total

failure of proof of a requisite element. Katakis, 800 F.3d at 1023 (9th Cir. 2015)

(quotation omitted).

B. Ms. Eidsons Participation in Negotiations Over a Potential Buyout of

an Equity Interest of a Privately Held Company Does Not Constitute

Attempted Money Laundering as Defined under 1956(a)(1)

The federal money laundering statute, 18 U.S.C. 1956, prohibits specified

transfers of money derived from unlawful activities. Regalado Cuellar v. United

States, 553 U.S. 550, 556 (2008). Ms. Eidson was convicted under 18 U.S.C.

1956(a)(1)(B)(i), which makes it a crime for a person to conduct a financial


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transaction that involves use of the proceeds of a specified unlawful activity,

knowing that the transaction is designed in whole or in part to conceal or

disguise the nature, the location, the source, the ownership, or the control of the

proceeds of specified unlawful activity. United States v. Jenkins, 633 F.3d 788,

804 (9th Cir. 2011) (quoting 18 U.S.C. 1956(a)(1)(B)(i)). Thus, the government

must prove that (1) the defendant conducted or attempted to conduct a financial

transaction; (2) the transaction involved the proceeds of unlawful activity; (3) the

defendant knew that the proceeds were from unlawful activity; and (4) the

defendant knew that the transaction [was] designed in whole or in part (i) to

conceal or disguise the nature, the location, the source, the ownership, or the

control of the proceeds of specified unlawful activity. United States v. Wilkes,

662 F.3d 524, 545 (9th Cir. 2011) (quotation omitted).

1.

The Government Failed to Prove Financial Transaction as

Defined Under the Statute

Under 1956, financial transaction is defined as:

(A) a transaction which in any way or degree affects interstate orforeign commerce (i) involving the movement of funds by wire orother means or (ii) involving one or more monetary instruments, or(iii) involving the transfer of title to any real property, vehicle, vessel,

or aircraft, or (B) a transaction involving the use of a financialinstitution which is engaged in, or the activities of which affect,interstate or foreign commerce in any way or degree.

18 U.S.C. 1956(c)(4). The Court has further explained that [a]s it is used in 18

U.S.C. 1956, then, the term financial transaction is a term of art constituting


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both an element of the offense and a jurisdictional prerequisite. United States v.

Anderson, 371 F.3d 606, 611 (9th Cir. 2004) (citing United States v. Ripinsky, 109

F.3d 1436, 1443-44 (9th Cir. 1997), as amended by129 F.3d 518 (9th Cir. 1997)).

The government failed to prove the element and that the district court had

jurisdiction over the purported transaction.

A financial transaction under 18 U.S.C. 1956(c)(4) must itself affect

interstate or foreign commerce in a way, or use a financial institution that is

engaged in or affects interstate or foreign commerce. Jenkins, 371 F.3d at 804.

Here, the government presented no evidence that Ms. Eidsons purported conduct

involved a financial institution that is engaged in or affects interstate or foreign

commerce; rather, the government charged her with demandingsometransfer of

$4,000,000 without any proof that anyfinancial institution would be used. And

there was absolutely no evidence that a financial institution would be used (and it

never would have gotten to that point, since the negotiations were a government

set-up). Therefore, the government was required, but failed to prove that the

alleged financial transaction itselfaffected interstate or foreign commerce. The

governments failureresults in insufficient evidence of both Counts 18 (conspiracy

to commit money laundering) and 19 (attempted money laundering).

Although the jury was erroneously instructed that [t]he simple transfer of

cash from one person to another may constitute a money laundering offense,


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(ER1023), more fully discussed below, the attempted simple transfer here cannot

sustain any money laundering conviction. At most, the government presented

evidence that Ms. Eidson attempted to resolve a dispute with a settlement bid at

$4,000,000, with no indication as to how the payout might occur, other than it

might occur in installments. This simple transfer alone is insufficient to

establish a financial transaction that affects interstate or foreign commerce.

Indeed, the Court has explained acts [that] affect interstate commerce and

certainly are financial transactions include the transfer of funds by wire and

writing checks,Jenkins, 633 F.3d at 804-05, and the use of personal checks,

United States v. Akintobi, 159 F.3d 401, 404 (9th Cir. 1998) (personal check[s]

falls within the purview of the statute because it is a monetary instrument);see

also United States v. Estacio, 64 F.3d 477, 479-80 (9th Cir. 1995). But no

evidence established that the purported transaction would have resulted in a wire

transfer, a check, or some type of transaction that would inevitably and sufficiently

touch interstate commerce. The government simply failed to meet its burden in

proving beyond a reasonable doubt a required element of the offense and []

jurisdictional prerequisite. Anderson, 371 F.3d at 611.


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2.

There is No Evidence, Nor Could the Government Present Any

Evidence Due to its Orchestrated Sting, that the Charged

Attempted Money Laundering In Fact Involves the Proceeds of

Specified UnlawfulActivity

Congress provided that to prove beyond a reasonable doubt the defendant

committed or attempted to commit money laundering in violation of 18 U.S.C.

1956(a)(1), the government must prove that the alleged financial transaction in

fact involves the proceeds of unlawful activity. But the government concocted

the charged attempted money laundering scheme, in which settlement negotiations

between two lawyers occurred due to confidential informant Wilberts insistence

that Mr. Zinnel speak with his attorney, Mr. Radoslovich, also a confidential

informant. Thus, the government could never prove that the funds [s]he

[attempted to] launder[] were in fact the proceeds of [the bankruptcy fraud].

United States v. Hassan, 578 F.3d 108, 127 (2d Cir. 2008). The $4,000,000 in

supposed proceeds was a government fiction. There was never going to be a

buyout for $4,000,000 or any amount, and thus, there were no proceeds that in

fact could ever be involved in a financial transaction at all. Accordingly, the

governments money laundering charges in Counts 18 and 19 fail on the most

fundamental level.3 18 U.S.C. 1956(a)(1).

3Indeed, defendants made a pretrial motion to dismiss Counts 18 and 19 onthis basis. (CR 80, 81.) As discussed in that motion, a government sting operation


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3.

The Evidence Falls Far Short of Establishing Beyond a

Reasonable Doubt that Ms. Eidson Had Any Knowledge of the

Specified Unlawful Activity of the Charged Bankruptcy Fraud and

Concealment of those Proceeds

While the government is not required to prove defendant knew money

laundering was itself illegal, to sustain Ms. Eidsons convictions for conspiracy to

launder money and attempted money laundering, the government had to prove

that [s]he knowingly engaged in a financial transaction with the proceeds of

unlawful activity, that is, that she knew the [attempted] laundered funds were

derived from [bankruptcy] fraud. United States v. Turman, 122 F.3d 1167, 1169

(9th Cir. 1997) (citing United States v. Stein, 37 F.3d 1407, 1410 (9th Cir. 1994));

see alsoUnited States v. Rahseparian, 231 F.3d 1257, 1264 (10th Cir. 2000).

The government was required to prove that Ms. Eidson actually knew of

the specified unlawful activity in order to support its convictions for conspiracy to

commit money laundering and attempted money laundering. See United States v.

Aguilar, 80 F.3d 329, 330-331 (9th Cir. 1996) (actual knowledge is an essential

element of a crime under a with knowledge statute). [T]he Government may

not carry its burden by demonstrating that the defendant was mistaken, recklessly

cannot support a money laundering charge under 1956(a)(1), as a matter of law.(Id.) Moreover, as discussed below, while 1956(a)(3) covers government stingoperations, the government did not and could not charge an offense under thatsection, and to allow the government to proceed with evidence based entirely on asting effected a constructive amendment.


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disregarded the truth, or was negligent in failing to inquire. United States v.

McAllister, 747 F.2d 1273, 1275 (9th Cir. 1984). Indeed, the Supreme Court

recently reaffirmed the longstanding rule that wrongdoing must be conscious to

be criminal. Elonis v. United States, 575 U.S. ___; 135 S. Ct. 2001, 2009 (2015)

(citations omitted). Permitting a jury to convict on the basis that the defendant

should have known is inconsistent with the conventional requirement for

criminal conductawareness of some wrongdoing. Id.at 2011 (quoting Staples

v. United States,511 U.S. 600, 606-607 (1994)).

The jury did not find Ms. Eidson to have personally participated in

bankruptcy fraud. In fact, the jury acquitted Ms. Eidson on the pre-petition

bankruptcy fraud charge (Count 1) and deadlocked on the post-petition bankruptcy

fraud charge (Count 2). Yet Ms. Eidson was convicted of Counts 18 and 19, even

though the specified unlawful activity was the charged bankruptcy fraud.

The government also failed to prove that Ms. Eidson actually knew that Mr.

Zinnel committed bankruptcy fraud or that the buyout under negotiation

represented the proceeds of his bankruptcy fraud. The governmentscontention

that her romantic relationship with Mr. Zinnel demonstrated her motivation

because it aligns their interests and [t]here isnt any greater motivator to helping

someone than being in a romantic relationship with them, (ER1050.), in no way

establishes that she was aware of Mr. Zinnels alleged bankruptcy fraud. Were that


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the case, then virtually every spouse or girlfriend could be found guilty based on

their mere association. Nor is motive sufficient to establish guilt because motive is

not an element of the crime. Cf. United States v. Brown, 880 F.2d 1012, 1015 (9th

Cir. 1989). Indeed, the jury obviously rejected the governments argument that

Ms. Eidsons supposed motivation to help Mr. Zinnel was sufficient evidence,

since the jury did not find her guilty of helping Mr. Zinnel commit bankruptcy

fraud. And the government theorized that Ms. Eidson must have known of Mr.

Zinnels apparent bankruptcy fraud because he was given access to bank accounts

for Done Deal and that she deposited checks from System 3 into those bank

accounts. But the fact of their joint banking, even that Ms. Eidson endorsed and

deposited checks from System 3, is insufficient to prove that Ms. Eidson knewMr.

Zinnel had allegedly committed bankruptcy fraud.

In an analogous case, the Tenth Circuit reversed the defendants money

laundering convictions for insufficient evidence as to his knowledge of the

specified unlawful activity. See Rahseparian, 231 F.3d at 1264-67. The court first

found that the government failed to prove by sufficient evidence that defendant had

knowledge of his co-defendants sons fraudulent telemarketing businesseven if the

defendants activity in his and his co-defendant sons joint bank account was

incriminating in some way. Id.at 1262-63. Where the defendant is not the

source of the illegal funds, the inquiry into whether he knew of an intent to conceal


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occurs only after it has been established that he knew the funds were illegal. Id.

at 1264. And having concluded the defendant was a non-participant in his sons

mail fraud and conspiracy, the court concluded that the mere fact that [defendant]

was handling his sons banking cannot evidence any intent to conceal money

from an illegal source if he had no knowledge the money was illegally obtained in

the first place. Id.at 1265. As inRahseparian, Ms. Eidsons conspiracy to

commit money laundering and attempted money laundering convictions cannot

stand because the government failed to prove by a reasonable doubt that Ms.

Eidson had knowledge of the unlawful activity or that she was even a

participant, and ultimately reques

eidson appealate brief may 2016

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