Document 145 Filed 0.7/2003 Page 1 of 34

J THOMAS E. MOSS United States Attorney

2 WENDY J. OLSON Assjstant United States Attomey

3 THOMAS C. BRADLEY I • • • • • .. ..... •. • _' ••• - - ·•--. . .• : ..•• :·• f\: Special Assistant United States Attorney

4 District of Idaho Wells Fargo Center

5 877 West Main Street, Suite 201 Boise, Tdaho 83702

6 Telephone: (208) 334-1211

1 Mailing Address:

8 P.O. Box32

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Boise~ Idaho 83707

UNITED STATES OF AMERICA,

Plaintiff,

vs.

DAVID HINKSON,

Defendant.

) CASE NO. CR-02-142-C (BLW) ) ) ) GOVERNMENT'S TRIAL BRIEF ) )

~ )

COMES NOW the UNITED STATES, by and through counsel, and files its trial brief.

I. STATUS OF THE CASE

The def end ant was indicted for criminal violations of the Tntenial Revenue Code, the Food,

Drug and Cosmetic Act, and the Bank Secrecy Act by the Coeur d'Alene gramljury 011 Ju)y t 8,

2002. The indictment was unsealed on November 18, 2002. The defendant was released on his

own recognizance, but release was revoked after the defendant repeatedly attempted to hire

individuals to mtl.rdcr United States District Judge Edward J. Lodge, Assistant United States

Attonicy Nancy D. Cook, and Special Agent Steven Hines of the Internal Revenue Service.

Trial is set to begin on Monday, September 29, 2003, in Boise, before the Honorable B.

Lynn Winmill, Chief United States Distiict Judge. The trial was transferred 011 the government's

motion from the Central Division, in Moscow, to the Southem Div1sion, in Boise, primarily based

on security c<.mccrns. Tri al hy jury has not been waived. Estimated trial time for the govcrrunent 's

\l)( .. I , I I ; o'

Case 3:02-cr-00142-v-RCT Document 145 Filed 0.7/2003 Page 2 of 34

1 case is 8-10 triaJ days, given rcasonab le cross examination I imits. The United Stat cs expects to call

2 approximately 30witnesses in its case-in-chi el: The government intends to offer approximately 200

3 exhibits, copies of which will be made available to the defendant ten days before trial. Copies of

4 the government's exhibit ljsl and witness list will also be provided no later than ten days before

5 trial.

6 The United States will be represented by Assistant United States A ttomcy Wendy J. Olson

7 of the District or Idaho, and by Special Assistant United States Attorney Thomas C. Bradley,

8 fom-'lerly of the Department of Justice, Tax Division, W cstem Criminal Enforcement Section.

9 Defendant is represented by Britt Groom (lf Grangeville, who is privately retained. The defendant

10 remains in custody without bond.

11 Disc<.wcry was provided to the defendant beginning in December, 2002, and has been

12 ongoing. The govenlmcnt has requested, bllt not received, reciprocal discovery.

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14 II. STATEMENTOFFACTS

15 During the prosecution years, 1997-2000, David Hink.sun lived ol1 ar\ isolated 200-acre

16 ranch in north-central Idaho, on the Nez Perce Indian Reservation. His company, WatetOz,

17 manufactured and sold alternative health products, including ozone generators and mineral water,

18 and promo led these items as able to treat varic.)us diseases. None of the products were approved by

19 the Food and Drug Administration (FDA), and Hinkson refused to allow an FDA inspection of his

20 facility in 1999.

21 Hinkson' s sales grew to several hundred thousand dollars a month, and he emp loycd aboul

22 forty people. He was the largest p1ivate employer in ldaho County, a11d was one oflhe largest UPS

23 shippers in the state. Hi1,kson paid employees 111 cash, with silver coins, or by check, and withheld

24 no taxes. He failed to file any tax return since 1993, despite annua1 income that grew from less

25 than $100,000 in 1995 to several million dollars by 2001. He had tax returns professionally

26 prepared each year and used them to obtain loans, but did not file them with lntcmal Revenue

27 Service (IRS). These unlilcd returns reflected significant gross income, as well as a large payroll

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subject to employment taxes. The indictment charges Hinkson with willful failure to file his 1997,

1998, and 1999 individual income tax returns. and with failing to collect employment taxes ror the

third quarter of 1997 through the third quarter e>f'2000.

WaterOz primarily marketed mineral waters, including Lithium, Selenium, Tin and

Molybde11um water, among many others, through telephone sales and through distributors. The

products were also promoted on the internet. The indictment charges Hinkson with introducing

misbranded and adulterated drugs and devices into interstate con1mcrce.

Lithium water was described in WatcrOz literature as "useful in treating alcoholism, manic

depression. and mental instability." Lithium is an clcmentorthc alkali-metal group, and is an active

con1po11enl of several drugs which have approved new drug applications. Lithium carb('>natc is the

generic name of an approved prcscriptiol''I drug used in the treatment ofbipo lar disorder~ also kn.own

as manic depression.

Accllrding to the Physicians' Desk Reference (PDR), the toxic levels for lithium are close

to the therapeutic levels, creating a significant danger of lithium poisoning if scrum levels arc not

closely monitored. The dangers of such toxicity arc increased in patients with serious renal or

cardiovascular disease, and the product should not be administered unless the psychiatric condition

is life-threatening. Even then, it should only be administered wjth extreme caution and in a hospital

setljng, with daily scrum Ji thium detenni nations. Lithium is known to cause harm lo the fetus in

pregnant women, especially in the first trimester, and should never be used by nursing mothers, as

it is excreted in human milk and could cause harm to the nursing child.

Hinksc.m's product contained no warnings about lithium other than stating that lithium can

have "serious side eITects," that it is uot recommended for .. connm.m or everyday use,'' and that it

should be used under the care of "your health professional." WatcrOz lithi utn water is labeled as

containing 30 parts-per-niillion (ppm) of lithium. The lithjum sample analyzed by the FDA lab in

May 2002 contained 2.5 ppm, 8% of the amount clajmed 011 the label.

The FDA obtained its sample of WalerOz lithium water, along with samples of other

WalerOz products, on January 22, 2002, at a mailbox in Pinole, California. The products were

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Case 3:02-cr-00142-.,.,-RCT Document 145 Filed '917/2003 Page 4 of 34

ordered over the telephone by Special Agent Rob Blcnkinsc.1p of the Food and Dmg Administration,

Office of Criminal Investigations, acting h1 an undercover capacity. Among the other products

ordered and received by Special Agent Blenkinsop were molybdenum water, selenium water and

tin water.

Molybdenum is a metal used to alloy steel. WaterOz marketed molybdenum water as uscftll

in treating a plethora of maladies, including acne, ATOS, anthrax, asthma, cancer, cavities, diabetes,

depression, E. coli, eczema, Gulf War syndrome, hepatitis, herpes, impotency, Lupus, Lyme

Disease, and multiple sclerosis. The FDA lab found that the molybdenum water obtained in January

2002 contained 6.2 ppm, 12% of the 50 ppm claimed on the label. A previous test by the ldahu

Department of Health and Wet fare (IDH W) iJ1 May 2001 showed a molybdenum conccntrati<.m of

10.2 ppm, 20.4% of the labeled conccntndion.

WaterOz also sold selenium waler. Selenium is listed in the WaterOz retail/wholesale

catalog as used to treat Alzheimer's, cancer, cystic fibrosis, fibromyalgia, heart disease, HIV, hot

flashes, muscular dystrophy, Parkinson's, scoliosis, sickle cell anemia, and SIDS.

Selenium is a poison often prodLiccd as a byproduct of mining operations. Its high

concentration in certain soils can cause animals who graze on plants growing in the soil te> die.

Although selenium is an essential trace element necessary for good nutrition, chronic exposure to

excessive selenium can result in hair loss, nail loss, and skin lesions in humans. The FDA standard

for permissible selenium levels in bottled water is 0.01 mg/L. The EPA maximum contaminant

level for drinking water js 0.05 mg/L. The WatcrOz label claims a selenium concentration of 75

ppm, wbile the May 2002 FDA test showed 26 ppm, 35% of the claimed strength. The IDHW test

in May 2001 showed 46.7 ppm, 62.3% of the stated concentration.

Wate10z also sold ozone machines, and an attachable "ozone suit.» Ozone is a molecule

composed of three atoms of oxygen, as opposed to the basic oxygen molecule consisting of two

oxygen atoms. Ozone is a toxic gas with vastly different chemical and toxicolosical propc1ties from

26 oxygen.

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Case 3:02-cr-00142.W-RCT Document 145 Filed .7/2003 Page 5 of 34

1 The WatcrOz web site described the ozone generator as a "personal health,, machine to be

2 used for water purification, air purification, and the treatment of specific diseases, including fungal

3 in fcction~, acne, chapped skin, melanoma, spider bites, and insect bites. The body suit is described

4 in WaterOz lj terature as to be used in cases of muscle fatigue and severe infections, and claims that

5 the suit "hcl_ps remove viruses from the body and attacks cancer cells." Instructions stress the

6 importance of staying warm, so that pores remain open and "a11ow your body to absorb the ozone

7 directly through your skin."

8 WatcrOz protocols call for application of 07,onc to treat athlete's foot, gangrene and stroke.

9 The recommended stroke treatment is to leave the ozone machine running constantly in the patient's

10 room, while the athlele's foot aud gangrene treatments require direct a.pp)jcation of the ozone using

11 a bag and hose attached to the machine.

12 Throughout the period charged in the indictment, the defendant followed a number of

13 procedures for paying W atcrOz workers, including by paying them in "silver coins" that they could

14 then exchange for currency. So that the defendant could pay WaterOz workers from at least the

15 period of approximately December of2000 through February of 2001, one of his workers would

16 ca.~h checks ofless than $10,000 on two consecutive days at the Kamiah Central Credit Union.

17 Although each check was less than $10,000, thereby allowing the defendant to cause the bauk to

18 avoid the currency transaction reporting requirements, the t(ltal of the two checks was greater than

19 $10,000.

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21 III. APPLICABLE STATUTES

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23 A. FAILURE TO FILE TAX RETURNS

24 Title 26, United States Code, Section 7203 provides in pertinent part that "[a]ny

25 persc.)n ... rcquired by this title or by regulations made undcrauth.oritythereoftomak.e aretum ... ,who

26 willfully fails to ... make such retum ... at the time or times required by law or regulations" is guilty

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of an offense against the United States.

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Case 3:02-cr-0014wW-RCT Document 145 Filed.17/2003 Page 6 of 34

B. FAil.URE TO WITHHOLD TAXES

Title 26, United States Code, Section 7202 provides in pertinent pait that "[ a Jny person

required under this title to collect, account for, and pay over any tax imposed by this title who

willfully fails to collect or truthfillly account for and pay over such tax" is guilty of an offense

against the United States.

C. ADULTERATED AND MISBRANDED PRODUCTS

The Federal Food, Drug and Cosmetic Act (FJ)CA) criminalizes "(t]he introduction or

delivery for introduction into interstate commerce of any food, drug, device, or cosmetic-that is

adulterated or misbranded." 21 U.S.C. § 33l(a).

D. STRUCTURING FINANCIAL TRANSACTIONS

Tille 31, United States.Code, section 5324 provides in pertinent part that "[n ]o person shall,

for the purpose of evading the reporting requirements or section 5313(a) or 5325 or any rcgulatio11

prcsc1ibcd under any such scc6on, the reporting OT rccordkceping requirements imposed by any

ordet issued under section 5326, or the recordkeeping requirements imposed by any regulation

prescribed under section 21 of the Federal Deposit Insurance Act or section 123 of Publfo Law

91--508 ... (3) structure or assist in structuring, or attempt to structure or assist in structuring, any

transaction with one or more domestic financial institutions."

E. l,ORFEITURE

Count forty-three of the indictment alleges crimjnal forfeiture of all property traceable to

the stn1cluring financial transactions offenses set forth in counts twenty-seven through forty-two.

Although the indictment jdentifies 18 U.S.C. §982 as the forfeiture statute that the United States is

proceeding under, the correct statute is 31 U.S.C. 5317. The United States bas separately filed a

bill of particulars identifying the correct statute. Title 31, United States Code, Section 5317

provides as follows:

(c) Forfeiture. -(1) Criminal Forfeiture. -

(A) In General. - The court in frnposing sentence for any violation of section 5313, 5316, or 5324 ofthis title7 or any conspiracy to commit such violation, shall

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Case 3:02-cr-0014.W-RCT Document 145 Filed.17/2003 Page 7 of 34

order the defendant to forfeit all properly, real or personal, involved in the offense and any property traceab]e thereto. ·

(B) Procedure. - Forfeitures umler this paragraph shall be governed by the procedures established in scctio11 413 of the Controlled Substan~es Act.

IV. PERTINENT IJAW

A. ELEMENTS OF THE Ol~FENSES

t. 26 U.S.C. § 7203 Failure to File Tax Returns (Counts One through Three)

To establish a violation of Title 26, United States Code, Section 7203, the government must

prove each of the following elements beyond a reasonable doubt:

a. The defendant was required to file a rctum;

b. The defendant failed to file at the ~ime required by law; and

c. The failure to file was willful.

United States v. Hayes, 190 F.3d 939,946 (9th Cir. 1999); Ur,itcd States v. Vroman, 975 F.2d 669,

671 (9th Cir. 1992); Ninth Circuit Model Jury Tnstmctions, § 9.36.

a. Persons Required to File Returns

lndivjdual income tax returns are due on the 15th day of the fourth month following the

close of the calendar year. 26 U.S.C. § 6072(a). lJmuarried persons who received gross income

in excess of $6,750 in 1997, $6~950 in 1998, and $7,050 in 1999 were required to file returns.

When the last day for filing a return falls on a Saturday, Sunday, or a legal holiday, the

return will be considered timely filed if it is filed on the next day which is nt)t a Saturday, Sunday,

or legal holiday. 26 U.S.C. § 7503.

Gross income is defined as 0 income from whatever source derived,,, including compensation

paid for services, gross income derived from a business, and a. taxpayer's share of partnership

income. 26 U.S.C. § 61. This information is provided in IRS publications that are available free

of charge to taxpayers. "Generally, you must include in gross income everything you receive in

payment for persona) services" jncluding "wages, salaries, commissions, foes, and tips.'' Taxable

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1 and Nontaxable Income, Department or the Treasury, I11ternal Revenue Service, Publication 525

2 at 1 (1991).

3 It has long been established that income is taxable to the person who actually eams it, and

4 that "the tax cou]d not be escaped by anticipatory arra11gcments and contracts however skillfully

5 devised to prevent the salary from vesting even for a second in the man who earned it.', Lucas v.

6 Earl, 281 U.S. 11 ·1, 115 (1930). Justice Holmes concluded his opinion with the now famous

7 language that invalidated attempts to attribute the fruits of one ~s labors "to a di ffcrenl tree from that

8 on which they grew."

9 While rccognizi11g the legal right of a taxpayer to reduce or eliminate tax liability thrm1gh

10 legal means, the cou1ts of the United States have consistently invalidated attempts by taxpayers to

11 create phony business transactions to disguise their income. See, e.g .• Oregozy v. Helvering. 293

12 U.S. 456,470 (1935)(describing sham stock sate as "an elaborate and devious form of conveyance

13 masquerading as a corporate reorganization"); Moline Properties v. Commissioner of Internal

14 Revenue, 319 U.S. 436, 439 (1943) (establishing the dominance of substance over fom1 when the

15 form "is .a bald and mischievous fiction").

16 It is not necessary for the govcrmnent to prove a tax due and owing io a failure-to-file case,

17 only that enough gross income was received to trigger the filing rcquiremeut. United States v.

18 Hairston, 819 F.2d 971,974 (10th Cir. l987)(tax due is an clement of the distinct offense oftax

19 evasion, 26 U.S.C. § 7201).

20 h. Failure to File

21 A failure to file by a given taxpayer can be established without a witness by obtaining a

22 certified transcript of account from the appropriate Internal Revenue Service Center stating that the

23 taxpayer has not filed a return lbr the ycar(s) in question. United States v. Neff1 615 F.2d 1235,

24 1241-42 (9th Cir. 1980).

25 c. Willfulness

26 Willfulness in criminal tax violations means a 0 voluntary, intentional violation. or a known

27 legal duty." Cheek v. United States, 498 U.S. 192 ( 1991 ); Uni led States v. Pomponio, 429 U.S. 10,

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12 (1976); United States v. Dahlstrom, 713 F.2d 1423, 1427 (9th Cir. 1983). This is contrary to tnc

general criminal law rule that ignorance of the law is 110 excuse. Cheek, 498 U.S. at 199. To

establish the requisite level of willfulness for a violation or section 7203, the govcrmnent mllst

prove that the offender deliberately failed to me returns which the offender knew the law required

to be filed. Check al 201-04; United State~ v. Hawk, 497 F.2d 365, 366-69 (9th Cir. 1974). The

purpose of the willfulness element in tax offenses is to protect people who have misconstrued their

duty under the tax code because of its complicated nan1re. ,Cb.eek at 205. In dctennining whether

a defendant acted willlully, the jury is "free to consider any admissible evidence from any source

showing that [the defendant] was aware ofhis duty to file a return" including evidence "showing

his awareness of relevant provisions of the Code or regulations" and knuwledge "of comt decisions

rejecting his interpretation of the tax law .... " Cheek at 202.

Proof of willfulness may be, and usually is, shown by cfrcurostantial evidence alone. United

States v. Marabelles, 724 F .2d 13 74, 1379 (9111 Cir. 1984) (section 7201) (list of acts frl'>m which

wjlllul11ess can be inferred); Unltcd States v. Schiff, 612 F.2d 73, 77-78 (2d Cir. 1979) (previously

filed corporate and personal remms; reminder by accountant); United Slates v. Brown, 548 F.2d

1194, 1199 (5th Cir. 1977)(warning letters from lRS service center).

Willfulness is suggested by a pattern or failing to file for consecutive years in which returns

should have been filed. Uuited States v. Crrcenlec, 517 F.2d 899, 903 (3d Cir. 1975). This may

include years prior or SLtbsequcnt to the prosecution period. United Stales y. Upton, 799 F.2d 432,

433 (8th Cir. 1986); United States v. Farris, 517 F.2d 226, 229 (7th Cir. 1975).

Continuing conduct after warning by knowledgeahlc individuals that a taxpayer•s activities

are illegal may show willful behavior. United States v. Daniel, 956 F.2d 540, 543 (6lh Cir. 1992)

(notice by CPA relevant to willfulness); United States v. Dack, 987 F.2d 1282, 1285 (7th Cir. 1993)

(willfulness jnforred from proor that a knowledgeable person warned defendant of tax

improprieties).

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Tax protest activities may be considered when detcmJining willfulness. United States v.

Grosshans, 821 F.2d 1247, 1253 (6th Cir 1987)(attendance at meetings, use of protest materials in

correspondence with IRS).

The gcnera1 educational background of a defendant is relevant to the ability lo fom1 willful

intent. United States v. MacKenzie, 777 F.2d 811,818 (2d Cir. 1985) (defendants' college degrees

in business and economics evidenced knowledge of tax laws). Business experience is also probative

of willfulness. United States v. Smith, 890 F.2d 711, 715 (Slh Cir. 1989) (defendant's experience

as an entreprenellr pointed to willfulness rather than honest error). A high gross income is relevant

to a taxpayer's likely awareness of filing requirements. United States v. Payne, 800 F.2d 227,229

(10th Cir. 1986)(incomc approaching $100,000 is sufficient to infer knowledge and willfulness).

2. 26 U,S.C. § 7202 l◄'ailure to Withhold Taxes (Counts Fo11r through Sixteen)

'fo establish a violation of section 7202, the following clements must be proved beyond a

reas(lnable doubt:

a. Duty to collect, and/or to truthfully account for, and/or pay over;

h. Failure to collect, or truthfully account for, and/or pay over; and

c. Willfulness.

26 U.S.C. § 7202. See also United States v. Evangelista, 122 F.3d 112, 121 (2d Cir. 1997).

a. Duty to Collect

The Internal Revenue Code (26 U.S.C.) requires employers to withhold employees• shares

ofFcderallnsuranceContributionActtaxes( 11FTCA"orsocialsect1rityandMedicarctaxes),Federal

Unemployment Tax Act ("FUT A") and income taxes from the salaries of thefr employees, and to

pay the withheld amounts to the United Slates. 26 U.S.C. §§ 3101-3102 (FlCA), 3301-3310

(FUTA), 3402 (income taxes). The FICA, FUT A, and income tax withheld from the salaries of

employees must be deposited witb an authorized financial institution or l•'ederal Reserve Bank, at

intervals that depend on the amounts withheld. 26 U.S.C. 6302; 26 C.F.R. §31.6302(c)-1. The

employer is requfred to report the amount of withheld FICA and income laxes on a payroll tax

rctum, Form 941. The Form 941 is filed quarterly, oue month after the conclusion of each quarter.

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26 U.S.C. §§ 601 t(a) & 6151; 26 C.F.R. §§ 31.601 I(a)-1; 601 l(a)-4; 31.607l(a)-1 (a)(l), (4). Sec

Jones y, United States, 60 F.3d 584,588 (9th Ci-r. 1995); Brewery, Inc. v. United States, 33 F.3d 589,

591-92 (6th Cir. 1994); Matter of A111erican Biomaterials Com., 954 F.2d 919, 920 (3d Cir. 1992);

Scho11v. UnitedStates, 759F.2d6l4,616(7 1hCir. 1985). TheFUTA taxcsarereportcdonaFonn

940, filed annually by J anuazy 31 of the year following the tax year.

The duty of employers to tmthfu11y account for and pay over certain taxes is created by

sections 3J01(a.) (employee's portion of Federal Insurance Contribution Act ("FICA") or social

security tax), 3101(b) (employee's portion l)f Medicare tax), 311 l(a) (employer's portion of social

security tax), and 3402{a) (income tax) of the 1.ntemal Revenue Code. See also United States v.

Porth, 426 F.2d 519, 522 (10th Cir. 1970). The FICA and income tax withheld from the salaries

of employees "are conmtonly referred to as 'tru!-'tl fund taxes/ reflecting [Code Section 750l{a)'s]

provh~ion that such withholdings or collections are deemed to be a ~special fund in tn1st for the

United States."' Slodov v. United States, 436 U.S. 238, 243 (1978).

A person is responsible for collecting, accow1ting for, and paying over trust fund taxes ifhe

has "the authority required to exercise significant contn:>l over the corporation's financial affairs,

regardless of whether [the individual] exercised such control in ract." United States v. Jones, 33

F.3d 1137, 1139 (9t11 Cir. 1994)(brackct in original). lf the employer fails to make such payments,

26 lJ .S.C. § 6672 provides an alternative method of collecting the taxes by assessjng a" 100 percent

penalty" equal to the amount of the delinquent laxes against a "responsible person" (defined at§

6671 (b), but typically is an officer or employee of the business). Notably, the text of the criminal

statute § 7202 tracks the language of§ 6672. Slodov al 245.

Additionally, civil case law demonstrates that the "responsible person" need not be an

employer or employee. Brown v. United States, 464 F.2d 590, 591 (5th Cir. 1972)(responsible

person is one who has "effective power and corresponding duty to insure that the (business)

obligation to the Government would be fulfilled."). In Maz:1.eo v. United States, 131 F .3d 295, 298

(2d Cir. 1997), the court explained that responsible individuals could include persons who were

"connected closely enough with the business to prevent the [tax] default from occurring'', orpersons

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t who "have the authority to direct the payment of corporate funds,, (citjng Fiataruolo v. United

2 States, 8 F.3d 930, 939 (2d Cir. '1993) and Hochstein v. United States, 900 F.2d 543, 546 (2d Cir.

3 1990) respectively). However, authority to sign checks is itself not enough to bring a person under

4 the civil penalty provisions. Vinick v. United States, 205 F.3d 1 (lli1 Cir. 2000).

5 More than one person in an organization can be a uresponsihlc person." Sec Peterson v.

6 United States, 728 F.Supp. 624, 625 (D. Tdaho 1989)(IRS may choose from whom to collect when

7 more than one person is responsible). Likewise, the responsihiUty cannot be evaded by assigning

8 the resp<.lnsibility to others.

9 [W]e conclude that an individual may be said to have uhad the final word as to what bHls should or should not be paid" i r such individual had the authority required to

10 exercise significant control over the corporation's financial affairs, regardless of whether he exercised such control in fact. The authority that permits co11trol cairies

1 '1 with it a nondelegab]e duty to ensure that withholding taxes are duly collected and paid over to the govemment.

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Purcell v. United States, 1 F.3d 932, 937 (9[h Cir. 1993)(company president was still responsible

even though he delegated all financial duties to a subordinate, who then embezzled the funds).

The United States must establish that. the business in question had employees to whom it

paid wages. The employer is required under the law to cu Hect this twc by dcducti11g the amount of

the taxes from the employee's wages at the time lbey arc paid. The withholding and payment of

these taxes is reflected ~n a f4"om1 941 for each calendar quarter, which is filed on or before the last

day of the first calendar month following the period for which it is made. Slodov v. United States~

436 lJ.S. 238, 242 (1978); Treas. Reg.§§ 31.60ll(a)•l(a)(1) and 31.6011 (a)-4.

The Supreme Collrt addressed the definition of"employee" in Nationwide Muh1al Insurance

Co. v. Darden, 503 U.S. 318 (1992). The Court adopted the common law oragcncyratherthan any

pa11icular state law, and considered factors such as the location of work, skill required, hiring

pn,cess .• hours of work, and others that centered on the "hiring party's manI1er and means by which

the product is accomp Ji shed." ld. at 323, clti ng Community for C1·eative Non--Violence v. Reid, 490

U.S. 730, 740 (1989). TI1e Darden opinion cites IRS Revenue Ruling 87-41, which sets forth 20

factors used in dete:rminit1g an "employee'' for tax purposes. 503 U.S. at 324. The cmnmon law

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test has also been adopted by the Ninth Circuit. Burrey v. Paci fie Gas & .Electric Co., 159 F.3d 388,

393 (9th Cir. 1998)(also citing Revenue Ruling 87-41 ).

Revenue Ruli11g 87-41 discusses how a determination is made whether income, FICA and

FUTA taxes are required to be withheld. The twenty factors to be considered are:

1. INSTRUCTIONS. A worker who is required to comply with other persons' instructions ahout when, where, and how he llr she is to work is ordinarily an employee. This control factor is present if the person or persons ror whom the services arc performed have the RIGHT to require compliance with instructions.

2. TRAlNTNG. Training a worker by requiring an experienced employee to work with the worker, by corresponding with the worker, by requiring the worker to attend meetings, or by using other methods, indicates that the person or persons for whom the service~ are performed want the services perfom1ed in a particular method or manner. 3. TNTEGRA TION. Integration of the worker's services into the business operations

generally shows that the worker is subject to direction and conlrol When the success or continuation of a business depends to an appreciable degree upon the perfonnance of certain services, the workers who perfonn those services must necessarily be subject to a certain amount of control by the owner of the business.

4. SERVICES RENDERED PERSONALLY. If the Services must be rendered personally, presumably the person or persons for whom the services are pe1formed are interested in the methods used to accomplish the work as well as in the results.

5. HIRING, SUPERVISING, AND PAYING ASSISTANTS. If the person or persons for whom the services are performed hire, supervise, and pay assistants, that factor generally shows control over the workers on the job. However, if one worker hires, supervises, at1d pays the other assistants pursuant to a contract under which the worker agrees to provide materials and labor and under which the worker is responsib1e only for the attainment of a result. this factor indicates an independent contractor status. 6. CONTINUING RELATIONSHIP. A continuing relationship between the worker

and the person or peTsons for whom the services are pe1·fonned indicates that an employer-employee relationship exists. A conlinuing relationship may exist where work is performed at frequently recuning although irregular intervals. 7. SET HOURS OF WORK. The establishment of set hours of work by the person

or persons for whom the services are perlbrmed is a factor indicating control. 8. FULL TIME REQUIRED. lfthe worker must devote substantially fu11 time to

the business of the person or persons for whom the services are perfonned, such person or persons have contro) over the an-\ount of time the worker spends working and impliedly restrict the worker from doing other gainful work. An independent contTaclor on the other hand, is free to work when and for whom he or she chooses. 9. DOING WORK ON EMPJ .. OVER'S PRE1vflSES. I f'thc work is performed on the

premises of the person or persons for whom the services are perfom1ed, that factor suggests control over the worker, especially if the work could be done elsewhere. Work done offthe pTemises of the person or persons receiving the services, such as at the office oflhe worker, indicates some freedom from control. However, this fact by itself does not mean that the worker is not an employee. The impOTtance of this factor depends on the nature of the service involved and the extent to which an employer generally would require that employees perform such services on the employer's premises. Contro1 over the place of work 1s indicated when the person or persons for whom the services are perfonned have the right to compel the worker to

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travel a designated route, to canvass a territory within a certain time, or lo work at specific places as required. 10. ORDER OR SEQUENCE SET. If a worker must perform services in the order

or sequence sel by the person or persons for whom the services arc perfolllled, that factor ~hows that the worker is not free to follow the worker's own pattern of work hut musl roll ow the established routines and schedules of the person or persons for whom the services are perfonncd. Often, because oflhe nature of an occupation, the person or persons ror whom the services arc performed do not set the order of the services or setthe orderin frequently. It is sufficient to show control, however, if such person or persons retain the right to do so.

11. ORAL OR WRITTEN REPORTS. A requirement that the worker submit regular or written reports to the person or persons for whom the services are perfonncd indicates a degree of control.

12. PAYMENT. BY HOUR WEEK, MONTH. Payment by the hour, week, or month generally points to an employer-employee relationship, provided that this method of paymet1t is not just a convenient way of paying a lump sum agreed upon as the cost of a job. Payment made by the job or on straight commissjon generally indicates that the worker is an independent contractor. 13. PAYMENT OF BUSINESS AND/OR TRAVELING EXPENSES. If the person

or persons for whom the services a.re pcrfom1ed ordinarily pay the worker's business and/or traveling expenses, the worker is ordinarily an employee. An employer, to be ab le to contro 1 expenses, generally retains the right to regulate and direct the worker's business activities.

14. FURNISHING OF TOOLS AND MATERIALS. The fact that the person or persons for whom the services arc performed furnish significant tools:, materials, and other equipment tends to show the existence nf an employer-employee relationship. 15. SIGNIFICANT INVESTMENT. Tfthc worker invests in facilities that are used

by the worker in pcrfonning services and arc not typically maintained by employees (such as the maintenance of an office rented at fair value from an unrelatecl party), that fack',r tends to indicate that the worker is an independent contractor. On the other hand, lack ofinvestmcnt in facilities indicates dependence on the person or persons for whom the services are performed for such facilities and, accordingly, the existence of an employer-employee relationship.

16. REALIZATION OF PROFIT OR LOSS. A worker who can realize a profit or suffer a loss as a result of the worker's services (in addition to the profit or loss ordinarily realized by employees) is generally m1 independent contractor, but the worker who cannot is an employee. See Rev. Rul. 70-309. For example, ifthe worker is subject to a real risk of economic loss due to significant investments or a bona fide liability for expenses, such as salary payments to unrelated employees, that factor indicates that the worker is an independent contractor. The risk that a worker will not receive payment for his or her services, however, is common lll both independent contractors and employees and thus does not constitute a sufficient economic risk to support treatment as an independc11t contractor. 17. WORKING FOR MORE THAN ONE FIRM AT A TIME. If a workerperforms

more than de minimus services for a multiple of unrelated persons or funis at the same time, that factor generally indicates that the worker is an independent contractor. However, a worker who performs services for more than one person may be an employee of each of the persons, especially where such persons are part of the same service arrangement.

18. MAKING SERVICE AVAlLABJ.E TO GENERAL PUBLIC. The fact that a worker makes his or her services available to the general public on a regular and consistent basis indicates an independent contractor relationship.

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19. RTGHT TO DISCHARGE. 111e right to discharge a worker is a f'actor indicating that the worker is an employee and the person possessing the right is an employer. An employer exercises control through the threat of dismissal, which causes the woTker to obey the employer's instnictions. An independent contractor, on the other hand, cannot be fired so long as the independent contractor produces a result that meets the contract specifications.

20. RIGHT TO TERMINATE. If the worker has the right to end his or her relationship with the person for whom the services are perfom1ed al any lime he or she wishes without incuning liability, that factor indicates an employer- employee relationship.

Rev. Rul. 87-41, 1987-1 Cum.Bui. 296, 298-299 (internal citations on1itted).

l11 Chin y. United States, 57 F.3d 722, 725 (9th Cir. 1995) the Ninth Circuit carefully analyzed the issu

of who is an "emplc.)yee" for employment tax purposes.

TI1c determination of an individual's status as an employee OT an independent contractor for tax purposes involves a mixed question of law and fact that is predominantly one of fact which this court reviews for clear error. Professional and Executive Leasing. luc. v. CIR .. 862 F.2d 751, 753 (9th CiT.1988) (mixed question of law/fact); McGuire v. United States, 349 F.2d 644,646 (9th Cir.1965) (question of fact).

Undet federal tax law, courts look to "the usual common law rules" when distinguishing between employees and independent contractors. Treas.Reg. § 3 1.3121 ( d)-1 ( c )( 1) ( 1980). '111ese common law factors include:

(1) the right to contml the details of the work; (2) famishing of tools and the workplace; (3) withholding of tax.es, workmen's compensation and unemployment

insurance lands; ( 4) right to discharge; and (5) permanency of the relationship.

Professional and Executive Leasing, luc., 862 F.2d at 753.

The first Professional factor, right to control, has been deemed the •'fundamental test"in distinguishing employees from independent contractors. Id. at 753; McGuire, 349 F.2d at 646. The Treasury Regulations similarly make control the locus of concern:

Generally [an employer/employee] relationship exists when the person for whom services arc pcrf'ormcd has the right to control and direct the individual who performs the services, not only as to the result to be accomplished by the work but also as to the details and n1eans hy which that result is accomplished. That is, an employee is subject to lhe will and control of the employer not only as to what shall be done but how it shall be done. In this com1ection, it is not necessary that the employer actually direct or control the manner in which the services are perfonned; it is sufficient i rhe has the right to do so.

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1 Treas.Reg.§ 31.3121(d)-l(c)(2).

2 Chin, 57 F .3d at 725 (holding that Dr. Chin was an independent contractor entitled to the foreign

3 earned jncomc exclusion n1ther than an employee of'thc Agency for International Development).

4 b. Failure to collect or trutht"ully account for and pay over tax

5 The United States must establish that the defendant failed to co11ect, account for, or pay over

6 the taxes collected from employees as that obi igatio11 is imposed under Title 26. While there are

7 no cases which define the term "account for,, in the context of a criminal prosecution, cases

8 involving 26 U.S.C. § 6672, the civil counterpart to § 7202, reflect that an employer's duty to

9 ''account for'' taxes collected fi-l)m his employees requires the employer to deposit the withheld "trust

10 fond,, taxes on a timely basis and file a quarterly tax return at the end of the month following the

11 taxable quarter for which the return is made. See Wood v. United States, 808 F .2d 411, 414 (5th Cir

12 1987); United Siding Sygply, Tnc. v. United States, 95-1 lJSTC (CCH) ~ 50,269, at 87,995, (N.D.

13 Okla. April 11, 1995)(No. 93-C-607 BU); Rykoffv. United States, 93-1 USTC (CCH) ii 50,104, al

14 87,396 (C.D. Cal Dec. 29, 1992)(No. CV 87-7503-T), judg. aff'd., 40 F.3d 305 (9th Cir. 1994); ~

15 also 26 C.F.R. § 31.601 t(a)-l(a)(l), § 31.6011(a)(4)(a)(1) and§ 31.6071(a)-1(a)(l).

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c. Willfulness

This clement was discussed under the failure-to-file charges, supra. Additional evidence

regaTding the employment taxes includes Hink.son's practices of paying in cash, and the later twist

of paying in silver which was then exchanged ror currency.

3. 2.1 U.S.C. § 331(a} ct seq., Misbranded and Adulterated Dru2s and Devices (Counts

Seventeen through Twenty-six)

In order to convict the defendant c.1fviolating the FDCA, the govemment must prove that:

a. The defendant

b. Intmduced into interstate commerce;

c. A drug or device;

d. Which was adulterated or misbranded.

21 U.S.C. § 33l(a).

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1 a. Criminally Responsible Persons

2 The FDCA is unusual in that il is a strict liability offense. Neither intent nor knowledge of

3 a violation is required to support a misdemeanor conviction of any ofthe prohibited acts listed in 21

4 U.S.C. § 331. United States v. Dotterweich, 320 U.S. 277 (1943); Roseman v. Uniled States, 364

5 ft'.2d 18 (9th Cir. 1966); Triangle Candy v. United States, 144 F.2d 195 (9th Cir. 1944). The absence

6 ofintenthas long been settled as proper, given the nature and purpose of the FDCA. In Dotterweich,

7 the Supreme Court held that the Act applied to "responsible" persons, and that the definition of that

8 tem1 was a question of fact for the jury. Id., at 285. The Court also ruled that more than one person

9 could be detennined to be responsible, and that both the corporation itself as welt as individuals in

1 O the corporation could be held criminally liable. As to the absence or intent, the Court stated

11 unequivllcally that this strict liability was constittLtionally sound.

12 Hardship lhere may be under a statute which thus penalizes the transactjon though consciousness of wrongdoing be totally wanting. Balancing relative hardships,

13 Congress has preferred to place it 011 those who have at least the opportunity of informing themselves of the existence of conditions imposed for the protection of

14 consumers before sharing in illicit commerce, rather than to throw the hazard on the innocent public who are wholly helpless.

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320 U.S. at 284 .. 85.

Detennining criminally liable "responsible" persons is properly based not on a titular position

such as president or owner (aJthough one's title may be evidence of responsibility) but rather on "a

responsible relation to the situation" and the accompanying "authority and responsibility to deal with

the situation" that created the violation. United States v. Park, 421 U.S. 658, 674 (1975)(affirming

criminal conviction of grocery store chain preside11t whose firm shipped contaminated food). Park

held that "the Government establishes a prima facie case when it introduces evidence sufficient to

wammt a iinding by the facllindcr that the defendant had, by reason of his position in the

corporation, responsibility and authority either to prevent in the first instance, or promptly correct,

the violation ... and that be failed to do so." Id. at 673-74. The Supreme Court has described the

requirements imposed on the responsible parties as •'beyond question demanding, and perhaps

onerous, but they arc no more stringent than the public has a right to expect of those who voluntarily

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assume positions of anthority in business enteJPrises whose services and products affect the health

and well-being of the public that supports them." ld. at 672.

An individual who has responsibility for the business activities of a company may be held

personally liable for introducing unapproved, adulterated or misbranded products into interstate

commerce. Le11es v. United States, 241 F.2d 21, (9lh Cir. 1957). Absence from a manufacturing

facility al particular times is not a bar to prosecution of a responsible person in the corporation, such

as a corporate presjdcnt. Golden Grain Macaroni Co. v. United States, 209 F.2d 166 (9th Cir.

1953)(adulleratcd foods). The duty of care is personal, and the 1·esponsible person may not escape

criminal liability merely by delegating duties toothers. United States v. Starr, 535 F.2d 512 (91h Cir.

1976)(corporate secretary-treasurer resp011siblc for mice infested food warehouse). As with

employment tax charges, more than one person may be found responsible for the criminal violations

of the FDCA, as can both a natural person and a corporation. See Dotterweich, 320 U.S. 277;

Lelles, 241 F.2d 21.

b. Interstate Commerce Ne~us

The interstate commerce requirement is satisfied by showing either: (I) commerce between

any State or Territory and any place outside thercot~ or (2) commerce within the District of

Columbia or within any other Territory not organized with a legislative body. 21 U.S.C. § 321 (b).

The shipment of any article of food, drug~ device or cosmetic, or any component of these articles,

across states lines is within the statutory definition of' jnterstate celmmcrce. See Barnes v. United

States, 142 F.2d 648 (9l11 Cir. 1944)(item shipped need not be a fittlshed product; one ingredient is

sufficient).

The courts have construed this definition liberally in order to effectuate Congress' intent to

provide maximum protection to the public health and safety. As the Supreme Court observed in

United States v. Sullivan, 332 U.S. 689,696 (1948), Congress sought through the Act "lo safeguard

the consumer by applying the Act to articles from the moment of their introduction into interstate

commerce a11 the way to the moment of their delivery to the ultimate co11sumcr."

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c. Drugs or Devices

Druas

The term .. drug'' means: (A) articles reco~ed in the official United States Phannacopocia, official

Homeopathic Phannacop<.'>eia of the United States, or official National Fonnularyt or any supp lenient to any of them; and

. (B) articles intended for use fo the diagnosis, cure, mitigation, treatment, or prevention of disease in man or other animals; and

(C) articles ( other than food) intended to affect the structure or any function of the body of man or other animals.

21 u.s.c. §321(g)(1).

The key to understanding this section is to focus on the "intended use" provision of the

statute. The intrinsic nature of the article is ilTelevant if the article is held out to have therapeutic

properties-that is, if it is represented as being able to diagnose, cure, treat or prevent disease, or to

affect the structure or function of the body .1 If the intended use of a product is therapeutic,

that article can be regulated as a drug. National Nutritional Foods Ass'n. v. Mathews, 557F.2d 325,

334 (2d Cir.1977). The vendc.,r's intent detennines whether a product may be regulated as a drug.

Id. at 333. The FDA is not hound by the vendor's subjective claims ofintent 1 but can find actual

therapeutic intent on the basis of objective evidence. Id. at 334.

TI1e Code of Federal Regulations provides guidance on determining intended use: The words intended ,,~es or words of similar import ... refer to the objective intent of the persons legally responsible for the labeling of drugs. The intent is detennincd by such persons' expressions or may be shown by the circumstances surrounding the distributi<.'>n of the article. This objective jntent may, for example, be shown by labeling claims, advertising matter, or oral or written statements by such persons or their representatives. Tt may be shown by the circumstances that the article is, with

1 The variety or products held to be dmgs is quite broad. United States v. An Article of ... Sudden Change, 409 F.2d 734 (2d Cir. 1969)(skin k>tion claiming to alter the structure of the skin by referring to "face lifts" and "surgery"); United States v. 250 Jars .. . U.S. Fancy Pure Honey, 218 F .Supp. 208 (E.D.Mich.1963), aft'd, 344 F.2d 288 (6th Cir.1965) (product claimed effective for "increas( ing] your vitality," was intended to affoct a function of the body and was therefore a drug); United States v. Hohensee, 243 F.2d 367, 370 (3d Cir.1957) (peppem1int tea leaves promoted for treatment of gall stones, colic, flatulence, headache, rheumatism, high blood pressure, arthritis, prostate trouble, lumbago, fits, colitis, tuberculosis, a.c;thma, and wonns); Bradlcyv. United Slates, 264F. 79, 81-82 (5th Cir.1920) (mineral water ''recommended in the treatment of Bright's Disease, Diabetes, Dropsy, Cystitis, Gout, .Rheumatisn1, Indigestion, Kidney and Bladder troubles"); Nutrilab, Inc. v. Schweiker, 547 F.Supp. 880, 883 (N.D.lll.1982) (kidney beau flour promoted as a ''starch blockcf' for weight-loss), aff'd, 713 F.2d 335 (7th

Cir.1983); United States v. 354 Bulk Cartons ... Trim Reducing-Aid Cigarettes, 178 F. Supp. 847, 851 (D.N.J.1959)(cigarettes advertised for treatment of obesity).

GOVERNMENT'S TRIAL BRIEF 19

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1 the knowledge of such persons or their representatives, o rJercd and used for a purpose for which it is neither labeled nor advertised. The intended uses of an article

2 may change after it ha.c; been introduced into interstate commerce by its manufacturer. If, for example, a packer, distributor, or seller intends an article for different uses

3 than those intended by the person from whom he received the drug, such packer, distributor, or seller is required to supply adequate labeling in accordance with the

4 new intended uses. But if a manufacturer knows, or has knowledge of facts that would give him notice, that a drug introduced into interstate commerce by him is to

5 be used for conditions, purposes, ur uses other than the ones for which he oflers it, he is required to provjde adequate labeling for such a drug which accords with such

6 other uses to which the article is to be put.

7 21 C.F.R.§ 201.128 (emphasis in original).

8 "I I)t is well-established 'that the intended use of a product, within the meaning of the

9 IFDCA], is detem1incd from its label, accompanying labeling, promotional claims, advertising, and

10 any other relevant sllurce.' ... " United Slates v. Travii!, 180 F.Supp.2d 115, 119 (D.D.C.

11 2001)(citing Action on Smoking and Health v. Harris, 655 F.2d 236 (D.C.Cir. 1980). See also

12 Hanson v. United States, 417 F.Supp. 30 (D.Minn.1976), aff'd'I 540 F.2d 947 (8th Cir. 1976);

13 National Nutritional 11oods Ass'n. v. Mathews, 557 F..2d 325 (2d Cir.1977); United States v. Kasz

14 Entemriscs, 855 F.Supp. 534 (D. R.l. 1994). For example, claims in c-irculars and newspaper

15 advertisements that explain the curative properties of products tnay establish that such products are

16 drugs. V.E. lrons,Inc. v. UnitedStatcs,244F.2d34,39-45 (1-'' Cir.1957). Similarly, testimonials

17 regarding a. product's curative properties or ability ttl affoct the structure or function of the human

18 body may be used to establish the intended use of the ~icle as a drug. United States v. Millpax,

19 Inc., 313 F .2d 152, 154 (71" Cir.1963). Even a manufacturer's Internet website with links to other

20 independent websites that reference the use of the article for then1peutic purposes may establish

21 intended use. See United States v. Undetermined Quantities of ... Street Drug AUemativcs. 145

22 F.Supp.2d 692 (D.Md. 2001). United States v. Articles of Drug, 263 F.Supp. 212, 215 (D.Neb.

23 1967) (Multi-vitamin "orally represented to be an effective cure for everything from a back.ache to

24 cancer.").

25 Placing a statement on the label or jn the labeling that the product is not a drug will not

26 negate evidence of intended therapeutic use. United States v. Nutrition Services, lnc., 227 F.Supp.

27 375,387 (W.D.Pa.1964). Nor will a disclaimer that the promotional claims made for the article have

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not been evaluated, or that the article is not intended as a treatment for disease ormcdicaJ conditions,

suffice to "cancel out" statements of intended therapeutic use.

WaterOr. ••protocols" Tecommend particular doses of various WaterOz products to treat a

wide variety of specific diseases. The diseases purportedly treated by WateT()z products include

ac.,-ne, AIDS, Alzhcintcr's Disease, cancer, carpal tunnel syndrome, dandruff, diabetes, Down's

Syndrome, epilepsy, gray hair, impotency, infertility, hepatitis, lupus, Lyme disease, multip]e

sclerosis, Parkinson's Disease, PMS, strep throat, ulcers, and varicose veins.

Medical Devices

The term "device" means: an instrument, 3:pparatus, implement, machine, contrivance, implant, in vitro reagent, or other similar or related article, including any component, part, or accessory, which is:-

(1) recognized in the official National Formulary, or the United Stales Pharrnacopeia, or any supplement to them,

(2) intended for use in the diagn~)sis of disease or f.'>ther conditions, or in the cure, mitigation, treatment, or prevention of disease, in man or olher animals., or

(3) intended to affect the structure or any function of the body of man or other animals, and which does not achieve its p1imary it1tcnded pUiposes through chemical action within or on the body of man or other animals and which is not dependent upon being metabolized for the achievement of its J>rimary intended purposes.

21 U.S.C. §321 (h); FDA v. Brown & Williamson Tobacco Corp., 529U.S. 120, 126 (2000)(holding

that the FDA lacks jurisdiction to regulate tobacco products as either 0 dmgs" or "devices'').

A wide variety of items have been identified as "devices'' by the courts. Sec. e.g., United

States v. Snoring Relief Labs. Inc., 210 F.3d 1081, 1084 (9th Cir. 2000)(anti-snoring mouthpiece);

Unite(l States v. Universal Mgmt. Scrvs., Inc., 191 F.3d 750, 755 (611' Cir. l 999)(electric gas grill

ig11itcr marketed as pain reliever); Church of Scientology v. Richardson, 437 F.2d 214,217 (9th Cir.

1971)(skin galvanometer); United States v. Crown Rubber Sundries Co., 67 F.Supp 92, 93 (N.D.

Ohio 1946)(condoms).

Prosecutions of those who distribute ozone machin~s for medical pwposes have been

successllll. See United States v. Dollar, 93 F.Supp. 2d 1234 (M.D. Fla. 2000)(sale of ozone

generators using 0 rcctal insufflation" to deliver ozone to the body and thereby cure cancer and

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AIDS); United States v. Thiefault, 275 F.3d 51 (tablc)(l lth Cir. 2001)(sale of ozone machines and

2 attached body bags and catheters to treat cancer, AIDS and Alzhcimer's).2

3 MisbrandinK

4 "Misbranded" drugs or devices are those using false or misleading labels, packaging, or

S containers. 21 U.S.C. § 352. A "lahel" includes anything presented to the customer in immediate

6 connection with his view and purchase of the product. United States v. 24 Bottles "Sterling Vinegar

7 and Honey Aged in Wood Cider Blended With Finest Honey Contents l Pint Product of Sterling

8 Cider Co., Inc., Sterling, Mass.", 338 F.2d. 157 (2d Cir 1964) . · Unlabeled drugs are considered

9 misbranded. 21 U.S.C. § 352(b). A dmg or device lhat is not labeled with adequate directions for

10 its use is misbranded. 21 U.S.C. § 352(f)(l); United States v. Urbutcit, 335 U.S. 355, 356

11 ( 1948)e'sinuothennic" machines designed to cure cancer, diabetes, tuberculosis, and arthritis);

12 United States v. Millpax. Inc., 313 F.2d 152 (71h Cir.1963). A misbranded drug or device is also one

13 that is not manufactured in a registered establishment. 21 U.S.C. § 352(0). Promotional literature

14 distributed as part of marketing a product can result in misbranding charges, even if the drugs

15 themselves arc not hannful. United States v. Kordel, 164 F.2d 913 (7th Cir. 1947)(extravagant

16 claims as to benefits ofmincral compounds)1 afrd, 335 U.S. 345 (1948). Attempts to label a product

17 as harmless natural supplements, accompanied by oral representations of medicjnal remedy value

18 are cJiminal misbranding. United States v. Cruez, 144 F.Supp 229 ('E.D. Jll. 1956)(hcrbal products

19 promoted as treatment Ibr arthritis, diabetes, and ulcers). Hut see Sterling Vinegar, 338 F.2d. at 158

20 (a "folk medicine" book sold in the same shop as the product was not a ''label").

21 A drug is also misbranded if its quantity is not what is stated on the label. However, the

22 difference must be significant. See United States v. Kraft Phenix Cheese Cor:p., 18 F. Supp. 60

23 (S.D.N.Y. 1936)(directed verdict forcheescmanufacturerwhose half-pOlmd packages were deficient

24 by an average of one-quarter-ounce).

25

26

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21ntereslingly, defendants Ke11neth Thiefault and Mardel Barber lived in Idaho County, near David Hinkson. They were also convicted ofa Klein conspirn.cy, and were long-time tax protesters and nonfilers. Their convictions and sentences were reported in the Idaho County Free Press on January 7, 1999. Likewise, the Dollars were tax protesters with Ku Klux Klan and militia ties who represented themselves at trial.

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1 Adulteration

2 Drugs are considered adulterated if strength, quality, or purity arc less than represented .. 21

3 U.S.C. § 351 (c); Woodward Labs. Inc. v. United States, 198 F.2d 995, 996-97 (9ttl Cir. 1952)(drug

4 strength between 23 and 73 percent less than label staled). Most drugs must be in the range of 90-

5 110% of the labeled strength, according to the USP. Adulterated devices are those which should

6 have been submitted l<.'> the FDA for approval but are marketed without such approval. 21 U.S.C.

7 § 351 (f)(l)(B).

8 d. Unit of Prosecution

9 It is proper to charge a separate o:ff ensc for each adulterated or misbranded product. Akin

10 Dist. of Florida v. United States, 399 F.2d 306 (51h Cir. 1968){each count referred to a different

11 adulterated. food). Separate counts may be charged for false medical claims and false representations

12 as lo quantity. Empire Oil & Gas Com. v. United States, 136 F.2d 868 (9th Cir. 1943)(inforn1alion

13 which charged misbranded drug claims and misbranded ointment quantity was not duplicitous).

14 4. 31 U.S.C. §§ S324(a}(3) & (c)(2) Structurine Financial Tra.nsactions (Counts

15 Twenty-seven through Forty-two).

16 lnordertnconvictthedefendantofstmcturing financial transactions, the United Stalesnmst

17 prove that:

18 (I) the defendant knew of the re1evant reporting requirements; a11d

19 (2) the defendant structured, or attempted to stn1cture, or assisted in structuring the charged

20 financial transaction for the purpose of avoiding the reporting requirement;

21 (3) the purpose of the structured transaction was to evade the cmTency transaction reporting

22 requirement; and

23 ( 4) The structured transaction involved one or more domestic financial institutions.

24 31 U.S.C. §5324(a)(3){as amended); sec also United Slates v. Ahmad, 213 F.3d 805, 809 (4lh Cir.

25 2000); United Stales v. Threadgill, 172 F.3d 357, 371 n. l 0 (51" Cir. 1999); United States v. Tipton,

26 5614'.Jd 1009, 1012 (9th Cir. 1995).

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1 The government must prove that the defendant acled with the intent to avoid the required

2 reporting, but need no longer prove that the de fcndant acted willfully, knowing that structuring itself

3 was a criminal offense. Tn Ratzlaf v. United States, 510 U.S. 135 (1994), the Supreme Court

4 reversed the conviction of a losing gambler who stn1ctured a $160,000 cash payment to a Reno

5 casino it1 order to avoid triggering the currency transaction reports (CTR's) required by law.

6 Focusing on the ''willfulness" element c:,rthc statute in effect at the time of Mr. Ral~lars conduct,

7 the Court reversed the convictions but left the door open for congressional remedy. 510 U.S. at 14 7-

8 48. Congress responded rapidly to the invitation, amendjng 31 U.S.C. § 5324 effective September

9 23, 1994 to eliminate the "willfulness" ele1ncnt.

LO Circuits across the nation have acknowledged that Ratzlafhas been overruled by statute for

11 offenses committed after the effective date ofthe amended law. United States v. Lindberg. 220 F .3d

12 1120, 1122 n.2 (9th Cir. 2000); Ahmad, 213 F.3d at 809; Threadgill, 172 F.3d at 371 n.10 (5th Cir.

13 1999). The government must now prove that a defendant structured financial transactions with the

14 intent to evade the reporting requirements, bu.t need not prove that he knew structuring itself was a

15 crime.

16 5. 31 U.S.C. §5317-Criminal Forfeiture

17 Criminal forfeiture occurs in two steps: (1) the judge or jury determines the forfcitability of

18 the property and the district court enters an order of forfeiture; and (2) third parties assert their

19 interests in an ancillary proceedfrtg. United States v. Pclullo, 178 F.3d 196 (3d Cir. 1999).

20 Criminal forfeiture procedures for forfeiture under 31 U.S.C §5317 are those set forth in 21

21 U.S.C. §853. 31 U.S.C. §5317(c)(l)(b). United States v. Kirschenbaum, 156 F.3d 784 (7th Cir.

22 l 998)(incorporation of procedures from section 853 is a shorthand way to avoid having to reiterate

23 procedures in subsequently enacted statutes; the procedures apply as they would in a drug case, but

24 no drug nexus is required). Under Rule 32.2(b), the criminal trial must be bifurcated into guilt and

25 forfeiture phases: Rule 32.2(h)(l) states that the forfeiture prnceeding takes place "as soon as

26 practicable" after court enters guilty verdict. The defendant has no constitutional right to jury

27 determination on forfeiture issues, but Rule 32.2(b)(4) givesthe defendant the right to demand a jury trial

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Rule 32.2(b)(4) also limits the jury's role to one lhing • detennining whether the requisite nexus

2 between the property and the offense has been established. Hearsay evidence may he used in the

3 forfeiture phase. United States v. GaAkin, 2002 WL 459005 (W.D.N. Y. 2002) (in the forfeiture

4 phase of the trial, the parties may offer evidence not already in the record; hccause forfeiture is part

5 of sentencing, such evidence may include reHable hearsay).

6 Criminal forfeiture is part of the sentence; it is not a substantive element of the offense.

7 Libretti v. United Slates, 516 U.S. 29 (1995); United States v. Dieter, 198 F.3d 1284, 1289 (11th Cir.

8 1999) (because forfeiture is part of sentencing, preponderance standard applies to all section 853(a)

9 forfeitures); Ultitcd States v. Garcia .. Guizar, 160 F.3d 511, 518 (9th Cir. 1998) (preponderance

JO standard is constitutional because criminal forfeiture is not a separate offense, but only an additional

11 pe1~ally for an offense that was establishe<.l beyond a reasonable doubt). Moreover, because

12 forfeiture is part of sentencing, tbe United States may seek forfeiture or more than the amount

13 specified in the indictment. United States v. Descent, 292 F.3d 703 {11th Cir. 2002) (because

14 forfeiture is part of' sentencing, modifications to amount Govemmcnt is seekjng as money j udgmcnt

15 do not constitute constructive amendments to the indictment).

16 Herc, although coW1t forty-three identifies the wrong statutory citation for the forfeiture

17 provision, the United States h.as filed a bill of particulars identifying tbe correct statutory provision,

18 31 U.S.C. §53 l 7(c), authorizing forfeiture of property traceable to the structuring financial

19 transactions offenses, 31 U.S.C. §5324(a)(3). Upon conviction of the defendant of any of the

20 structuring offenses set forth in counts 27-42 of the indictment, the United States intends to seek

21 forfeiture or property traceable to the structuring offenses, including the amount of money involved

22 in the off cnse, the United States currency or other monetary instnunents in the Kamiah Comnmnity

23 Credit Union bank account involved in the structuring or any other substitute property.

24 As no party has yet asked for jury trial of the forfoiture issue under Fed. R. Crim. P.

25 32.2(b)(4), the United States has separately filed a request for the Court to detem1ine before whom

26 the forfeiture issue will be tried. Absent an affim1ative response by the defendant that he will seek

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a jury trial, forfeitability should be decided by the Court upon conviction of the defendant on any

of the structuring offenses.

The United States has not yet submitted proposed jury instructions on forfeiture, and does

not intend to do so unless lhc defenda11t makes a specific demand that the jury, llpon convicting him

of one of the structuring offenses, detenn.ine forfeitability of the property identified in the

indictment.

B, PQ'fENTIAL DEFENSES

1. Good Faith Misunderstandine of the Tax Laws

Willfulness is the "jntentional vic.llation of a known legal duty." Check v. United States, 498

U.S. 192, 200 (1991); United States v. Pomponio, 429 U.S. 10, 12 (1976); United States v. Pallan,

571 F.2d 497,501 (9th Cir.1978). Willfulness is dctennined by a subjective standard rather than an

objective one, and the defendant's beliefs need not he objectively reasonable. Check, 498 U.S. at

203. However, the jury may "consider the reasonableness of the defendant's asserted beliefs in

dctennining whether the belief was honestly or genuinely held.n !Jpited States v. Gnmewald, 987

F.2d 531, 536 (8111 Cir. 1993). Although ignorance and misunderstanding of the law maybe asserted

to foreclose a finding of willfulness 011 the part of a defendant, disagreement with the validity of a

1aw may not Once it has been established that the defendant was aware of a legal duty and

_intentionally violated that duty, it is no defense that the defendant believed that the Jaw imposing the

duty was unconstitutional. Cheek. 498 U.S. at 205-06.3

2. Defendant was Not Reguired to File Returns

David Hinkson has stated that he is not reqttired to file returns. This argument is frivolous

and has been consistently rejected as such. United States v. Dawes, 951 F .2d 1189 (10th Cir. 1991 );

United States v. Pederson, 784 F .2d 1462, 1463 (9th Cir. 1986 )( characterizing vagueness argument

as "mcritlcss"); United States v. Karlin, 785 F.2d 90, 91(3d Cir. 1986)(arguments 0 frivolous and

require no discussion"). See also !Jnited States v. Mas§.!, 948 F.2d 923, 934 (5th Cir. 1991 )(holding

'Joh11 Cheek was convicted on remand. United States v. Check, 3 F.3d 1057, 1059 (7th Cir. 1993).

GOVERNMENT'S TRIAL BRIEF 26

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1 that defendant's argument that he is a "non-citizen" and "non-resjdent" is frivolous),; United Stales

2 v. Sloan, 939 F.2d499, 500 (7th Cir. 1991) (rejecting defendant's '•strange argument" that he was not

3 a U.S. citizen, but rather a citizen ofthe State oflndiana); Fox v. Commissic.l11erorintcmal Revenue,

4 65 T.C. Memo 1993-277, p. 4 (1993)(holding that petitioner's position that he is a "nonresident

5 alien" is fiivolous and groundless); Cleveland v. United States, 76 A.P.T.R. 2d 95-7530 (D. Mont.

6 1995) (rejecting arb1Ument that pn, se plaintiffs arc ''nonresident aliens"); United States v. Studley.

7 783 F.2d 934, 937 (9th Cir. 1986) (noting that defendant's argument that he is not a "person" under

8 the tax laws has been "consistently and thoroughly rejected by every branch of government for

9 decades.").

lO 3. Absence of Intent in FDA Violations

11 Unlike tax offenses, there is no good faith defense Lo misbranding and adulteration charges.

12 United States v. Walker, 26 F.3d 108 (11th Cir. 1994)(intcnt to defraud instruction was sufficient and

13 defendant was 1u,t entitled to a good faith instruction); United States v. Kocmond, 200 F.2d 370 (7th

14 Cir.1952)(good faith no defense to mislabeling horse meal a, heel). There is a good faith provision

·15 for innocentmidd.lemen who rely on n,annfacturcr representations, but this safe harboris unavailable

16 to manufacturers. Barnes v. Unhcd States, 142 F.2d 648 (9th Cir. 1944)(middleman relying on

17 manufacturer's guaranty may avoid liability, but manufacturer cannot). A willful blindness or

18 · conscious avoidance instruction may be appropriate if a defendant displays deliberate ignorance of

19 adulteration. United States v. Beech-Nut Nutrition Corp., 871 F.2d 1181 (2d Cir.1989).

20 Claims by a defendant that be was powerless to prevent or correct FDA violations arc an

21 affinuative defense, with the burden of production on the defendant. United States v. Park, 421 U.S.

22 658 (1975): United States v. Starr, 535 F.2d 512 (9th Cir. 1976). See also United States v. Y. Hata

23 & Co .. Ltd., 535 F.2d 508 (9th Cir. 1976)(no objective impossjbility inslTuction in case involving

24 birds flying into storage area and contaminating rice).

25 Religious freedom claims should also fail, as "lhe exercise of religious freedom does D.Q!

26 include the freedom to violate the Federal Food, Drug, and Cosmetic Act." Church of Scientology

27 v. United States, 437 F.2d 214, 217 (9th Cir. 1971). But see, Founding Church of Scientology v.

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United States~ 409 F.2d 1146 (D.C. Cir. 1969.)(religious claims made in literature could not be

constitutionally evaluated, and therefore could not be classified as "misleading").

The WaterOz "protocoJs" contain a 0 disclaimcr" that the recommended doses are only

"suggestions" based on anecdotal data and unspecified "extensive research." The disclaimer urges

customers to consult with medical professionals, and states that the claims have 0 11ot been evaluated

by the Food and Drug Administn1tion."

However, the same disclaimer also describes the protocols as "intended for sped fie health

issues" and ••not for general health supplementation." This final statement seems to confirm that the

products ''are intended for use in the diagnosis, cure, mltigation, treatment, or prevention of disease

in man" and are thus "drugs" under the FDCA definition. Disclaimers, in and of themselves, do not

provide a complete defense to misbranding charges. Church of Scientology v. United States, 437

F.2d. 214, 218 (91h Cir. 1971); Albeey Food Prod's v. United States, 194 F.2d 463 (9th Cir. 1952).

4. WaterOz Produets as Dietary Supplements

The Dietary Supplement Health and Education Act of 1994 (DSHF.A) significantly altered

the way that FDA can regulate products that fall within the statutory definition of a dietary

supplement. If a product fits the definition, and the n1anufacturer has property notified the FDA of

the introduction of the product into the marketplace, the burden shifts to the .FDA to prove that a

supplement is unsafe prior to ordering a company to cease marketing or to recalJ the product.

An article may Cit into more than one FDA-regulated category. ''The definitions of drugs,

biologics and food ... are not mutually exclusive. h1deed, nothing prohibits food from also being

a biologic, and all biologics are by definition drugs." United States v. Pro-Ag, Inc., 796 F.Supp.

1219, 1224 (D.Minn. 1991 ), afrd, 968 F.2d 681 (81h Cir. 1992). "It is well estahHshed that the

definitions of food and dmg arc normally not mutually exclusive; an article that happens to be a

food but is intended for use in the treatment of disease fits square]y within the drug definition ...

and may be regulated as such." Nutrilab, lnc. y, Schweiker, 713 F.2d 335 (7th Cir. 1983). Sec also,

Grand Laboratories, Inc. v. Harris, 660 F.2d 1288, 1289 (Stl• Cir.1981 ); United States v. Calise, 217

.F.Supp. 705 (S.D.N. Y. 1962). As discussed supra, it is the intended use of an article that detennines

GOVERNMENT'S TRIAL BRIEi? 28

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whether the article is merely a food or dietary supplement, or a drug. When an article meets the

2 definition of a drug, it is regu1ated as such, regardless of any other category it might meet.

3 Note that§ 201(g)(I)(C) of the FDCA defines the tem1 ''drug" in part to mean "articles

4 (other than food) intended to affect the stn1cture or any function of the body of man or other

5 animals.'' 21 U.S.C. § 321 (g)(l)(C)(cmphasis added). Tt is this parenthetical exception that allows

6 foods and dietary supplements to make certain slructure/lunction claims without "transforming" into

7 a drug based on intended use.

8 This exemption, of course, does not exist in the definition of a dTug under§ 321(g){l){B).

9 TI1erefore, no food or dietary supplement ca11 make therapeutic (diagnosis, cure, miligati<m,

10 treatment, or prevention of disease) c1aims without being considered a drug.

11 Asdefinedby21 U.S.C. § 32l{ff)(3)(B)(i),adietary supplementcannothcsomcthi11gwhich

12 was approved a.~ a new dmg prior to its marketing as a food or dietary supplement. 1n Pharmanex.

13 Tue. v. Shalala, 221 F.3d 1151, 1159 (10th Cir. 2000), the n1anufacturer of an herbal supplement

14 challenged FDA 's detem'lination that their product was a "new drug" rather than a supplement.

15 Phannanex's product contained a natural substance, mevinolin, which was chemically identical to

16 the active ingredient, lovastatin, in an approved prescription drug. Pharmanex argued that

17 § 32l(ff)(3)(B) only appJied to the complete, finished drug product, nol their individual active

18 ingredients. The Tenth Circuit reversed the lower court, which had agreed with Pham1anex. •vro

19 find that I'§ 32l(ft)(3)(B)] only refers to finished drug pmducts would be to restrict this provision

20 so as to render it without practical application." ld. at 1159.

21 C. OTHEREVIDENTIARY ISSUES

22 1. Expert Summary Witness and Summary Schedules

23 Near the end ofits case, the United States will call expert/summary witnesses who are tTai11ed

24 in accounting and the computation of tax liabilities. These witnesses will provide an analysis of all

25 the witness testimony at trial, the numerous financial records introduced into evidence and explain

26 the tax consequences of the Government's evidence. The testimony may include the use of

27 summaries of voluminous evidence.

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Tl1e Rule 1006 summaries must summarize information which is voluminous, admissible,

2 an.d available for inspection. City of Phoenix v. Com/Systems, Inc., 706 F.2d 1033, 1038 (9th Cir.

3 1983); United States v. Johnson, 594 F.2d 1253, 1255 {9th Cir. 1979). Whi1e the underlying

4 documents must be admissible, they need not be admitted at trial. Johnson., 594 F.2d at 1257, n. 6;

5 United States v. Meyers, 847 F.2d 1408, 1412 (9th Cir. 1988). Sllch summaries are admissib]e

6 evidence. ld.; United States v. Wood, 943 F.2d 1048, 1053 (9th Cir. 1991).

7 The introduction of an expert summary witness and summary schedules has been approved

8 by the Ninth Circuit in tax cases, United States v. Marchini, 797 F.2d 759, 756-766 (9th Cir. 1986);

9 Goldberg v. United Slates, 789 F.2d 1341, 1343 (9th Cir. 1986); United States v. Greene, 698 F.2d

10 1364, 1367 (9'h Cir. 1983); Barsky v. United S1ates'I 339 F.2d 180 (9th Cir. 1964), a1'\d specifically

11 in bank deposits cases. United States v. Soulard, 730 F.2d 1292, 1299 (9th Cir. 1984). ''The fact of

12 a tax due and owing maybe established by documentary evidence of tax liabi]ity, accompanied by

13 asummarybyanexpett." UnitedSlatesv. Voorhics,6581•'.2d 710,715 (9th Cir.1981). A summary

14. witness draws conclusions from the evidence presented at tria1. United States v. Esser, 520 F.2d

t 5 213, 217-218 (7111 Cir. 1975). A swnmary witness may be used to help the jury organize and evaluate

16 evidence which is factually complex and :fragmentally revealed in the testimony of a multitude of

17 witnesses. See United Stales v. Baker, 10 F.3d 1374, 1411 (911' Cir. 1983). The summary witness

18 may review the evidence in a manner that advocates the government's theory of the case, and need

19 not give effect to the contentions oflhe defendant. Barsky, at 181; United States v. Moore, 997 F.2d

20 55, 58-59 (5th Cir. 1993). Copies of the summaries may be published to the jury while the expert

21 testifies c<mceming them. Id.

22 The su1mnary schedules, because they will reflect only evidence that is admitted or

23 admissible at trial, by necessity will not be finalized until short1y before the agent testifies. As such,

24 final copfos of the summary schedules wi11 be provided to the defense shortly before the agent

25 testifies.

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2. Copies

Under the Federal Rules of Evidence, Rule 1003t a duplicate, such as a photocopy, has the

same status as an original, unless: (1) there is a genuine question as to lhe authenticity of the original

or (2) it would be unlair to admit the duplicate in lieL1 of the original.

The United States does not anticipate that either of these exceptions will apply to any of the

records introduced in this case.

3. Business Records

Criminal tax cases, of necessity, depend on documentary evidence. For the 1nost part, these

documents arc obtained from financial institutions, private business and other third parties. A

portion of the Government's evidence in this case consists of business records. TI1ese include the

bLlsincss records seized from the defendant.

Business records n1ade and kept in the regular course of business are admissible pursuant to

Rule 803{6) of the Federal Rules of Evidence. When seeking to introduce documents under Rule

803(6), the United States must produce a quali lied witness to testify that the docu111ents were made

and kept in the regular course of business. United States v. Keplinger, 776 F .2d 678> 693 (71h Cir.

1985). The phrase "other qualified witness'• is broadly jnterprcted to require only that the witness

understand the rccord .. keeping system. ld. The witness need not have actual knowledge· of the

treatment of the specjffo documents in question and need not know who actually made and kept the

records. Id.; United States v. Chappell, 698 11.2d 308, 3 l 1 (7th Cir. 1983). A challenge to the

accuracy or completeness of business records merely concems the weight of the evidence and docs

not affect admissibility. La Porta v. United States, 300 F.2d 878, 880 (9th Cir. 1962).

4. Certified Documents

TI1c United Stales anticipates offering into evidence certi fled copies of certain Internal

Revenue Service records. Tltese records arc self-authenticating and admissible pursuant to Federal

Rules of Evidence 902(4), 803(8), and 1005.

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5. Charts

The Government intends to use charts during its opening statement, examination of

witnesses, and in closing argwnent. The Ninth Circuit has consistently approved the use of charts.

Uniter.I States v. Johnson, 594 F.2d 1253 (9'h Cir. 1979); United States v. Soulard, 730 F.2d 1292,

1300 (9th Cir. 1 984 ).

Charts may be referred to during opening statement. The purpose of an opening statement

is to acquaint the jury with the substance and theory of the case and to outline the forthcoming proof

so that the jurors may more i11telligcntly folJow the testimony. Sec, e.g .. United States v. Zielic, 734

F.2d 1447, 1455 (1 ph Cir. 1984); Foster v. United States 308 F.2d 751, 753 (8th Cir. 1962). Charts

are pennitted during opening statement when they do no more than assist the jury in understanding

thenature<.lfthc proofitis aboutto hear. Sec United Statesv. De Peri, 778 F.2d963, 978-79(JdCir.

1985); United States v. Churchill, 483 F.2d 268, 274 (1 't Cir. 1973); United States v. Rubino, 431

F.2d 284, 289-290 (6th Cir. 1970).

A foundation for the admission or each chart will be established through the testimony of a

witne8.q or witnesses who will testify that the chart accurately renccts infom,ation contained in

documents already in evidence orto be received in evidence. Sec United States v. Lemire. 720 F.2d

1327, 1349 (D.C. Cir. 1983); United States v. Scales, 594 F.2d 558, 563 {6th Cir. 1979). It is not

necessary that the witness presenting the chart be an expert witness or have some specialiied

knowledge o fwhat he or she is testifying about if the chart does not contain complicated calculations

that an expert would need to explain. United St.ates v. Jennings, 724 F.2d 436,443 (5th Cir. 1984).

Courts have repeatedly alJowcd the use of charts similar to the ones the United States intends

to use in this case. See,~, Scales, 594 F.2d at 562 (summary of indictment); Jennings, 724 F.2d

at 441-443 (compilation of 200 pages of material involving substantial amount ofn1athcmatical

calculations); lJnited States v. Stephens, 779 F.2d 232, 238 (5th Cir. 1985) (simple flow charts

tracing the defendant's use of loan proceeds).

The Ninth Circuit has determined that three precautionary measures should be taken when

summary charts are used. First, the court should carefu11y examine the charts, out of the presence

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1 ofthcjury, to determine that everything contajned in them is supported by proof. United States v.

2 Soulard, 730 F.2d at 1300; United States v. Abbas, 504 F.2d 123, 125 (9lh Cfr. 1974). Second, the

3 court should allow the charts to be used as a testimonial aid for witnesses and as a visual aid for

4 counsel in argument, but should not admit the charts in evidence <•r allow their use during jury

5 dcliberati<m. Id. Third, the Court should instruct the jury that the charts are an explanation of other

6 evidence and not proof per sc. The jury should be told that the charts were presented as a matter or

7 convenience and to the extent the jury finds that they arc not in truth summaries of facts arad figures

8 shc.'>wn by the ev1dence in the case, the jury should disregard them entirely. Id.

9 Subject to the court being assured that the Governmcnes charts are accurate, and that each

10 piece of information contained on the charts is supported by admissible documentary or testimonial

11 pr<>of, use of the charts should be pem1itted. The charts wi11 help the Government's proof in this

12 case.

13 Dated this/'l?,r day of September, 2003.

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GOVERNMENT'S TRIAL BRIEF

Respectfully submitted,

THOtv!AS E. MOSS United States Attomey

. radlcy ssistaat U.S. Attorney

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