Case of the Day: United States v. Cohen

The case of the day is United States v. Cohen (C.D. Ill. 2012). The government had a lien on the property of Irving Cohen for unpaid taxes. The claim in the case was that one of the defendants, The Windsor Organization, Inc., owned a property as Cohen’s alter ego or nominee, and that the government therefore could foreclose the lien on the property. Windsor and Cohen claimed that Windsor was a wholly-owned subsidiary of TI & M Services, Ltd., a British Virgin island corporation. The government claimed that after Windsor defaulted on a mortgage of the property, Cohen negotiated with TI & M to provide funds in return for an ownership interest. The government wanted to offer the testimony of Markus Kolzoff, a national of Liechtenstein and a director of TI & M, claiming that Klozoff and Cohen are the “only two people with knowledge of the purported transaction between Windsor and TI & M.”

The court had issued a letter of request to Liechtenstein (which acceded to the Hague Evidence Convention in 2008—the United States accepted the accession, and the Convention came into force between the two countries in 2009) seeking to compel Kolzoff to testify and produce documents. At a hearing in the Court of Justice, Kolzoff mostly refused to testify or to produce documents. The Liechtenstein judge informed the US judge that Kolzoff had “relied upon his right to refuse to testify, as he is permitted to do, in connection with his confidentiality duty as attorney and trustee.” According to the government, the Liechtenstein judge did not ask any of the questions posed in the request, and in fact asked no questions at all. Rather, Kolzoff “offered limited testimony that was unresponsive to the Letters of Request.”

The government claimed that the testimony that Kolzoff did give was inadmissible hearsay. Just by way of explanation for readers in civil law countries for whom the glories and intricacies of our law of evidence are no doubt a source of amusement and bewilderment, hearsay is a statement that the declarant does not make while testifying at the current trial or hearing, and that a party offers in evidence to prove the truth of the matter asserted in the statement. So if a witness gives a deposition at some time prior to trial, his testimony at the deposition is hearsay if offered to prove the truth of what the witness asserts in the testimony. Or if a witness testifies in a foreign court pursuant to a letter of request before trial, his testimony is hearsay if offered to prove the truth of what the witness asserted. Hearsay is—with important exceptions—inadmissible in evidence.

Among the many exceptions to the hearsay rule is an exception for former testimony given as a witness in a trial, hearing, or lawful deposition, as long as the witness is unavailable to testify at the trial and the party against whom the testimony is to be offered “had an opportunity and similar motive to develop [the testimony] by direct, cross-, or redirect examination.” The government conceded that Kolzoff was unavailable as a witness but claimed that because the Liechtenstein judge had not put any of the questions in the letter of request and because Kolzoff basically refused to testify, the government had lacked an opportunity to question Kolzoff. Thus, in the government’s view, the exception to the hearsay for former testimony of an unavailable witness did not apply.

The judge agreed with the government on this question. The judge also agreed that Kolzoff’s testimony did not come within the residual exception to the hearsay rule, which allows the admission of hearsay in evidence if the statement has “equivalent circumstantial guarantees of trustworthiness” when measured against the hearsay exceptions permitted by the rules. I don’t review that aspect of the decision in detail here.

I agree that the former testimony exception was not satisfied. But I think the judge missed an important point, namely, the special provision in the Rules of Civil Procedure for admissibility of evidence obtained in response to a letter of request. According to Rule 28(b)(4):

Evidence obtained in response to a letter of request need not be excluded merely because it is not a verbatim transcript, because the testimony was not taken under oath, or because of any similar departure from the requirements for depositions taken within the United States.

The real question, it seems to me, is: how much of a departure from the ordinary requirements for admission of evidence are permissible under Rule 28(b)(4), and on which side of the line does Kolzoff’s testimony lie?

It seems to me that the inability of the government to pose any questions to Kolzoff, or even to get the Liechtenstein judge to pose any questions to him, should be fatal to Cohen’s ability to use Kolzoff’s testimony. This is not just matter of form, as are the oath and verbatim transcription requirements noted in Rule 28(b)(4). It goes to the heart of the reliability of Kolzoff’s testimony. So although I think the outcome was correct, I think the judge should have viewed the case through the lens of Rule 28(b)(4) rather than strictly through the lens of the ordinary rules of evidence.

A note on the form of the letter of request: somewhat surprisingly, the government’s proposed letter of request did not use the recommended form. Nor does it appear to comply with Article 3 of the Convention, which provides, in part:

A Letter of Request shall specify –

a) the authority requesting its execution and the authority requested to execute it, if known to the requesting authority;
b) the names and addresses of the parties to the proceedings and their representatives, if any;

* * *

This is surprising, since the letter issued on the government’s motion.

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