Peregrine Trial – August to November

Comments by Bob Grimes

August 23, 2007

It is still not certain whether the Government will retry Defendants Lenz, Reichner, Towle and Stulac. The jury deadlocked on July 27, 2007, after three months of trial and two weeks of deliberations. The case is now in the somewhat unusual posture of the defendants stating that they are ready to assert their right to a speedy trial, if the Government is really going to re-try them. The Government, on the other hand, filed a motion with Judge Whelan on August 2, 2007, asking the judge to exclude time from speedy trial calculations to allow the Government to try these defendants later, rather than sooner. It would appear that this is a maneuver by the Government to have these four defendants tried together with the final three defendants (Crook, Nelson, and Deller). Those final three defendants have a motion hearing/trial setting in front of Judge Whelan on January 28, 2008.

It appears that this issue will be litigated in front of Judge Whelan on August 27, 2007, at 9:00 a.m. If the judge does not agree with the Government’s motion to exclude time, he may rule that the Speedy Trial Act requires that the Government re-try these four defendants before the trial of the final three, if the Government is going to re-try them at all.

If Judge Whelan agrees to exclude time under the Speedy Trial Act, he will at some point have to rule on whether it is appropriate to try all seven remaining defendants together. The defense lawyers will present the judge with arguments that to do so is unfair to the individual defendants given the different legal issues and different witnesses for the various defendants.

August 27, 2007 Status Hearing

The Indictment was dismissed as to Joe Reichner only, last Friday. Today, the lawyers for Defendants Lenz, Stulac, and Towle argued for a speedy re-trial for their clients.

Judge Whelan scheduled a motion hearing for October 1, 2007 at 2:00 p.m. Attorney Mike Attanasio then addressed the court. Attanasio said that the defense lawyers were amazed that they were here under these conditions after the jury had deadlocked in favor of acquittal for all defendants. He pointed out that some of the jurors were present in court, and that he believed that they questioned the wisdom of the use of additional Government resources for another trial for these three defendants (three of the jurors who voted not guilty were seated in court today with the family of the defendants, and none of the jurors who voted for the prosecution were in court today).

Attorney Attanasio said that if the Government was going to insist on re-trying Lenz, Stulac, and Towle, they should do so right away. Attanasio requested a trial date shortly following the October 1, 2007 motion date. Attorney Thomas Bienert and Kate Leff joined in this request on behalf of their clients.

AUSA Eric Beste spoke on behalf of the Government. AUSA Bhandari and Narus were present, as were several FBI agents and Government support staff. Beste argued that these three defendants should be tried with defendants Nelson, Deller, and Crook.

Judge Whelan scheduled a tentative re-trial date for January 8, 2008, for Lenz, Stulac, and Towle. There will be further argument on legal issues, including the trial date, on October 1, 2007. However, Nelson, Deller, and Crook will next appear in court on January 28, 2008, and it is unlikely that their trial will commence before the summer or fall of 2008. It does not appear likely that Judge Whelan will require Lenz, Stulac, and Towle to wait that long for a re-trial.

September 26, 2007

Motions Filed for Hearing on October 1, 2007

The Government and the defense have both filed voluminous written motions containing arguments they will be prepared to present at the hearing in front of Judge Whelan on October 1, 2007, at 11:00 a.m. The issues covered in these motions include joinder of defendants, and many evidentiary issues. The Government is arguing that the re-trial of Lenz, Towle, and Stulac should occur with the trial of Defendants Crook, Nelson, and Deller. The defense opposes the joinder of Lenz, Towle, and Stulac with the other three defendants. The defense says that if the Government insists on retrying the case that resulted in a hung jury, the trial should begin as soon as possible.

When the issue of joinder of defendants was argued on August 27, Judge Whelan indicated that he was likely to set a trial date of January 8, 2008 for Lenz, Stulac, and Towle. Defendants Crook, Nelson, and Deller are much further behind in the proceedings, and are not likely to go to trial until summer or fall of 2008.

During the hearing on October 1, Judge Whelan could address some of the evidentiary issues presented in the motions recently filed by the parties, but it is also possible that he will rule that these evidentiary matters should be argued as part of the in limine proceedings shortly before trial.

October 1, 2007

Ruling on Motions

Judge Whelan denied the Government’s motion to join the Defendants Stulac, Lenz, and Towle with more recently indicted Defendants Nelson, Crook, and Deller. Defendants Gary Lenz, Patrick Towle and Daniel Stulac have already been tried on the charges still pending against them. The jury was unable to reach a unanimous verdict.

Judge Whelan pointed out that Lenz, Towle, and Stulac are ready to go to trial whereas the three newer defendants are not ready. Judge Whelan stated that it would be easier for the court to try all six defendants together but he believes it to be unfair to Lenz, Towle, and Stulac because they have already been tried in this matter, and because of the outcome of the jury’s deliberations. (The jury deadlocked in favor of an acquittal as to all the defendants.)

The court discussed whether witnesses who reviewed this blog should be permitted to testify at the retrial of Lenz, Stulac, and Towle. Judge Whelan noted that it is common for witnesses to read newspaper articles during well publicized trials but this blog is different from newspaper articles because it is written by attorneys and it is similar to a detailed summary of the transcript. Judge Whelan stated that if a witness has read this blog he or she may or may not be allowed to testify at the second trial, but he declined to rule on the matter, telling the attorneys that he was unwilling to “rule in a vacuum.” The judge says that he will have to make a factual determination regarding that issue on a case by case basis, in a hearing outside the presence of the jury.

Attorney Attanasio, who represents Stulac, pointed out that after the controversy regarding this blog first came to the court’s attention, the Government was still unable to prevent “a second universe of witnesses” from reading the blog. Attanasio requested that the Government provide him with a list of these witnesses. The Government agreed to provide the defense with this information.

AUSA Bhandari said that he believes that the retrial of the three defendants previously tried may take four to five months (longer than the first trial), despite the fact that the Government has since dismissed the charges against Joseph Reichner, one of the original defendants. Bhandari stated that there is a great deal of evidence and a number of witnesses that the Government did not present in the last case and “that will not be the case this time.”

Judge Whelan set the second trial date for those three defendants previously tried for January 29, 2008, with the understanding that if any other attorney in this case has a conflict with scheduling, the date will be February 12, 2008.

Motions in limine for this case will be heard at 9:00 a.m. on November 27, 2007.

November 21, 2007

Motions In Limine Filed For Hearing on November 27, 2007

The Government previously indicated to the court that their best estimate of the amount of time a re-trial would take was approximately four to five months. They are now indicating that they believe their case will take approximately two months. Numerous motions and responses have been filed in anticipation of the upcoming hearing scheduled for November 27, 2007, including the following:

1. The Government moves to preclude evidence on note-taking during trial preparation by Government, or claims of other Government misconduct

After pleading guilty on March 13, 2007, participating Witness Gardner had 13 meetings with the Government. Attorney Iredale repeatedly pointed out on cross-examination that no notes were taken during these meetings by AUSA Beste or the agents or Gardner’s three attorneys from Washington, D.C. Iredale implied the reason no notes were taken was to avoid creating reports with which Gardner could be impeached if his testimony at trial varied from his interviews with the Government. During closing argument, Attorney Iredale looked directly at AUSAs Bhandari and Beste and challenged them to provide a legitimate explanation for the fact that Gardner was interviewed over approximately 50 hours without any written notes or reports which could potentially be used to cross-examine Gardner. Now the Government is attempting to preclude this line of inquiry.

The Government requests that the court prevent the defense from arguing to the jury that because there were no agent’s notes or reports provided of trial preparation meetings with Gardner that the Government committed misconduct. The Government requests that this particular subject be handled outside of the jury’s presence, alleging that “defense counsel now have a history of asking such questions in the presence of the jury in an effort to improperly poison the jury against the government.” The Government requests that both sides be informed that they will be admonished in the presence of the jury for such “attacks” against opposing counsel alleging misconduct.

The defense argued in response that they are entitled to address the fact that the Government specifically directed agents not to take notes in these trial preparation interviews to avoid creating a record with which defense counsel could later impeach the witnesses if they changed their stories. According to the Government, apparently some jurors told them after trial that they had agreed with the defense that “because there were no agent notes or reports provided of trial prep meetings with Gardner, the Government had deprived them of something to which they were entitled by law.”

Attorney Tom Bienert requested that the Court deny the Government’s motion, stating that the lack of notes goes to the reliability of the witness’s testimony, particularly where “all parties to the meeting conveniently failed to take notes … Such failures show the Government’s attempt to deprive Defendants of crucial witnesses and explain Defendant’s inability to challenge the reliability of their testimony at trial.”

2. The Government moves to preclude reference to maximum potential punishment

During the first trial, defense counsel pointed out that cooperating Defendant Gardner was facing a 20-year sentence; that Defendant Powanda and Gless were facing up to 15 years, and so on. This questioning was designed to show the motivation of these witnesses to provide testimony favorable to the Government. For example, during the first trial, after Defendant Steve Gardner testified that Defendant Reichner participated in the fraud, Attorney Iredale argued that Gardner was lying to try to persuade the Government to recommend less than the 20-year maximum sentence.

During the cross-examination of Gardner, the defense also read aloud to the jury a portion of an arraignment hearing in which the Government announced in open court that due to the number of crimes and the amount of money at stake, each defendant faced a mandatory term of life imprisonment, and indicated that they would indeed recommend life imprisonment. The Government says that this is improper, and is asking Judge Whelan from precluding this line of questioning during the retrial.

Defense attorney Mike Attanasio responded that it was proper in the first trial for defense counsel to cross-examine Government witnesses who were threatened with life imprisonment, stating “Although the Government now understandably regrets having uttered the threat, it is impossible for the Court to unring the bell that the prosecutor thunderously hammered at arraignment.” Attanasio notes that Mr. Gardner admitted on cross-examination that he was “sick to his stomach” when he heard the prosecutor threaten him with life in prison.

Defense counsel argues that since this line of questioning goes to motive (bias and credibility), they are entitled to impeach the Government witnesses regarding the terms of their plea agreements, as a defendant has a 6th Amendment Constitutional right to confront his accusers.

3. The Government moves to preclude improper argument

The Government requests that the court direct defense counsel not to inform the jury whether they are appointed or retained. They further request that the defense not be permitted to introduce family members of the defendants to the jury. The Government contends that some jurors must have formed strong emotional bonds with the defendants’ families during the first trial, and that is for this reason that these jurors have attended post-trial proceedings. Defense counsel Kate Leff argued in response that the more likely cause for the jurors attending post-trial proceedings is that “the Government spent three months of the juror’s lives trying to convict these defendants and the jury votes overwhelmingly to acquit, yet the Government has ignored the majority of the jury in deciding to retry the case.”

The Government asks that the Court direct all parties to have all agents, family members, and certain “not guilty” jurors from the prior trial use separate break areas from the jury. The Government also requests that in its introductory comments to the jury that the Court indicate that family members are not allowed to make conversation with jurors, removing all possible need for defense to comment on family members.

Additionally, the Government believes it was improper for defense counsel to suggest during closing argument that the jurors ask themselves why Stulac was charged, but not Bigelow, or others from Arthur Andersen. The Government argues that a jury may not be asked to consider the guilt or innocence of anyone else in considering the guilt of any of the defendants. They assert that asking the jury to consider whether others should have been charged asks the jury to speculate on evidence not presented and invites decision-making on improper grounds.

Attorney Mike Attanasio responded that it was entirely proper to ask the jury to make a reasonable inference from the evidence – that if no one from Arthur Andersen detected the fraud although several other employees saw the same evidence Defendant Stulac saw, that Mr. Stulac is not guilty because, just like those other employees, he too missed the fraud.

4. Defense counsel Bienert moves to admit the polygraph examination results of Defendant Lenz

Defendant Gary Lenz apparently took and passed a polygraph examination, administered by a nationally recognized former FBI polygrapher. The results indicated he answered truthfully when denying the factual allegations of the indictment.

Attorney Bienert argues that since the jury in the first trial was presented with plea agreements of the government’s cooperating witnesses which contained provisions that the witnesses would take polygraph examinations at the Government’s request, that it was the Government who introduced the issue of polygraph examinations being relevant to credibility. The motion states “The government cannot plausibly maintain that Mr. Lenz’s uses of polygraph evidence at trial is unfairly prejudicial when it affirmatively chose to make polygraph examinations a material provision of its plea agreements with its cooperating witnesses.”

Additionally, and in the alternative, if the Court refuses to admit into evidence the particular questions and answers of the polygraph examination, defense counsel Bienert seeks to admit evidence that Defendant Lenz took and passed a polygraph. He argues that since the Government already suggested to the jury that its witnesses were in fact credible because they agreed to take polygraph examinations, Defendant Lenz’s having actually done so and passed is highly probative rebuttal to the suggestion that the Government’s witnesses are more credible.

The Government filed a motion in opposition to admitting the polygraph results as evidence, arguing the results are unreliable.

5. The Government moves to preclude reference to prior hung jury or grand jury testimony.

The Government requests that the court prohibit any reference, either direct or indirect, to the fact that the first trial resulted in a hung jury, asking that all former testimony be referred to generically as coming from “prior proceedings.”

The Government also asserts that in the first trial there was unnecessary public disclosure of the contents of secret grand jury testimony, and requests that when witnesses in the re-trial are impeached with their grand jury testimony, that it should be referenced in a more generic manner.

The court will hear arguments on the in limine motions on November 27, 2007. The retrial of Gary Lenz, Patrick Towle, and Dan Stulac will begin on January 29, 2008.

November 27, 2007


Defendants Gary Lenz, Patrick Towle, and Dan Stulac were present with their attorneys and some family members. AUSAs Eric Beste, Sanjay Bhandari, and Bill Narus were present, along with special agent Bridgid Cook of the FBI. Judge Whelan heard argument regarding the previously filed motions in limine, discussed below in the same order in which they were listed above.

1. Judge Whelan ruled that the defense is allowed to put into evidence the fact that no notes were taken during meetings that AUSAs and FBI agents had with prosecution witnesses, including Steve Gardner. Defense counsel is allowed to bring out the fact that during these lengthy meetings with cooperating witness, no notes were taken and no reports were generated.

2. The court ruled that in cross-examining witnesses, it is permissible for defense counsel to point out the potential sentences that these witnesses could receive, as it goes to their potential bias and credibility.

3. With respect to the government’s motion to preclude improper defense arguments, the court ruled that it is not improper for attorney Kate Leff to let the jury know that she is court-appointed, and that the family members of the defendants are allowed to be presented to the jury by the defense attorneys. Judge Whelan stated that he has no reason to believe that the jury will disobey his admonition that they refrain from talking to anyone about the case during trial.

The Government argued that Attorney Mike Attanasio should be prevented from suggesting the jurors ask themselves why Mr. Stulac was charged, but not Mr. Bigelow, or others from Arthur Andersen. Attorney Attanasio stated that he should be permitted to make this argument as a rebuttal to the Government’s contention that Mr. Stulac was “close to the fire” and therefore Stulac must have known about the fraud. Attorney Attanasio stated that in order to rebut that Government argument, he is entitled to show that numerous people at Arthur Andersen saw the same information as Mr. Stulac, yet were unaware of the fraud. Judge Whelan said that Attanasio is allowed to ask the jury to make reasonable inferences based on the evidence presented at trial, but he declined to rule in a vacuum, telling the AUSAs to object at trial if they see the need to.

4. Attorney Bienert’s motion to admit Mr. Lenz’s polygraph results, along with the fact that Gary Lenz took a polygraph examination, was denied on the grounds that polygraph evidence is not generally accepted in the scientific community, and the prejudicial effect of the evidence outweighs its probative value.

5. Judge Whelan ruled that the attorneys are allowed to refer to “Grand Jury” testimony as such. It is inevitable in the re-trial that witnesses will be directed to their testimony from the previous trial. Judge Whelan said that the fact that there was a hung jury in the first trial will not be mentioned.

In addition, the court heard argument regarding whether the prosecution could introduce evidence on new transactions that were not brought into evidence by the government in the first trial. Specifically, the Government sought to introduce evidence of the “IMS deal.” Attorney Bienert argued that the IMS deal would be very difficult to investigate because it occurred in Australia, where the United States Courts do not have subpoena power.

Judge Whelan ruled that the IMS deal is admissible because it was included in discovery, and indicated that both sides might be making a mountain out of a molehill because prosecutors don’t usually save their best “smoking gun” transaction to use in case there is a retrial. Judge Whelan stated that he does not have the authority to order the prosecution to identify specific areas of evidence they will be presenting, however, he saw merit to the assertion that it would delay the trial if evidence is presented that substantially varies from the transactions presented in the first trial. Judge Whelan requested, but did not order, that the Government give the defense notice if they decide to introduce new transactions at the retrial.

There was considerable discussion about the prosecution witnesses who have admitted to reading this blog. The defense is concerned that having read summaries of testimony of other witnesses could color the testimony of some Government witnesses at the retrial. The court stated that it will conduct a hearing on each of these blog-reading witnesses to determine if their recollection or ability to testify had been tainted by their reading of this blog.

Defense attorneys asked the Government to identify which blog-reading witnesses they intend to call, so that hearings on this issue can be conducted prior to the beginning of trial. Witnesses in this category, who were not called in the first trial, include Matt Gless, John Benjamin, Bill Moore, and Pradeep Vancheeswaran.

AUSA Eric Beste stated that the Government has not yet decided on which witnesses they are going to call in the retrial. Judge Whelan stated that the Government should have a very good idea of who they will call in their case-in-chief within two to three weeks of the date the trial is scheduled to begin, and he scheduled hearings on the testimony of the blog-reading witnesses for January 14, 2008 at 2:00 p.m.

A jury panel will be summoned to Judge Whelan’s department on January 28. They will be screened for a three-month trial (although the prosecution’s trial estimate is now two months), and each juror will fill out a one-page jury questionnaire. Voir dire will begin on January 29, 2008.