UNITED STATES DISTRICT COURT

DISTRICT OF MAINE

UNITED STATES OF AMERICA

CATHERINE DUFFY PETIT

The government has charged conduct in Counts 2 through 5 and 7 through 15 which under the facts alleged does not as a matter of law constitute bankruptcy fraud. The counts should be dismissed, or a Bill of Particulars provided making a prima facie showing of some fact supporting the charge alleged in each count.

Bankruptcy law deals primarily with the financial affairs of a debtor during the period of time up to and through the commencement of the bankruptcy petition. On June 4, 1993, several of Catherine Petit's creditors filed an involuntary bankruptcy naming Petit as the bankrupt. The bankruptcy involves only Catherine Duffy Petit, and not C.D.P., Inc., Whiteway Amusements, or Old Orchard Pier Company. Each of these three corporations are plaintiffs along with Catherine Duffy Petit in the pending civil suit against Key Bank.

Federal Rule of Criminal Procedure 7(f) provides for a court ordered filing by the government of a bill of particulars. The function of a bill of particulars is to provide the defendant with necessary details of the charges against her to enable her to prepare her defense, to avoid surprise at trial, and to protect against double jeopardy. U.S. v. Abreu, 952 F.2d 1458, 1469 (1 st Cir. 1992); U.S. v. Paiva, 892 F.2d 148, 154 (1 st Cir. 1989). The pending indictment in counts 2 through 5 and 7 through 15 either fails as a matter of law, or fails to provide enough facts for preparation of an adequate defense and avoidance of surprise at trial. Until the defendant understands the government's claim, the risk of double jeopardy remains.

The Government seems to be under the mistaken belief that Petit as a debtor in bankruptcy had a legal obligation to set forth in the bankruptcy process her post-petition finances. The government apparently feels that funds raised post-petition be they to finance the Key Bank litigation or for any other purpose are assets of the bankruptcy. That is not the law. The Government confuses Catherine Petit's personal finances with those of various corporations. "It is well established that a corporation is a separate legal entity which has the power to sue and be sued in its corporate name. See 13 -A M.R. S.A. § 202(l)(B)", Chrysler Credit Corp. v. Bert Cote's L/A Auto Sales, Inc.,1998ME53,PI6. Funds coming to corporations, pre or post petition are not and were not the subject of the bankruptcy and can not form the factual or legal basis of the bankruptcy fraud allegations.

COUNT 2. The government charges that Petit concealed from creditors and the United States Trustee, property belonging to the estate, specifically funds raised from the sale of assignments. Initially, cross reference is made to Petit's Motion To Dismiss Due To Improper Grand Jury Practice as the applicable version of § 1 52 does not make the United States Trustee a party from whom concealment is actionable. Because the bankruptcy estate deals only with Catherine Petit's personal financial position through June 4, 1993, funds raised from any source after that date do not have to be reported to the United States Trustee, creditors, or anyone else concerning the bankruptcy. Only unspent funds raised before June 4, 1993 could be property of the bankruptcy estate. Nothing in the indictment, the earlier complaint, or agent Osterreider affidavits suggests that there were any "funds" raised before the bankruptcy filing which remained, that is were unspent, at the time of the filing. If the government makes such a claim, a Bill Of Particulars is requested identifying what "funds" of a pre-filing nature are claimed to have existed and not been revealed by Petit during the bankruptcy process. If the government is unable to provide such a response, then count 2 should be dismissed.

COUNT 3. In Count 3 the indictment charges that Petit failed to list investors on her February 25, 1994 Bankruptcy Schedules. (The schedules are actually dated February 24, 1994 but were apparently filed on February 25, 1994). The only investors Petit would have any obligation of listing, were those to whom an obligation was owed from Petit personally as of June 4, 1993, and who had not been paid as of the date the schedules were filed. A copy of the relevant portion of Petit's February 25, 1994 Bankruptcy Schedules is attached as Exhibit 1. Petit asks that the government file a Bill Of Particulars indicating what investors they claim should have been on the schedules who are missing and provide some basis for such a claim. If the government is unable to do this, then Count 3 should be dismissed.

COUNTS 4, 5, 7 & 8. In count 4, the government claims that there was something untrue in the bankruptcy schedules filed on February 25, 1994. The Defendant asks that the government identify the alleged untruth or perjury. In count 5, the Defendant understands that the government claims there was a false statement or untruth in Petit's §341 testimony given on May 17, 1994. The defense asks that the government provide some detail as to what the alleged false statements were. The same is true for counts 7 & 8 stemming from §341 testimony given on December 4, 1995 and on February 2, 1996. The Defendant suspects that Counts 4-8 are merely another attempt by the government to allege the conduct which was previously alleged in Count 2 & 3. For the same reasons, the Defendant requests a Bill Of Particulars. To the extent the government is unable to provide such Bill Of Particulars, Counts 4, 5, 7 & 8 should be dismissed.

COUNT 9. In Count 9 the government again charges that Petit failed to list creditors on her February 25, 1994 Bankruptcy Schedules. This appears to be identical to the allegations in Counts 3 & 4 and dismissal or the requested Bill of Particulars should be equally applicable to Count 9.

COUNT 10. In Count 10, the government charges that Petit in conjunction with Paul Richard presented "a false claim for proof against the estate" in the form of "Richard's claim as reflected in Petit's Bankruptcy Schedules filed on or about February 25, 1994." A claim for proof is the debtor putting potential creditors on notice. In Exhibit 1, Petit's Bankruptcy Schedules, Petit indicates that Paul Richard advanced her approximately $60,000 back in 1987. Richard is listed in Schedule F as a creditor holding an unsecured nonpriority claim, the lowest form of potential claim in bankruptcy. Under bankruptcy law, Petit is required to list on her schedules those to whom she believes she owes a debt. The mere listing by a debtor of a potential creditor on her schedules can never amount to a bankruptcy fraud. The purpose of the listing of creditors on the schedule is so that creditors can be given notice so that the creditor may choose, if they desire, to file a proof of claim. The schedules allow notice to be given. A listing of a potential creditor on a schedule is for the benefit of the bankruptcy estate. Failure to list a creditor means that notice is not given, and the Trustee must deal with that potential creditor under a different bankruptcy section. In this case, although Petit listed Richard as a potential creditor, Richard never filed a proof of claim regarding the approximately $60,000 involved. If Richard filed a false proof of claim, that would be a crime. By not filing a proof of clain-4 Richard abandoned whatever interest, if any, he might have had. This is how the bankruptcy process is supposed to work. A debtor lists potential claims. Potential creditors either move to verify that the are owed money, hence have a claim, or they do nothing, losing any claim which might have existed. This works as a benefit to the bankrupt estate by reducing the number of creditors and overall amount being sought. As a matter of law, Petit's listing of Richard as a potential creditor cannot be a bankruptcy fraud and Count IO must be dismissed.

COUNT 11. In Count 11, the government charges that Petit and others fraudulently received a material amount of property from the debtor after the filing of the case with the intent to defeat provisions of Title I 1. Specifically, the government charges that it is a bankruptcy fraud for Petit to have obtained funds raised from the sale of agreements to investors. If the government is claiming that "funds" raised from investors pre-petition were disseminated to defendants post-petition then a Bill of Particulars outlining the specific allegations is requested. Under any other theory count I I must be dismissed as a matter of law. Any assignments or agreements post-petition could not serve as a bankruptcy fired. To the extent that the Key Bank litigation is the property of the bankruptcy estate, no personal assignment given by Petit would have any validity. While the government may argue that such conduct violates a different law, it is not a bankruptcy fraud. Any investments after the date of the bankruptcy were done through the three corporations, none of whom were in bankruptcy. Nothing done by the corporations can be a bankruptcy fired as they are not part of the bankruptcy claim. A final issue addresses whether the agreements involved the sale of "assignments of proceeds from Petit's Key Bank litigation." This calls for a legal interpretation of the documents used in the various transactions. It appears premature in the discovery process for the court to address this issue which would be better handled as a motion in limine.

COUNT 12. Count 12 charges the same thing as Count I 1, just under a slightly different legal theory. The underlying factual predicates remain the same and Count 12 must be dismissed.

COUNT 13. In Count 13, the government charges that there was something improper about the agreements entered into by Petit's corporations. The corporations were not in bankruptcy and were free to raise funds as they saw fit. As a matter of law, there is no basis to the allegations of Count 13 and they must be dismissed, unless the government in a Bill Of Particulars can provide some substance as to why any corporate borrowing in this case was improper.

COUNTS 14 AND 15. In Count 14 the government charges that Petit concealed, falsified or withheld records relating to funds raised from the assignments. Once again the government appears to be under the mistaken belief that funds raised post-petition had to be disclosed. All records of pre-petition funds raised which were sought were provided. If the government disagrees a Bill of Particulars is requested outlining in some detail what the government claims to be the illegal conduct alleged in count 14. Otherwise count 14 should be dismissed. In Count 15 the government alleges that Petit withheld "recorded information reflecting funds raised from the sale of assignments...... This is basically the same allegation as in count 14 and the same response and relief is sought.

Petit requests that the government file a Bill of Particulars showing how there is a factual basis for the crimes alleged in counts 2 through 5 and 7 through 15. Petit does not think the government can make the showing sought and if that is the case the counts should be dismissed as lacking a legal basis.

Dated: March 25, 1998

David Beneman, Esq.

LEVENSON, VICKERSON & BENEMAN

UNITED STATES DISTRICT COURT

DISTRICT OF

UNITED STATES OF AMERICA

CATBERINE DUFFY PETIT

The documents involved in the case by definition are not "securities" or are exempt from federal regulation and can not form the basis of a "security" fraud charge.

Counts 323-343 allege securities fraud in violation of 15 U.S.C. §77q. Such a violation requires the conduct of one or more frauds in connection with the offering, purchase or sale of a "security." The only instruments at issue in this case, the "agreements" offered, purchased and/or sold, were not "securities" as defined in governing law. The government fails to allege what it is about any of the agreements in this case which makes those agreements a security. Accordingly, counts 323-343 alleging securities violations, should be dismissed.

The Securities Act of 1933 and the Securities Exchange Act contain virtually identical definitions of the term "security." That definition provides in pertinent part as follows:

The only possible area the government might look would be investment contracts or notes.

A. Investment Contracts

The "agreements"are not "investment contracts" as defined by statute and case law. An &(investment contract" is defined as :

1. Fornian, 421 U.S. 837, 848 (1976).

A contract is properly denominated an "investment contract" and hence a "security" within the Acts' definitions where the following factors are met:

1. solely from the efforts of others.

The "agreements" satisfy the first, third and fourth factors. However, the "agreements" fail to satisfy the second factor-the conunonality of enterprise, so they cannot be "investment contracts' or "securities."

Two distinct forms of "common enterprise" exist. "Horizontal commonality" is where the fortunes of the investors are tied to the fortunes of the other investors, generally in a pooled-assets context with apro rata distribution of profits, see Hart v. Ptilte Homes of Michigan Corp., 73 5 F. 2d 1001, 1004 (6th Cir. 1984); Saicer v. Merrill, Lynch, Pierce, Feliner & Smith, Inc., 682 F.2d 459 (3rd Cir. 1982). "Vertical commonality" is where the fortunes of the investors are tied to either the promoter's efforts ("broad vertical commonality") or to the promoter's fortunes/profits ("narrow or strict vertical commonality"). SEC v. KosotInterplane@, Inc., 497 F.2d 473, 479 (5th Cir. 1974); SEC v. Glenn W. Tumer Enterprises, Inc., 474 F.2d 476, 482 n. 7 (9th Cir.) Cert. Denied, 414 U.S. 821 (1973).

Although the First Circuit has not definitively delineated the parameters of sufficient commonality binding upon this Court, it appears that at least narrow/strict vertical commonality is necessary.

Appellate courts have provided a variety of definitions for the term "common enterprise." Some courts require horizontal commonality, seen as the pooling of assets from two or more investors into a single investment fund, usually combined with pro rata sharing of profits. Other courts require that there be vertical commonality, which focuses not on whether there is an enterprise common to the aggregate of investors, but rather on whether there is a venture common to the promoter and the investor. Lavery v. Kearns, 792 F. Supp. 847, 851 (D. Me. 1992). "Most of the District Courts in this circuit have required narrow vertical commonality for a finding of common enterprise." Lavery at 852. Narrow vertical commonality is defined as a "compromise approach between requiring horizontal commonality and broad vertical commonality [which] finds a common enterprise when the investment manager's fortunes rise and fall with the investor." Lavery at 85 1. See also, Pliskin v. Bruno, 838 F. Supp. 658 (D. Me. 1993).

There is no horizontal commonality here among and between the various investors. Stripped to its essence, each "agreement" represented a distinct and separate investment by its contributor. The agreement document provides no claim that the funds paid will be used directly or even indirectly for prosecution of the Key Bank lawsuit. The investor(s) received for his/her investment a fixed dollar "agreement," see Osterreider affidavit at paragraph 8, with 18% interest, without any reference to pro rata participation in the event that the eventual settlement or judgment was insufficient to satisfy in full all of the outstanding agreements. Notably, there was no uniformity between the investors respecting their rate of return. Many received a "two for one" return, see e.g. Osterreider affidavit at paragraphs 18, 24, 32; others received a greater return, especially as the "agreements" occurred temporally later, or a lesser return, see e.g. Osterreider affidavit at paragraphs 35, 40 ("SAPST FBO Brown, Ruth"), 65. This absence of uniformity confirms the separateness of each solicited investment/"agreement" and the non-pooled nature of the transactions.

Likewise, there exists no narrow or strict vertical commonality. Wule Petit clearly stood to gain by the success of her litigation, she did not stand to gain or lose in the same manner as did her investors. The "agreements" were structured so that under some situations the investors would profit by their investment but Petit would not, for example an adverse disposition of the Key Bank litigation, implicating the "judgment and writ of execution" term of the "agreements," see Osterreider affidavit at paragraph 8. Under other potential situations the investors would profit far less than would Petit, for example an extremely favorable disposition of the Petit litigation.

B. Notes.

The agreements are not notes however, to the extent that the government might argue otherwise, the agreements are exempt from the Securities Act. "Exempted securities - Except as hereinafter expressly provided, the provisions of this sub-chapter shall not apply to any of the Following classes of securities;

(3) any note, draft, bill of exchange, or banker's acceptance which arises out of a current transaction or the proceeds of which have been or are to be used for current transactions, and which has a maturity at the time of issuance of not exceeding nine months, exclusive of days of grace, or any renewal thereof, the maturity of which is likewise limited; and ...

(11) any security which is a part of an issue offered and sold only to persons resident within a single state or territory, where the issuer of such security is a person resident and doing business within or, if a corporation, incorporated by and doing business within such state or territory. 17 U.S.C. §77(c).

In this case, to the extent the government is claiming the agreements are promissory notes,

they are exempt from the securities law because they all contain a clause making them due and

payable within 9 months or less.

Lacking horizontal or vertical commonality, the agreements by definition are not investment contracts. If the documents are notes, then they are exempt, hence as a matter of law the Securities Act does not apply and counts 323-343 must be dismissed.

Dated: March 25, 1998

David Beneman, Esq.

LEVENSON, VICKERSON & BENEMAN

UNITED STATES DISTRICT COURT

DISTRICT OF MAINE

UNITED STATES OF ANMRICA

CATBERINE DLJFFY PETIT

The grand jury returned an indictment based on a version of 18 U.S. C. § 1 52 which does not apply to the time periods in this case. Further the grand jury used a post-amendment version of 18 U.S.C.§1341which is not applicable to certain counts. An indictment premised on inapplicable law must be dismissed.

Catherine Petit's involuntary bankruptcy was filed on June 4, 1993. Indictment, P31. The version of 18 U. S.C. § 1 52 referenced in the indictment and relied on by the grand jury applies only to bankruptcies commenced on or after October 22, 1994. The grand jury and the United States Attorney used inapplicable law. The mail fraud statute, 18 U.S.C. § 1341 applied only to use of the United States mails, not to common carriers until amended effective September 13, 1994. Counts 16, 17 and 18 all lack the essential element of using the United States mails and must be dismissed. The overall conspiracy alleged as the basis for all of the mail fraud, counts 16 through 88 is deficient as it is premised on acts occurring before the September 13, 1994 amendment. see Indictment P27

The Fifth Amendment to the United States Constitution requires that a felony indictment be brought by a grand jury. The framers of the Bill of Rights included the grand jury guarantee in the Fifth Amendment to protect wrongfully accused defendants against mistaken or vindictive prosecutions. United States v. Dionisio, 4 1 0 US 1, 16-17 (1973). The grand jury determines not guilt or innocence, but whether probable cause exists to believe that a crime has been committed. In order to make that determination, the grand jurors rely upon the office of the United States Attorney to properly inform them of the applicable federal laws. It is recognized and understood that indictments are drafted by the United States Attorney's Office and submitted to the grand jury for approval. The lengthy indictment in this case certainly is the work of the prosecutor, ratified by the grand jury.

The bankruptcy fraud statue relied upon by the grand jury, based on the indictment prepared by the United States Attorneys Office, is 18 U S. C. § 1 52. That statute was significantly amended by public law 103-394, effective on October 22, 1994. The amendments to § 152 do not "apply with respect to cases commenced under Title I I of the United States code before October 22, 1994, see section 702 of Public Law 103-394, set out as a note under section 101 of Title II". Catherine Petit's involuntary bankruptcy under Title I I was commenced on June 4, 1993. The 1994 amendments are not applicable. Accompanying exhibit I shows § 1 52 as it existed in 1993, before the amendments and exhibit 2 shows the post amendment statute erroneously used in the grand jury indictment. A major change to the statute was in the language of the first paragraph, now labeled §152(l). The amendment language adds a new crime of fraudulent concealment from the United States Trustee. Before the amendment fraudulent concealment from the U.S. Trustee did not constitute a violation of §152 and was not a crime. Under the statute which applies to Catherine Petit, the United States Trustee is not a party upon whom a fraud is actionable under § 1 52. The indictment in this case includes the United States Attorney as one of the group of individuals from whom Catherine Petit "knowingly and fraudulentlv" concealed material information, and specifically property belonging to the estate of the debtor. See for example indictment at IM 2, 3, 17. The indictment uses only the post-1994 §152 statute. There are no numbered subsections to the applicable pre-amendment statute. All references in the indictment list the allegedly applicable subsection of § 152 revealing the government and grand juries reliance on the wrong law.

In this case, the grand jury has risen. It is impossible for the Defendant or the Court, to know the extent of the government's legal error in influencing the grand jury. Merely striking the term "United States Attorney" from its various locations in the indictment will not remedy the underlying error. The Defendant has a Constitutional right to be indicted by a grand jury. Currently Catherine Duffy Petit faces an indictment based on incorrect law. Whether a grand jury would or would not indict when informed of the proper law is beyond the Court's providence. The erroneous law counts permeate and taint the entire indictment. The very first "object of the conspiracy" alleged, in P2 is fraudulent concealment from the United States Trustee! This claim forms the backbone of the government's case and is inextricably tied to the other counts within the indictment. The government has chosen an all inclusive theory and approach to this prosecution. Half of the money laundering counts allege that the funds involved are proceeds of the bankruptcy charges, charges brought under inapplicable law. The conspiracy claim includes as overt acts the same alleged bankruptcy fraud, based on incorrect law. The forfeiture count builds on the bankruptcy fraud allegation. The only appropriate remedy is a dismissal of the entire indictment.

Remedy Sought:

It is requested that the indictment be dismissed. If, for any reason the court denies the dismissal of the entire indictment, then it is requested that those counts which are based in whole or in part on application of the wrong law, specifically counts 1,2,16-18, 19-88, 89-183, and 344, be dismissed with prejudice.

David Beneman, Esq.

LEVENSON, VICKERSON & BENEMAN

P.O. Box 465

Portland, ME 04112-0465

Tel. (207) 775-5200

Fax. (207) 772-1829

UNITED STATES DISTRICT COURT

DISTRICT OF MAINE

UNITED STATES OF AMERICA

CATHERINE DUFFY PETIT

Multiplicity in an indictment occurs when a crime or act has been divided into more than one count. Here the government has plead a limited number of transactions multiple ways artificially dividing a single act into numerous separate crimes.

The indictment in this case consists of 344 counts spanning 33 pages of text. The criminal charges consist of the following; bankruptcy fraud, counts 2-15, mail fraud, counts 16-88, money laundering, counts 89-322, securities fraud, counts 323-342. An overarching conspiracy based on the bankruptcy fraud, mail fraud, money laundering and securities fraud, constitutes count 1, and a criminal forfeiture claim, rounds out the indictment as count 344. The essence of the indictment is the government's conspiracy claim. This is because the conspiracy claim, as part of its overt acts, incorporates all of the remaining substantive counts of the indictment.

Multiplicity in an indictment occurs when a crime or act has been divided into more than one count. The Double Jeopardy Clause of the Constitution precludes an individual from being sentenced twice for the same conduct. That is the harm sought to be avoided by striking counts which are multiplicatus. See, Ball v. United States, 470 US 856, 865, 105 S.Ct. 1668,1674 (1985). While it is acceptable for the government to have several theories explaining how an individual allegedly violated the statute, it is unduly prejudicial for a defendant to stand trial on multiple counts based on the government's differing theories. Counts 2-15 all involve the same essential allegation of bankruptcy fraud, hence are multiplicatus. While the government may be entitled to seek several theories in proving its case, multiple theories do not require multiple counts. Counts 2-15 should be consolidated into a single allegation of bankruptcy fraud.

Counts 16-88 should be a single charge of mail fraud. It is multiplicatus to make them separate counts because they are all part of the same scheme. Conduct which constitutes one common plan or scheme is appropriate for inclusion in a single count. This is especially true in light of the sentencing guidelines which base punishment on the overall relevant conduct, not on the number of counts brought. The same is true of counts 89-322. These are but one set of money laundering allegations pled and repackaged as multiple successive counts. The first set of money laundering counts, 184-278 are no different than the previous fraud, bankruptcy and conspiracy allegations, but are merely another method for pleading the essence of the identical conduct. Counts 279-322 are the same as the conduct pled in counts 184-278, just under a different theory. Counts 223-343 are again one common scheme of alleged securities fraud which should be consolidated into a single count.

The current indictment is unnecessarily prejudicial to everyone involved, including the court and the government. This case will waddle into trial burdened by such excessive pleading it is sure to confuse and put to sleep even the most avid juror or jurist. The government's pleading style has taken each check or transaction and turned it into multiple separate charges. There is no advantage to be gained for the government under the current structuring of the indictment. It could be argued that the defendants could hide under the obscurity and confusion this indictment creates. Nevertheless, Defendant Petit seeks a trial on the merits, not an endless repetition and recitation of multiple unfocused counts.

The indictment as it currently stands is like a bowl of corn flakes where the government has painstakingly placed a number on each flake within the bowl. The issue in this case is not and will not be how many flakes are in the bowl. It is a bowl of flakes. So too with this case. Either Petit was part of a fraud and related conspiracy or she was not. Just as there is no particular value to counting each flake within the bowl of cereal, there is absolutely no value provided by the structure of the currently pending indictment.

Under the supervisory powers granted to this court, it is requested that the indictment be reduced to a manageable number of charges. The purpose of this motion is not to preclude the government from putting on its case. The motion seeks to have the Court intervene to assist in focusing the government's case on the criminal conduct alleged, and not on each flake within the bowl.

Dated: March 25, 1998

David Beneman, Esq.

UNITED STATES DISTRICT COURT

DISTRICT OF MAINE

UNITED STATES OF AMERICA

CATHERINE DUFFY PETIT

PETIT'S MOTION TO REMEDY IMPROPERLY USED GRAND JURY SUBPOENAS AND INCORPORATED MEMORANDUM

Following indictment the government has continued to utilize existing grand jury subpoenas to obtain evidence. This is an improper use of the grand jury subpoena process. The defendant should be provided with prompt disclosure of the grand jury transcripts.

The grand jury issued an indictment in this case on November 4,1997. Since then the government has continued to utilize existing grand jury subpoenas to obtain further evidence. Attached as Exhibit 1 are the cover letters from some of the various entities that continue responding to the government's document subpoenas since the indictment. Of particular concern is the letter from Saco & Biddeford Savings Institution dated December 1, 1997. That letter indicates that the U. S. Attorney's office is having ongoing conversations with the institutions from which documents had been subpoenaed, well after the date of the grand jury indictment. Knowing misuse of the grand jury subpoena power constitutes a willful violation as opposed to mere inadvertence.

It is well established that a grand jury may not conduct an investigation for the primary purpose of helping the prosecution prepare existing indictments for trial. In re Grand Jury Proceedings, 814F.2d 61, 70 (1 st Cir. 1987); United States v. Doe, 455 F.2d 1270, 1273 (1 st Cir. 1972). The Fifth Amendment to the United States Constitution reads: "No person shall be held to answer for a capital, or otherwise infamous crime, unless on a presentment or indictment of a Grand Jury. . . . " The function of the grand jury terminates with the issuance of the indictment. The grand jury has no relationship to the trial itself. There is no constitutional, statutory or case authority for employment of the grand jury as a discovery instrument to help the government prepare evidence to convict an already indicted defendant. Such a use of the grand jury would pervert its constitutional and historic function. U.S. v. Doss, 563 F.2d 265, 276 (6th Cir. 1977).

Courts are sensitive to the possibilities of abuse of the grand jury process which are inherent in the present situation. "The government has at its disposal one of the most effective discovery mechanisms yet devised-the grand jury. This body may call witnesses under compulsory process and examine them in secret under oath, unhampered by the rules of evidence or an adversary counsel's cross-examination, or in the case of a 'prospective defendant' by Fifth Amendment immunity. [citations omitted]." Doe at 1275.

Government misuse of grand jury subpoena power as a discovery tool unfairly skews the trial preparation process. The government has obtained early disclosure of evidence which would not non normally be available until trial. One possible remedy is for the Court to suppress all improperly subpoenaed documents. Would such an order prevent the government from using those documents to build its case ? Would the government re-subpoena the documents for trial? The appropriate remedy is to put the parties on equal footing. The government has obtained early discovery. The defense is entitled to a level playing field. Doe suggests that an appropriate remedy is to provide the defendant with transcripts of the grand jury at an earlier time than might normally occur. The Court should ameliorate the situation by requiring the government to provide the defense with the transcripts of all grand jury testimony immediately.

Rule 6(e) of the F.R.Cr.P. authorizes a court 'preliminarily to or in connection with a judicial proceeding" to direct disclosure. 'After the grand jury's functions are ended, disclosure is wholly proper where the ends of justice require it." Dennis v. United States, 3 84 U. S. 85 5, 870, 86 S. Ct. 1840, 1849, 16 L.Ed.2d 973 (1966), referring to this power, quoting United States v. Socony- Vacuum Oil Co., 3 1 0 U. S. 150, 234, 60 S.Ct. 811, 84 L.Ed. 1 129 (1940), see also Gibson v. United States, 131 U. S.App.D. C. 143, 403 F.2d 166, 167 (1968), and cases cited therein.

The remedy sought makes sense. The defense is not asking that evidence be excluded, the normal remedy defendants seek. The defense is not claiming the government's error rises to a level requiring dismissal of the indictment. Rather the defense asks only that it be provided now with that which will be forthcoming later, the grand jury transcripts. This is exactly what the government has attained for itself by misuse of the grand jury subpoena process. Early disclosure of the grand jury transcripts rectifies the unwarranted advantage the government's error has created. The government chose to use the grand jury for discovery purposes after return of an indictment. The totality of the circumstances in this case call for an order requiring the government to provide the defendant with transcripts of the grand jury now.

Dated: March 25, 1998.

David Beneman, Esq.

Attorney for Defendant Catherine Duffy Petit

UNITED STATES DISTRICT COURT

DISTRICT OF MAINE

UNITED STATES OF AMERICA

CATBERINE DUFFY PETIT

Petit seeks suppression of taped conversation between herself and Thomas Blackburn, her former attorney. She also seeks suppression of all documents provided by Blackburn to the government. The motion is based on the fact that Blackburn served as her attorney and the conversations and documents were obtained by the government in violation of attorney/client privilege, work product doctrine, and the Sixth Amendment to the United States Constitution.

Thomas Blackburn has served as an attorney for Catherine Petit for almost 10 years. See Exhibit 1. In February of 1997 Blackburn, a now admitted felon, violated the attorney client privilege and without Petit's permission or knowledge began telling the government about the very same matters for which he had served as her legal advisor. Osterrieder Affidavit of 10/8/97 7 4. The beginning portion of Osterrieder's affidavit consists of a recitation of Blackburn's breach of the privilege.

The attorney/client privilege is the oldest of the privileges for confidential communications known to the common law. It plays a crucial role in the administration of Justice. United States v. Zolin, 491 U.S. 554, 562 (1989). The attomey/client privilege embodies the recognition that our system of justice, both civil and criminal cannot function unless clients feel free to confide in their attorneys all the information which is essential to effective representation by counsel. The purpose of the privilege is:

A similar threat is imposed by governmental intrusion into attorney work product. Although the work product doctrine most frequently is asserted as a bar to discovery in civil litigation, its role in assuring the proper functioning of the criminal justice system is even more vital. The interests of society and the accused in obtaining a fair and accurate resolution of the question of guilt or innocence demand that adequate safeguards assure the thorough preparation and presentation of each side of the case. United States v. Nohles, 422 U.S. 225, 238 (1975). Just as the legal system cannot function properly if clients do not feel free to confide necessary information in their attorneys, the attorney cannot provide adequate representation if he does not feel safe in committing to paper his interview notes, thoughts, ideas, plans, and strategies relative to the client's case.

The First Circuit recently reaffirmed the sanctity of the attorney client privilege in a similar situation. U.S. v. Rakes, 97-1693, (Ist. Cir., 2/11/98). Rakes was indicted and charged with perjury and obstruction of justice based on allegedly false testimony he gave as a grand jury witness on two earlier occasions. The allegedly false testimony related to his denial that he was being extorted resulting in the sale of his store. Rakes' business attorney for the formation of the company that owned the store and sold the store was John Sullivan. The government subpoenaed attorney Sullivan to the grand jury and obtained a compulsion order requiring Sullivan to respond to grand jury questions after Sullivan asserted attorney client privilege. Rakes moved to suppress all conversations between him and attorney Sullivan. The district court granted the motion and the government appealed. The First Circuit not only affirmed, but chastised the government stating the appeal "ought never to have been brought."

The Sixth Amendment to the United States Constitution guarantees every criminal defendant the right to effective representation by counsel. In a criminal case the Sixth Amendment attaches at a "critical" stage in the proceedings, ordinarily at the time a formal charge is brought. In the context of civil litigation effective representation is required well before commencement of a lawsuit.

In this case, the government purposefully utilized Thomas Blackburn in a covert manner, to serve as an agent of the state against the interests of Blackburn's client, Catherine Duffy Petit. The government knew that Thomas Blackburn was part of a legal team actively representing Petit. Nevertheless, the government not merely encouraged, not merely condoned, but actually sponsored Blackburn's surreptitious taping via telephone and body wire of conversations between Blackburn and Petit. Blackburn's conduct is a blatant violation of the Maine Bar Rules. Maine Bar Rule 3.4(f), 3.5(b), 3.6(f) and (h). It is disappointing that here in Maine the U.S. Attorney's Office would stoop to the level of recruiting an attorney (a crooked one at that) to secretly tape via a body wire conversations with a client.

Blackburn acknowledges his legal representation of Petit. Exhibit 1. Petit specifically relied on Blackburn in his role as her attorney for financial affairs. As such both the attorney/client privilege and the work product privilege attach. The irony is not lost. Her is a woman who has been so violated in the past by her attorneys, one again being victimized, this time at the insistence of the government. For the government to wire Blackburn and send him into conversations with Catherine Petit at a time when Blackburn and the government are working together against the interests of Catherine Petit, without informing Petit of this, violates attorney/client privilege and work product and cannot be condoned.

Petit requests a testimonial hearing where the Court can hear from the relevant witnesses and make a sound factual determination upon which to apply the law. Petit requests this court enter an order suppressing the contents of all conversations allegedly occurring between Catherine Petit and Thomas Blackburn from the date Mr. Blackburn began working on behalf of the government through the present, including but not limited to the contents of the various tape-recorded conversations dated April 1, 1997 through June 30, 1997, as well as all documents provided by Blackburn to the government. The Defendant further requests that this Court enter an order precluding the government from making direct, or derivative use of the contents of these conversations or documents and requiring the government to affirmatively show by a preponderance of the evidence that no such information was relied on in obtaining the warrant of arrest for the Defendant, the pending indictment against the Defendant, or in the preparation for or use in the government's case in chief for trial.

David Beneman, Esq.

UNITED STATES DISTRICT COURT

DISTRICT OF MAINE

UNITED STATES OF AMERICA

CATBERINE DUFFY PETIT

Petit seeks suppression of all information Richard E. Poulos, Esq., Petit's former attorney, supplied to the government in violation of attorney/client privilege, work product doctrine, and the Sixth Amendment to the United States Constitution.

For many years Richard E. Poulos, Esq. represented Petit and Petit's business interests including C.D.P. Inc., White Way Amusements, and Old Orchard Pier Co. in a variety of civil matters. On October 31, 1990 Poulos was paid $ 499,368.78 for his work on the Bernstein Shur portion of the Key Bank case. Ex 1. In 1992 Poulos was reimbursed an additional $ 19,025.60 for costs associated with the Key bank litigation. In 1993 several of Petit's creditors placed her in an involuntary bankruptcy. Part of petit's obligation as a debtor in bankruptcy was to file a series of lists know as schedules. One of the required lists contains the potential assets of the debtor including potential legal claims. Petit, represented by a bankruptcy attorney, listed a potential legal claim as, "possible attorney malpractice claims". Petit also listed on her bankruptcy schedules that Poulos held a $ 100,000.00 second mortgage on what was then her home at 1 Fourth Ave., Old Orchard Beach. Poulos took great offense at the term "possible attorney malpractice claims", apparently assuming that he was the attorney involved. It is true that a portion of Petit's case against Key Bank was dismissed on procedural grounds attributable to conduct of Poulos in an earlier but related lawsuit in which he represented Petit, Petit v. Key BancShares of Maine, 635 A.2d 956, 959 (Me. 1993). Poulos grew increasingly hostile to Petit during the course of the bankruptcy case intervening and filing numerous pleadings "pro se" based on his status as a creditor. On approximately January 2, 1996 Poulos met with Paula Silsby, a high ranking prosecutor with the U.S. Attorneys Office in Portland. At that meeting Poulos disclosed to Silsby privileged information which Poulos had gained as part of his representation of Petit. See attached Exhibit 2, a portion of Poulos's Memo summarizing the meeting with Silsby. Poulos remained a counsel of record for Petit in the Key bank case until he withdrew on January 27, 1997. Ex. 4.

The attorney client privilege is "the oldest of the privileges for confidential communications known to the common law." Upjohn Company v. United States, 449 US 393, 389, 101 S.Ct. 677, 682, 66 L.Ed. 2d 5 84 (1981). The attorney client privilege applies so that: 1) where legal advice of any kind is sought; 2) from a professional legal advisor in his capacity as such; 3) the communications relating to that purpose; 4) made in confidence; 5) by the client; 6) are at its instance permanently protected 7) from disclosure by himself or the legal advisor. In re Richard Roe, Inc., 69 F.3d 3 9, 3 940 (2nd Cir. 1995). The attorney client privilege is designed to promote unfettered communication between the attorneys and their clients so that the attorney may give fully informed legal advice. The protection given to attorney work product serves a similar purpose: "to avoid chilling attorneys in developing materials to aid them in giving legal advice and in preparing a case for trial." Id. A lawyer has an obligation not to reveal client confidences. Maine Code Of Professional Responsibility 3.6(ID. US v. Edgar, 82 F.3d. 499, 508 (1 st Cir. 1996). A lawyer also has an obligation to assert privilege on behalf of a client. Id.

The First Circuit recently re-affirmed the sanctity of the attorney client privilege in a similar situation. US. v. Rakes, 97-1693, (1 st. Cir., 2/11/98). Rakes was indicted and with perjury and obstruction of justice based on allegedly false testimony he gave as a grand jury witness on two earlier occasions. The allegedly false testimony related to his denial that he was being extorted resulting in the sale of his store. Rakes business attorney for the formation of the company that owned the store and sold the store was John Sullivan. The government subpoenaed attorney Sullivan to the grand jury and obtained a compulsion order requiring Sullivan to respond to grand jury questions after Sullivan asserted attorney client privilege. Rakes moved to suppress all conversations between him and attorney Sullivan. The district court granted the motion and the government appealed. The First Circuit not only affirmed, but chastised the government stating the appeal "ought never to have been brought".

In this situation not only did Poulos fail to assert the privilege, he went to the government as a spy and an informant against his client! Poulos's motive, be it fear of a malpractice action, anger at the malpractice claim, retaliation, or spite show his malice. At a time when he remained listed as counsel of record in a pending civil suit, Poulos violated the attorney client privilege he owed Petit. While Poulos can and should be faulted for his conduct, the government was wrong in allowing him to reveal attorney client confidences. The government knows it can not use information gained in violation of attorney client privilege, and by doing so they have jeopardized and called into question their entire case. Once arsenic is dropped into a glass of water, the whole glass is poisoned. It is doubtful that the government can purge this taint.

Petit requests a testimonial hearing where the Court can hear from the relevant witnesses and make a factual determination upon which to apply the law. Petit requests this court enter an order suppressing all privileged information provided to the government by Poulos. The Defendant further requests that this Court enter an order precluding the government from making direct, or derivative use of the contents of such privileged information and requiring the government in the nature of a Kastigar hearing to affirmatively show by a preponderance of the evidence that no such information was relied on in obtaining the warrant of arrest for the Defendant, the currently pending indictment against the Defendant, preparation for or use in the government's case in chief for trial.

Dated: March 25, 1998

David Beneman, Esq.

LEVENSON, VICKERSON & BENEMAN

P.O. Box 465

Portland, @ 04112-0465

Tel. (207) 775-5200

Fax. (207) 772-1829

4

UNITED STATES DISTRICT COURT

DISTRICT OF MAINE

UNITED STATES OF AMERICA

CAT'BERINE DUFFY PETIT

Petit seeks suppression of all evidence taken in the search of the 23 Water St. offices on October 9, 1997. The motion is based on the materially false and misleading warrant application affidavit which failed to inform the Court that the location to be searched was the law office of Ronald Caron, one of Petit's civil attorneys and John Rzasa, her private investigator.

On October 9, 1997, the government applied to this Court for a warrant to search "Suite 7, 23 Water Street, Saco, Mame7, and "the office directly across the hall from Suite7, believed to be the office of John Rzasa of Coastal Associates." In support of the search warrant request, the government submitted to Magistrate Judge Cohen the hastily prepared October 9, 1997 Affidavit of Special FBI Agent James Osterrieder which incorporated the much lengthier and more detailed Affidavit of October 8, 1997, also by agent Osterrieder.

In Franhs v. Delaware, 438 U.S. 154, 98 S.Ct. 2674, 57 L.Ed.2d 667, the Supreme Court held that a defendant was entitled to a hearing at which he could challenge the truthfulness of statements made in an affidavit supporting a search warrant if the defendant made a substantial preliminary showing that (1) a statement in the affidavit was knowingly and intentionally false, or made with reckless disregard for the truth, and (2) the falsehood was necessary to the finding of probable cause. Id. at 155-56, 171-72, 98 S.Ct. at 2676-77, 2684-85; United States v. Paradis, 802 F.2d 553, 558 (1 st Cir. 1986). The right to a Franks hearing can be triggered by an affidavit which suffers from a material omission. US v. Hadfield, 918 F.2d 987,992 (I st Cir. 1990); United States v. Parcels of land, 903 F.2d 3 6, 46 (1 st Cir. 1990).

The test for granting an evidentiary hearing in a criminal case is substantive: has the defendant made a sufficient threshold showing that material facts were in doubt or dispute? United States v. Pwiitz, 907 F.2d 1267, 1273 (I st Cir. 1990) see Franks, 43 8 U. S. at 171, 98 S. Ct. at 2684 ("To mandate an evidentiary hearing, the challenger's attack must be more than conclusory and must be supported by more than a mere desire to cross examine.").

The purpose of the search was to obtain the contents of Ronald Caron's 23 Water Street law office and those of legal team investigator John Rzasa. There can be no question, but that Agent Osterrieder and the government wished to search Petit's lawyer's law office. Knowing the difficulty they would have in obtaining such a warrant, the government deliberately misled the Court by claiming that what they sought to search was not a law office. As the supporting documents show, nothing can be further from the truth. The government's affidavit in support of the search warrant was based almost exclusively on the unsubstantiated allegations of a convicted murderer and drug dealer, a fact glossed over in the affidavit. See exhibit 1, Paradis criminal record.

For many years, Ronald Caron has represented Catherine Petit in a variety of legal matters. In early 1994, Ronald Caron entered his appearance on behalf of Catherine Petit in the Key Bank litigation. That litigation had been going on for numerous years and the quantity of documents, the uniqueness of the case, and the level of case activity required a special office. Attorney Caron's Pool Street office was not set up to accommodate a case of the magnitude of the Key Bank case. Arrangements were made for Caron to lease the office suite at 23 Water Street. See exhibit 2, lease. Large signs were placed both at the front of the office park and by the entry to the office clearly stating "Law Offices of Ronald G. Caron. See exhibit 3, photographs. The office suite is set up as a law office with a reception window and waiting area, a large and small conference room, work station areas for support staff, a large more formal desk area, computers, printers, fax machine, copier, and shelf upon shelf and row upon row of binders and boxes containing the various legal materials involved in Petit's lawsuit. The accompanying affidavit of Ronald Caron, an member of the bar, sets forth the salient facts regarding the 23 Water St. office and the falsehoods of the warrant affidavit. See exhibit 4, Caron affidavit.

 Since 1993, John Rzasa has been employed as a private investigator for a group of lawyers representing Catherine Petit in a number of legal matters including Catherine Petit v. Key Bank et al, the Catherine Petit involuntary bankruptcy, and State of Maine v. Catherine Petit. Since 1996, Rzasa has also been employed as a private investigator for several lawyers representing Paul Richard, including the case of State of Maine v. Paul Richard and HE9 Inc. In his capacity as private investigator for the Petit's lawyers, Rzasa leased a small office on the second floor of 23 Water Street in Saco, directly across the hallway from the office of Attorney Ronald Caron. Rzasa leased this space specifically because of its location and proximity to attorney Caron's office. Rzasa considered the contents of his 23 Water Street office to be a combination of work product and attorney/client privileged material which was gathered and stored in his office solely for the purpose of litigation involving or related to Catherine Petit, Paul Richard or related corporations. See Rzasa affidavit exhibit 5. Robert Paradis worked directly with John Rzasa since Rzasa's involvement back in 1993. Paradis knew that almost all documents in Rzasa's office were part of Petit or Richard's legal cases.

The government was frustrated by it's inability to make a case against Petit. This is born out by the unprecedented 1 13 page October 8, 1997 affidavit of agent Osterrieder. In paragraph 2 ofthat affidavit, Osterrieder tells the Court that the FBI has been investigating Petit and others including Robert Paradis since about July 1996. Later, in paragraph 126 Osterrieder regales the Court with details from a February 14, 1994 interview of Paradis discussing the same conduct now alleged to be criminal in the pending indictment. Nothing in Osterrieder's epic shows any change in circumstances or pressing danger that required the government to proceed by complaint and arrest rather than the constitutionally mandated grand jury indictment. The only explanation is the fear factor. The government hoped that by arresting the defendants en masse, they would be terrified into quick pleas, obviating the government's need to prove its case. Robert Paradis, a felon who served time for murder and conspiracy to commit a dangerous drug offense, apparently decided to throw his hat into the government ring. Paradis was arrested on the afternoon of October 8, 1997. The next day, October 9, 1997 Paradis spoke with Osterrieder. Search Warrant Affidavit, paragraph 5. Paradis "proffered", was bailed, and was headed home by the afternoon of October 9. Osterrieder's interview of Paradis, his "investigation' into the truthfulness of Paradis statements, his foray into the Bar Directory and Telephone Book, and his consultation with FBI Special Agent Scripture at the FBI laboratory division, all transpired in a few hours time. The typed 16 page October 9, 1997 affidavit was sworn to before Judge Cohen presumably in the late afternoon of October 9, 1997. Judge Cohen signed the search warrant at 6:42 p.m. having read the affidavit as well as the salient portions of the 113 page affidavit of the day before, incorporated by reference in paragraph 4(a) and provided to the court as exhibit A.

The investigation in this case at a minimum ran for 15 months. Thomas Blackburn, "CI 1", began working with the government back in February 1997, seven months before the arrest. Oct. 8 Affid., para. 4. Blackburn was an attorney for Petit and Richards. Blackburn not only knew the 23 Water St. office, he had been there, as had "Cl 2", James Erskine. The existence of 23 Water St. was no new revelation coming for the first time from Paradis. The government did not seek to search 23 Water St. at an earlier date because they knew it was Ronald Caron's law office. The Justice Department has very strict guidelines concerning what procedures must be followed before attempting to search a law office. DOJ policy requires a law office search warrant as a last resort, sought only after high-level DOJ consultation and approval. See exhibit 5. If the agents had done the right thing and called Attorney Caron there would have been no issue. Asking Caron if he had a law office at 23 Water St. would not have revealed some deep secret relating to the government's case. After all, Petit had been arrested the day before and the supporting affidavit says more than most people ever want to know. Ironically, Agent Ostenieder, perhaps suffering pangs of guilt, eventually called Attorney Caron on February 6, 1998, four months after the search! Caron returned the call. Agent Osterrieder specifically asked Caron if 23 Water St. was Caron's office. Caron told Osterrieder that 23 Water St. was his satellite office. Caron affidavit T 8.

Recognizing their dilemma and the impossibility of obtaining records from attorney Caron, the government chose to ignore the attomey's status. The misleading approach taken by the government is highlighted by paragraphs 6 and 7 of the warrant affidavit which explain the government's "attempt" to determine if in fact 23 Water Street was a law office. Beginning with the proposition that the outside of the facility contains two large signs designating it as Ronald Caron's Law Offices, one would think that the government would have to disprove that it was a law office before brushing aside several hundred years of American jurisprudence. What did the agents do? They say they looked up Ronald Caron's address in the telephone book and the Maine Bar Directory. Both listed his main office at 25 Pool Street. They then called the telephone number for 25 Pool Street and asked directions to the office. Not surprisingly, they were given directions to 25 Pool Street.

The government made no attempt to directly determine if 23 Water Street was Attorney Caron's office. The government knew that Catherine Petit was represented by Ronald Caron. He was representing her in the Key Bank case and he was representing her in the State case. He was present at many of the bankruptcy proceedings. If one had to determine whether 23 Water Street was a law office of Ronald Caron, what might be the most logical and appropriate approach? Call Ronald Caron on the telephone and ask him. The agents deliberately did not call Ronald Caron and ask him if 23 Water Street was his law office because they knew what the answer would be. Yes it is. See exhibit 3, Caron affidavit. Maine does not have a history of law office searches by prosecutors. Even worse, the entire alleged probable cause is based on the uncorroborated statements of a violent felon. This may be a first. The Affidavit in support of the warrant was materially defective rising to the Franks standard for exclusion of evidence obtained as the result of a false affidavit.

The inquiry is: 1) was a false statement made knowingly and intentionally or with reckless disregard for the truth and; 2) was the false statement necessary to the finding of probable cause. The warrant affidavit's failure to inform the Court that the premises to be searched were Ronald Caron's Law Office was knowingly false, in reckless disregard of the truth, and a material omission. Failure to disclose the extent of Robert Paradis criminal record shows the agent's own doubts about Paradis claims. Probable cause would not have existed for the search of Caron's law office had the fact that it was a law office been communicated to the Court. In this case, both prongs have been met and a testimonial hearing is required.

Dated: January 27, 1998

David Beneman, Esq.