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Case 2:09-cv-00104-LDG-GWF

Document 95

FREDERICK SANTACROCE, ESQ. SANTACROCE LAW OFFICES LTD.

State Bar 5121 706 South Eighth St

Las Vegas, NV 89101 (702) 598-1666

Email: Fasatty@yahoo.com

Filed 12/12/11

Page 1 of 12

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF NEVADA

SECURITIES AND EXCHANGE

COMMISSION,

vs.

Plaintiff,

MARCO GLISSON,

Defendant

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Case No.: 2:09-cv-00104-LDG-GWF

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REPLY TO PLAINTIFF’S OPPOSITION

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TO DEFENDANT’S MOTION IN LIMINE

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FOR STAY

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Defendant, Marco Glisson, by and through his attorney Frederick

Santacroce, Esq., and files this Reply to Plaintiff’s Opposition to Defendant’s Motion in Limine for

Stay.

COMES NOW,

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Case 2:09-cv-00104-LDG-GWF

Document 95

Filed 12/12/11

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This Motion is made based upon the pleadings, papers and Affidavits on file herein, the

following Memorandum of Points & Authorities, and any argument of counsel to be entertained at

the time of any hearing of this matter.

Dated: 12/10/2011

FREDERICK SANTACROCE, ESQ. /s/ Frederick Santacroce

FREDERICK SANTACROCE, Esq. Nevada Bar No. 5121 SANTACROCE LAW OFFICES, LTD 706 S. 8th St Las Vegas, Nevada 89101 Telephone: (702) 598-1666 Fax: (702) 385-1327 Attorney for Defendant

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Case 2:09-cv-00104-LDG-GWF

Document 95

TABLE OF CONTENTS

Filed 12/12/11

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PRELIMINARY STATEMENT

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LEGAL ARGUMENT

I. A STAY SHOULD BE GRANTED BECAUSE A PARALLEL CRIMINAL

PROCEEDING IS IMPLICATED BY THIS CASE

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II. THE DEFENDANT’S FIFTH AMENDMENT AND DUE PROCESS RIGHTS WILL BE VIOLATED IF A STAY IS NOT GRANTED

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III. A STAY WOULD NOT SUBSTANTIALLY PREJUDICE THE PLAINTIFF

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CONCLUSION

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Case 2:09-cv-00104-LDG-GWF

Document 95

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TABLE OF AUTHORITIES

Cases:

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United States v. Kordel, 397 U.S. 1, 11 (1970)

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United States v. Robson, 477 F.2d 13 (9 th Cir. 1973)

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United States v. Stringer, 408 F.Supp 1083, 1087 (D.Or. 2006)

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Keating v. Office of Thrift Supervision, 45 F.3d

at 324 (9th. Cir. 1995)

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United States v. Parrot, 248 F.Supp. 196 (D.D.C. 1965)

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United States v. Rand, 308 F.Supp. 1231, 1237 (N.D. Ohio 1970)

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McNabb v. United States, 318 U.S. 332 (1943)

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Smith v. Katzenbach, 351 F.2d 810, 811-13 (D.C. Cir. 1965)

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United States v. Lipshitz 132 F.Supp. 519, 523 (E.D.N.Y. 1955)

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United States v. Guerrina, 112 F. Supp. 126, 128 (E.D. Pa. 1953)

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Other Authority:

11 Lewis & Clark L. Rev.753 (2007)

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Case 2:09-cv-00104-LDG-GWF

Document 95

PRELIMINARY STATEMENT

Filed 12/12/11

Page 5 of 12

Defendant Marco Glisson filed his Motion in Limine to Stay these civil proceeding

pending the outcome of a parallel criminal investigation. Defendant relies on the facts as set

forth in his Motion in Limine and further relies on the Legal Argument set forth therein.

This reply will focus on First, the SEC’s Opposition that there is no overlap or parallel

investigation implicated in this case; Second, the extent to which the Defendant’s Fifth

Amendment rights are implicated if a Stay is not granted; and Third the SEC will not be

prejudiced by a Stay.

LEGAL ARGUMENT

I. A STAY SHOULD BE GRANTED BECAUSE A PARALLEL CRIMINAL PROCEEDING IS IMPLICATED BY THIS CASE

The SEC argues that a stay should not be granted “because there is no parallel criminal

proceeding that is implicated by this case.”

However, attorney Robert Bretz (Defendant’s co-counsel) had several communications

with Michael Chu who is an Assistant United States Attorney in Las Vegas in 2011. Mr. Chu

told Mr. Bretz that there was a pending criminal investigation directed at Marco Glisson and his

efforts to conceal assets that might otherwise be available to satisfy existing Federal tax

obligations due and owing by Glisson.

Mr. Chu further told Mr. Bretz that the return of an indictment against Glisson was likely

to be forthcoming in the very near future, and that Glisson should consider coming in to discuss

the subject matter of the investigation as soon as possible.

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Case 2:09-cv-00104-LDG-GWF

Document 95

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Based on Mr. Bretz’ conversations with Mr. Chu and with staff attorneys for the SEC in

this case, he believes that the pending criminal investigation was instituted as a result of a

referral by and/or assistance from the SEC including without limitation the SEC’s having

provided the Justice Department with investigative and deposition testimony and documents

obtained by the SEC during the course of this civil injunctive action. (See Declaration of Robert

Bretz attached to Defendant’s Motion in Limine for Stay)

The SEC has never disclosed, to the Defendant, whether a parallel investigation is being

conducted. The SEC has a duty to inform the Defendant whether there was a pending parallel

criminal investigation. United States v. Kordel, 397 U.S. 1, 11 (1970); see also United States v.

Robson, 477 F.2d 13 (9 th Cir. 1973).

The SEC argues that since no indictment has been returned by any state or federal

authorities that a Stay is not necessary. The SEC further argues that Glisson’s Fifth Amendment

rights are not threatened. The SEC is mistaken on both counts, as the following case law

illustrates.

In United States v. Stringer, 408 F.Supp 1083, 1087 (D.Or. 2006) the court determined

that the criminal investigation commenced when the USAO communicated the high potential for

prosecution to the SEC and identified specific targets of the investigation. Id.

In the instant case the SEC petitioned this court, and obtained permission to, reopen

discovery so that they could question the Defendant about his 2010 activities, even though this

”2010" time period was not pled nor alleged in the Complaint.

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During the course of the Defendant’s “2010 deposition”, the defense raised the issue of

parallel criminal proceedings with the SEC. The defense was told to ask the USA’s office in Las

Vegas, which the defense did. (See affidavit of Robert Bretz Esq., attached to Defendant’s

Motion in Limine.)

The instant situation is eerily similar to the facts in Stringer, 408 F.Supp at

1087. In Stringer the Defendant’s attorney specifically asked whether the SEC was “working in

conjunction with any other department of the United States, such as the U.S. Attorney’s Office in

any jurisdiction, or the Department of Justice.” The SEC referred the defendant to the “routine

use of” section of form 1662, which advises that information obtained in the civil investigation

can be used in a criminal prosecution. The SEC attorney further stated that it was “the agency’s

policy not to respond to questions like that, but instead, to direct [a defendant] to other

agencies

mentioned.”

Id. The defense attorney then specifically asked which U.S. Attorney’s

office he should contact for that information and was told that it was “ a matter up to [his]

discretion.” Id. This query took place right before Stringer was to testify before the SEC. The

District Court concluded that the government was deliberately hiding the criminal investigation

in order to continue the successful discovery being obtained by the SEC. Id. at 1087-88, Had

Stringer been made aware of a parallel criminal investigation he would have elected to invoke

his Fifth Amendment privilege. Thus the Defendant’s due process rights were violated.

Defendant, asks that before deciding this Motion, this court should require the SEC to

submit a Declaration stating certain matters such as (1) when the SEC first learned of a criminal

investigation, (2) did the SEC make a referral that was the basis for the criminal investigation,

(3) did the SEC provide discovery in the civil case to the USA including the deposition

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Case 2:09-cv-00104-LDG-GWF

Document 95

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testimony obtained in the extended discovery period permitted by the Court, (4) what the SEC

knows to be the scope of the criminal investigation, (5) whether (and who) any member of the

SEC has participated in the criminal investigation and (6) the SEC’s knowledge of the status of

the criminal investigation or subsequent indictment if one has already been returned.

Only when the SEC answers these questions can this court evaluate the extent to which

the Defendant’s Fifth Amendment rights have been impacted and whether a Stay should be

granted. Keating v. Office of Thrift Supervision, 45 F.3d

at 324 (9 th . Cir. 1995)

Further, the SEC suggests that “by Glisson’s own admission, the criminal investigation

involves Glisson’s prior tax obligations and his efforts to evade payment of his taxes, and is not a

parallel criminal investigation of the same conduct that is the subject of the Commission’s civil

enforcement action for violation of the federal securities laws.”

Glisson simply does not know the extent and scope of any criminal investigation because,

despite repeated requests the SEC has never divulged the extent and scope of any criminal

investigation.

The SEC has a duty to divulge that information. When the SEC is aware that federal

prosecutors have identified an individual for potential criminal prosecution and keeps that

information from the individual the SEC engages in a form of deception that infringes upon the

fundamental right to due process of law. 408 F.Supp 2d 1083(D.Or. 2006)

II. THE DEFENDANT’S FIFTH AMENDMENT AND DUE PROCESS RIGHTS WILL BE VIOLATED IF A STAY IS NOT GRANTED

In United States v. Parrot, 248 F.Supp. 196 (D.D.C. 1965) the court said “The danger of

prejudice flowing from testimony out of a defendants mouth at a civil proceeding is even more

acute when he is aware of the pending criminal charge.” In this situation, the defendant is

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“placed in a trap.” As such, it is a violation of due process for the government, either as an

administrative agency or as the prosecution, to induce testimony when the criminal liability is

concurrently contemplated outside of an individuals knowledge. United States v. Rand, 308

F.Supp. 1231, 1237 (N.D. Ohio 1970)(citing McNabb v. United States, 318 U.S. 332 (1943)

In upholding the constitutionality of parallel proceedings, the Supreme Court in United

States v. Kordel, 397 U.S. 1, 12 (1970) cited three cases in support of the caveat that the Court

was not dealing with the case where the government had failed to inform the defendant in a civil

proceeding that it was contemplating his criminal prosecution . Id.

Each case involved a joint investigation by the IRS and the DOJ, during which the

defendant voluntarily provided the government with the information at issue, unaware that the

government agent requesting and receiving the information was acting in pursuit of criminal, as

opposed to purely civil, charges.

In each case, the court suppressed the illegally obtained evidence because the

defendant’s constitutional rights were violated by the government’s deception. (See Smith v.

Katzenbach, 351 F.2d 810, 811-13 (D.C. Cir. 1965) United States v. Lipshitz 132 F.Supp. 519,

523 (E.D.N.Y. 1955); and United States v. Guerrina, 112 F. Supp. 126, 128 (E.D. Pa. 1953); See

also 11 Lewis & Clark L. Rev.753 (2007)

In the instant case Glisson submitted himself to two depositions without invoking his

Fifth Amendment privilege. Glisson cooperated in the civil discovery process unaware that a

criminal investigation may have been initiated, despite repeated request of the SEC to divulge

such information.

It is not surprising that the Supreme Court noted in United States v. Rand, 308 F.Supp.

1231, 1237 (N.D. Ohio 1979) that when a defendant is aware of the possibility of a criminal

proceeding, “he is caught in the horns of a dilemma. He may either testify against himself in the

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civil proceedings or be held in contempt.” “The danger is even greater in a situation where the

defendant is unaware of pending criminal action.” Id.

A Stay in the instant case is warranted in order to protect Glisson’s Fifth Amendment

privilege and Due Process rights until such time as the criminal investigation and potential

prosecution is concluded.

III. A STAY WOULD NOT SUBSTANTIALLY PREJUDICE THE PLAINTIFF

Insincerely, the SEC argues that the staying of this action would potentially prejudice the

SEC’s prosecution of this matter. The SEC’s disingenuous argument is totally undermined and

refuted by the facts in this case.

The SEC’s Complaint alleges illegal activity between the time periods of 2005 to 2007.

While the SEC sought, and obtained permission from this court to reopen discovery for the

purpose of inquiring into the Defendant’s “2010 activities” and with the expectation of amending

the Complaint to include the “2010" time period, the SEC never amended their Complaint to

include any other time period other than those alleged in the Complaint. (See Plaintiff’s Motion

to Re-Open Discovery) For the SEC to now argue facts about the “2010" time period in

opposition to a Stay is at the very least disingenuous.

The SEC suggests in their Opposition to the Stay, that they would be prejudiced by a Stay

because “at any time, without the court’s or the Commission’s knowledge, Glisson could

resume his illegal activities in CMKM securities to the detriment of innocent investors who are

duped into believing CMKM securities have some value.” The SEC made a similar argument in

its Motion for Summary Judgment, which among other things, sought Preliminary Injunction.

The Court did not accept the SEC’s argument at that time and denied the SEC’s Motion for

Summary Judgment in its entirety.

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The SEC’s argument that it would be prejudiced by a Stay is further undermined by the fact

that the SEC never alleged fraudulent conduct by Glisson in their Complaint and the SEC never

amended their Complaint to include such allegations. Further, the SEC’s argument is specious

because they know even if Glisson were inclined to resume activities in CMKM securities, it

would be impossible because the stock is de-registered and incapable of being transferred.

When the court weighs the interest in preserving the Defendant’s Due Process and Fifth

Amendment privilege against the lack of prejudice to the Plaintiff, the Court must err on the side

of preserving a defendants constitutional privileges and should issue a Stay of these proceedings.

CONCLUSION

Based on the foregoing, it is respectfully requested that Defendant Marco Glisson’s Motion to

Stay this action until after the completion of the criminal proceedings be granted.

DATED this 10 th day of December, 2011.

FREDERICK SANTACROCE, ESQ.

/s/ Frederick Santacroce

FREDERICK SANTACROCE, Esq. Nevada Bar No. 5121 SANTACROCE LAW OFFICES, LTD 706 S. 8th St Las Vegas, Nevada 89101 Telephone: (702) 598-1666 Fax: (702) 385-1327 Attorney for Defendant

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Case 2:09-cv-00104-LDG-GWF

Document 95

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CERTIFICATE OF SERVICE

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I hereby certify that this document was filed through the ECF system and has been sent

electronically to the registered participants as identified on the Notice of Electronic Filing (NEF)

on December 12, 2011 and paper copies sent to those indicated as non-registered.

FREDERICK SANTACROCE, ESQ.

/s/ Frederick Santacroce

FREDERICK SANTACROCE, Esq. Nevada Bar No. 5121 SANTACROCE LAW OFFICES, LTD 706 S. 8th St Las Vegas, Nevada 89101 Telephone: (702) 598-1666 Fax: (702) 385-1327 Attorney for Defendant

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