Case 3:10-cr-00003-SA-SAA Document 20 Filed 02/18/2010 Page 1 of 8

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF MISSISSIPPI

UNITED STATES OF AMERICA

VS. CASE NO.: 3:10CR003-A

PHILIP HALBERT NEILSON

RESPONSE TO GOVERNMENT’S MOTION FOR REIMBURSEMENT OF CJA FUNDS

AND REQUEST FOR DISCLOSURE OF FINANCIAL AFFIDAVIT

COMES NOW, Philip Halbert Neilson, by and through counsel, and files this

Response to the Government’s Motion for Reimbursement of CJA Funds by Defendant

and Request for Disclosure of Financial Affidavit as follows:

1. Procedural History

The Government argues that Mr. Neilson has equity in certain real property, and

in his retirement account. These issues were considered by the Court in appointing

counsel, and counsel for Mr. Neilson provided the Court a copy of U.S. v. Lexin, 434 F.

Supp.2d 838 (S.D. CA. 2006), which provides that, even if counsel is appointed when the

defendant has insufficient funds to retain counsel, that the Court retains jurisdiction

over the defendant’s assets (which, as in this case, are not liquid) to require

reimbursement to the Government for any funds expended. In sum, Mr. Neilson fully

recognizes, as provided in U.S. v. Lexin, that if a defendant has assets, but no liquid

assets with which to retain counsel, then the Court retains jurisdiction to require the

defendant to reimburse any funds paid by the Government pursuant to the CJA

process.

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Furthermore, on January 23, 2010 counsel for Mr. Neilson informed the Court

that neither the undersigned, nor Mr. Neilson, would ask the Court for payment of

attorney fees. Mr. Neilson did reserve the right to ask for Court assistance for expenses,

investigative fees and expert witnesses with the understanding that the Court would

have to approve any such expenses. However, at this point no such request for financial

assistance for experts, investigators, etc., has been made. Therefore the Government’s

motion is premature.

As to the specific items addressed in the Government’s motion, Respondent will

address those items, but by doing so does not waive his right to privacy as to his

personal financial affairs. Suffice it to say that Respondent is recovering from heart

surgery, has a wife and four children, has been suspended without pay, will be allowed

to draw some period of accumulated sick and “leave” time, after which he will have no

income.

2. General statement regarding Mr. Neilson’s assets

Respondent will address each of the Government’s concerns. However, as a

general proposition the Government’s concerns are addressed in Mr. Neilson’s financial

form submitted with his request for counsel which states: “Mr. Neilson is willing to sell

everything listed.” Mr. Neilson has made it clear that he will sell everything he owns in

an effort to liquidate his assets to pay for his expenses in this case.

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3. Equity in the building leased by GSA.

The financial forms submitted by Mr. Neilson disclosed his interest in the

building leased by GSA. Mr. Neilson stated that he was unsure as to the exact value of

the building, but did provide a copy of the Lafayette County Tax Assessor’s records

which reflect the assessed value of the building. The assessed value of the building is

$1,474,930. The information provided to Mr. Neilson when the form was filled out was

that the approximate amount owed on the building is $1,450,000. As Mr. Neilson stated

on his form, he is willing to sell, this and all other, assets.

The appraisal done in 2005 is no longer believed to be accurate. Real Estate

values in Oxford, Mississippi have plummeted since 2005. In addition, the monthly rent

from GSA is no longer a guaranteed payment. GSA has the right to move out of the

building on very short notice (which is believed to be 60 days). In light of the current

litigation this may or may not be a real possibility at this point. Real property is worth

what someone is willing to pay for it. As noted earlier, Mr. Neilson is perfectly willing

to sell his interest in C&G, LLC which owns the building. Mr. Neilson does not dispute

that the Court retains jurisdiction to require that any equity that can be realized from

the sale of the building be used to reimburse any expenses that may be paid through the

CJA process.

4. Mr. Neilson’s retirement account.

Mr. Neilson fully disclosed his retirement account to the Court. Furthermore, Mr.

Neilson, through counsel, advised the Court during the appointment process that even

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if Mr. Neilson was provided appointed counsel that the Court would retain jurisdiction

to decide if these funds should be liquidated to reimburse the Government for any

funds paid through the CJA process.

5. The ODDS Storage facility.

The Government is incorrect regarding rental proceeds on this property. The

lease on the property has been terminated and no rental income is being realized from

this property. The Government is also incorrect in its assumption that this property was

not disclosed on Mr. Neilson’s request for appointed counsel. Mr. Neilson’s interest in

ODDS was fully disclosed. Mr. Neilson stated that he was not sure what the property

was worth, but did disclose that there was a contingent contract for the sale of the

property and further stated that he was (and is) willing to sell everything he owns. If

the property sells then the Court will be notified as to the closing date and the expected

proceeds to be realized from the sale. Furthermore, Mr. Neilson did in fact disclose that

he had received rental proceeds in the past for this property, but also disclosed that the

lease on the property was over and that no further rental was expected.

6. Rental Income Issues

The short response to the Government’s motion is that Mr. Neilson disclosed the

rental income that had been paid over to him personally during the previous 12 months

as was requested on the form. Mr. Neilson also stated that he did not expect any rental

income (or “overages”) to be paid to him in 2010, and no such rental payments have

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been paid to Mr. Neilson in 2010. Therefore, the Government’s assertion that Mr.

Neilson is receiving thousands of dollars of rental income each month is incorrect. Mr.

Neilson has received no such funds in 2010.

Mr. Neilson did disclose that he is a 50% owner of ODDS, LLC and C&G, LLC.

As to whether ODDS LLC and/or C&G LLC are receiving rental income such that those

businesses are “cash flowing,” Mr. Neilson has no knowledge that the amounts alleged

by the Government are accumulating in the bank accounts of C&G or ODDS. If this is

happening then any such funds would still be in possession of C&G, LLC and/or

ODDS LLC and are controlled by the other individual who owns 50% of ODDS, LLC

and C&G LLC. However, no such funds have been paid over to Mr. Neilson since the

date he submitted his financial form and Mr. Neilson does not expect any such funds to

be paid to him in 2010.

There is a contingent contract to sell some of the property owned by ODDS

(which was disclosed on Mr. Neilson’s CJA form). The prospective purchaser is paying

some unknown amount each month to the other individual who owns 50% of ODDS for

the option on the property, and it is believed that the other individual who owns ODDS

is servicing the debt on the ODDS property and retaining the balance in the ODDS

account. However, no such funds have been paid to Mr. Neilson.

As to C&G, LLC, Mr. Neilson’s understanding is that after payment of expenses,

and lease payments, no income is available to be disbursed on a monthly basis.

However, Mr. Neilson does not control the bank account or the finances for C&G, LLC

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and would defer to the individual who owns the other 50% of C&G, LLC who does

manage the property and the finances of C&G as to whether C&G LLC has funds

available for disbursement. What Mr. Neilson can verify, and which he verified in his

financial form, is that he is not receiving any funds on a monthly basis from C&G, LLC

or ODDS, LLC. However, if the individual who owns the other 50% of C&G, LLC has

any such funds to disburse, and if the other individual who controls the LLC is willing

to disburse said funds to Mr. Neilson on a monthly basis, then Mr. Neilson certainly

does not dispute or oppose these funds being used in considering this issue.

7. Mr. Neilson’s employment status.

Mr. Neilson has been suspended without pay. On his financial form Mr. Neilson

disclosed that he anticipated being able to draw some period of “leave” time, which he

estimated at the time to be two months. This is believed to have been accurate.

Subsequent to the filing of the CJA form Mr. Neilson has undergone a triple bypass and

has been diagnosed with coronary artery disease, and as a result of the surgery now

qualifies for six months of “sick” time, which will be in addition to the two months of

annual leave time listed on the CJA form.

The Government’s motion is not well taken. As the court in Lexin held, a

defendant’s financial form submitted in support of his request for appointed counsel is

not a judicial record but is instead an administrative record used solely by the Court in

determining whether counsel should be appointed. Id., at 847. The Prosecutors are not

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entitled to the form and requiring a defendant to turn over information to the

prosecutor in order to obtain court appointed counsel would implicate both the 5th and

6th Amendment right to counsel. Indeed, as the court in Lexin noted:

The process by which a defendant obtains court-appointed Counsel is a

vehicle to effectuate a defendant’s Sixth Amendment right to counsel. A
right of access to a defendant’s personal financial information puts the
defendant in the precarious position of exercising his Sixth Amendment
right to counsel over his constitutional right to informational privacy.

Id., at 853.

Mr. Neilson has previously acknowledged that the Court retains jurisdiction to

determine whether any assets Mr. Neilson owns should be used to repay any funds

advanced pursuant to the CJA process. Mr. Neilson and his counsel have previously

informed the Court that no funds would be sought for reimbursement of counsel, but

that Mr. Neilson reserves the right to petition the Court for payment of expenses in the

future if he cannot afford to pay for those expenses. No such request has been made at

this point in time. Therefore the Government’s motion should be denied.

This the 18th day of February, 2010.

Respectfully submitted,

PHILIP HALBERT NEILSON

RAYBURN COGHLAN LAW FIRM, PLLC

P. O. Drawer 1360
Oxford, MS 38655
(662) 234-7575
(662) 234-1999

BY: /s/ Kenneth H. Coghlan

KENNETH H. COGHLAN
Mississippi Bar No.: 6336

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CERTIFICATE OF SERVICE

I, KENNETH H. COGHLAN, of Rayburn Coghlan Law Firm, PLLC, Oxford,

Mississippi, do hereby certify that on the 18th day of February, 2010 I electronically filed

the foregoing with the Clerk of the Court using the ECF system which sent notification

of such filing to the following: richard.bourgeois@usdoj.gov;

Rene.Salomon@usdoj.gov.

/s/ Kenneth H. Coghlan

KENNETH H. COGHLAN