llen: supplement briefing

United States’ Supplement In Support of Motion for Detention/ - 1 Dickson Lee, CR14-024RAJ

UNITED STATES ATTORNEY 700 STEWART STREET, SUITE 5220

SEATTLE, WASHINGTON 98101 (206) 553-7970

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Magistrate Judge James P. Donohue

UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF WASHINGTON

AT SEATTLE UNITED STATES OF AMERICA,

Plaintiff,

v.

DICKSON LEE,

Defendant.

NO. CR14-024RAJ UNITED STATES’ SUPPLEMENTAL FILING IN SUPPORT OF A MOTION FOR DETENTION

The United States of America files this supplemental briefing in support of its

motion to detain the defendant, Dickson Lee, pending trial. Lee was arrested on March

16, 2014, upon entry at Sea-Tac airport from Taipei, Taiwan. Lee has been charged in a

ten count Indictment for securities fraud, false certifications, and false submissions to the

Securities and Exchange Commission. A detention hearing has been set for April 1,

2014.

Detention is warranted because Lee presents both a serious risk of flight and a

serious risk of obstruction of justice. See 18 U.S.C. § 3142(f)(2). Indeed, Lee has

already attempted to mislead Pretrial Services in an effort to gain release by hiding the

extent of his overseas ties and failing to provide requested information. As detailed

below, Lee’s ties to the Western District of Washington are superficial, he has little

incentive to remain in the United States, and he has access to substantial wealth in

Taiwan. Finally, Lee has attempted to tamper with two witnesses during the course of

Case 2:14-cr-00024-RAJ Document 9 Filed 04/01/14 of 9




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this investigation, presenting serious concerns about the integrity of the proceedings if

Lee is not detained.

I. BACKGROUND

Dickson Lee is the Chief Executive Officer and Chairman of the Board of L&L

Energy, Inc., a NASDAQ listed company. According to L&L’s public filings, L&L’s

business consists of coal mining and coal wholesale in China. L&L maintains its

“corporate headquarters” in Seattle, Washington, but no revenue generating operations

are conducted anywhere in the United States.

On January 29, 2014, a grand jury returned a ten count indictment charging

Dickson Lee with Securities Fraud, in violation of 18 U.S.C. § 1348, False Sarbanes-

Oxley Certifications, in violation of 18 U.S.C. § 1350, and False Submissions to the

Securities and Exchange Commission, in violation of 15 U.S.C. §§ 78m(a) and 78ff. The

maximum statutory penalties associated with these various offenses range from twenty to

twenty five years imprisonment and millions of dollars in fines.

The indictment alleges, in essence, that Dickson Lee in 2008 through 2009,

fabricated the existence of a Chief Financial Officer for L&L Energy, representing that a

certain individual was the company’s CFO when she was not; and forged required CFO

certifications that accompanied the company’s annual and quarterly financial reports,

falsely attesting to the accuracy of the reports and existence of internal controls.

Furthermore, when the individual whose name he had used to forge the CFO

certifications discovered the fraud, the indictment alleges that Dickson Lee paid the

individual for her silence and then engaged in a cover-up resulting in further material

misrepresentations to the investing public.

II. ARGUMENT

The Bail Reform Act requires a court to order a defendant detained pending trial,

if no condition or combination of conditions will reasonably assure (1) the appearance of

the person required, and (2) the safety of any other person and the community. 18 U.S.C.

§ 3142(e). In making the determination as whether conditions exist as to assure both





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prongs, § 3142(g) requires the court to take into account four statutory factors: (1) the

nature and circumstances of the offense charged; (2) the weight of the evidence against

the person; (3) the history and characteristics of the person, including his character,

physical and mental condition, family ties, employment, financial resources, length of

residence in the community, community ties, past conduct, history, and record

concerning appearance at court proceedings; and (4) the nature and seriousness of the

danger to any person or community that would be posed by the person’s release. The

burden of proof rests with the Government which must establish risk of flight by a

preponderance of the evidence, and risk to others and the community by clear and

convincing evidence. United States v. Motamedi, 767 F.2d 1403, 1405 (9th Cir, 1985).

A. Dickson Lee Poses a Serious Risk of Flight. Dickson Lee is charged with offenses that carry substantial penalties, including jail

time. Lee has no incentive to remain in the United States and substantial means available

to permanently flee the country. Lee’s willingness to mislead Pretrial Services, and by

extension, this Court, with respect to his ties to Taiwan are indicative of how far he is

willing to go to obtain release.

At the time of initial appearance, Lee acknowledged to Pretrial that he travelled

frequently to China, but pointed to homes he owned in the Seattle area as evidence of ties

to this District. Lee also stated that he had certain bank accounts overseas, but provided

no details as to the amount and extent of foreign assets. No one to date has come forward

on Lee’s behalf with any details regarding Lee’s foreign assets in spite of Pretrial

requests. When asked about family ties in the area, Lee disclosed one adult child in the

Boston area, and siblings in other parts of the United States.

Lee’s information to Pretrial is misleading, designed to hide the extent of his true

ties to Taiwan, the amount of assets he maintains overseas, and the superficial nature of

his connection to this District. First, there is a basic conflict of information regarding

where in the United States Lee maintains a residence, if at all. Even though Lee





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suggested the homes in the Kent area, a review of Lee’s official driver’s license indicates

that he is listed as a resident of Florida. Lee made no mention of the Florida residence to

Pretrial. A printout from the Florida Department of Motor Vehicles for Dickson Lee

indicating a current, valid Florida driver’s license with a Florida address is attached as

Exhibit A.

Second, it is not accurate to suggest that Lee lives in the United States and

“travels” to China. Lee actually resides in Taiwan and travels back to the United States

for short periods of time. The United States has obtained U.S. customs records of Lee’s

entries and exits. Over the last 12 months, Lee has spent collectively no more than 39

days in the United States, returning each time, except in one instance, to Taipei. The one

exception was a return to Beijing. In prior contexts, Lee himself has confirmed that he no

longer resides in the U.S. On March 13, 2013, Lee testified under oath before the

Securities and Exchange Commission in a parallel investigation. During the testimony

Lee clarified that because he now spends “95 percent of the time” overseas, his tax filing

status is one of a citizen living abroad. An excerpt of the relevant March 13, 2013 SEC

deposition testimony is attached as Exhibit B.

Third, the reason Lee resides in Taiwan is that he has successfully removed most

if not all of his personal, financial, and business affairs there. Lee told Pretrial Services

he had only one child, an adult, in the Boston area, suggesting he no longer has any

dependents. That information is false. Lee has two additional children, less than 3 years

old, living in Taiwan. On July 1, 2013, Robert Lee, Dickson Lee’s brother, was

interviewed by the government. According Robert Lee, Dickson Lee owns a home in

Taipei, Taiwan where he resides with the children and the children’s mother Jung Mei

Wang, a.k.a. Rosemary Wang. Rosemary Wang is a former financial officer of L&L, a

witness in this case who has so far rebuffed requests for information. An excerpt of a

memorandum of interview provided by Robert Lee is attached as Exhibit C.

In addition to his personal ties, Lee has transferred substantial financial assets to

Taiwan and China, providing him with the means and further incentive to flee and never





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return. The government has obtained and reviewed banking information for Lee’s main

personal bank account held at East West Bank for the year 2013. The government’s

analysis revealed that throughout 2013, Lee transferred more than $200,000 to various

accounts located in Taiwan, Hong Kong, and China so that by December 2013, the

account’s balance was left at less than $300. Due to the sensitive nature of the banking

documents, relevant excerpts will be provided to the Court for review at the time of

hearing.

A review of L&L’s main corporate business bank account shows a remarkable

parallel shift of funds overseas in the same time frame, so that by end of December 2013,

the L&L corporate account that had routinely carried an average balance in the hundreds

of thousands of dollars was left with a balance of less than $300. Again, an analysis of

the banking information showed that millions of dollars were transferred to various

accounts in China.

Finally, the banking information revealed that Dickson Lee personally had access

to substantial cash in Taiwan. On May 22, 2013, the L&L corporate bank account

received an incoming wire from a bank account held in the name of Dickson Lee in the

amount of $999,912. 90. This wire was traced to a Taiwanese bank account held in

Dickson Lee’s name.

Lee may argue that the continuation of L&L’s business and exoneration of his

name is an incentive to stay. The argument is hollow in light of publicly announced

plans by L&L to seek a listing on a Taiwanese exchange. In addition, NASDAQ halted

trading in L&L stock in November 2013. The current allegations will likely lead to a

delisting, eliminating any business reason for Lee and the company to remain in the U.S.

In sum, contrary to the information given to Pretrial, Lee has nothing holding him

to the Western District of Washington and every incentive and the where-with-all to flee

permanently. He has little children who are dependent upon him, a fact Lee chose to hide

from Pretrial. His personal financial affairs and L&L’s financial affairs have ostensibly

been transferred overseas. All revenue generating operations conducted by L&L is in





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China. Electronic monitoring and the confiscation of passports are not fail-safe,

especially in light of Lee’s already demonstrated willingness to mislead Pretrial and this

Court. There appears to be no condition short of detention that would assure the

defendant’s appearance.

B. Dickson Lee Poses a Serious Risk of Obstruction of Justice.

The underlying criminal case includes allegations that in 2009, when N.L.

discovered that she had been fraudulently held out as L&L’s CFO, Dickson Lee paid her

to keep her silent and subsequently engaged in a cover up. Dickson Lee’s pattern of

corrupt conduct continued throughout this investigation and extended to tampering with

witnesses.

In March 2013, during his deposition testimony before the SEC, Dickson Lee was

questioned extensively regarding the CFO situation and specifically about N.L. Lee was

confronted with evidence that N.L. did not serve as the CFO during the time the company

made filings representing such. Dickson Lee testified that a former L&L employee, Rui

Liang, could give information that in fact N.L. did the work of CFO. In April 2013, after

the deposition, the United States Attorney’s Office formally informed Dickson Lee’s

counsel that Lee and the company were targets of a criminal investigation.

On June 7, 2013, the government interviewed Rui Liang. Liang told investigators,

however, that she had no dealings with N.L. during the time period she was purportedly

the CFO. Liang further explained that in May 2013, after Dickson Lee’s deposition and

after his counsel had been informed that he was the target of a criminal investigation,

Lee’s personal assistant, Candy Tang, requested that she and Liang meet for lunch.

During this lunch meeting, Tang offered Liang 5000 shares of L&L company stock in

return for Liang signing a statement that Liang had worked with N.L. in reviewing

financial statements during N.L. tenure as CFO. Liang questioned the necessity of such a

document and Tang had insisted simply that the “SEC” needed it. Liang did not sign the

document or accept payment and clarified to investigators that the suggested statement





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was false. Excerpt of the memorandum of interview of Rui Liang is attached as Exhibit

D.

Dickson Lee subsequently used Candy Tang to also tamper with Robert Lee prior

to his interview with the government. During Lee’s SEC deposition testimony, attorneys

inquired extensively as to the reasons his brother, Robert Lee, sold shares of L&L stock

and gave money to L&L. On July 1, 2013, Robert Lee met with investigators in

connection with this case. Robert Lee explained that a week before the interview, he was

contacted suddenly by Candy Tang, Dickson Lee’s assistant. Robert Lee was surprised

because Tang does not usually call him. Tang instructed Robert Lee not to tell

investigators that he loaned money to the company because the company needed the

money, but because of the 10% interest that was offered. Robert told investigators that

the interest was not the reason he loaned the money. He sold shares and loaned the

money because Dickson told him to. Excerpt of the memorandum of interview of Robert

Lee is attached as Exhibit E.

The clear and convincing evidence demonstrates that Dickson Lee uses proxies to

tamper with witnesses. Such conduct cannot be deterred with electronic monitoring and

confiscation of passports and verbal admonishments. Given Dickson Lee’s repeated

pattern of corrupt behavior, coupled with his attempted deception of Pretrial Services,

shows that there are no conditions that will ensure the integrity of the process.

Accordingly, detention is warranted.





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CONCLUSION

For the reasons stated above, the United States respectfully requests that this Court

enter an order detaining Dickson Lee pending trial of this matter.

DATED this 1st day of April, 2014.

Respectfully submitted, JENNY A. DURKAN United States Attorney /s/ Katheryn Kim Frierson

KATHERYN KIM FRIERSON Assistant United States Attorney WSBA # 37794 700 Stewart Street, Suite 5220 Seattle, Washington 98101 Telephone: (206) 553-7970 Facsimile: (206) 553-2502 E-mail: [email protected]





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CERTIFICATE OF SERVICE

I hereby certify that on April 1, 2014, I electronically filed the foregoing with the

Clerk of Court using the CM/ECF system which will send notification of such filing to

the attorney(s) of record for the defendant(s).

/s/Anna Chang ANNA CHANG Paralegal United States Attorney=s Office 700 Stewart Street, Suite 5220 Seattle, Washington 98101-1271 Telephone: (206) 553-7970 Facsimile: (206) 553-4440 E-mail: [email protected]


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