Motion For Discovery

BILL BOYD 1
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Texas Bar No. 0278000
bill@boyd-veigel.com

RUSS A. BAKER
Texas Bar No. 24045440
russ@boyd-veigel.com

BOYD-VEIGEL, P.C.
P.O. Box 1179
McKinney, Texas 75070
Telephone: 972-562-9700
Telecopier: 972-562-9600

Attorneys for Armstrong

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

SAN FRANCISCO DIVISION

UNITED STATES OF AMERICA

Plaintiff

v.

CONNIE C. ARMSTRONG, JR.

Defendant
No. CR 94 276 PJH
DEFENDANT ARMSTRONGS MOTION
FOR DISCOVERY IN SUPPORT OF 28
U.S.C. 2255 MOTION

Armstrong requests an order from this court permitting limited discovery in support of
his pending 28 U.S.C. 2255 motion.
ARGUMENT
A habeas petitioner, unlike the usual civil litigant in federal court, is not entitled to
discovery as a matter of ordinary course. See Harris v. Nelson, 394 U.S. 286, 295 (1969). In
Harris, The Supreme Court held that where specific allegations before the court show reason to
27
ARMSTRONGS MOTION FOR DISCOVERY PAGE 1

believe that the petitioner may, if the facts are fully developed, be able to demonstrate that he is
... entitled to relief, it is the duty of the court to provide the necessary facilities and procedures
for an adequate inquiry. 394 U.S., at 300. Habeas Corpus Rule 6 is meant to be consistent
with Harris. See ADVISORY COMMITTEES NOTE ON HABEAS CORPUS RULE 6, 28 U.S.C., p. 479.
Leave of court is required to invoke discovery in a 2255 proceeding and may be granted only
for good cause. See RULES GOVERNING 2255 CASES, Rule 6(a). Petitioner bears the burden
of demonstrating good cause and must allege some material fact to trigger the courts discretion
to grant leave for discovery. See Bracy v. Gramley, 520 U.S. 899, 908-09 (1997). Discovery is
not required if the habeas petition plainly warrants dismissal. See Mayle v. Felix, 545 U.S. 644
(2005). Here, Armstrong suggests that the Mayle v. Felix threshold has been met because this
Court has issued a show cause order.
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At the onset, Armstrong notes that the governments response to this Courts show cause
order failed to address almost all of the Brady violations raised in his 2255 motion. These
violations include:
a) Failure to produce documents showing that the operation of Armstrongs
company was the subject of a prior, exculpatory investigation;
b) Failure to produce documents showing that the 36 audio tapes produced at the
close of trial were actually prepared at the request of the prosecution of this case, contrary to the
express oral representations of AUSA Yamaguchi and the affidavit of SA Hatcher that the tapes
concerned an unrelated investigation;
1
and

1
In its response, the government seems to misconstrue this point as a re-litigation of the
judges evidentiary and continuance rulings on this topic. Armstrong apologizes for any
confusion. To the contrary, the issue is not whether the judge abused his discretion in ruling on
the record before him. Rather, the issue is would the judge have ruled differently if he knew the
tapes in question actually concerned Armstrongs prosecution in this case and were obtained at
the express instruction of AUSA Yamaguchi.
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c) Failure to produce documents concerning the alignment between the bankruptcy
trustee for Hamilton Taft and the governments prosecution team.
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Armstrong requests discovery on these matters as detailed and particularized below.
However, should the Court, having reviewed the evidence already in the record and having
considered the lack of response from the government, be prepared to grant the relief requested
under section 2255, Armstrong withdraws this discovery request as moot.
Concerning item (a), the prior investigation, Armstrong received documents through
FOIA referencing this investigation. [Exhibits p, 1-6, 7]. The documents show that the
investigation closed without a finding of wrongdoing. [Exhibits p, 8-9]. Although this prior
investigation occurred before Armstrongs ownership, a partial FBI 302 shows that cash flow
patterns analyzed in the prior investigation were the same as those occurring while Armstrong
controlled the company. [Exhibits pp. 10-12]. Fortunately, the failure to disclose a prior
favorable investigation is an oddity, but the Fifth Circuit nonetheless had the recent opportunity
to consider the matter in U.S. v. Fernandez.
2
There, a unanimous panel analyzed an undisclosed
investigation under the three familiar factors of Brady. The panel found that the fact of the
investigation was actually well-known during trial with only the results of the investigation
remaining undisclosed. The panel further found that the district judge conducted an in camera
review of the results and found no exculpatory material. Based upon these findings, the panel
held that no Brady violation occurred. Here, of course, the prior Hamilton Taft investigation was
clearly exculpatory yet was never disclosed to Armstrong. Further, the instant situation is more
troubling from a policy perspective because, unlike the Fernandez investigation that looked for
conduct which violated a known law, the inquiry here turned on whether known conduct could

2
559 F.3d 303 (5th Cir. 2009).
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be interpreted as violating a yet-unknown law. [Exhibits p. 13-17; opinion letter stating at page
16 that no case law, regulation, or statute addressed this situation]. Accordingly, Armstrong
requests un-redacted copies of all memoranda, reports, transcripts of oral statements, financial
statements, and other such similar documents which concern the instigation, scope, conduct and
results of the investigation referenced in the letter shown on Exhibit pages 8 and 9.
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Concerning item (b), the audio tapes, an FBI memo received years after conclusion of the
trial shows that AUSA Yamaguchi authorized SA Hatcher to conduct the undercover recording
operation. [Exhibits, p. 18.] This directly contradicts both the sworn affidavit of Hatcher
[Exhibits, p. 19-22] and the express assurances of AUSA Yamaguchi, both oral and written, to
the trial judge and to the Ninth Circuit. Additional documents reveal that the Dallas FBI office
provided significant investigatory support to its San Francisco colleagues. [Exhibits, pp. 23-24;
25; 26].
When the state, through an act of flagrant prosecutorial misconduct,
precludes the introduction of evidence that, had it been admitted, would
undermine the courts confidence in the outcome of a criminal proceeding, it
substantially increases the possibility that a fundamental miscarriage of justice
the conviction of an innocent individualhas occurred. Even more so if the state
by that egregious misconduct precludes the holding of the evidentiary hearing
itself.

Smith v. Baldwin, 510 F.3d 1127, 1156 (9th Cir. 2007)( Reinhardt, J., in dissent). Here,
the trial court relied upon the false representation of the AUSA and the FBI on this important
evidentiary matter. Absent a stipulation from the government that this conduct occurred and was
materially harmful to the defense, Armstrong requires the discovery of certain documents to
expand the 2255 record. Accordingly, Armstrong requests un-redacted copies of all memoranda,
reports, transcripts of oral statements, telephone logs and summary reports, and other such
similar documents flowing between the San Francisco and Dallas offices of the FBI (including
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responsive documents sent by or to the prosecuting AUSA) where the subject of the document
was Armstrong or the company Hamilton Taft.
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Concerning item (c), the alignment between the prosecution and the bankruptcy trustee,
Armstrong requires documents to prove the facts that are suggested by documents in his
possession. As shown by the record in the trial court and the pleadings on file in this habeas
matter, the law of the case issue was significant to all parties. Armstrong certainly argued for
the instruction and the government conceded its materiality with the statement that the requested
instruction would amount to a gutting of the governments case. [Exhibits, pp. 28-30 at 29.]
While the parties utilized the term law of the case in describing the requested instruction, that
doctrine is not fully on point.
In an odd procedural conundrum, the trial judge hearingand the appellate court
reviewingboth Armstrongs criminal matter and the Hamilton Taft bankruptcy case were the
same. Even so, they were two different causes, thus making a law of the case application
difficult if not impossible. In short, Armstrong had no standing to contest the actions in the
bankruptcy case or its appellate proceedings, even though these proceedings directly impacted
his criminal prosecution.
Armstrong respectfully requests that this Court remain mindful that the Ninth Circuit
reversed the trial court and entered a ruling supporting Armstrongs contention in the criminal
matter. While a petition for rehearing was pending, the parties settled their dispute.
3
In response
to motions by the parties, the Ninth Circuit vacated its opinion, thus reinstating the trial courts
orderan order that had been held erroneous. This vacatur is expressly prohibited by Supreme

3
As additional evidence of the materiality of the bankruptcy proceeding to the criminal
prosecution, AUSA Yamaguchi actually authored an amicus brief urging rehearing by the Ninth
Circuit. [Exhibits, pp. 38-39].
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Court precedent barring vacatur by reason of settlement. But Armstrong had no direct
mechanism to address this issue because he was not a party and lacked standing.
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The documents received by Armstrong after trial reveal that the doctrine of collateral
estoppel was available to him in the trial court. Under collateral estoppel, once a court has
decided an issue of fact or law necessary to its judgment, that decision may preclude relitigation
of the issue in a suit on a different cause of action involving a party to the first case. San Remo
Hotel, L.P. v. City and County of San Francisco, Cal., 545 U.S. 323, 336 (2005). In briefing to
the trial court, the government argued that it was not a party to the bankruptcy case and should
not be bound by its holding. However, the government did not reveal its close alignment with
the bankruptcy trustee.
Evidence delivered to Armstrong after trial shows that the government and the
bankruptcy trustee were in privity, thus opening the door for a collateral estoppel argument that
was otherwise unavailable. [Exhibit, p. 31, showing that counsel for the trustee met with AUSA
Yamaguchi to discuss prosecution strategy; pp. 33-35, detailing an FBI meeting at the offices
of the trustee; and pp. 36-37, containing a partial FBI 302 where a witness told the FBI
interviewer that the trustee was doing your work.] Courts are no longer bound by rigid
definitions of parties or their privies for purposes of applying collateral estoppel or res judicata.
Tahoe Sierra Preservation Council, Inc. v. Tahoe Regional Planning Agency, 322 F.3d 1064,
1082 (9th Cir. 2003). In light of documentation showing the trustees participation in the
governments prosecution strategy and assertions that the trustee was doing the work of the FBI,
Armstrong asserts a particularized need for documentation concerning the linkage between the

4
He did, however, try. [Exhibit, pp. 40-41, docket sheet in the bankruptcy matter; and
pp. 42-47, Armstrongs Motion to Recall Mandate to the Ninth Circuit.] The recall motion
overviews the Supreme Court precedent prohibiting vacatur under these circumstances.
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trustee and the prosecution team to conduct a privity analysis for collateral estoppel purposes.
Accordingly, Armstrong requests un-redacted copies of all memoranda, reports, transcripts of
statements, telephone logs and summary reports, and other such similar documents that touch on
the topic of meetings between the FBI, the AUSA, and the Hamilton Taft bankruptcy trustee
where the topic of the meeting was either Armstrong or Hamilton Taft.
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Finally, Armstrong requests discovery on whether his prosecution was improperly
instigated. In its response, the government calls Armstrongs arguments conclusory. The
remedy for a conclusory statement is the discovery of facts sufficient to plead with particularity,
and Armstrong shows good cause for the Court to order this discovery. It is axiomatic that most
of the relevant proof in such situations will be in the governments hands. See Wayte v. U.S.,
470 U.S. 598 (1985) (Marshall, J., dissenting); see also Alderman v. United States, 394 U.S. 165
(1969) ([D]isclosure must be made even though attended by potential danger to the reputation
or safety of third parties or to the national securityunless the United States would prefer
dismissal of the case to disclosure of the information).
Here, documents delivered to Armstrong after trial disclose the involvement of
Representative Pelosi in his prosecution. [Exhibits, pp. 48-51.] Shortly after the prosecution
launched its investigation, FBI Deputy Director Larry Potts sends a status report to Howard
Baker, then a director of Federal Express,
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and copies the report to staff members of Pelosi and
Senator Boxer. [Exhibits, p. 52]. This memo is the only communiqu produced which reveals
contact between Mssrs. Baker and Potts. All documents initiating the involvement of Mr. Potts
were withheld from Armstrongs FOIA production, as were the follow-up reports promised in

5
While the memo was sent to Baker, no corporate officer of Federal Express was on the
distribution. As a Delaware corporation, a Federal Express director is very different from a
corporate officer who would actual run the company. See generally In re Bridgeport Holdings,
Inc., 388 B.R. 548 (Bankr. D. Del. 2008)
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the Potts memo. Armstrong is entitled to discovery on the question of whether pressure from
political leaders deprived him of his right to a disinterested prosecutor. See Clearwater-
Thompson v. Michael A. Grassmueck, Inc., 160 F.3d 1236, 1237 (9th Cir. 1998)(It is
fundamental that the prosecutor of a criminal charge be disinterested. Where that is not the case,
a judgment of conviction is to be reversed without the need of showing prejudice.)
Accordingly, Armstrong requests un-redacted copies of all memoranda, reports, transcripts of
oral statements, telephone logs and summary reports, and other such similar documents flowing
between the San Francisco office of the FBI, main justice, Howard Baker, and any elected
official or staff member of an elected official (including without limitation the persons copied on
the April 3 Potts memo) where the subject of the evidence is Hamilton Taft or Armstrong.
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SUMMARY
[W]here specific allegations before the court show reason to believe that the petitioner
may, if the facts are fully developed, be able to demonstrate that he is ... entitled to relief, it is the
duty of the court to provide the necessary facilities and procedures for an adequate inquiry.
Harris v. Nelson, 394 U.S. 286, 300 (1969); see also RULES GOVERNING 2255 CASES, Rule
6(a)(adopting the Harris standard as the test for good cause.) Armstrong therefore requests an
order from this Court compelling the government to produce:
a) un-redacted copies of all memoranda, reports, transcripts of oral
statements, financial statements, and other such similar documents which concern
the instigation, scope, conduct and results of the prior Hamilton Taft
investigation;

b) un-redacted copies of all memoranda, reports, transcripts of oral
statements, telephone logs and summary reports, and other such similar
documents flowing between the San Francisco and Dallas offices of the FBI
(including responsive documents sent by or to the prosecuting AUSA) where the
subject of the document was Armstrong or the company Hamilton Taft;

c) un-redacted copies of all memoranda, reports, transcripts of
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documents that touch on the topic of meetings between the FBI, the AUSA, and
the Hamilton Taft bankruptcy trustee where the topic of the meeting was either
Armstrong or Hamilton Taft; and

d) un-redacted copies of all memoranda, reports, transcripts of oral
documents flowing between the San Francisco office of the FBI, main justice,
Howard Baker, and any elected official or staff member of an elected official
(including without limitation the persons copied on the April 3 Potts memo)
where the subject of the evidence is Hamilton Taft or Armstrong.

Armstrong respectfully requests that this Court order production of the requested
discovery items.
DATED: August 13, 2009
Respectfully submitted,
/s/ Bill Boyd
BILL BOYD

u.s. Department of Justice
Federal Bureau of Investigation
In Reply, Please ReIer t.o
FIle No
Mr. william T. Mc Givern
united states Attorney
Northern District of California
450 Golden Gate Avenue
P.O. Box 36055
San Francisco, California 94102
San Francisco, CA 94102
February B, 1991
yt ,( ''''''! liI.'6enhtJ/
II nYlDIIIYt{J '1
th11
/1'!uM/ ')7l'N/U
Vi,,1 /til II/If} flo,) '1 htloJ tJ .
Attn: Mr. Michael Yamaguchi
Assistant u.s. Attorney
r'
Re: Chip Armstrong, dba
Hamilton Taft and
company
#1 Market
Spear Tower
San Ca 94105
Fraud by Wirer
Tax raud
00: San Francisco
Dear Mr. Me Givern:
Our office is SUbmitting the following information to
you for a prosecutive opinion as to 'whether a violation of
Federal Law has taken place.
\
\
D
9(;ff-
/q/ .L1 - rJ':: - q '?:J c-<-:- I 11
b7C
Enclosures
The San Francisco Division first became cognizant of
the existence of Hamilton Taft and Company in August of 1988 when
I interviewed at our office. I I was
the co-founder of Hamilton Taft and the other founder was one, -
I I who founded the company in ,1979. For your
information
r
Hamilton Taft is a service company which provides. a
tax paying service on behalf of their clients. Hamilton Taft and
Company collects money from their clients and in turn
pays their clients various and local income
1 - Addressee 'nn,O '""\ I fJt, 1
1 - 196A-2868 I \ , 1/ 'V
PKM/sgc
(2)
b7C
U.S. Department of Justice
Federal Bureau of Investigation
In Reply, Please ReIer to
FIle No
Mr. william T. Mc Givern
Northern District of California
P.O. Box 36055
February B, 1991
yt ,If '''Ildl
II nYlDN"" '1thT7/1'JUM/ m""o
IVI .j.,oJ 1 hr/ol d
Attn: Mr. Michael Yamaguchi
Assistant U.S. Attorney
Re: Chip Armstrong, dba
Hamilton Taft and
Company
#1 Market "Plaza,
Spear Tower
San Frqncisco, Ca 94105
Possi91e Fraud by Wire,
Tax raud
00: San Francisco
Dear Mr. Mc Givern:
Our office is submitting the following information to
you for a prosecutive opinion as to 'whether a violation of
Federal Law has taken place.
\
i
o
--, 9"fj-
./q/LI- q,?..Jc,-:" I""
b7C
Enclosures
The San Francisco Division first became cognizant of
the existence of Hamilton Taft and Company in August of 1988 when
l interviewed at our office. I I was
the co-founder of Hamilton Taft and the other founder was one, .
I I who founded the company in 1979 For your
information, Hamilton Taft is a service company which provides. a
tax paying service on behalf of their clients. Hamilton Taft and
Company collects money from their clients and in turn
pays their clients various and local income
1 - Addressee 'nl\\ 0 ""\ I fJt. - 1
1 - 196A-2B6B ru I \ '1/ 'V
PKM/sgc
(2)
b7C
Exhibits to Motion for Discovery - Page 1
taxes. Unemployment taxes and other various tax liabilities are
also paid by Hamilton Taft. When a company becomes a client of
Hamilton Taft, it notifies Hamilton of the companies payroll
dates, pertinent payroll information, the state in which the
company is required to pay taxes and the type of taxes which need
to be paid and on what dates. Hamilton collects monies from
these various clients and in turn pays the clients tax obligation
whether they be local, county, state and/or federal income taxes,
unemployment taxes and/or other tax liabilities.
b7C I I advised that when a client company enrolls
with Hamilton Taft, the company notifies Hamilton of its payroll
dates, pertinent payroll information the state in which the
to be paid. The company then remits to Hamilton Taft on a timely
basis its payroll tax liability. The client company will also
remit funds to Hamilton Taft which would be used to pay the
aforernentionedtax liabilities. Historically the funds were
either wired to a Hamilton Taft Impound Account each time a
payroll is paid by the company or Hamilton Taft gains access to
the companies account by a depository transfer check.
Hamilton Taft was also responsible for filing all
applicable federal, state, county and local tax filing
information on behalf of its client and pay their various taxes
as they become due for the service Hamilton Taft charges its
clients a fee based on the number of times a client renders a
payroll and the number of areas taxing agencies which have to be
ultimately paid. Hamilton Taft also receives the interest in
which it can generate on the funds its clients deposit with it.
All this information is revealed to the client prior to a
contract being entered into by the client and Hamilton Taft.
This is also done orally by Hamilton Taft's sales
representatives.
As Hamilton Taft grew, the company became concerned
with what its liability may be with the funds they were
collecting on behalf of their clients. Because of this internal
concern in 1981, the firm contacted Baker and McKenzie Attorney's
at Law, 555 California street, San Francisco, California, 94104
and requested that this firm provide Hamilton with an opinion of
the characterization of the funds it was holding on behalf of its
clients for tax payments.
On October 29, 1981, Baker and McKenzie issued an
opinion that basically stated that at the time a payroll is
rendered, that is paid by the employer, the funds representing
the withheld taxes belong to the federal government. The
employer becomes a trustee for those funds and as such the duties
and responsibilities of a trustee are mandated under common law.
2
taxes. Unemployment taxes and other various tax liabilities are
also paid by Hamilton Taft. When a company becomes a client of
Hamilton Taft, it notifies Hamilton of the companies payroll
dates, pertinent payroll information, the state in which the
to be paid and on what dates. Hamilton collects monies from
these various clients and in turn pays the clients tax obligation
whether they be local, county, state and/or federal income taxes,
unemployment taxes and/or other tax liabilities.
b7C I I advised that when a client company enrolls
with Hamilton Taft, the company notifies Hamilton of its payroll
dates, pertinent payroll information the state in which the
to be paid. The company then remits to Hamilton Taft on a timely
basis its payroll tax liability. The client company will also
remit funds to Hamilton Taft which would be used to pay the
aforernentionedtax liabilities. Historically the funds were
either wired to a Hamilton Taft Impound Account each time a
payroll is paid by the company or Hamilton Taft gains access to
the companies account by a depository transfer check.
Hamilton Taft was also responsible for filing all
applicable federal, state, county and local tax filing
information on behalf of its client and pay their various taxes
as they become due for the service Hamilton Taft charges its
clients a fee based on the number of times a client renders a
payroll and the number of areas taxing agencies which have to be
ultimately paid. Hamilton Taft also receives the interest in
which it can generate on the funds its clients deposit with it.
All this information is revealed to the client prior to a
contract being entered into by the client and Hamilton Taft.
This is also done orally by Hamilton Taft's sales
representatives.
As Hamilton Taft grew, the company became concerned
with what its liability may be with the funds they were
collecting on behalf of their clients. Because of this internal
concern in 1981, the firm contacted Baker and McKenzie Attorney's
at Law, 555 California street, San Francisco, California, 94104
and requested that this firm provide Hamilton with an opinion of
the characterization of the funds it was holding on behalf of its
clients for tax payments.
On October 29, 1981, Baker and McKenzie issued an
opinion that basically stated that at the time a payroll is
rendered, that is paid by the employer, the funds representing
the withheld taxes belong to the federal government. The
employer becomes a trustee for those funds and as such the duties
and responsibilities of a trustee are mandated under common law.
2
In addition various state and federal law mandates how a trustee
needs to act in his capacity as a trustee.
Although Hamilton Taft is not the employer but an
independent agent, it was the opinion of Baker and McKenzie that
the funds are still trust funds and the holder of these funds
(Hamilton Taft) still bears the responsibility of a trustee.
...::
::l
r

()
-

When interviewed by the Federal Bureau of Investigation
(FBI) in August of 1988, I I went so far as to stat,e that some <:i::i:::-
individuals representing clients have stated that the collected
funds need to be put in a bank account separate from other funds
of that particular entity. In during his tenure at lJ
Hamil ton Taft, Hamil ton ,Taft considered themselves to be trustees "'-t..it
, for those funds on behalf of the various taxing agencies. :L:"t>:;;
. i.'
By way of background information, I I stated that in
August of 1984, Hamilton Taft was sold to the Cigna.Corporation
the large insurance conglomerate out of Philadelphia,
Pennsylvania and Hartford, Connecticut. At that time, Hamilton
Taft had approximately 900 corporate clients and was -handling on
'"a daily basis, approximately $100,000,000 in client deposits.
"'.
According to a personality conflict developed
b7C between himself and one formally Executive Vice
President of cigna W 0 was placed by that corporation
as the person in charge of Hamilton Taft's operation. Because of
I
tbe persynality differences landl lonel I
Jwas appointed as President of Hamilton Taft.
Shortly after leaving ,Hamilton Taft in the latter
of ,1stated he became aware th.at Hamilton Taft stc;rted 1
to lose approx1mately $100,000 per month. He noted that whlle he (.
was President of Hamilton Taft, that the company although not
highly profitable, was able to stay in a slight profit position.
He understands that Hamilton Taft hired another President but'the
company continued to lose, money in C.igna and soon thereafter
began to look for a buyer for Hamilton "Taft. In December of
1987, Maxphrama Incorporated of Dallas, Texas paid $500,000 to
Cigna Corporation as a down payment for the purchase of Hamilton
Taft. On February 29, 1988, Maxphrama Incorporated completed 'its
purchase of Hamilton Taft from Cigna Corporation. / .
____ stated to onel I former Executive
Vice President in charge of operations for Hamilton Taft provided
him with the foregoing information. r--1allegedly toldl Ion
February 27,1988 I ! transfer
$5,000,000 by wire transfer to a brokerage house in New
Louisiana called the Howard Wiel Labluisse Friedricke Investment
Security Incorporated. I that this wire
transfer was td'"purchase a Treasury B111 at 5 1/2% interest. rI
allegedly asked I Iwhy she was purchasing a Treasury" Birr--
3
In addition various state and federal law mandates how a trustee
needs to act in his capacity as a trustee.
Although Hamilton Taft is not the employer but an
independent agent, it was the opinion of Baker and McKenzie that
the funds are still trust funds and the holder of these funds
(Hamilton Taft) still bears the responsibility of a trustee.
".
'.
\;. ..:::
;.- :3
'" r
-.F-...J:....
()

L

c.. 'l;.
)C':;'
When interviewed by the Federal Bureau of Investigation
::" (FBI) in August of 1.988, I I went so far as to state that some
"':. individuals representing clients have stated that the collected
,: funds need to be put in a bank a'ccount separate from other funds .,...
:-\. ';:" of that particular entity. In addition, during his tenure at :i;.
Hamilton Taft, Hamilton ,Taft considered themselves to be trustees '-..I...Q?,i
-'. for those funds on behalf of the various taxing agencies.
,
Byway of background information, I I stated that in
August of 1984, Hamilton Taft was sold to the Cigna.Corporation
the large insurance conglomerate out of philadelphia,
Pennsylvania and Hartford, Connecticut. At that time, Hamilton ,..r'
Taft had approximately 900 corporate clients and was handling on
"a daily basis, approximately $100,000,000 in client deposits.
According to a personality conflict developed
b7C between himself and one formally Executive Vice
President of cigna w 0 was placed by that corporation
as the person in charge of Hamilton Taft's operation. Because of
I
the persynality differences between I I and I loneI I
was appointed as President of Hamilton Taft.
-----
Shortly after leaving Hamilton Taft in the latter
of 1985, I Istated he became aware that Hamil ton Taft started I
to lose approximately $100,000 per month. He noted that while he ('
was President of Hamilton Taft, that the company although not
highly profitable, was able to stay in a slight profit position.
He understands that Hamilton Taft hired another President but'the
company continued to lose money in C.igna and soon thereafter
began to look for a buyer for HamiltonTaft. In December of
1987, Maxphrama Incorporated of Dallas, Texas paid $500,000 to
Cigna Corporation as a down payment for the purchase of Hamilton
Taft. On February 29, 1988, Maxphrama Incorporated completed 'its
purchase of Hamilton Taft from Cigna Corporation. '
I stated to onel I former Executive
Vice President in charge of operations for Hamilton Taft provided
him with the foreqoin: information. r--1allegedly toldl Ion
February 27,1.988 thatC I I transfer
$5,000,000 by wire transfer to a brokerage house in New
Louisiana called the Howard Wiel Labluisse Friedricke Investment
Security Incorporated. I that this wire
transfer was to' purchase a Treasury Blll at 5 1/2% interest. rI
allegedly asked I Iwhy she was purchasing a
3
fLit, Ii fJk t dlnJ 0fd /;(JJ
(J W has /&../-l,,{/ nJ I IS IIJIJ c.J
d."pbdJ....? /w //JO!; ! !d,/.,[
aJtfo/f ;t:;'; til IhJ r:.p j/
J I
with such a short yield period, I I would not respond to
Mayl s question and just told him to do it. c::::::J told! I that
the $5,000,000 was funds which were put on
deposit with Hamilton Taft. at the time the
transfer was made, Hamilton Taft did not have any funds of its
own.
hJ--l
:--\"'"
In order to assist you in preventing your opinion from 7 fs
a historical point of Yle are enclosing a copy of the actual r
FD-302 noting interview Of, Iwith appropriate copies of -J '1\
documents provided byl to our agent. --/-t
G
__I noted that the form 8-K report which,. was filed in -'-'.
the Securities Exchange Commission (SEC) by Maxphrama for the
purchase of Hamilton Taft, Maxphrama states it has used a
$5,000,000 Treasury Bill to secure a promissory note which funds
were used to conclude the of Hamilton Taft from Cigna
Corporation. According tal Itold him that these funds
had been transferred to brokerage firm from customer funds
in the custody of Hamilton Taft. According toL' . also
advised thatl
J
; - Ihad directed him to wire transfer $50,000
in an unrelated transaction.
b7C
b7C
I was also interviewed in December of
1988. by Hamilton Taft as Treasurer-
Manager of the firm. I I is a Certified Public Accountant
(CPA) having become a CPA in the state of :': t986.
I Ibasically stated that shortly after became
President of Hamilton Taft, she told him t a sewall e making
the day to day investment decisions regarding the funds of
Hamilton Taft. She instructed him not to make any investment
unless she okayed them. He explained to her that any monies
collected from the clients only had a two or three day "window"
during which they could be invested prior to having to be paid to
taxing entities. Thereafter, all investments he made, other than
into commercial paper, were done at the direction L
I I In connection with his responsibilitiesC:
assist in the preparation of the monthly financial statements for
Hamilton Taft. Each month a meeting would be held to discuss a
just completed financial statement for the previous month. At
the close of such a meeting in April, 1988, after the close of
the April financial statements,l lstated that he had a
conversation with in her office. During this
conversation was bragging on the financial strength of
Maxphrama an ow axphrama was in the process of purchasing C &
H Nationwide Incorporated, a specialized trucking company.
Apparently, in order to herr statements and the
strength of Maxphrama, she showedL _ the Hamilton financial
statement which listed Hamilton Taft's assets in excess of
30,000,000. r Ifinancial picture was quite different than
the financial statements which he had prepared for Hamilton from
the month of April, 1988. x -,
i,"'" t"'"'' ''''U' k'" '.' I
b7C
b7C
with such a short yield period, I I would not respond to
May's question and just told him to do it. c:::Jtold! I that
the $5,000,000 was funds which were put on
deposit with Hamilton Taft. Ithat at the time the
transfer was made, Hamilton Taft did not have any funds of its
own.
noted that the form a-K report which. was filed in -"',
the Securities Exchange Commission (SEC) by Maxphrama far the \
purchase of Hamilton Taft, Maxphrama states it has used a \
$5,000,000 Treasury Bill to secure a promissory note which funds u
i
were used to conclude the of Hamilton' Taft from Cigna
Corporation. According to 1 Itold him that these funds
had been transferred to brokerage firm from customer funds
in the custody of Hamilton Taft. According to L' . I also f
advised that 1-; . Ihad directed him to wire transfer $50,000 i
in an unrelated transaction. !
In order to assist you in preventing your opinion from 7 ..,f,.
a historical point of are enclosing a copy of the actual r - ,
FD-302 noting interview of, Iwith appropriate copies of -J
documents provided by' to our agent. -,,/'r (>,
(:!l.
'-'
!,
l was also interviewed in December of
1988. by Hamilton Taft as Treasurer-
Manager of the firm. I I is a Certified Public Accountant
(CPA) having become a CPA in the state of ta:if:rnia t986.
I Ibasically stated that shortly after became \<
President of Hamilton Taft, she told him t a s e weu e making
the day to day investment decisions regarding the funds of
Hamilton Taft. She instructed him not to make any investment
unless she okayed them. He explained to her that any monies
collected from the clients only had a two or three day "windowll
during Which they could be invested prior to having to be paid to
taxing entities. Thereafter, all investments he made, other than
into commercial paper, were done at the direction :D L
I In connection with his responsibilitiesC: .Jwould
assist in the preparation of the monthly financial statements for
Hamilton Taft. Each month a meeting would be held to discuss a
just completed financial statement for the previous month. At
the close of such a meeting in April, 1988, after the close of
the April financial statements, I lstated that he had a
conversation with in her office. During this
conversation was bragging on the financial strength of
Maxphrama an ow axphrama was in the process of purchasing C &
H Nationwide Incorporated, a specialized trucking company.
Apparently, in order to her, statements and the
strength of Maxphrama, she showedL _ the Hamilton financial
statement which listed Hamilton Taft's assets in excess of
30,000,000. r Ifinancial picture was quite different than
the financial statements which he had prepared for Hamilton from
the month of April, 1988. -{t7,:,:
"'t.'.:' """... 4

lin looking at the financial

statement showed him that someone had taken the April,
1988 statements of Hamilton and re-did them. The
financial statement prepared for Hamilton Taft showed its
reta)U:d earnt'ngs at approximately $200,000. , Istated he
toldL _ . during this conversation that he thought the
statements which she had showed him for Hamilton Taft
were a fabrication and not of Hamilton Taft's
actual financial condition. _ Jreplied that the people in
Dallas were taking care of these statements.
that the above incident concerning what he
considered false and misleading financial statements was a major
factor in his ultimate decision to sever his employment with
Hamilton Taft. A copy of the interview form FD-302 the interview
oil I is incorporated as part of this communication.
It should also be noted that onel I was
interviewed in september of 1988 regarding his former employment
with Hamilton Taft. At the time of this interview,c::J stated
that he was self-employed as a consultant in
employment taxes. He stated that prior to being self-employed,
he was employed for five years with Hamilton Taft in San
Francisco as their Chief Operations Officer and Executive Vice
President. A copy of the interview conducted withc::J is
attached hereto.
This matter was informally presented to the united
states Attorney's office which concluded that there was a lack of (.
evidence to support the violation of any federal law at that
time. Our case was subsequently closed. I IttI j J.'j(J ;:' .. ". /$. ' ...-,..
. .'"
On December 24, 1990
7
-the. receiy..etf complaint S/,.;
Icall from one I "and CPA. I I
( stated that he was the current Controller of Hamilton Taft and
that he was calling the FBI because he felt that his employer was). < }11
cheating the Internal Revenue Service - (IRS) by not paying I-J; ,'iiI
owing to not only the but other taxing entities J
wer,e due. I - that at least $20,000,000 J.n r
JIJ
' !
funds have been transferred to accounts controlled by Chip .
Armstrong, the new CEO of Hamilton Taft. I I stated that
I
tbe:e f"rdS were used to purchase one or more companies in Texi?-s.
stated that Hamilton Taft had approximatel: 100 .
emp oyees in San Francisco in July of 1990. Itadvised
Armstrong is basically operating a Ponzi scheme, the
tens of millions of dollars which are sent to Hamilton Taft for
the ultimate payment of tax liabilities sustained by Hamilton
Taft I s clients. I has documentation, to support his claims t;
and is scheduled to present same to rBI on Jar:uary 13"
at 10: 00 am. I I furth
7
r stated that th
7
re an , i.;
procedure for lul11ng letters to c11ents who actually
\
comPlain to Hamilton Taft when they, the client, receive a late
"" ;=
s.;- 'R
5
. :

'(";,:""1...
.. t"- 1 .;::"....
, ...... t;,.i

'-:
.... '1-,
J

tol lin looking at the financial

statement showed him that someone had taken the April,
1988 statements of Hamilton and re-did them. The
financial statement prepared for Hamilton Taft showed its
reta)u:d earnt'ngs at approximately $200,000. I Istated he
toldL _ . during this conversation that he thought the
statements which she had showed him for Hamilton Taft
were a fabrication and not of Hamilton Taft's
actual financial condition. L Jreplied that the people in
Dallas were taking care of these statements.
that the above incident concerning what he
considered false and misleading financial statements was a major
factor in his ultimate decision to sever his employment with
Hamilton Taft. A copy of the interview form FD-302 the interview
ofl I is incorporated as part of this communication.
It should also be noted that onel I was
interviewed in September of 1988 regarding his former employment
with Hamilton Taft. At the time of this interview,c::J stated
that he was self-employed as a consultant in
employment taxes. He stated that prior to being self-employed,
he was employed for five years with Hamilton Taft in San
Francisco as their Chief Operations Officer and Executive Vice
President. A copy of the interview conducted withc::J is
attached hereto.
This matter was informally presented to the United
States Attorney's office whioh concluded that there was a lack of (
evidence to support the violation of any federal law at that
time. Our case was subsequently closed. /.1'1 j OL..... !'.' .'..-,.
rJUV--i_"'''' _.fJ.
M
:.,.....
On December 24, 1990 , -the office receiyetf complaint SA) }';:A,
Icall from one I CPA. I I
I stated that he was the current Controller of Hamilton Taft and
that he was calling the FBI because he felt that his employer was} . }11
cheating the Internal Revenue Service -(IRS) by not paying 1"1 I,ll
owing to not only the but other taxing entities wh
7
n th
7
y 1.
wer,e due. I ladv1sed that at least $20,000,000 1n c11ent (l/I' !
funds have been transferred to accounts controlled by Chip ':ljl,jj .
Armstrong, the new CEO of Hamilton Taft. I I stated that
I
the;e turdS were used to purchase one or more companies in
_ stated that Hamilton Taft had approximatel: 100 ,
emp oyees in San Francisco in July of 1990. Itadvised
Armstrong is basically operating a Ponzi scheme, the
tens of millions of dollars which are sent to Hamilton Taft for
the ultimate payment of tax liabilities sustained by Hamilton
Taft's clients. I I has documentation, to support his claims t;
and is scheduled to present same to FBI on Jar;uary 13" <;;
at, 10: 00 am. I Ifurth
7
r stated that th
7
re 15 an ongolng , ;:; s.:
procedure for prov1d1ng lul1J.ng letters to cll.ents who actually ,_
\
complain to Hamilton Taft when they, the client, receive a late
"-""
b: r, '.:: ....
'. \',
5 t- ." .. \
'it.; :--'0,

l .::......
, ... \/
'.

'"
b7e
notice from the IRS. , ~ states that a letter on Hamilton
Taft stationery is generated to the IRS berating the IRS for
having made an error in showing at least the front copy of a
check drawn on Hamilton Taft/s checking account allegedly
demonstrating that payment was actually made on a particular date
for a particular tax liability_ These checks were never sent to
the IRS but a copy of the letter was sent to the client, thereby
stalling the clients further inquiries.
Please contact us at your earliest convenience so that
we might discuss this matter in greater detail.
Sincerely yours,
RICHARD W. HELD
Special Agent in Charge
6*
By:
b7C
b7e
notice from the IRS. I I states that a letter on Hamilton
Taft stationery is generated to the IRS berating the IRS for
having made an error in showing at least the front copy of a
check drawn on Hamilton Taft's checking account allegedly
demonstrating that payment was actually made on a particular date
for a particular tax liability. These checks were never sent to
the IRS but a copy of the letter was sent to the client, thereby
stalling the clients further inquiries.
Please contact us at your earliest convenience so that
we might discuss this matter in greater detail.
sincerely yours,
RICHARD W. HELD
special Agent in Charge
b7C
6*
By:
I (J!.P/f!6 I
Special Agent
(l2/311199S)
FEDERAL BUREAU OF INVESTIGATION
Precedence: PRIORITY
To: San, FranClSCO
Date: 02/10/1997
Attn: SA Will Hatcher
From: Sacramento
Contact: IAI
Approved By:
Drafted By:
_________1epg
Case ID i: 196D-SF-93255
Title: CONNIE CHIP ARMSTRONG, JR.;
I IFormerly dba
HAMILTON-TAFT COMPANY
FBW (D); MF; ITSP
00: SF
Synopsis: of FD-302s and inserts enclosed from Sacramento
ille 196B-1364.
Reference: 196D-SF-93255 Serial 124
/23/86
6
4 - 6/18/86
5/86
8/7/86
on 9/17/86
7
/25/87
7
Enclosures: FD-302 of
"FD-302 of
FD-302 of
FD-302 of
Insert a-c
FD-302 of
FD-302 of
FD-302 of
FD-302 of
FD-302 of
FD-302 of
Ion 2/19/86
Ion 3/12/86
Ion 5
Ion 6/19/8
Oreoon from 5/1
Ion 6/2
Ion
I
Ion 3/3l!8
Ion 3
Ion 4/7/8
Details: A review of closed Sacramento ille 196B-1364 revealed
the above enclosed FD-302s and inserts .

Precedence: PRIORITY
To: San FranC1SCO
Date: 02/10/1997
Attn: SA Will Hatcher
From: Sacramento
Contact: IA I
Approved By:
Dra.fted By: Iepg
Case ID #: 196D-SF-93255
Title: CONNIE CHIP ARMSTRONG, JR.;
I IFormerly dba
HAMILTON-TAFT COMPANY
FBW (D) i MF; ITSP
00: SF
synopsis: Caples of FD-302s and inserts enclosed from Sacramento
flle 196B-1364.
Reference: 196D-SF-93255 Serial 124
/23/86
6
4 - 6/18/86
5/86
8/7/86
on 9/17/86
7
/25/87
7
Enclosures: FD-302 of
"FD-302 of
FD-302 of
FD-302 of
Insert at:.
FD-302 of
FD-302 of
FD-302 of
FD-302 of
FD-302 of
FD-302 of
Ion 2/19/86
Ion 3/12/86
Ion 5
Ion 6/19/8
Euaene reaon from 5/1
Ion 6/2
Ion
I
Ion 3131/8
Ion 3
Ion 4/7/8

Details: A review of closed Sacramento flle 196B-1364 revealed
the above enclosed FD-302s and inserts .

U.S. Departmen ..Jf Justice
In Reply, PleaBe Reier to
Ftle No
Federal Bureau of InveStlgatlOn
September 23, 1988
Joseph P. Russonie11o
Northern District of california
Box 36055
Attention: Mr. Floy Dawson
Assistant u.s. Attorney
Re: Il...-. _
PRESIDENT, dba
HAMILTON TAFT AND COMPANY,
SAN FRANCISCO 1 CALIFORNIA ;
UNKNOWN SUBJECTS, dba
MAX PHARMA, INCORPORATED,
200 CRESCENT COURT, SUITE 1375,
TEXAS;
POSSIBLE WIRE FRAUD
Dear Mr. Russoniello:
I
Referenced conference between Assistant u.s. Attorney
(AUSA) Michael and Special Agent (SA) J I
on September 14, 1988.
This letter is to confirm the above referenced
conference in which SAl Idelineated the details of the
allegation and the OI his investigation to date regarding
captioned matter. AUSA Mike Yamaguchi indicated based on what
was presented to him as well as his examination of documentation
pertinent to the captioned matter, there was insufficient
1 - Addressee
- San ((196A-2868)
'R'ES Ibfo
(2)
I \
{J.
U.S. Departmen, ..If Justice
In Reply, Ple:lBe Reier to
File No
Federal Bureau of InvesngatlOn
September 23, 1988
Joseph P. Russoniello
united States Attorney
Northern District of california
Box 36055
Attention: Mr. Floy Dawson
Assistant U. S. Attorney
Re: ....,j
PRESIDENT, dba
HAMILTON TAFT AND COMPANY,
SAN FRANCISCO, CALIFORNIA;
UNKNOWN SUBJECTS, dba
MAX PHARMA, INCORPORATED,
200 CRESCENT COURT, SUITE 1375,
TEXAS;
POSSIBLE WIRE FRAUD
Dear Mr. Russoniello:
I
Referenced conference between Assistant U.S. Attorney
(AUSA) Michael and Special Agent (SA) I I
on September 14, 1988.
This letter is to confirm the above referenced
conference in which SAl Idelineated the details of the
allegation and the or his investigation to date regarding
captioned matter I AUSA Mike Yamaguchi indicated based on what
was presented to him as well as his examination of documentation
pertinent to the captioned matter, there was insufficient
1 - Addressee
,1 - San ((196A-2868)
ItES/bfo
(2)
.
{ ,
{J.- Exhibits to Motion for Discovery - Page 8
Mr. Joseph P. RU5soniello
evidence to support a violation of federal law at this time and
he would therefore decline prosecution. AUSA Yamaguchi added if
further information could be obtained regarding the allegations
presented, he would reconsider his opinion.
Based on AUSA Yamaguchi's declination, our office will
close its investigation into the captioned matter.
Very truly yours,
RICHARD W. HELD
2*
By: I I
Spec2al Agent
b7C
Mr. Joseph P. RU5soniello
evidence to support a violation of federal law at this time and
he would therefore decline prosecution. AUSA Yamaguchi added if
further information could be obtained regarding the allegations
presented, he would reconsider his opinion.
Based on AUSA Yamaguchi's declination, our office will
close its investigation into the captioned matter.
Very truly yours,
RICHARD W. HELD
2*
By: I I
Spec2al Agent
b7C
fD-302a 11-15-83)
196A-SF-93255
b7C
of FD-302 of On 2/ B/ 9 3 J Page 2 ---- ......1...- _-----=.-----.;____ _ _
She said that it was apparent to her within the first
twenty-four hours while reviewing Hamilton Taft financial records
that Hamilton Taft was in a cash flow crisis. She said it was
then her job to look at investments and/or loans to determine the
likelihood of these assets generating any She was to
insure that any future capital outflow was ureal investments".
She found out that almost immediately after Maxpharma
purchased Hamilton Taft from cigna corporation that Hamilton Taft
client funds were wire transferred out of Hamilton Taft. These
funds were in the form of notes and were booked at Hamilton Taft
as investments. But she saw no evidence of an attempt to collect
on these notes by Hamilton Taft. She said that some of the
transactions were incredibly complicated.
She said that she had frequent meetings concerning
these notes with Hamilton Taft officers. She discovered that
I I (PHD), Chief Financial Officer,l I
PHO), Director of Operations, I 1President
Comptroller, were the only Hamilton Taft
a knew about the loans by Hamilton Taft which Were
outstanding and uncollected.
She further explained that she recalls ten to fourteen
million dollars in loans had left Hamilton Taft with no payments
returning to Hamilton Taft. She discussed these loans with
I Ibut not with I , All of these loans were
"brokered
ll
through the Maxpharma office in Dallas, Texas. She
discovered that Maxpharma officers would telephoner 1at
Hamilton Taft and instruct her to wire money to
Dallas a9d then the fact.Maxpharma would then send the
b7C notes toL Jln San FranC1SCO.
She felt that the officers at Hamilton Taft were
protective I oftenl accuse
I IOf raiding the funds of Hamilton Taft.1 )was not
very helpful in her audit. She felt that this was because he was
the person who actually wire transferred the funds from Hamilton
alIas. She understood the process being that (FNU)
of Maxpharma in Dallas would
o transfer un s an c::: Iwould then instruct
r---...... the monies. I a director, often
got irate at her inquiries regarding Hamilton Taft loans. A day
or two after she started working at Hamilton Taft she discovered
lD-302a (R.:v 11-15-83)
196A-SF-93255
b7C
:onllnuallon of FD-302 or
I 0 2/8/93 p 2 --11.... .....,j n_------'----''-- , age _
She said that it was apparent to her within the first
twenty-four hours while reviewing Hamilton Taft financial records
that Hamilton Taft was in a cash flow crisis. She said it was
then her job to look at investments and/or loans to determine the
likelihood of these assets generating any income. She was to
insure that any future capital outflow was ureal investments
lf
She found out that almost immediately after Maxpharma

purchased Hamilton Taft from cigna corporation that Hamilton Taft
client funds were wire transferred out of Hamilton Taft. These
funds were in the form of notes and were booked at Hamilton Taft
as investments. But she saw no evidence of an attempt to collect
on these notes by Hamilton Taft. She said that some of the
transactions were incredibly complicated.
She said that she had frequent meetings concerning
these notes with Hamilton Taft officers. She discovered that
I I (PHO) , chief Financial Officer, I I
(PHD), Director of Operations, I lPresictent
I(PHO), Comptroller, were the only Hamilton Taft
that knew about the loans by Hamilton Taft which Were
outstanding and uncollected.
She further explained that she recalls ten to fourteen
million dollars in loans had left Hamilton Taft with no payments
returning to Hamilton Taft. She discussed these loans with
I Ibut not withl I All of these loans were
"brokered
lJ
through the Maxpharma office in Dallas, Texas. She
discovered that Maxpharma officers would telephoner 1 at
Hamilton Taft and instruct her to wire money to in
Dallas a9d then the fact.Maxpharma would then send the
b7C notes toL Jln San FranC1SCO.
She felt that the officers at Hamilton Taft were
protective ofl I oftenl accuse
I 10f raiding the funds of Hamilton Taft.1 jwas not
very helpful in her audit. She felt that this was because he was
the person who actually wire transferred the funds from Hamilton
allas. She understood the process being that (FNU)
of Maxpharma in Dallas would
o transfer un s an c::: Iwould then instruct
the monies. I (PHD), a director, often
got irate at her inquiries regarding Hamilton Taft loans. A day
or two after she started working at Hamilton Taft she discovered
FD-302u (Re.v 11-15-83)
196A-SP-93255
ContinuatIOn of FD-302 of
On __2-:,./_
8
....:;/_
9
_
3
PAgo __3__
J7C
a "funny" transaction where two to three million dollars of
Hamilton Taft funds was wired to Dallas, Texas. She understood
thatl working on some deal to raise funds.
She was told that these funds were supposedly to be used to
"recapitalize" Hamil ton Taft. I linstructed her that the
details of the transaction was none of her business
l
but she
believes that the funds went to either Amerimac Company in
California or to Gulftex, a real estate business in Texas.
I that from her examination of Hamilton
Taft financ1ai records she discovered that all the funds sent out
for these loans had to be dedicated Hamilton Taft client funds.
She said that' lhad to know that
Hamilton Taft client funds were being used to finance these
investments. She understood thatl lactually assisted in
the creation of the notes to Hamilton Taft. One of these loans
in 1988 in the amount of approximately $200,000.00 was to a
CONNIE CHIP ARMSTRONG, JR. business in Dallas, Texas by the name
of Dresdner Corporation (PHD).
She said thatl 1 (PHO) I Sales Manager, and
Vice Presldent of dperations, at Hamilton
Taft were both concerned and upset at the news of the loans.
These loans violated Hamilton Taft's written cash management
policy which stated that Hamilton Taft can onJY invest client
funds in safe overnight type of investments. I I said that
she recalls that most of the notes for the 1988 loans were for a
90 or 180 day period. She stated that in or around March 1989
I Iwas fired byl I resigned.
She said that Arthur Anderson C.P.A. firm withdrew from
the Hamilton Taft audit a couple of days after they gave Hamilton
Taft their appointment letter. At that point she said that
management at Hamilton Taft felt that Hamilton Taft did not have
enough interest money to pay Arthur Anderson. Therefore,
Hamilton Taft did not receive any audited financial statements to
give the increasingly concerned Hamilton Taft clients. EDS one
of Hamilton Taft's largest clients was requesting audited
financial statements.
I 'said that she started taking legal action on
the debtors at the notes to Hamilton Taft. She was taking
aggressive collection felt that she could have
collected on the Amerimac'L----Jandl rates if not for
FD-302u (Re.v 11-15-83)
196A-SP-93255
ContinuatIOn of FD-302 of
On __2-:,./_8....:;/_9_3 PAgo __3__
J7C
a "funny" transaction where two to three million dollars of
Hamilton Taft funds was wired to Dallas, Texas. She understood
thatl working on some deal to raise funds.
She was told that these funds were supposedly to be used to
"recapitalize" Hamil ton Taft. I linstructed her that the
details of the transaction was none of her business
l
but she
believes that the funds went to either Amerimac Company in
California or to Gulftex, a real estate business in Texas.
I that from her examination of Hamilton
Taft financ1ai records she discovered that all the funds sent out
for these loans had to be dedicated Hamilton Taft client funds.
She said that' lhad to know that
Hamilton Taft client funds were being used to finance these
investments. She understood thatl lactually assisted in
the creation of the notes to Hamilton Taft. One of these loans
in 1988 in the amount of approximately $200,000.00 was to a
CONNIE CHIP ARMSTRONG, JR. business in Dallas, Texas by the name
of Dresdner Corporation (PHD).
She said thatl 1 (PHO) I Sales Manager, and
Vice Presldent of dperations, at Hamilton
Taft were both concerned and upset at the news of the loans.
These loans violated Hamilton Taft's written cash management
policy which stated that Hamilton Taft can onJY invest client
funds in safe overnight type of investments. I I said that
she recalls that most of the notes for the 1988 loans were for a
90 or 180 day period. She stated that in or around March 1989
I Iwas fired byl I resigned.
She said that Arthur Anderson C.P.A. firm withdrew from
the Hamilton Taft audit a couple of days after they gave Hamilton
Taft their appointment letter. At that point she said that
management at Hamilton Taft felt that Hamilton Taft did not have
enough interest money to pay Arthur Anderson. Therefore,
Hamilton Taft did not receive any audited financial statements to
give the increasingly concerned Hamilton Taft clients. EDS one
of Hamilton Taft's largest clients was requesting audited
financial statements.
I 'said that she started taking legal action on
the debtors at the notes to Hamilton Taft. She was taking
aggressive collection felt that she could have
collected on the Amerimac'L----Jandl rates if not for
FD-30la (Rev 11-15-83)
196A-SF-93255
Conunuullon of FD-302 of
_ ~ ~ ~ ! ! ! ! ! ! ! ! ! ! ! ~ ,---- , On __2-.;.1_
8
.....;1_9_ 3 Pngc: _4_
the ARMSTRONG takeover of Hamilton Taft in March of 1989. She
said that the I ~ and Amerimac notes totaled approximately $6
million dollars. She personally told ARMSTRONG at the Petit and
Martin law offices about the notes outstanding and her collection
efforts at Hamilton Taft. She told him that he should be able to
collect on some of these loans. She said that he did not seem
interested.
She said that in March of 19891 I concluded that
he was not able to recapitalize Hamilton Taft and that Hamilton
Taft would have to file for Chapter Seven bankruptcy protection
b7C so he conceded Hamilton Taft to ARMSTRONG 4 She recalls a $20
million dollar figure being used at Hamilton Taft around the time
ARMSTRONG took control of Hamilton Taft. She said that the $20
million dollars represented the negative capital and the negative
cash flow at Hamilton Taft. She said that she felt at that time
that this much capital would be necessary to keep Hamilton Taft a
viable company. The financial condition of Hamilton Taft was
constantly being communicated to ARMSTRONG and his attorneys
during the legal actions. I 'said that she sat through
all of the depositions during ARMSTRONG's legal action to gain
control of Hamilton Taft.
She said that she understood that ARMSTRONG's plan for
Hamilton Taft was to recapitalize Hamilton Taft by investing $20
million dollars, rehirel Ito satisfy Wells Fargo Bank and
expand Hamilton Taft's customer base to infuse more revenue into
Hamilton Taft.
FD-30la (Rev 11-15-83)
196A-SF-93255
Conunuullon of FD-302 of
_ ~ ~ ~ ! ! ! ! ! ! ! ! ! ! ! ~ ,---- , On __2-.;./_8.....;/_9_3 Pngc: _4_
the ARMSTRONG takeover of Hamilton Taft in March of 1989. She
said that the I ~ and Amerimac notes totaled approximately $6
million dollars. She personally told ARMSTRONG at the Petit and
Martin law offices about the notes outstanding and her collection
efforts at Hamilton Taft. She told him that he should be able to
collect on some of these loans. She said that he did not seem
interested.
She said that in March of 19891 I concluded that
he was not able to recapitalize Hamilton Taft and that Hamilton
Taft would have to file for Chapter Seven bankruptcy protection
b7C so he conceded Hamilton Taft to ARMSTRONG 4 She recalls a $20
million dollar figure being used at Hamilton Taft around the time
ARMSTRONG took control of Hamilton Taft. She said that the $20
million dollars represented the negative capital and the negative
cash flow at Hamilton Taft. She said that she felt at that time
that this much capital would be necessary to keep Hamilton Taft a
viable company. The financial condition of Hamilton Taft was
constantly being communicated to ARMSTRONG and his attorneys
during the legal actions. I 'said that she sat through
all of the depositions during ARMSTRONG's legal action to gain
control of Hamilton Taft.
She said that she understood that ARMSTRONG's plan for
Hamilton Taft was to recapitalize Hamilton Taft by investing $20
million dollars, rehirel Ito satisfy Wells Fargo Bank and
expand Hamilton Taft's customer base to infuse more revenue into
Hamilton Taft.
:..&. = ..... .. :.
'- ':-"'C,-.
.. ::.l:e.... l'r.,;
"'H: .... C
-""' ... G";a ... a.!: .

::r: .. - .
,:,:... ... . ...:. 9":",:":'
:- o
"1I: ruPt'
:,c .. ( ,,
"O .. G ..
.: .... =CN
.... 0'0
...........
Octc=er 19, 1981
Mr. :iarc Paiva
Taft & COffi?any
1255 Post Street
Re: Charac:erization of Funds by Employer
'E'or Tax Payments
Dear Marc:
Per your request, this letter Q1SCUSSes the characteri-
zation of funds withheld by employers from employee pay
checks in satisfaction of federal and income taxes,
Social Security taxes, and state insurance '.
taxes. This letter is limited to a discussion of the In-
ternal Revenue Code ("I.R.C."), California Revenue and
Taxation Code ("Cal. Rev. & Tax. Code"), ;:he California
Unemployment Insurance Code ("Cal. U. Com. Code"), and the
general responsibilities and duties of a trustee as reflected
in the California Civil Code ("Cal. Civ. Code").
An employer is required to withhold from the wages of
employees amounts in respect of federal income taxes (I.R.C.
3402], Social Security taxes [I.R.C. 3102], state income
taxes [Cal. U. Corn. Code 13020], and state unemployment
insurance "taxes [Cal. U. Com. Code 986]. The employer is
liable for the deduction and witr.holding of taxes. I.R.C. 5
3403: Cal. U. Corn. Code 13021.
Characterization of Withheld Funds
Funds that are withheld or collected as income tax or
Social Security Tax are to be held by the employer as " a
special f:..1nd in trust for the United States." LR.C. 750l.
u.s ..... Hill, 368 F.2d 617,66-2 ::.S.T.C. at 87382 (5th
:..&. = ..... .. :.
'- ':-"'C,-.
.. ::.l:e.... l'r.,;
"'H: .... C
-""' ... G";a ... a.!: .

::r: .. - .
,:,:... ... . ...:. 9":",:":'
:- o
"1I: ruPt'
:,c .. ( ,,
"O .. G ..
.: .... =CN
.... 0'0
...........
Octc=er 19, 1981
Mr. :iarc Paiva
Taft & COffi?any
1255 Post Street
Re: Charac:erization of Funds by Employer
'E'or Tax Payments
Dear Marc:
Per your request, this letter Q1SCUSSes the characteri-
zation of funds withheld by employers from employee pay
checks in satisfaction of federal and income taxes,
Social Security taxes, and state insurance '.
taxes. This letter is limited to a discussion of the In-
ternal Revenue Code ("I.R.C."), California Revenue and
Taxation Code ("Cal. Rev. & Tax. Code"), ;:he California
Unemployment Insurance Code ("Cal. U. Com. Code"), and the
general responsibilities and duties of a trustee as reflected
in the California Civil Code ("Cal. Civ. Code").
An employer is required to withhold from the wages of
employees amounts in respect of federal income taxes (I.R.C.
3402], Social Security taxes [I.R.C. 3102], state income
taxes [Cal. U. Corn. Code 13020], and state unemployment
insurance "taxes [Cal. U. Com. Code 986]. The employer is
liable for the deduction and witr.holding of taxes. I.R.C. 5
3403: Cal. U. Corn. Code 13021.
Characterization of Withheld Funds
Funds that are withheld or collected as income tax or
Social Security Tax are to be held by the employer as " a
special f:..1nd in trust for the United States." LR.C. 750l.
u.s ..... Hill, 368 F.2d 617,66-2 ::.S.T.C. at 87382 (5th
:-: :'. :.: 3 r c ? ..= ': j. .J
, 'C ::.:)0-2 r :::?, ;
?-".:ls:e :'... 0
Lhat are ..... cr :::: __ as
3re be held by employer aE "3 special fund
in tr'Jsc for the S't'ate ot Cali=ornia
ll
rCcl. -,:. Com .. Cocie
13070]; '..."hile withheld 2.5 :'nsurance tax
.:i ret0 be \.; i t h he 1d "i n t r L1 st. II Cal . - U - Ca . :: 0 d e 9 8 6 The
duty to keep Withheld taxes as a trust arises as the taxes
are withheld from wages regardless of the dace for
to the government and does not until the
taxes are paid over. ';stleforc 'I. U.S., 75-1 U.S .T.C. I! 9464
( D. i nn. 1975).
During the ?eriod the funds are held trust, the person
holding the with a few discussed
the duties and resDonsibilities of a as such
duties and are mandated under common law.
v. Home Federal Savinas & Loan Assn, 66 Cal. App. 3d
674, 136 Cal. Rptr. 180 (4th D.C.A. 1977). In general, a
trustee is a fiduciary and is bound to act in the highest
good faith toward his beneficiary, must make full disclosure
of material facts, must not acquire any adverse interest, and
must not use his position to gain any advantage over the
beneficiary or to make any special Cal. Civ. Code
2228-2233. A trustee normally should not trust
property with his own, but if he do.es willfully mingle the
trust funds with property of his own, he is absolutely liable
for their safety and for the value of use. Cal. Civ.
Code 2236.
A trustee has a general duty to invest funds for the
benefit of the beneficiaries, but he must account over to the
beneficiaries any interest earned. Cal. eiv. Code 2262.
In investing, reinvesting, or otherwise managing trust property,
a trustee must exercise the judgment and care which people of
prudence, discretion, and intelligence exercise in the management
of their own affairs. Cal. eiv. Code 2261. California law
provides a-fairly liberal description of the type of investment
a prudent person would make, including every kind of property,
real, personal, or mixed, and every kind of investment which
a prudent person might enter into. Id.
the foregoing, the parties to the trust
may alter or waive any of the standard and duties.
Rest. 2d, Trusts 216. It is possible for the parties to a
trust arrangement to authorize commingling of funds, to authorize
the trustee to retain any income rrom the trust assets, and
:-: :'. :.: 3 r c ? ..= ': j. .J
, 'C ::.:)0-2 r :::?, ;
?-".:ls:e :'... 0
Lhat are ..... cr :::: __ as
3re be held by employer aE "3 special fund
in tr'Jsc for the S't'ate ot Cali=ornia
ll
rCcl. -,:. Com .. Cocie
13070]; '..."hile withheld 2.5 :'nsurance tax
.:i ret0 be \.; i t h he 1d "i n t r L1 st. II Cal . - U - Ca . :: 0 d e 9 8 6 The
duty to keep Withheld taxes as a trust arises as the taxes
are withheld from wages regardless of the dace for
to the government and does not until the
taxes are paid over. ,;stleforc 'I. U.S., 75-1 U.S .T.C. I! 9464
( D. i nn. 1975).
During the ?eriod the funds are held trust, the person
holding the with a few discussed
the duties and resDonsibilities of a as such
duties and are mandated under common law.
v. Home Federal Savinas & Loan Assn, 66 Cal. App. 3d
674, 136 Cal. Rptr. 180 (4th D.C.A. 1977). In general, a
trustee is a fiduciary and is bound to act in the highest
good faith toward his beneficiary, must make full disclosure
of material facts, must not acquire any adverse interest, and
must not use his position to gain any advantage over the
beneficiary or to make any special Cal. Civ. Code
2228-2233. A trustee normally should not trust
property with his own, but if he do.es willfully mingle the
trust funds with property of his own, he is absolutely liable
for their safety and for the value of use. Cal. Civ.
Code 2236.
A trustee has a general duty to invest funds for the
benefit of the beneficiaries, but he must account over to the
beneficiaries any interest earned. Cal. eiv. Code 2262.
In investing, reinvesting, or otherwise managing trust property,
a trustee must exercise the judgment and care which people of
prudence, discretion, and intelligence exercise in the management
of their own affairs. Cal. eiv. Code 2261. California law
provides a-fairly liberal description of the type of investment
a prudent person would make, including every kind of property,
real, personal, or mixed, and every kind of investment which
a prudent person might enter into. Id.
the foregoing, the parties to the trust
may alter or waive any of the standard and duties.
Rest. 2d, Trusts 216. It is possible for the parties to a
trust arrangement to authorize commingling of funds, to authorize
the trustee to retain any income from the trust assets, and
.' : r. arc r' 2 V i..J
>: tobe r .2 9, : 9 S 1
?age Three
:0 consent various of The G[
:;acsh Va HOi7le Federal Savir.qs &. Loan Assn. I 66 C::. ';?p . .,)0
6 7 4 , 1 36 Cal.. R t: r--:. 1 8 0 (4 t h D. C .. rl.. 1 9' 7 7), i spa=- ticu 1 a t 1Y
instructive. At issue in Marsh was the and
:egality or ':he lIimpoundll or llreserve" accounts :::.lstomar-ily
required by savings and loan and in
connection with residential to insure of
and insurance.. The suit was a class action seeking
general and punitive damages and seeking an of
interest on the impound accounts, which were customarily held
interest.
The Court first determined that the impound accounts
trusts, not escrOws. It then considered in
detail the nature of a trust and the duties of a trustee,
observing that the beneficiary of ' the trust may the
right to any income and may authorize the commingling of
Eunds. Thus, the Court noted that the deed of trust authorizing
the impound account stated specifically that the payments by
the plaintiff would be held by Home Federal "in its general
fund without interest," and concluded that the parties had
agreed that the trustees could commingle and use the trust
funds, but did not have to account for any interest earned.
9.
The statute and cases indicate that the trust funds
created by I.R.C. 7501, Cal. U. Com. Code 986, and Cal.
U. Com. Code 13070 are subject to some modification of the
general rule. Thus, although normally a trustee must segregate
the assets of a trust and not commingle the assecs with his
personal funds, see Cal. eiv. Code 2236, it is not generally
required that the-Iunds withheld for taxes be held separately
from the general accounts of the corporation or chat they be
deposited in a separate bank account, Slodov v. 436
U.S. 238, 78-1 U.S.T.C. ,[ 9447 at 84,206 (1978); Newsome v.
U.S., 431 F.2d 742, 70-2 U.S.T.e. 9504 at (5th Cir.
1970). The Treasury or the Franchise Tax Board, as the case
may be, may specially require that withheld taxes be put into
separate accounts, however, in the event the employer has
failed previously to make appropriate deposits, payments, or
returns for such taxes, I.R.C. 7512; Cal. Rev .. & Tax. Code
5 18492.
Furthermore, there is nothing in the statute or any
regulation or case with which we are acquainted to imply that
the government is entitled to any additional interest on the
trust funds doring the period such funds are held in trust.
Thus, it would follow that if an employer decided to forego
interest on the trust funds, he, too, could do so.
.' : r. arc r' 2 V i..J
>: tobe r .2 9, : 9 S 1
?age Three
:0 consent various of The G[
::acsh Va HOi7le Federal Savir.qs &. Loan Assn. I 66 C::. ';?p . .,)0
6 7 4 , 1 36 Cal.. R t: r--:. 1 8 0 (4 t h D. C .. rl.. 1 9' 7 7), i spa=- ticu 1 a t 1Y
instructive. At issue in Marsh was the and
:egality or ':he lIimpoundll or llreserve" accounts :::.lstomar-ily
required by savings and loan and in
connection with residential to insure of
and insurance.. The suit was a class action seeking
general and punitive damages and seeking an of
interest on the impound accounts, which were customarily held
interest.
The Court first determined that the impound accounts
trusts, not escrOws. It then considered in
detail the nature of a trust and the duties of a trustee,
observing that the beneficiary of ' the trust may the
right to any income and may authorize the commingling of
Eunds. Thus, the Court noted that the deed of trust authorizing
the impound account stated specifically that the payments by
the plaintiff would be held by Home Federal "in its general
fund without interest," and concluded that the parties had
agreed that the trustees could commingle and use the trust
funds, but did not have to account for any interest earned.
9.
The statute and cases indicate that the trust funds
created by I.R.C. 7501, Cal. U. Com. Code 986, and Cal.
U. Com. Code 13070 are subject to some modification of the
general rule. Thus, although normally a trustee must segregate
the assets of a trust and not commingle the assecs with his
personal funds, see Cal. eiv. Code 2236, it is not generally
required that the-Iunds withheld for taxes be held separately
from the general accounts of the corporation or chat they be
deposited in a separate bank account, Slodov v. 436
U.S. 238, 78-1 U.S.T.C. ,[ 9447 at 84,206 (1978); Newsome v.
U.S., 431 F.2d 742, 70-2 U.S.T.e. 9504 at (5th Cir.
1970). The Treasury or the Franchise Tax Board, as the case
may be, may specially require that withheld taxes be put into
separate accounts, however, in the event the employer has
failed previously to make appropriate deposits, payments, or
returns for such taxes, I.R.C. 7512; Cal. Rev .. & Tax. Code
5 18492.
Furthermore, there is nothing in the statute or any
regulation or case with which we are acquainted to imply that
the government is entitled to any additional interest on the
trust funds doring the period such funds are held in trust.
Thus, it would follow that if an employer decided to forego
interest on the trust funds, he, too, could do so.
:1 r. :1.3 r c ? a \. i 3-
Oc tobe r :2 9, 1981
?age four
of
The foregoing discussion has considered the situation of
an emclover. There does noe appear to be any case law, regula-
tion, or statute dealing an agent who actually
pays over the taxes to the sovernment. The funds presumably
are still trust funds, and che holder of those funds still
bears the responsibilities of a trustee. Presumably, however,
the collecting agent may use the in the same manner as
the employer have, ana is noe required, insofar as the
Internal Revenue Service or the Franchise Tax Board are
concerned, to segregate the =unds from the general fund of
the collecting agent.
Penalties
The normal penalty for a breach of fiduciary duty by a
trustee is the amount of the loss to the beneficiary. A simi-
lar penalty is imposed by I.R.C. 6672 or Cal. Rev. & Tax.
Code 18815: any person required to collect, account for,
and pay over withholding taxes who willfully fails to collect,
account for, or pay over such tax, is liable for a penalty
equal to the total amount of the tax evaded, not collected,
not accounted for, or paid over.
The test is " willfullness." Basicallv, "willfullness"
does not require anintent to deprive the government of its
taxes, Newsome v. U.S., suora, 70-2 U.S.T.C. at 84,151, but
can be evidenced merely by use of the withheld funds for any
other corporate purpose, regardless of any expectation that
adequate funds would be available at the due date for the
taxes. WavchofE v. U.S., 79-2 U.S.T.C 9602 at 88,195
(S.D. Tex. 1979). Any person who voluntarily and consciously
risks the withheld taxes in the operation of a corporation is
subject to liability under I.R.C. 6672 (Cal. Rev. & Tax.
Code 18815) if subsequently the corporation is unable to
remit the withheld taxes. v. U.S., supra.
In addition to the civil penalties, however, there are
also ciminal penalties. 7202 provides that any
person required to collect, account for, and pay over any tax
who willfUlly fails to collect, account for, or pay over such
tax shall be guilty of a felony and, upon conviction thereof,
shall be fined not more than S10,000, or imprisoned not more
:1 r. :1.3 r c ? a \. i 3-
Oc tobe r :2 9, 1981
?age four
of
The foregoing discussion has considered the situation of
an emclover. There does noe appear to be any case law, regula-
tion, or statute dealing an agent who actually
pays over the taxes to the sovernment. The funds presumably
are still trust funds, and che holder of those funds still
bears the responsibilities of a trustee. Presumably, however,
the collecting agent may use the in the same manner as
the employer have, ana is noe required, insofar as the
Internal Revenue Service or the Franchise Tax Board are
concerned, to segregate the =unds from the general fund of
the collecting agent.
Penalties
The normal penalty for a breach of fiduciary duty by a
trustee is the amount of the loss to the beneficiary. A simi-
lar penalty is imposed by I.R.C. 6672 or Cal. Rev. & Tax.
Code 18815: any person required to collect, account for,
and pay over withholding taxes who willfully fails to collect,
account for, or pay over such tax, is liable for a penalty
equal to the total amount of the tax evaded, not collected,
not accounted for, or paid over.
The test is " willfullness." Basicallv, "willfullness"
does not require anintent to deprive the government of its
taxes, Newsome v. U.S., suora, 70-2 U.S.T.C. at 84,151, but
can be evidenced merely by use of the withheld funds for any
other corporate purpose, regardless of any expectation that
adequate funds would be available at the due date for the
taxes. WavchofE v. U.S., 79-2 U.S.T.C 9602 at 88,195
(S.D. Tex. 1979). Any person who voluntarily and consciously
risks the withheld taxes in the operation of a corporation is
subject to liability under I.R.C. 6672 (Cal. Rev. & Tax.
Code 18815) if subsequently the corporation is unable to
remit the withheld taxes. v. U.S., supra.
In addition to the civil penalties, however, there are
also ciminal penalties. 7202 provides that any
person required to collect, account for, and pay over any tax
who willfUlly fails to collect, account for, or pay over such
tax shall be guilty of a felony and, upon conviction thereof,
shall be fined not more than S10,000, or imprisoned not more
:lr. :larc Pa'.'.:..3
October 29, :981
?age Five
than five years. o ~ both, together with the costs of prosecu-
tion. Cal. Kev. & Tax. Code 19408 imposes a fine of nat
mOre than $2,000 or imprisonment [no staeed maximuml, or both
for the similar offense. Although the penalties under these
sections have been imposed only rarely and only in particularly
egregious situations, there is considerable need to be con-
cerned about the potential criminal penalties as well.
If you have any questions or comments.concerning the
foregoing, please do not hesitate to contact us.
t;;jY,
~ i d L. Kimpert
DLK/aw
..
:lr. :larc Pa'.'.:..3
October 29, :981
?age Five
than five years. o ~ both, together with the costs of prosecu-
tion. Cal. Kev. & Tax. Code 19408 imposes a fine of nat
mOre than $2,000 or imprisonment [no staeed maximumj, or both
for the similar offense. Although the penalties under these
sections have been imposed only rarely and only in particularly
egregious situations, there is considerable need to be con-
cerned about the potential criminal penalties as well.
If you have any questions or comments.concerning the
foregoing, please do not hesitate to contact us.
t;;jY,
~ i d L. Kimpert
DLK/aw
..
TRANSMIT VIA:
o Teletype
o Facsimile
!KJ AIRTEL
TO
PRECEDENCE:
o Immediate
D Inority
D Routine
DALLAS, SAC
FBI
CLASSIFICATION:
o TOP SECRET
o SECRET
o CONFIDENTIAL
o UNCLAS EFT 0
o UNCLAS
Date 8/4/93
FROM
SUBJECT
SAC, SAN FRANCISCO (196A-SF-93255) (P)
CONNIE CHIP ARMSTRONG, JRj
ET ALi
WIRE FRAUD (A)i
MAIL FRAUDj
00: SAN FRANCISCO
Reference airtel dated February 22,
SA HATCHER has obtained from
united states Attorney, MICHAEL YAMAGUCHT, forL _ I
I Iconfidential source to record conversa lons with b2
subiects of this case. I I
2 - DALLAS
(1) - SAN FRANCISCO
WLH/wlh
1.
" '
Approved:
Transmitted
(Nmnber) (Tune)
PCI' _
FD-36 (Rev 11-17-88)
FBI
TRANSMIT VIA:
o Teletype
o Facsimile
tKl AIRTEL
TO
PRECEDENCE:
o Immediate
o IJriority
o Routine
DALLAS, SAC
CLASSIFICATION:
o TOP SECRET
o SECRET
o CONFIDENTIAL
o UNCLAS EFT 0
o UNCLAS
Date 8/4 / 9 3
FROM
SUBJECT
SAC, SAN FRANCISCO (196A-SF-93255) (P)
CONNIE CHIP ARMSTRONG, JRi
ET ALi
WIRE FRAUD (A)i
MAIL FRAUDi
00: SAN FRANCISCO
Reference airtel dated February 22,
SA HATCHER has obtained verbal ::tign from
United States Attorney I MICHAEL YAMAGUCHI, forL _ I
I Iconfidential source to record conversa lons with b2
subiects of this case. I I
2 - DALLAS
tfj,) - SAN FRANCISCO
WLH/wlh
l.
.' .

-.
(:5- 0"

Transmitted
(Nwnher) (Tune)
Per _
1 MICHAEL J. YAMAGUCHI
United states Attorney
2
JOEL R. LEVIN
3 C ~ i e f , Criminal Division
41 RONALD D. SMETANA
Special Assistant U.S. Attorney
5 GEORGE D. HARDY
6
7 San Francisco, CA 94102
Telephone: (415) 436-6851
II
UNITED STATES OF AKBRlCA,
CONNIE C. ARHSTRONG, JR., Iilnd
RICHARD A.FOlllrLES,
No. OR 94-0276 CAL
All!'lI!'IDAVIT Oll!' WILLARD L.
HATCHER, JR. Illi SUPPORT
OF GQVBRmU!JIIT'S EX-PARTE
SUBHXSSION
Plaintiff,
Dllfondanta.
v.
)
)
)
)
)
)
)
)
)
)
---------------)
11
10
15
16
12
14
17 I, Willard L. Hatcher, Jr., state that:
18 I have been a Special Agent with the Federal Bureau of
19 Investigation ("FBI") for 6 years, and am currently the case
20 agent for the prosecution in United States v. Connie C.
21 Armstrong. Jr .. et al, I have been involved with the
22 investigation of Hamilton Taft and Company since March of 1991.
23 Prior to his retirement on January 1, 1997, FBI special Agent
24 Patrick K. Murphy was the case agent.
25 2. I first learned of the government's possession of
26 recorded conversations of Connie C. Armstrong, Jr., on the night
AFFIDAVITOP WILLARD L HATCHIJIl, lR
IN SUPPORT OF GOYllRNMENT'S EX-PARTE
SUBMISSION
1 MICHAEL J. YAMAGUCHI
United states Attorney
2
JOEL R. LEVIN
3 C ~ i e f , Criminal Division
41 RONALD D. SMETANA
5 GEORGE D. HARDY
6
7 San Francisco, CA 94102
Telephone: (415) 436-6851
II
UNITED STATES OF AKBRlCA,
CONNIE C. ARHSTRONG, JR., Iilnd
RICHARD A.FOlllrLES,
No. OR 94-0276 CAL
All!'lI!'IDAVIT Oll!' WILLARD L.
HATCHER, JR. Illi SUPPORT
OF GQVBRmU!JIIT'S EX-PARTE
SUBHXSSION
Plaintiff,
Dllfondanta.
v.
)
)
)
)
)
)
)
)
)
)
---------------)
11
10
15
16
12
14
17 I, Willard L. Hatcher, Jr., state that:
18 I have been a Special Agent with the Federal Bureau of
19 Investigation ("FBI") for 6 years, and am currently the case
20 agent for the prosecution in United States v. Connie C.
21 Armstrong. Jr .. et al, I have been involved with the
22 investigation of Hamilton Taft and Company since March of 1991.
23 Prior to his retirement on January 1, 1997, FBI special Agent
24 Patrick K. Murphy was the case agent.
25 2. I first learned of the government's possession of
26 recorded conversations of Connie C. Armstrong, Jr., on the night
AFFIDAVITOP WILLARD L HATCHIJIl, lR
IN SUPPORT OF GOYllRNMENT'S EX-PARTE
SUBMISSION
1 of January 12, 1997, after witness Terri Robins informed
2 Assistant United states Attorney George Hardy of their existence.
3 3. I telephoned Patrick K. Murphy on January 13, 1997, and
4 asked his knowledge of such recordings. Mr. Murphy stated that
5 he understood that Ms. Robins had made some recordings for the
6 government on an unrelated investigation. Mr. Murphy stated he
7 did not know that Ms. Robins had ever recorded conversations with
8 Armstrong.
4. Mr. Murphy and I knew of the existence of the Dallas
10 FBI's investigation of Armstrong's activity at Comp-U-Check. We
11 understood that this investigation related to conduct that
12 occurred well after the bankruptcy of Hamilton Taft. To our
13 knowledge this investigation was unrelated to Hamilton Taft
14 except for the common involvement of Armstrong.
15 5. Since January 12, 1997, I have contacted Special Agent
16 Peter A. Galbraith, the Dallas FBI case agent for the Comp-U-
17 Check investigation, and requested all taped conversations with
18 Armstrong. I have received thirty-six (36) audio tapes and
19 special Agent Galbraith has assured me that these constitute all
20 of the tape recordings of Armstrong in the possession of the
21 Dallas FBI.
22 6. In addition, Special Agent Galbraith provided to me
23 copies of 302 reports prepared relating to the tapes and
24 documents provided to the Dallas FBI by Terri Robins. He assured
25 me that all of the reports and documents have also been forwarded
26 to San Francisco.
AFFIDAVIT OF WILLAIlD L HATCIlEll, JR
IN SUPPORT OF GOVERNMENT'S E X ~ P A R . T E
SUBMISSION 2
1 of January 12, 1997, after witness Terri Robins informed
2 Assistant United states Attorney George Hardy of their existence.
3 3. I telephoned Patrick K. Murphy on January 13, 1997, and
4 asked his knowledge of such recordings. Mr. Murphy stated that
5 he understood that Ms. Robins had made some recordings for the
6 government on an unrelated investigation. Mr. Murphy stated he
7 did not know that Ms. Robins had ever recorded conversations with
8 Armstrong.
4. Mr. Murphy and I knew of the existence of the Dallas
10 FBI's investigation of Armstrong's activity at Comp-U-Check. We
11 understood that this investigation related to conduct that
12 occurred well after the bankruptcy of Hamilton Taft. To our
13 knowledge this investigation was unrelated to Hamilton Taft
14 except for the common involvement of Armstrong.
15 5. Since January 12, 1997, I have contacted Special Agent
16 Peter A. Galbraith, the Dallas FBI case agent for the Comp-U-
17 Check investigation, and requested all taped conversations with
18 Armstrong. I have received thirty-six (36) audio tapes and
19 special Agent Galbraith has assured me that these constitute all
20 of the tape recordings of Armstrong in the possession of the
21 Dallas FBI.
22 6. In addition, Special Agent Galbraith provided to me
23 copies of 302 reports prepared relating to the tapes and
24 documents provided to the Dallas FBI by Terri Robins. He assured
25 me that all of the reports and documents have also been forwarded
26 to San Francisco.
AFFIDAVIT OF WILLAIlD L HATCIlEll, JR
IN SUPPORT OF GOVERNMENT'S E X ~ P A R . T E
SUBMISSION 2
1 7. Agent Galbraith expressed concern about the disclosure
2 the tapes, reports and documents to Armstrong because the Comp-U-
3 Check investigation and other related investigations are on-going
4 and he is concerned that disclosure of the materials may
5 jeopardize these investigations. He understood that certain of
6 the tapes, written materials and reports may have to be turned
7 over to Armstrong, but requested that the materials be
a scrutinized carefully and that those ultimately turned over be
9 limited to those necessary to protect Armstrong's rights without
10 harming the investigations.
11 8. Agent Galbraith said that all of the conversations were
12 recorded and documents were received in late 1993 and early 1994,
13 SUbsequent to the Hamilton Taft bankruptcy and before the
14 indictment of Armstrong.
15 9. After review of the tapes and documents by myself,
16 Special Agent Laura Nielson, Assistant United States Attorney
17 George Hardy and special Assistant United states Attorney Ronald
18 Smetana, we determined that Hamilton Taft is mentioned in five
19 (5) tapes; copies of the relevant portions of those tapes have
20 been reproduced for review by the Court for a determination of
21 whether they should be turned Over to Armstrong. In addition,
22 there is one document, a "novella" about Hamilton Taft, that has
23 statements attributed to Armstrong; since I do not know its
24 authorship, that document has been copied for the Court's review.
25 10. All of the reports, tapes and documents received from
26 the Dallas FBI are being made available for the Court's in camera
AFFIDAvrrOF wn.LARD L HATCHER, JR
IN SUPPORT OF GOVEIlNMIlNl"S !lX-FARTE
SUBMISSION 3
1 7. Agent Galbraith expressed concern about the disclosure
2 the tapes, reports and documents to Armstrong because the Comp-U-
3 Check investigation and other related investigations are on-going
4 and he is concerned that disclosure of the materials may
5 jeopardize these investigations. He understood that certain of
6 the tapes, written materials and reports may have to be turned
7 over to Armstrong, but requested that the materials be
a scrutinized carefully and that those ultimately turned over be
9 limited to those necessary to protect Armstrong's rights without
10 harming the investigations.
11 8. Agent Galbraith said that all of the conversations were
12 recorded and documents were received in late 1993 and early 1994,
13 SUbsequent to the Hamilton Taft bankruptcy and before the
14 indictment of Armstrong.
15 9. After review of the tapes and documents by myself,
16 Special Agent Laura Nielson, Assistant United States Attorney
17 George Hardy and special Assistant United states Attorney Ronald
18 Smetana, we determined that Hamilton Taft is mentioned in five
19 (5) tapes; copies of the relevant portions of those tapes have
20 been reproduced for review by the Court for a determination of
21 whether they should be turned Over to Armstrong. In addition,
22 there is one document, a "novella" about Hamilton Taft, that has
23 statements attributed to Armstrong; since I do not know its
24 authorship, that document has been copied for the Court's review.
25 10. All of the reports, tapes and documents received from
26 the Dallas FBI are being made available for the Court's in camera
AFFIDAvrrOF wn.LARD L HATCHER, JR
IN SUPPORT OF GOVEIlNMIlNl"S !lX-FARTE
SUBMISSION 3
1 review.
2
3 I declare under penalty of perjury that the foregoing is
4 true and correct. Executed
5 Francisco, California.
Ii
7
8
COUNTY OF SAN FRANCISCO )
9 ) SS.
STATE OF CALIFORNIA )
10
11 Sworn to and subscribed in my presence on January 24, 1997,
12
13
15
in San Francisco, California.
e.eeeeceee.eeeJ
@, . .. '
z Notory N:>IIc - Co1IlomlrJ !
' , Son FrancIDCO CounIV 1
d" 0 0
16 My Commission Expires on ,OJ; :: i.\" ""'\ ie,' . cl
i
.' [CYll
\
17
18
20
21
22
23
24
2S
26
AFFIDAVIT OF WILLAIID L HATCHER, JR
IN SUPPORT OF GOVERNMENT'S EX-PART!!
SUBMLSSION 4
1 review.
2
3 I declare under penalty of perjury that the foregoing is
4 true and correct. Executed
5 Francisco, Ca1ifornia.
7
8
COUNTY OF SAN FRANCISCO )
9 ) 53.
STATE OF CALIFORNIA )
10
11
12
13
14
15
Sworn to and subscribed in my presence on January 24, 1997,
\ \ \, ". \ ')
. Notary publIc /'
I
t
16 My Commission Expires on '-j: Ie )+-" )C. --}-\ 1Cl1l
\
17
18
19
20
21
22
23
25
26
AFFIDAVIT OF WD..LARD L HATCHER. JR
IN SUPPORT OF GOVIlRNMENT'S EX-PARTE
SUBMISSION 4
FD-36 (Rev 11-17-88)
FBI
TRANSMIT VIA:
D Teletype
o Facsimile
(K] AIRTEL
PRECEDENCE:
o Immediate
[J Priority
o Routine
CLASSIFICATION:
D TOP SECRET
o SECRET
o CONFIDENTIAL
o UNCLAS EFT 0
o UNCLAS
-93255) (SQD 15) (P) SAC,
SAC, SAN FRANCISCO
CONNIE C. ARMST
DBA HAMILTON T T AND COMPANY, ET ALi
SAN FRANCISC , CALIFORNIA;
FBW (B); MA FRAUD; BANKRUPTCY FRAUD (A);
00: SAN F CISCO
ARMED AND DANGEROUS
FROM
SUBJECT
TO
RE: Teletype from San Francisco to Dallas dated
April 3, 1992.
b'7C
b7D
Enclosed for San Francisco are two copies of insert
regarding witness I I original and one copy of
FD-302 regarding meeting betweenl
with original interview notes.
For __ __ agents observed
__ between and debriefed
I Jimmediately a
cp:
San Francisco (encl
Dallas
)
, , "
I
(Number)
Transmitted
Approved: _
FD-36 (Rev 11-17-88)
FBI
TRANSMIT VIA:
o Teletype
o Facsimile
lKl AIRTEL
PRECEDENCE:
o Immediate
[] Priority
o Routine
CLASSIFICATION:
o TOP SECRET
o SECRET
o CONFIDENTIAL
o UNCLAS EFT 0
o UNCLAS
-93255) (SQD 15) (P) SAC,
SAC, SAN FRANCISCO
CONNIE C. ARMST
DBA HAMILTON T T AND COMPANY, ET ALi
SAN FRANCISC , CALIFORNIA;
FBW (B) i MA FRAUD; BANKRUPTCY FRAUD (A);
00: SAN F CISCO
ARMED AND DANGEROUS
FROM
SUBJECT
TO
RE: Teletype from San Francisco to Dallas dated
April 3, 1992.
b'7C
b7D
Enclosed for San Francisco are two copies of insert
regarding witness ori inal and one co of
FD-302 regarding meeting between
with original interview notes. L... ....
For observed
between and debriefed
I Jimmediately a
<9>:
San Francisco (enci
Dallas
- .. _--
tARCH IKOOO-
--
"
i .
I
, ,
Approved: Transmitted

)
(Number) (Ti
..

<.
fa Exhibits to Motion for Discovery - Page 23
b7D
LEADS:
DALLAS AT DALLAS: Will obtain co ies of
2
and forward them to San
b7D
LEADS:
DALLAS AT DALLAS: Will obtain co ies of
2
and forward them to San
FD-36 (Rev 11-11-88)
FBI
TRANSMIT VIA:
o Teletype
o Facsimile
IX] AIRTEL:
PRECEDENCE:
o Immediate
D Priority
o Routine
CLASSIFICATION:
D TOP SECRET
o SECRET
o CONFIDENTIAL
o UNCLAS EFT 0
o UNCLAS
Date 5 5/92
TO
FROM
SAC, SAN FRANCISCO (196A-SF-93255)
SAC, DALLAS (196A-SF-93255) (SDQ 15) (RUe)
SUBJECT CONNIE C. ARMSTRONG, ET ALi
DBA HAMILTON TAFT AND COMPANY, ET ALi
FBW (B) i MAIL FRAUDj BANKRUPTCY FRAUD (A);
00: SAN FRANCISCO
ARMED AND DANGEROUS
RE: Teletype from San Francisco to Dallas dated April
3, 1992 and Airtel from Dallas to San Francisco dated 5/1/92.
Enclosed for San Francisco are nine documents
enclosed in a envelope.
For information, San Francisco,
sent copies of -------- __
r These documents are as
b7C
b7D
r
'"IS pertal.n to 1..... 1
.....------------.....
Inasmuch as all investigation has been conducted by
the Dallas Division in this matter, this case is being consid-
ered Rue.
(2)- San Francisco (encl
Y - Dallas
JM/jm
Approved: _
Transmitted
(Number) (Time)
,EARCH,fD .... .....--1
ERIAUZED,......... ( __
5
A._ ", "_
FD-36 (Rev 11-11-88)
FBI
TRANSMIT VIA:
o Teletype
o Facsimile
IX] AIRTEL:
PRECEDENCE:
o Immediate
o Priority
o Routine
CLASSIFICATION:
o TOP SECRET
o SECRET
o CONFIDENTIAL
o UNCLAS EFT 0
o UNCLAS
Date 5/5/92
TO
FROM
SAC, SAN FRANCISCO (196A-SF-93255)
SAC, DALLAS (196A-SF-93255) (SDQ 15) (RUC)
SUBJECT : CONNIE C. ARMSTRONG, ET AL;
DBA HAMILTON TAFT AND COMPANY, ET AL;
FBW (B); MAIL FRAUDi BANKRUPTCY FRAUD (A);
00: SAN FRANCISCO
ARMED AND DANGEROUS
RE: Teletype from San Francisco to Dallas dated April
3, 1992 and Airtel from Dallas to San Francisco dated 5/1/92.
Enclosed for San Francisco are nine documents
enclosed in a envelope.
For information. San Francisco. 1 ,
sent copies of :__------------------
I These documents are as follows:
b7C
b7D
I'nL __ ..:I
IS to I...... --Ir
L.- ..1 I
Inasmuch as all investigation has been conducted by
the Dallas Division in this matter, this case is being consid-
ered RUC.
(2)- San Francisco (encl 1)P?
Y - Dallas
JM/jm
An/If
Approved: Transmitted
(Number) (Time)
A __ "-'
APAGE 2 196A-SF-93255 UNCLAS
WILLARD L. HATCHER, JR. AND SAI IN
DALLAS LAST WEEK (4/22/92-4/24/92) INTERVIEWING WITNESSES IN
THE DALLAS AREA. I IWAS ONE OF THE WITNESSES
INTERVIEWED. I I
"'-------- 1
BY THE SAN FRANCISCO OFFICE) BE AWARE THAT
?
SAl IDALLAS
DIVISION.
LEAD:
DALLAS DIVISION
AT DALLAS] TEXAS
DEBRIEFI SOON AS POSSIBLEI I
I I

IF FEASIBLE AND PRACTICAL, CONTACT .
PRIOR TOI... .....,j1
b7e
b7D
WILLARD L. HATCHER, JR. AND SAI IN
DALLAS LAST WEEK (4/22/92-4/24/92) INTERVIEWING WITNESSES IN
THE DALLAS AREA. I IWAS ONE OF THE WITNESSES
INTERVIEWED. I I
"'-------- 1
BY THE SAN FRANCISCO OFFICE) BE AWARE THAT
?
SAl IDALLAS
DIVISION.
LEAD:
DALLAS DIVISION
AT DALLAS] TEXAS
DEBRIEFI SOON AS POSSIBLEI I
I I

IF FEASIBLE AND PRACTICAL, CONTACT .
PRIOR TOI... .....,j1
b7e
b7D
BY THE MEETING P L A C E ~ ITO b7D
WITNESS THE MEETING AND/OR OVER HEAR THE CONVERSATION.
BT
BY THE MEETING P L A C E ~ ITO b7D
WITNESS THE MEETING AND/OR OVER HEAR THE CONVERSATION.
BT
1 should not be used to justify making a ruling on an issue that is
2 nothing but a red herring.
3 It is clear what the defendant is attempting to do. He
4 wants the jury not to hear relevant evidence. He doesn't want the
5 jury to hear about the Ranch acquisition, or the limousine rides,
6 or the luxury jet purchase. He also doesn't want the jury to hear
7 what his lawyers and senior management were telling him--that he
8 couldn't use client tax money for long-term personal investments.
9 He also doesn't want the jury to hear about the lies he told his
10 employees regarding the source of funds for his ranch and other
11 purchases. He doesn't want the jury to hear about the lies he told
12 the victim companies in order to lull them into a false sense of
13 security. But all of this evidence is relevant to prove the
14 charges in the Indictment.
15 To his credit, the defendant spells out the remarkable
16 ramifications of a decision to declare that In re Hamilton Taft &
17 Co. represents the "law of the case". He wants:
18
19
20
21
22
23
24
25
26
1.
2.
3.
4.
Defense counsel to be able to refer to monies at
issue, in both opening and closing statements as the
property of Hamilton Taft or Hamilton Taft cash
flow;
The government not to refer to those monies as
"client monies" or "client funds" and not to state
or imply that Hamilton Taft held those monies in
trust;
The government not to present evidence of any advice
which Mr. Armstrong received from lawyers or other
experts, to the extent that such advice was
inconsistent with the "law of the case";
The court to instruct the jury that monies, once
delivered to Hamilton Taft, became the property of
J
GOVERNMENT'S OPPOSITION TO ARMSTRONG'S
MOTION TO DISMISS AND/OR REQUEST FOR
PRETRIAL INSTRUCTION 10
000165.
1 should not be used to justify making a ruling on an issue that is
2 nothing but a red herring.
3 It is clear what the defendant is attempting to do. He
4 wants the jury not to hear relevant evidence. He doesn't want the
5 jury to hear about the Ranch acquisition, or the limousine rides,
6 or the luxury jet purchase. He also doesn't want the jury to hear
7 what his lawyers and senior management were telling him--that he
8 couldn't use client tax money for long-term personal investments.
9 He also doesn't want the jury to hear about the lies he told his
10 employees regarding the source of funds for his ranch and other
11 purchases. He doesn't want the jury to hear about the lies he told
12 the victim companies in order to lull them into a false sense of
13 security. But all of this evidence is relevant to prove the
14 charges in the Indictment.
15 To his credit, the defendant spells out the remarkable
16 ramifications of a decision to declare that In re Hamilton Taft &
17 Co. represents the "law of the case". He wants:
18
19
20
21
22
23
24
25
26
1.
2.
3.
4.
Defense counsel to be able to refer to monies at
issue, in both opening and closing statements as the
property of Hamilton Taft or Hamilton Taft cash
flow;
The government not to refer to those monies as
"client monies" or "client funds" and not to state
or imply that Hamilton Taft held those monies in
trust;
The government not to present evidence of any advice
which Mr. Armstrong received from lawyers or other
experts, to the extent that such advice was
inconsistent with the "law of the case";
The court to instruct the jury that monies, once
delivered to Hamilton Taft, became the property of
J
000165.
..
1
2
3
4
5
6
7
5.
6.
Hamilton Taft;
The court to instruct that Hamilton Taft was free to
use its cash flow to cover its operating expense or
to invest those monies for its own benefit and in
anyway it wished;
The court to instruct the jury that Hamilton Taft's
sole duties to its clients were those duties stated
contractually but that clients were free to sue for
breach, if Hamilton Taft ever failed to live up to
those duties.
J
8 Nothing in the language, logic, or holding of the vacated
9 opinion in In re Hamilton Taft & Co. comes close to justifying such
10 a gutting of the government's case.
11 The defendant's motion to characterize, as a matter of law,
12 the nature of the relationship between Hamilton Taft and the victim
13 clients, in the form of a pretrial ruling should not be granted.
14 The characterization has not been settled as a matter of law. The
15 characterization, even if accepted as "debtor-creditor", does not
16 negate the presence of a fraudulent scheme or support in any way
17 the six conclusions cited above. The characterization would only
18 confuse the jury, leaving them to wonder about the illogical
19 technicalities of the law.
20 II
21 II
22 II
23 II
24 II
25 II
26 II
000166
..
1
2
3
4
5
6
7
5.
6.
Hamilton Taft;
The court to instruct that Hamilton Taft was free to
use its cash flow to cover its operating expense or
to invest those monies for its own benefit and in
anyway it wished;
The court to instruct the jury that Hamilton Taft's
sole duties to its clients were those duties stated
contractually but that clients were free to sue for
breach, if Hamilton Taft ever failed to live up to
those duties.
J
8 Nothing in the language, logic, or holding of the vacated
9 opinion in In re Hamilton Taft & Co. comes close to justifying such
10 a gutting of the government's case.
11 The defendant's motion to characterize, as a matter of law,
12 the nature of the relationship between Hamilton Taft and the victim
13 clients, in the form of a pretrial ruling should not be granted.
14 The characterization has not been settled as a matter of law. The
15 characterization, even if accepted as "debtor-creditor", does not
16 negate the presence of a fraudulent scheme or support in any way
17 the six conclusions cited above. The characterization would only
18 confuse the jury, leaving them to wonder about the illogical
19 technicalities of the law.
20 II
21 II
22 II
23 II
24 II
25 II
26 II
000166
1 III. Conclusion
2 For the foregoing reasons, the government respectfully
3 submits that the motion to dismiss be denied and that the Court
4 deny the request to make In re Hamilton Taft & Co. the law of the
5 case.
6 DATED:
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
November 5, 1996 Respectfully submitted,
YAMAGUCHI
.. __

RONALD D. SMETANA
J
HOnlG1
1 III. Conclusion
2 For the foregoing reasons, the government respectfully
3 submits that the motion to dismiss be denied and that the Court
4 deny the request to make In re Hamilton Taft & Co. the law of the
5 case.
6 DATED:
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
November 5, 1996 Respectfully submitted,
YAMAGUCHI
.. __

RONALD D. SMETANA
J
HOnlG1
Memorandum
To
From
SAC, San Francisco ((Q(,J}-SF-Cf1}S"5)(P) 3/8/92
I b7C
Subject Connie Chip Armstrong, et al
dba, Hamilton Taft and Company, et al
San Francisco, Ca.
FBW (B); Mail Fraud, Bankruptcy Fraud, (A);
OO:SF
712
On the afternoon of March 5, 1992 a meeting was held at
the office of AUSA Michael Yamaguchi to discuss __
strategy in the above referenced matter. Present
ESQ. representing the bankruptcy trustee. Also present was Mr.
Ronald Smetana, Deputy Attorney General, Major Fraud unit of the
california state Attorney General's office. SA's will Hatcher and
re resented the FBI.
i u.
J
-, .
iJ{'! i.e. J

;oA-
(I) It-SF-cr)aS,
(
I
Oa I - J
b7C I
/C) lL1l (.! t:-::: ?h
lVIemorandum
To
From
SAel San Francisco ((C'f(,I}-SF-Q'rJ..s5)(P) Dole 3/8/92
I b7C
Jr....

Subject Connie Chip Armstrong, et al
dba, Hamilton Taft and Company, et al
San Francisco
l
Ca.
FBW (B); Mail Fraud, Bankruptcy Fraud, (A);
OO:SF
On the afternoon of March 5, 1992 a meeting was held at
the office of AUSA Michael Yamaguchi to discuss
strategy in the above referenced matter. Present
ESQ. representing the bankruptcy Also present was Mr.
Ronald Smetana, Deputy Attorney General, Major Fraud unit of the
california state Attorney General's office. SA's will Hatcher and
I represented the FBI.
_
-J.-:-.,,1,',.' ,'", ","""', f,) . - >. r (;)0/:. 1 '
>,tV]
iJA r.

f'h-
(I) {q, Pr-SF-'1Yd.S,
(
I
JJ., I - -")
b/C I
/C7 I L1 l 1/ e-::- r,-- ?rl
2
On February 27, 1992 the accountant for the trustee
finished his second interim report for the bankruptcy which
includes among other thing a tracing of over $4,000,000 directly
into the pockets of Armstrong himself. The report cites payments
by Armstrong using Hamilton Taft funds to a stripper' and the use
of over $225,000 to purchase Dallas Cowboy "skyboxes
lt
The next investigative step is to apply for an ex parte

order for Armstrong's personal tax returns for 1988, 1989, and
1990. Also several interviews of former Armstrong associates will
be conducted in Texas.
Finally due to the continuing effort being expended by
SA Will Hatcher and his anticipated involvement in this matter it
is requested that he be designated co-case agent for the
remainder of the investigation of this case.
2
2
On February 27, 1992 the accountant for the trustee
finished his second interim report for the bankruptcy which
includes among other thing a tracing of over $4,000,000 directly
into the pockets of Armstrong himself. The report cites payments
by Armstrong using Hamilton Taft funds to a stripper' and the use
of over $225,000 to purchase Dallas Cowboy "skyboxes
lt
The next investigative step is to apply for an ex parte

order for Armstrong's personal tax returns for 1988, 1989, and
1990. Also several interviews of former Armstrong associates will
be conducted in Texas.
Finally due to the continuing effort being expended by
SA Will Hatcher and his anticipated involvement in this matter it
is requested that he be designated co-case agent for the
remainder of the investigation of this case.
2
FD-302 (REV. 3-10-82)
- 1 -
Date of transcription 2/18'/92
On the afternoon of January 13, 1992, a conference was
held at thelPffices gf Feldman. Waldman and Kline, bankruptcy
counsel for. 1trustee in the bankruptcy of
Hamilton Taft Corporation (HTC). The law firm's offices are
located at 235 Montgomery street, suite 2700, San Francisco,
California, 94104. Present at this meeting werel I
I
Esw1;re, representing Feldman, Waldman and Kline, at cetera. Mr .
. CPA, accQuntant fOr the bankruptcy trustee, and
the trustee These individuals thereafter
provided the following information:
I 'stated that he has recently received certain
accounting reports from representatives of CHIP ARMSTRONG in
Dallas, which begin reporting on the period from
November 1, 1990 through June 15, -1991. This accounting work was
generated using the Quicken Software and chronicles CHIP
ARMSTRONG's personal finances.
I stated that in July, three reports became
available to him. Wated that only copies Of!Som: CberkS
were duplicated by per a restriction put on_ _ . and
apparently agreed 0 y the for the frus ee y
Mr. ARMSTRONG's representatives. L advised that the
Quicken summary was in fact a pub11C record and that, in
addition, the law firm had filed a motion for conternptagainst
CHIP ARMSTRONG for his having allegedly violated a temporary
restraining order issued by the bankruptcy court.
I I stated that his preliminary report indicates
that approximately four million dollars of Hamilton Taft funds
have been traced directly to CHIP ARMSTRONG, that is, four
million dollars of HTC funds have been traced to going directly
to Mr. ARMSTRONG. I Istated that ARMSTRONG had or has five
bank accounts. Any payment that was made to CHIP from either
Hamilton Taft or one of the subsidiaries controlled by ARMSTRONG
are accounted for, that is, they are covered by explanations.
These explanations are usually in the form of a note receivable
or an account receivable notation. These entries to the books
and records of Hamilton Taft or anyone of these subsidiaries
b7C
- ..
-.]ID
Invesligationon at Sa);} Caloi.;fornil
ile
11 J96A-SF-93255 Sub C
I b7C
by SA f,YNN HATCHER PKM la an Dale dictated 2 11 0 192
I ; I
IfThis document neither recommendations nor conclusions of the FBI. It Is the property of the FBr and is loaned to your agtncy;
1\ and ils contents are not to be c1blrlbuted outside your aaency.
----------------'------'--_._- ..._-- ..._---
FD-302 (REV. 3-10-82)
- 1 -
Date of transcription 2/18'/92
On the afternoon of January 13, 1992, a conference was
held at thelPffices gf Feldman. Waldman and Kline, bankruptcy
counsel for. 1trustee in the bankruptcy of
Hamilton Taft Corporation (HTC). The law firm's offices are
located at 235 Montgomery street, suite 2700, San Francisco,
California, 94104. Present at this meeting werel I
I
Esw1;re, representing Feldman, Waldman and Kline, at cetera. Mr .
. CPA, accQuntant fOr the bankruptcy trustee, and
the trustee These individuals thereafter
provided the following information:
I 'stated that he has recently received certain
accounting reports from representatives of CHIP ARMSTRONG in
Dallas, which begin reporting on the period from
November 1, 1990 through June 15, -1991. This accounting work was
generated using the Quicken Software and chronicles CHIP
ARMSTRONG's personal finances.
I stated that in July, three reports became
available to him. Wated that only copies Of!Som: CberkS
were duplicated by per a restriction put on_ _ . and
apparently agreed 0 y the for the frus ee y
Mr. ARMSTRONG's representatives. L advised that the
Quicken summary was in fact a pub11C record and that, in
addition, the law firm had filed a motion for conternptagainst
CHIP ARMSTRONG for his having allegedly violated a temporary
restraining order issued by the bankruptcy court.
I I stated that his preliminary report indicates
that approximately four million dollars of Hamilton Taft funds
have been traced directly to CHIP ARMSTRONG, that is, four
million dollars of HTC funds have been traced to going directly
to Mr. ARMSTRONG. I Istated that ARMSTRONG had or has five
bank accounts. Any payment that was made to CHIP from either
Hamilton Taft or one of the subsidiaries controlled by ARMSTRONG
are accounted for, that is, they are covered by explanations.
These explanations are usually in the form of a note receivable
or an account receivable notation. These entries to the books
and records of Hamilton Taft or anyone of these subsidiaries
b7C
- ..
-.]ID
Invesligationon at Sa);} Caloi.;fornil
ile
11 J96A-SF-93255 Sub C
I b7C
by SA f,YNN HATCHER PKM /a an Dale dictated 2 /1 0 /92
I ; I
IfThis document neither recommendations nor conclusions of the FBI. It Is the property of the FBr and is loaned to your agtncy;
1\ and its contents are not to be c1btrlbuted outside your aaency.
----------------'------'--_._- ..._-- ..._---
FD-302a (B:ev. 1l-lS-83)
f:>A-SF-93255 Sub C
Con tlnua tion of FD-302 01 -J I ' On 2/10/92
, Page __
controlled by ARMSTRONG were to pay for clothing for
Mr. ARMSTRONG or for a truck for his personal use. Succinctly
stated, these documents provided a paper trail for a trloan" or
"advance
ll
to ARMSTRONG to account for the payments to him.
I that an enormous portion of
ARMSTRONG's standard of living was booked by the various
comptrollers as advances to CHIP ARMSTRONG.
I Istated that during the period March 20th
through April 4th, 1991, CHIP ARMSTRONG liquidated three assets
which were not in Hamilton Taft's name. The first asset to be
liquidated was a helicopter, apparently owned and/or leased by
Winthrup Corporation for 1.1 million dollars. The second asset
and/or payment was a $700,000 payment to CHIP ARMSTRONG's
criminal. lawyer in Dallas. Finally,1 lindicated that
$300,000 went to was possibly in turn
repaid to a law firm of Long and Leavitt in San Francisco.
. With to the helicopter transaction and
liquidation indicated million dollars was
transferred to on the same day and on the same day, CHIP
ARMSTRONG wired transferred $700,000 to his Dallas based criminal
IWith respect to this $700,000 'wire
transfer, Istated that $400,000 of the lawyers' fees were
returned toJthe Again, with respect to the helicopter
transaction indicated that three million dollars had
originally been wire transferred to another one Bridge
companies and then in turn to winthrup Realty. I I stated
that ARMSTRONG has few sources of income other than the sale of.
assets purchased with Hamilton Taft funds. Among the assets that
ARMSTRONG purchased, apparently with Hamilton Taft funds, are two
stadium boxes for the Dallas Cowboys football team and these
apparently were purchased for $140,000 and $125,000,
respectively. A third box is still owned by ARMSTRONG.
Approximately 1.1 million to 1.3 million went to various lawyers.
Seven hundred and thirty-five thousand dollars went to criminal
lawyers and one hundred seventy-five thousand, two hundred
thousand and eighty thousand dollars, respectively, went to civil
attorneys.
---_... _-- ----
b7C
FD-302a (B:ev. 1l-lS-83)
}:>A-SF-93255 Sub C
Continuation ofFD-302 01 -Jl- .J--------------, On 2/10/92 , Page _----2"---
controlled by ARMSTRONG were to pay for clothing for
Mr. ARMSTRONG or for a truck for his personal use. Succinctly
stated, these documents provided a paper trail for a trloan" or
"advance
ll
to ARMSTRONG to account for the payments to him.
I that an enormous portion of
ARMSTRONG's standard of living was booked by the various
comptrollers as advances to CHIP ARMSTRONG.
I Istated that during the period March 20th
through April 4th, 1991, CHIP ARMSTRONG liquidated three assets
which were not in Hamilton Taft's name. The first asset to be
liquidated was a helicopter, apparently owned and/or leased by
Winthrup Corporation for 1.1 million dollars. The second asset
and/or payment was a $700,000 payment to CHIP ARMSTRONG's
criminal. lawyer in Dallas. Finally,1 lindicated that
$300,000 went to was possibly in turn
repaid to a law firm of Long and Leavitt in San Francisco.
. Wlth to the helicopter transaction and
liquidation! jindicated million dollars was
transferred to on the same day and on the same day, CHIP
ARMSTRONG wired transferred $700,000 to his Dallas based criminal
lawyer,C:: IWith respect to this $700,000 'wire
Istated that $400,000 of the lawyers' fees were
returned tOfhe Again, with respect to the helicopter
_ indicated that three million dollars had
originally been wire transferred to another one Bridge
companies and then in turn to winthrup Realty. I I stated
that ARMSTRONG has few sources of income other than the sale of.
assets purchased with Hamilton Taft funds. Among the assets that
ARMSTRONG purchased, apparently with Hamilton Taft funds, are two
stadium boxes for the Dallas Cowboys football team and these
apparently were purchased for $140,000 and $125,000,
respectively. A third box is still owned by ARMSTRONG.
Approximately 1.1 million to 1.3 million went to various lawyers.
Seven hundred and thirty-five thousand dollars went to criminal
lawyers and one hundred seventy-five thousand, two hundred
thousand and eighty thousand dollars, respectively, went to civil
attorneys.
b7C
"--'-'
FD-301a 11-15-83)
Sub C
b7C
Continuation of FD-302 of -J I On 2/10/92 Pagc_..lI
3
"'----
All records for Hamilton Taft and any of trmstrOnq/S
companies are currently domiciled in San Francisco.
indicated that some records are missing and those records are for
the company known as Winthrup Realty and CHIP ARMSTRONG's
personal financial records.
Additionally,l that her law firm is in b7C
possession of winthrup's ledgers through May of 1991. b7D
------ .' -------------"'---- ---_.-_.--"-----
FD-301a 11-15-83)
Sub C
b7C
Continuation of FD-302 of -J f--------------. On _-'2...;.I..... Page
All records for Hamilton Taft and any of
companies are currently domiciled in San Francisco. L
indicated that some records are missing and those records are for
the company known as Winthrup Realty and CHIP ARMSTRONG's
personal financial records.
b7C
Additionally,l that her law firm is in
possession of winthrup's ledgers through May of 1991. b7D
---- .. -----------'---
"1-3028 (Rev. 11-15-83)
196A-SF-93255
,On 4/15/91
--------
,
Pa
llC __2__
cash account for that day. If an overage, the money would go to
Hamilton Management for investing. If short, he would ask
Hamilton Management to money into the account to cover
checks written that day. _ lassumed all the trouble was
started when ARMSTRONG instructed one of these guys to send money
to somewhere else or he had the money from Kansas go to one of
his companies in Dallas for investment. "No, I don't consider
his ranch a real investment".
After the interviewing agents gavel la copy of
the sUbpoena for HT records, I 'said "I have been down a
similar shopping list as yours.
lI
He thought a chunk of client
money was taken out and used for investments. Probably a verbal
order by ARMSTRONG. This money replaced later. HT replaced
Federal Express money with Federal Express payments. HT did not
use "Joe Blow's" money to pay Federal Express's taxes and
penalties. Every tax that is owed in last quarter has been paid.
b
""1n
I Istated that HT is about 90 million short this quarter .! ....
because the clients are not putting money into the company. 4
I lexpressed that everything the trustee is
doing will help your investigation. IIHe's doing your work. I am
concerned that you guys will come in here and take all the
records away.. We will not see them for years." He had that
happen before in another case dealing with meat inspectors
getting kickbacks.
I Idiscussed he had worked for his family/s
company which had filed bankruptcy. He had successfully
reorganized the company. He had went on to work for other
companies in trouble. He decided to start consulting on his own.
That is when he answered the HT ad.
When questioned again about his contact with ARMSTRONG
he explained most of his contact was in bUdget meetings. He said
ARMSTRONG was planning to double the volume of business. There
was a summary of the meeting minutes kept by a secretary but he
was not sure which secretary.
When asked what was ARMSTRONG's long term plans
he did not know much about ARMSTRONG/s goals.
"I've been trying to do what you guys are doing. If I I
stated "I know a lot of peripheral facts, but not any detail".
I Idid say that ARMSTRONG went overseas to establish
"-302. (Rev. 11-15-83)
196A-SF-93255
_______,On 4/15/91 ,page __2__
cash account for that day. If an overage, the money would go to
Hamilton Management for investing. If short, he would ask
Hamilton Management to money into the account to cover
checks written that day. _ lassumed all the trouble was
started when ARMSTRONG instructed one of these guys to send money
to somewhere else or he had the money from Kansas go to one of
his companies in Dallas for investment. "No, I don't consider
his ranch a real investment
ll
After the interviewing agents gavel la copy of

the sUbpoena for HT records, I Isaid "I have been down a
similar shopping list as yours.". He thought a chunk of client
money was taken out and used for investments. Probably a verbal
order by ARMSTRONG. This money replaced later. HT replaced
Federal Express money with Federal Express payments. HT did not
use "Joe Blow's" money to pay Federal Express's taxes and
penalties. Every tax that is owed in last quarter has been paid.
b
"""
I Istated that HT is about 90 million short this quarter . J '.-
because the clients are not putting money into the company. 4
I lexpressed that everything the trustee is
doing will help your investigation. "He's doing your work. I am
concerned that you guys will come in here and take all the
records away. We will not see them for years.
1I
He had that
happen before in another case dealing with meat inspectors
getting kickbacks.
I Idiscussed he had worked for his family's
company which had filed bankruptcy. He had successfully
reorganized the company. He had went on to work for other
companies in trouble. He decided to start consulting on his own.
That is when he answered the HT ad.
When questioned again about his contact with ARMSTRONG
he explained most of his contact was in bUdget meetings. He said
ARMSTRONG was planning to double the volume of business. There
was a summary of the meeting minutes kept by a secretary but he
was not sure which secretary.
When asked what was ARMSTRONG's long term plans
he did not know much about ARMSTRONG's goals.
"I've been trying to do what you guys are doing." I I
stated "I know a lot of peripheral facts, but not any detail".
I Idid say that ARMSTRONG went overseas to establish
r::D-301a (Rev. 11-15-83)
196A-SF-93255
Continuation ofFD-302 of ~ l . . . ...J----------' On 4/15/91
. Page _3_
Hamilton gaft International aed make SOme sorf of deal.
I Jsaw the bUdget that_ . prepared for
ARMSTRONG. The bUdget indicated that some $50 million dollars of
capital was to be introduced back into HT this month and
eventually catch up all the delinquent taxes due by October of
this year.
b7C
I Ibelieves what' Istated in his written
statement about the actions of the client response unit is a lie.
He was managin; t n ~ ! unit. The intent was not to mislead ~
clients. r _ ~ h O was the supervisor in that ~
department weu d verIfy the unit's intent.
I Ilast contact with ARMSTRONG was last friday
at the HT office in San Francisco. l Istated,IIWe all met
here. It; The trustee with three others and ARMSTRONG with his
attorneys. He explained that he was trying to salvage the
business. He had another meeting later with employees. A sort
of pep talk asking them not to believe the newspapers.
I Iproduced a list of all current employees to
the interviewing agents upon the agents request. Since the
produced copy was missing the last digit of the employee's
telephone numbers another copy was sent vis facsimile to Federal
Bureau of Investigation office later the same day.
r::D-301a (Rev. 11-15-83)
196A-SF-93255
Continuation ofFD-302 of ~ l . . . ...J----------' On 4/15/91
. Page _3_
Hamilton gaft International aed make SOme sorf of deal.
I Jsaw the bUdget that_ . prepared for
ARMSTRONG. The bUdget indicated that some $50 million dollars of
capital was to be introduced back into HT this month and
eventually catch up all the delinquent taxes due by October of
this year.
b7C
I Ibelieves what' Istated in his written
statement about the actions of the client response unit is a lie.
He was managin; t n ~ ! unit. The intent was not to mislead ~
clients. r _ ~ h O was the supervisor in that ~
department weu d verIfy the unit's intent.
I Ilast contact with ARMSTRONG was last friday
at the HT office in San Francisco. l Istated,IIWe all met
here. It; The trustee with three others and ARMSTRONG with his
attorneys. He explained that he was trying to salvage the
business. He had another meeting later with employees. A sort
of pep talk asking them not to believe the newspapers.
I Iproduced a list of all current employees to
the interviewing agents upon the agents request. Since the
produced copy was missing the last digit of the employee's
telephone numbers another copy was sent vis facsimile to Federal
Bureau of Investigation office later the same day.
, ..
IN THE UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
No. 93-15455
IN RE: HAMILTON TAFT & COMPANY,
,
Debtor
FREDERICK S. WYLE, TRUSTEE,
Appellant
v.
S & S CREDIT COMPANY,
Appellee
ON APPEAL FROM THE JUDGMENT OF THE
FOR THE NORTHERN DISTRICT OF CALIFORNIA
BRIEF OF THE UNITED STATES AS AMICUS CURIAE
ON PETITION FOR REHEARING
On May 23, 1995, this Court invited the Government to file
an amicus brief "addressing whether the opinion filed in this
case, In re Hamilton Taft & Co., No. 93-15355 [sic], slip op.
filed May 2, 1995, adversely affects in any way the interests of
the IRS in collecting federal taxes." The following brief is
sUbmitted in response to that invitation.
STATEMENT
The case is an appeal from a District Court judgment
~ f f i r m i n g a Bankruptcy Court's refusal to treat a payment of
federal taxes as a voidable preference under Bankruptcy Code (11
000154
, ..
IN THE UNITED STATES COURT OF APPEALS
No. 93-15455
IN RE: HAMILTON TAFT & COMPANY,
,
Debtor
FREDERICK S. WYLE, TRUSTEE,
Appellant
v.
S & S CREDIT COMPANY,
Appellee
ON APPEAL FROM THE JUDGMENT OF THE
FOR THE NORTHERN DISTRICT OF CALIFORNIA
BRIEF OF THE UNITED STATES AS AMICUS CURIAE
ON PETITION FOR REHEARING
On May 23, 1995, this Court invited the Government to file
an amicus brief "addressing whether the opinion filed in this
case, In re Hamilton Taft & Co., No. 93-15355 [sic], slip op.
filed May 2, 1995, adversely affects in any way the interests of
the IRS in collecting federal taxes." The following brief is
sUbmitted in response to that invitation.
STATEMENT
The case is an appeal from a District Court judgment
~ f f i r m i n g a Bankruptcy Court's refusal to treat a payment of
federal taxes as a voidable preference under Bankruptcy Code (11
000154
- 15 -
CONCLUSION
,
J
For the above stated reasons, this Court should grant the
petition for rehearing and affirm the jUdgment of the District
Court affirming the Bankruptcy Court's jUdgment insofar as it
refuses to treat payments made by debtor for S & S's trust fund
tax liabilities as voidable preferences.
LORETTA C. ARGRETT
Assistant Attorne General
c:::c..
L
<1. (oJ I) (L[LLtLA',c,J
GARY R ~ ALLEN 1 (202) 514-3361
GARY D. GRAY (202) 5 1 4 ~ 3 0 0 5
PAULA K. SPECK (202) 514-4329
Attorneys
Tax Division
Department of Justice
Post Office Box 502
Washington, D.C. 20044
Of Counsel:
MICHAEL JOSEPH YAMAGUCHI
United States Attorney
AUGUST 1995
000155
- 15 -
CONCLUSION
,
J
For the above stated reasons, this Court should grant the
petition for rehearing and affirm the jUdgment of the District
Court affirming the Bankruptcy Court's jUdgment insofar as it
refuses to treat payments made by debtor for S & S's trust fund
tax liabilities as voidable preferences.
LORETTA C. ARGRETT
Assistant Attorne General
c:::c..
L
<1. (oJ I) (L[LLtLA',c,J
GARY R ~ ALLEN 1 (202) 514-3361
GARY D. GRAY (202) 5 1 4 ~ 3 0 0 5
PAULA K. SPECK (202) 514-4329
Attorneys
Tax Division
Department of Justice
Post Office Box 502
Washington, D.C. 20044
Of Counsel:
MICHAEL JOSEPH YAMAGUCHI
United States Attorney
AUGUST 1995
000155
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Full Docket
General Docket
United States Court of Appeals for the Ninth Circuit
Court of Appeals Docket #: 93-15455 Docketed: 03/18/1993
Termed: 10/12/1995 Wyle, et al v. S & S Credit Co.
Appeal From: US District Court for Northern California, San Francisco
Case Type Information:
1) bkd
2) district court
3) null
Originating Court Information:
District: 0971-3 : CV-92-02996-CAL Lead: 92-3-0057-LK
Trial Judge: Charles A. Legge, U.S. District Judge
Date Filed: 08/03/1992
Date Order/Judgment: Date NOA Filed:
02/23/1993 03/01/1993
Page 1 of 2 93-15455 Summary
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08/24/1995 56 Filed original and 40 copies IRS's brief as amicus curiae on petition for rehearing and
suggestion for rehearing en banc., of 15 pages; served on 8/21/95. (Per court request,
PANEL AND ALL ACTIVE JUDGES.) [93-15455] (RG)
09/08/1995 57 Filed Appellant Frederick S. Wyle's response to petition for enbanc rehearing by
defendant-appellee S&S Credit Company, Inc., (PANEL AND ALL ACTIVE
JUDGES.) [2790529-1] served on 9/8/95 [93-15455] (RG)
09/12/1995 58 Rec'd notice of appearance of George M. Borkowski (Withdrew as counsel: attorney
Richard R. Mainland for All American Gourmet, attorney John Tate for All American
Gourmet, attorney Karl E. Block for All American Gourmet [93-15455] (RG)
09/19/1995 59 Received csl Patricia S. Mar for Appellant Frederick S. Wyle letter dated 9/19/95 re:
....we request that the court take no action on the petition for rehearing or sugg for
rehearing en banc pending the filing of any pleadings necessary to withdraw the petition
for rehearing (PANEL & ALL ACTIVE JUDGES); served 9/19/95 [93-15455] (SA)
09/21/1995 60 Received csl Robert D. Crockett for Appellee S & S Credit Co. letter dated 9/20/95 re:
...the above case has settled. S&S Credit withdraws its petition for rehearing and
suggestion for en banc review (PANEL & ALL ACTIVE JUDGES); served 9/20/95 [93-
15455] (SA)
10/12/1995 62 Order filed (FOR PUBLICATION) The court is advised that the case has been settled.
Accordingly, the appeal is dismissed as moot and the decision filed May 02, 1995,
appearing @ 53 F.3d 285, is vacated. ( Procedurally Terminated After Other Judicial
Action; Dismissed. William A. NORRIS, author; David R. THOMPSON; Stephen S.
TROTT. ) [93-15455] (DL)
10/17/1995 63 MANDATE ISSUED [93-15455] (XX)
04/15/1996 64 RECORD RETURNED. (See control card for details.) (BL)
02/11/2005 65 Received Movant Connie C. Armstrong's motion to recall the mandate. ;no service.
Party is not listed on docket. PANEL [5325953] [93-15455] (GR)
03/07/2005 67 Filed order ( David R. THOMPSON, ): The " mtn to recall Mandate" submitted by pro
se Connie C. Armstrong, and received by this court on 2/11/05 is ordered filed. The
mandate in this case was issued 10/17/95. the movant Armstrong's mtn to recall the
mandate is denied. No further filings of any kind will be accepted in this closed case.
[93-15455] (KKW)
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, .
" "
Ncr. 93-15455
IN THE
UNITED STATES COURT OF APPEALS
In re HAMILTON TAFT & Co.,
Debtor, Frederick S. WYLE,
Trustee in Bankruptcy of
Hamilton Taft & Co.,
Plaintiff-Appellant
v.
S & S CREDIT CO.,
Defendant-Appellee.
MOTION TO RECALL MANDATE
Movant Connie C. Armstrong, Jr. respectfully requests that
this Court recall its mandate issued on October 12, 1995. On
that date, this Court dismissed a pending en bane appeal due to
mootness by reason of settlement and then vacated the panel
decision appearing at 53 F.3d 285. For the reasons that follow,
vacatur was not appropriate, and Armstrong seeks the remedy of a
recalled mandate to prevent injustice.
1. The instant civil litigation parallels criminal
litigation originating in the same district court and reviewed.
by this Circuit. Specifically, the criminal litigation was
addressed by this Court in United States of America v. Connie C.
Motion to Recall Mandate
Page 1
, .
" "
Ncr. 93-15455
IN THE
UNITED STATES COURT OF APPEALS
In re HAMILTON TAFT & Co.,
Debtor, Frederick S. WYLE,
Trustee in Bankruptcy of
Hamilton Taft & Co.,
Plaintiff-Appellant
v.
S & S CREDIT CO.,
Defendant-Appellee.
MOTION TO RECALL MANDATE
Movant Connie C. Armstrong, Jr. respectfully requests that
this Court recall its mandate issued on October 12, 1995. On
that date, this Court dismissed a pending en bane appeal due to
mootness by reason of settlement and then vacated the panel
decision appearing at 53 F.3d 285. For the reasons that follow,
vacatur was not appropriate, and Armstrong seeks the remedy of a
recalled mandate to prevent injustice.
1. The instant civil litigation parallels criminal
litigation originating in the same district court and reviewed.
by this Circuit. Specifically, the criminal litigation was
addressed by this Court in United States of America v. Connie C.
Page 1
Armstrong, ~ r . , 216 F.3d 1084, No. 97-10392, WL 425007 (9th Cir.
2000) (Table Opinion). In that criminal appeal of a fraud
conviction arising from his ownership of Hamilton Taft,
Armstrong challenged the district court's refusal to give a
theory-of-the-defense instruction. Armstrong pointed to this
Court's opinion in In re Hamilton Taft & Co., 53 F.3d 285 (9th
Cir. 1995) and requested that the district court instruct the
jury in accordance with that opinion. To counter arguments by
the government during the criminal trial concerning breach of
trust, Armstrong wanted the jury informed that ~ . . under
ordinary principles of trust, Taft did not hold the funds in
trust. Thus, the funds were property of [Taft] 1/ Id. at
288. The requested ,instruction was pivotal as it underscored
Armstrong's legal authority to invest the subject monies for his
own account. In reliance on this Court's improper vacatur of
its opinion in In re Hamilton Taft, the district court refused
the instruction.
2. This Court upheld the district court's refusal. In
doing so, this Court also relied upon the vacatur of In re
Hamilton Taft & Co. as the basis for affirming the district
court.
~ W e reject Armstrong's assertion that this Court's
decision in In re Hamilton Taft & Co., 53 F.3d 285 (9th
Cir.1995), opinion vacated, 68 F.3d 337 (9th Cir.1995), required
Page 2
Armstrong, ~ r . , 216 F.3d 1084, No. 97-10392, WL 425007 (9th Cir.
2000) (Table Opinion). In that criminal appeal of a fraud
conviction arising from his ownership of Hamilton Taft,
Armstrong challenged the district court's refusal to give a
theory-of-the-defense instruction. Armstrong pointed to this
Court's opinion in In re Hamilton Taft & Co., 53 F.3d 285 (9th
Cir. 1995) and requested that the district court instruct the
jury in accordance with that opinion. To counter arguments by
the government during the criminal trial concerning breach of
trust, Armstrong wanted the jury informed that ~ . . under
ordinary principles of trust, Taft did not hold the funds in
trust. Thus, the funds were property of [Taft] 1/ Id. at
288. The requested ,instruction was pivotal as it underscored
Armstrong's legal authority to invest the subject monies for his
own account. In reliance on this Court's improper vacatur of
its opinion in In re Hamilton Taft, the district court refused
the instruction.
2. This Court upheld the district court's refusal. In
doing so, this Court also relied upon the vacatur of In re
Hamilton Taft & Co. as the basis for affirming the district
court.
~ W e reject Armstrong's assertion that this Court's
decision in In re Hamilton Taft & Co., 53 F.3d 285 (9th
Cir.1995), opinion vacated, 68 F.3d 337 (9th Cir.1995), required
Page 2
the district court to use his proposed instruction. In re
Hamilton Taft has been vacated as moot, and thus is no longer
binding precedent."1 U.S. v. Armstrong at *1. Because the
vacatur challenged in this instant motion is both intertwined
with and materially impacting the review of Armstrong's criminal
conviction, Armstrong asserts the vacatur actually invades a
concrete and particularized legal interest, thereby giving him
standing to challenge the vacatur. See Lujan v. Defenders of
Wildlife, 504 U.S. 555
1
560 (1992). He has a "direct stake in
the outcome." Diamond v. Charles, 476 U.S. 54
1
56 (1986)
3. Armstrong is still incarcerated from the convictions
challenged in his ongoing criminal appeal. On May 28, 2002,
Armstrong filed a PETITION FOR PANEL REHEARING WITH SUGGESTION
FOR REHEARING EN BANC of the panel opinion released as U.S. v.
Armstrong, No. 00-10399, WL 554373 (9th Cir. Apr 15, 2002).
This Court has not released its response to Armstrong's
Petition. For these reasons, this motion concerns an actual
I The quoted passage continues as follows:
"Furthermore, its holding--that Hamilton Taft does not hold
client funds in trust for the IRS--is inapplicable to the issue
of what obligations existed between the company and its
clients." U.S. v. Armstrong at *1 (emphasis in original). Thip
statement contradicts the clear language of the opinion, which
held that the subject funds were the property of Hamilton Taft.
Contractual obligations were of no moment in either the civil or
the criminal litigation.
Page 3
the district court to use his proposed instruction. In re
Hamilton Taft has been vacated as moot, and thus is no longer
binding precedent."1 U.S. v. Armstrong at *1. Because the
vacatur challenged in this instant motion is both intertwined
with and materially impacting the review of Armstrong's criminal
conviction, Armstrong asserts the vacatur actually invades a
concrete and particularized legal interest, thereby giving him
standing to challenge the vacatur. See Lujan v. Defenders of
Wildlife, 504 U.S. 555
1
560 (1992). He has a "direct stake in
the outcome." Diamond v. Charles, 476 U.S. 54
1
56 (1986)
3. Armstrong is still incarcerated from the convictions
challenged in his ongoing criminal appeal. On May 28, 2002,
Armstrong filed a PETITION FOR PANEL REHEARING WITH SUGGESTION
FOR REHEARING EN BANC of the panel opinion released as U.S. v.
Armstrong, No. 00-10399, WL 554373 (9th Cir. Apr 15, 2002).
This Court has not released its response to Armstrong's
Petition. For these reasons, this motion concerns an actual
I The quoted passage continues as follows:
"Furthermore, its holding--that Hamilton Taft does not hold
client funds in trust for the IRS--is inapplicable to the issue
of what obligations existed between the company and its
clients." U.S. v. Armstrong at *1 (emphasis in original). Thip
statement contradicts the clear language of the opinion, which
held that the subject funds were the property of Hamilton Taft.
Contractual obligations were of no moment in either the civil or
the criminal litigation.
Page 3
case or controversy under Article III of the United States-
Constitution.
4. This Court held in Zipfel v. Halliburton Co., 861 F.2d
565 (9th Cir.), that "the authority of a Court of Appeals to
recall its mandate is clear. While the authority is not
conferred by statute, it exists as part of the court's power to
protect the integrity of its own processes." Id. at 567
(citations omitted). The decision whether to exercise the power
"falls within the discretion of the court, but such discretion
should be employed to recall a mandate only when good cause or
unusual circumstances exist sufficient to justify modification
or recall of a prior judgment." rd. As a general rule, this
Court will recall a mandate only when animated by "an
overpowering sense of fairness and a firm belief that this is
the exceptional case requiring recall of the mandate in order to
prevent an injustice.
1f
Verrilli v. City of Concord, 557 F.2d
664, 665 (9th Cir. 1977) i see also Zipfel, 861 F.2d at 567.
Specifically, this Court has recalled its mandate when a
"decision of the Supreme Court \departs in some pivotal aspects'
from a decision of
lf
this court. Zipfel, 861 F.2d at 567 (quoting
American Iron and Steel lnst. v. EPA, 560 F.2d 589, 596 (3d Cir.
1977) I cert. denied, 435 U.S. 914 (1978)). This is the
situation in the case at bar.
Page 4
case or controversy under Article III of the United States-
Constitution.
4. This Court held in Zipfel v. Halliburton Co., 861 F.2d
565 (9th Cir.), that "the authority of a Court of Appeals to
recall its mandate is clear. While the authority is not
conferred by statute, it exists as part of the court's power to
protect the integrity of its own processes." Id. at 567
(citations omitted). The decision whether to exercise the power
"falls within the discretion of the court, but such discretion
should be employed to recall a mandate only when good cause or
unusual circumstances exist sufficient to justify modification
or recall of a prior judgment." rd. As a general rule, this
Court will recall a mandate only when animated by "an
overpowering sense of fairness and a firm belief that this is
the exceptional case requiring recall of the mandate in order to
prevent an injustice.
u
Verrilli v. City of Concord, 557 F.2d
664, 665 (9th Cir. 1977) i see also Zipfel, 861 F.2d at 567.
Specifically, this Court has recalled its mandate when a
"decision of the Supreme Court \departs in some pivotal aspects'
from a decision of
u
this court. Zipfel, 861 F.2d at 567 (quoting
American Iron and Steel lnst. v. EPA, 560 F.2d 589, 596 (3d Cir.
1977) I cert. denied, 435 U.S. 914 (1978)). This is the
situation in the case at bar.
Page 4
5. The mandate for which recall is sought reads, in its
entirety, as follows: "The Court is advised that the case has
been settled. Accordingly, the appeal is dismissed as moot and
the decision filed May 2, 1995, appearing at 53 F.3d 285, is
vacated." In re Hamilton Taft & Co., 68 F.3d 337, 337 (9th Cir.
1995). As discussed below, automatic vacatur of an appeal
mooted by settlement is not authorized by the Supreme Court.
Moreover, 'this case presents a uniquely harmful twist. Unlike
the typical situation where a district-court ruling is under
review by a panel, the parties settle, and the inquiry then
becomes whether or not to vacate the district court ruling,
here, the panel had already released an opinion reversing the
lower court. By vacating the panel opinion, this Court has let
stand a district court opinion that was held erroneous following
de novo appellate review.
6. The u.s. Supreme Court has spoken on this issue and has
instructed that "mootness by reason of settlement does not
justify vacatur of a judgment under review." u.s. Bancorp v.
Bonner Mall, 513 U.S. 18, 29 (1994). This Court has interpreted
Bonner Mall to hold that when the mootness is caused by actions
of the parties, rather than happenstance, automatic vacatur is
not appropriate. See American Garnes Inc. v. Trade Prod., 142
F.3d 1164, 1169 (9th Cir. 1998); Mayfield v. Dalton, 109 F.3d
Page 5
5. The mandate for which recall is sought reads, in its
entirety, as follows: "The Court is advised that the case has
been settled. Accordingly, the appeal is dismissed as moot and
the decision filed May 2, 1995, appearing at 53 F.3d 285, is
vacated." In re Hamilton Taft & Co., 68 F.3d 337, 337 (9th Cir.
1995). As discussed below, automatic vacatur of an appeal
mooted by settlement is not authorized by the Supreme Court.
Moreover, 'this case presents a uniquely harmful twist. Unlike
the typical situation where a district-court ruling is under
review by a panel, the parties settle, and the inquiry then
becomes whether or not to vacate the district court ruling,
here, the panel had already released an opinion reversing the
lower court. By vacating the panel opinion, this Court has let
stand a district court opinion that was held erroneous following
de novo appellate review.
6. The u.s. Supreme Court has spoken on this issue and has
instructed that "mootness by reason of settlement does not
justify vacatur of a judgment under review." u.s. Bancorp v.
Bonner Mall, 513 U.S. 18, 29 (1994). This Court has interpreted
Bonner Mall to hold that when the mootness is caused by actions
of the parties, rather than happenstance, automatic vacatur is
not appropriate. See American Garnes Inc. v. Trade Prod., 142
F.3d 1164, 1169 (9th Cir. 1998); Mayfield v. Dalton, 109 F.3d
Page 5
1423, 1427 (9th Cir. 1997); Cammermeyer v. Perry, 97 F.3d 1235,
1239 (9th Cir. 1996). Despite the Supreme Court's clear
instructions, this Court nonetheless automatically vacated an
opinion under review when that opinion was mooted by settlement
between the parties.
7. Such vacatur was not lawful and has had a direct and
adverse impact on the review of Armstrong's criminal conviction.
ACCORDINGLY, Armstrong requests that this Court recall the
mandate issued on October 12, 1995 and thereby reinstate its
opinion in In re Hamilton Taft. Armstrong further requests that
this Court, in the interest of justice, ameliorate the harm
caused by the improper vacatur by recalling its opinion in U.S.
v. Armstrong,2 which opinion relied upon the improper vacatur,
and remand that criminal case for a new trial.
Connie C. Armstrong
r
Jr.
Reg. No. 88762-011
r
Unit B-5
Federal Correction Institution
P.O. Box 9000
Seagoville
r
Texas 75159-9000
2 216 F.3d 1084, No. 97-10392, WL 425007 (9th Cir.
2000) (Table Opinion) .
Page 6
1423, 1427 (9th Cir. 1997); Cammermeyer v. Perry, 97 F.3d 1235,
1239 (9th Cir. 1996). Despite the Supreme Court's clear
instructions, this Court nonetheless automatically vacated an
opinion under review when that opinion was mooted by settlement
between the parties.
7. Such vacatur was not lawful and has had a direct and
adverse impact on the review of Armstrong's criminal conviction.
ACCORDINGLY, Armstrong requests that this Court recall the
mandate issued on October 12, 1995 and thereby reinstate its
opinion in In re Hamilton Taft. Armstrong further requests that
this Court, in the interest of justice, ameliorate the harm
caused by the improper vacatur by recalling its opinion in U.S.
v. Armstrong,2 which opinion relied upon the improper vacatur,
and remand that criminal case for a new trial.
Connie C. Armstrong
r
Jr.
Reg. No. 88762-011
r
Unit B-5
Federal Correction Institution
P.O. Box 9000
Seagoville
r
Texas 75159-9000
2 216 F.3d 1084, No. 97-10392, WL 425007 (9th Cir.
2000) (Table Opinion) .
Page 6
Memorandum
To
. SAN FRANCISCO (196A-SF-93255) (P) Date 3/8/91
From
sAJ _
(SQ' 5) b7C
Subject
CHIP ARMSTRONG, Jr., dba
Hamilton Taft and Company
1 Market Plaza
Spear street Tower
San Francisco, California
FBW; MFi Tax Fraud;
00: SAN FRANCISCO
The purpose of this memo is tO'document events that
since 6bruary 13 I 1 99 whi,?h is the date that
last interviewed by the writer. On that
__________ a numbs ocuments to iter which
have been disse e y he writer to or the IRS
in San Francisco, telephone number 556-6850. It should:
also be noted. that a copy of these documents along with a
of the writer's review of San Francisco file 196A-2868 has been
prepared and disseminated to AUSA MICHAEL YAMAGUCHI at 556-1328.
A copy of this summary is a matter of record under a separate
communication which is a part of this file.
Due to the fact that AUSA YAMAGUCHI was on annual leave
and did not return to his office until March 4, and/or 5, 1991 no
overt investigation was undertaken. This matter was referred to
Mr. Y GUCHI because of his revious referral w' he handled
re ardin Haml on Taft in which he subse entl f r-
lJlck 0] prosecution.. This matter was investigated by S - -7
I _it was handled under--SF 196A-2868 and was closed
August, 1988.
with regard to information supplied byl I writer
was reluctant to initiate any overt investigation for fear that-
there Eotential liability attached wherein the
.QB1dJ2e accused.Qf initiatipg the downfall ,of
captioned company bvl'the mere fact that it was making overt
inquiries. [ . ' ,has provided detailed information which,
of this date, has'been unable to be thoroughly corroborated.
Progress is being made to effect such corroDorat2on. .
I. expressed apprehension in his mind regarding
the "extensive
n
time-it was taking for the government to decide
Whether or not to initiate an investigation and to effect some
criminal process. He was told that the government ha_g._:t.Q.........
victim before any process would be forthcoming. He was further
Memorandum
To
. SAN FRANCISCO (196A-SF-93255) (P) Data 3/8/91
From
_
(SQ' 5) b7C
Subject
CHIP ARMSTRONG, Jr., elba
Hamilton Taft and Company
1 Market Plaza
Spear street Tower
San Francisco, California
FBW; MFi Tax Fraudj
00: SAN FRANCISCO
The purpose of this memo is to'document events that
since 13, which is the date that
last interviewed by the writer. On that
provided a numbe ocuments to iter which
have been disse e y he writer to qA or the IRS
in San Francisco, telephone number 556-6850. It should:
also be noted. that a copy of these documents along with a
of the writer's review of San Francisco file 196A-2868 has been
prepared and disseminated to AUSA MICHAEL YAMAGUCHI at 556-1328.
A copy of this summary is a matter of record under a separate
communication which is a part of this file.
196A-SF-93255
PKM/sgc
advised on more than one occasion by the writer of the potential
civil liability which miggt attach to the revelation to the
general public that the FBI was conducting or maybe conducting an
investigation into certain alleged criminal activities on the
part of Hamilton Taft. .
Nonetheless, on February 1-1, lsaw fit to
contact the congressional offices here in San Francisco of
Congress persons NANCY PELOSI and BARBARA BOXER.
on resswoman PELOSI's office to whom
spoke ave arne of an investi ative re orter e
consider contacting.. with infOrmat.iQD. On
the as well as lof the Cln
- receiving telephone calls from an attorney at the Department of
Justice making inquiry as to the FBI and/or IRS' connection if
any with Hamilton Taft.
On February 13, 1991, during the interview __
conducted by the writer, he was again questioned as to the reason
for making calls to the aforementioned conaressional offices. He
stated that he was concerned about I
Ifollowing his resignation from Hamilton
It should be noted that I l
during this interview on February 13, 1991 re-iterated that fact.-
thatl I
1 I He was J----
again reminded of potential civil liability problems that might
gn?ue from the publicatiQD Qf the of the FBI
with to-Jiamilton
On Wednesday, March 6 1991, the writer received
telephone call from SAJ ; JIRS CID who advised that he
had been called by a M-. RALPH :IN
W
, an investigative reporter
for the Wall street Journal here in San Francisco. The purpose
of KING's call to SWAIN was to confirm that the IRS was
regarding Hamilton Taft. On the
morning of March 6, 1991, the writer reviewed message slips that
had arrived on Tuesday, March 5, 1991, the writer having been on
sick leave that day and one of, them was from RALPH KING of the
Wall street Journal. The writer did not return KING's phone
call, however, in to a page, for a telephone calIon
the afternoon call of 1991, the writer became connected
to Mr. KING of the Wall street,Journal. The usual inquiries were
made and the usual response, is we can neither confirm
and/or deny the existence of any investigation was provided to
Mr. KING who seemed perturbed y thi
2
b7C
196A-SF-93255
PKM:/sgc
advised on more than one occasion by the writer of the potential
civil liability which miggt attach to the revelation to the
general public that the FBI was conducting or maybe conducting an
investigation into certain alleged criminal activities on the
part of Hamil ton Taft. . .
Nonetheless, on February Isaw fit to
contact the Corigressional offices here in San Francisco of
Congress persons NANCY PELOSI and BARBARA BOXER.
on resswoman PELOSI's office to whom
spoke ave arne of an investi ative re rter e
contacting.. with infdt:matipn. On
the wrlter as well as lof the eIn reported
- receiving telephone calls from an attorney at the Department of
Justice making inquiry as to the FBI and/or IRS' connection if
any with Hamilton Taft.
On February 13, 1991
r
during the interview -....
conducted by the writer, he was again questioned as to the reason
for making calls to the aforementioned conaressional offices. He
stated that be was concerned about I
Ifollowing his resignation from Hamilton
It should be noted that I l
during this interview on February 13, 1991 re-iterated that fact.
that I I
1 I He was
again reminded of potential civil liability problems that might
gDpue from the pyblicatign of the of the FBI
with to-llamilton .
On Wednesday, March 6 1991, the writer received a
telephone call from SAJ ; JrRS CID who advised that he
had been called by a M RALPH IN , an investigative reporter
for the Wall street Journal here in San Francisco. The purpose
of KING's call to SWAIN was to confirm that the IRS was
conducting-an-ipystigation regarding Hamilton Taft. On the
morning of March 6, 1991, the writer reviewed message slips that
had arrived on Tuesday, March 5, 1991, the writer having been on
sick leave that day and one of, them was from RALPH KING of the
Wall street Journal. The writer did not return KING's phone
call, however, in to a page, for a telephone call on
the afternoon call of 1991, the writer became connected
to Mr. KING of the Wall street. Journal. The usual inquiries were
made and the usual response, is we can neither confirm
and/or deny the existence of any investigation was provided to
Mr. KING who seemed perturbed y
:2
b7C
196A-SF-93255
PKMjsgc
On March 6, 1991,1 r head of corporate
security of Sun Micro Systems Inc. at 2550 Garcia Ave., Mountain
View, California 94043, telephone number (415) 336-0496 was
called by the writer in response to call that he had made to our
office on March 5, 1991.
that his office had
been contacted by was
accompanied by an attorneJ one (ph) who advised that
the purpose ofl . _contac lcro Systems was to
advise Sun Micro Systems that it had been the victim of a fraud
perpetrated by Hamilton Taft' on Sun -.Micro Systems and numerous
other corporate clients of Hamilton Taft. I
the writer that he would fax certain documents up to San
Francisco at the writer's 5uggestiqn. These documents included a
copy of the service agreement thal: exists Sun .Mic1;"o .
Systems and Hamil ton Taft dated (October 1, __.1987 as well as copies
of certain Federal tax forms whicn had been executed by employees
of Hamilton Taft Company. lalso advised the writer
that I rad of his own volition convened a meeting of _ "
several of the corporate representatives who he had contacted _'J_'- .. '/ .Jr
presumably in the first week of March telling these corporations
who are current and/or former clients of Hamilton Taft, that they
had in fact been ,defrauded by Hamilton Taft. Sun Micro-Systems
reluctantly agreed to "host" this meeting which was to take place .I"'"
during the afternoon of March 8, 1991 at Sun Micro System's ';
offices in Mountain View. ,i' " '
.' , ..
nf
/, :':' ;
Of the mornin: of March 7, H91, I I,throtgh'
his associatel l, an investigator for the
of un Micro Systems, facsimiled oj
documents to the writer. The most salient point of
documents was a letter to Sun Micro Systems dated February 13, "', ,'.' '
1991 from the ,.IRS in-- Fresno. The letter refers to a particular ,/' ;) >')'
tax identification number utilized by' Sun Micro Systems and .
references a tax period ending september 30 I 1990.'- The letter
}
goes on to thank tax payer (Sun Micro Systems) for its reply t ';
dated January 25, 1991 and its payment of $260,784.25 in penaltyJ;'.....
fees and for its late deposit of ($5,215, The -
signifiri:lD:e Of ::mmunication is that Sun Micro Systems .,' ..
throughLJhas represented, as of March 7, 1991, that
it did sen t e appropriate money that is $5,215,684.86
to Hamilton Taft via a wire transfer in order to pay employment
tax obligations do and owing the IRS for the tax period ended
September 30
r
1990. Per an agreement of which the writer is in
receipt, that is, the service agreement between Hamilton Taft and
Sun Micro System?, Hamilton Taft is responsible for the
payment It is an inference drawn by Sun
3
196A-SF-93255
PKM/sgc
On March 6, 1991,1 r head of corporate
security of Sun Micro Systems Inc. at 2550 Garcia Ave., Mountain
View, California 94043, telephone number (415) 336-0496 was
called by the writer in response to call that he had made to our
office on March 5, 1991.
> )1/("
Of the mornin: of Marcb 7. 1991, I l:throilgh .
his associatel l, an investigator for the
security:.. Department of un Micro Systems, facsimiled 16/pages o,f
documents to the writer. The most salient point of these
documents was a letter to Sun Micro Systems dated February 13,
1991 from the ,.IRS in-' Fresno. The letter refers to a particular ./, .;'0;7 ";'
tax identification number utilized by' Sun Micro Systems and ' "s;";:,'
references a tax period ending september 30, 1990.' The letter \,e':,.
goes on to thank tax payer (Sun Micro Systems) for its reply I, 0
dated January 25, 1991 and its payment of $260,784.25 in penaltyJ;'. , ..
fees and for its late deposit of ($5,215, The .. ' .... '
,'."
signifipan:e of 5 ::mmunication is that Sun Micro Systems ,; .'
throughLJhas represented, as of March 7, 1991, that
it did sen t e appropriate money that is $5,215,684.86
to Hamilton Taft via a wire transfer in order to pay employment
tax obligations do and owing the IRS for the tax period ended
September 30
r
1990. Per an agreement of which the writer is in
receipt, that is, the service agreement between Hamilton Taft and
Sun Micro System?, Hamilton Taft is responsible for the
payment penalties. It is an inference drawn by Sun
writer that his office had
been contacted by was
accompanied by an attorney one (ph) who advised that
the purpose of I . Jcontac lcro Systems was to
advise Sun Micro Systems that it had been the victim of a fraud
perpetrated by Hamilton Taft' on Sun Micro Systems and numerous
other corporate clients of Hamilton Taft. I 'advised
the writer that he would fax certain documents up to San
Francisco at the writer's suggestiqn. These documents'included a
copy of' the service agreement thati, Sun, }1,icJ;'o ..
Systems and Hamil ton Taft dated (October 1, ._.1981 as well as copies
of certain Federal tax forms whicn had been executed by employees
of Hamilton Taft Company. I Ialso advised the writer.
that I pad of his own volition convened a meeting of ;'N" . n;
several of the corporate representatives who he had contacted .'r<
presumably in the first week of March telling these corporations
who are current and/or former clients of Hamilton Taft, that they
had in fact been ,defrauded by Hamilton Taft. Sun Micro-Systems
reluctantly agreed to "host" this meeting which was to take place .1,'
during the afternoon of March 8, 1991 at Sun Micro System's ,; ,;
offices in Mountain View.
3
b7C
196A-SF-93255
PKM/sgc
Micro Systems personnel that this document tends to corroborate
what I I was alleging in his representations to the
government. '
On the afternoon of March 7, 1991, AUSA YAMAGUCHI was
personally visited by the writer and a brief update was provided
to him of events that have taken place. On March 8, 1991, copies
of the aforementioned facsimiles were provided to AUSA YAMAGUCHI
fore his review. On March 8, 1991, Mr. YAMAGUCHI suggested to
the writer ,that efforts continue to accumulate enough probable
cause to cause the issuance of a search warrant for the offices
at Hamilton Taft at the earliest possible date.
The following corporations have been contacted by ]
I land/or his attorney and that they' have been the
victims of fraud perpetrated on them by Hamilton Taft. These
corporations are Costal Savings Bank, Sun Micro Systems, American
West Airlines, and one or two chemical companies located at the
east coast. In addition, I I advised writer that he
has been contacted by of Lloyds of London
Insurance company with respect to Hamilton Taft. It
, __ "_9! .. J)}.e
__ systems, ,on the .afternoon
at-March 8, 1991.
San Francisco at San Francisco, California:
Investigation is continuing.
4*
b7C
196A-SF-93255
PKM/sgc
Micro Systems personnel that this document tends to corroborate
what I I was alleging in his representations to the
government. '
On the afternoon of March 7, 1991, AUSA YAMAGUCHI was
personally visited by the writer and a brief update was provided
to him of events that have taken place. On March 8, 1991, copies
of the aforementioned facsimiles were provided to AUSA YAMAGUCHI
fore his review. On March 8, 1991, Mr. YAMAGUCHI suggested to
the writer ,that efforts continue to accumulate enough probable
cause to cause the issuance of a search warrant for the offices
at Hamilton Taft at the earliest possible date.
The following corporations have been contacted by ]
I land/or his attorney and that they' have been the
victims of fraud perpetrated on them by Hamilton Taft. These
corporations are Costal Savings Bank, Sun Micro Systems, American
West Airlines, and one or two chemical companies located at the
east coast. In addition, I I advised writer that he
has been contacted by of Lloyds of London
Insurance company with respect to Hamilton Taft. It
, __ "_9! .. J)}.e
__ systems, ,on the .afternoon
at-March 8, 1991.
San Francisco at San Francisco, California:
Investigation is continuing.
4*
- ;""
-- .-
. ..
P -I qtpl1-s f-, 9d25(
.,--
Mr. Baker:\f7
sSP
:. .e'c n.;f ,
I j -
.,f
RE:
4/3/91
CONNIE/C. JR.,
AKA
DBAvHAMILTON TAFT AND COMPANY:
32ND FLOOR, SPEAR STREET TOWER,
FRAUD BY WIRE MAIL FRAUD; TAX FRAUD i
00: SAN FRANCISCO
San Francisco has initiated a Fraud By Wire
investigation based on information received from the former
Comptroller of Hamilton Taft and Company (HTC) that the SUbject,
Armstrong, has embezzled over $100 million from the firm's
clients over the last three years. These allegations continue to
be front-page news in San Francisco and on 3/15/91, the Wall
Street Journal ran a front7page article detailing the allegations
(copy attached).
HTC contracts ,with companies who owe taxes to numerous
state and local taxing authorities. Client companies make a lump
sum wire transfer of funds to the HTC account, and thereafter,
HTC issues checks to whatever taxing authority is owed money.
The former Comptroller, I I, has alleged that
Armstrong diverted lump sum payments to his own use and
thereafter, incurred penalties associated with late payments and
7C passed these costs along to the client companies who were not
notified of the late charges. In essence the allegation is that
Armstrong is running a "Ponzi scheme" of considerable magnitude
Which requires increasing amounts of cash to keep the operat'on
going. Jt; -jJj & - l
left HTC in Februar of 1991 and on 3
You will be kept apprised of pertinent developments.
NOT APPROPRIATE FOR DISSEMINATION TO THE PUBLIC

Enclosure
1 - Mr. Jones
1 - Mr. Baker
1 - Mr. Potts
1 - Mr. Bryant
GDM:gdmjsw (9)

1 - Mr. O'Hara
1 - Mr. Esposito
1 - Special Assistants, CID

Motion For Discovery

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BILL BOYD 1

lin looking at the financial

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