trudeau civil case document 814 0 and 1 ftc statement in advance of the jan 30 status conference...

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IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS

FEDERAL TRADE COMMISSION, Plaintiff, v. KEVIN TRUDEAU, Defendant.

))))))))))))

Case No. 03-C-3904 Hon. Robert W. Gettleman

FTC’S STATEMENT IN ADVANCE OF THE JANUARY 30 STATUS CONFERENCE

I. INTRODUCTION

Following six civil contempt findings, the Court incarcerated Trudeau on November 21

to coerce his compliance with multiple orders intended to benefit the consumers he injured. See

DE801 (Nov. 21, 2013). Trudeau now seeks his release, but has not made the necessary legal

showing. First, nothing has changed since the last hearing. Accordingly, Trudeau has not

established that he has complied or can do nothing further. Second, Trudeau apparently intends

to “wait out” the Court, the Receiver, the FTC, and ultimately his victims. However, Trudeau

has not proven that there is “no realistic possibility” that incarceration will accomplish its

coercive purpose,1 as the law requires that the Court find. Finally, the FTC responds more fully

to Trudeau’s latest misrepresentation (on December 19)—that he disclosed his MGM Grand

casino account to the FTC through a letter from Marc Lane. The letter is attached as PXA:1, and

it plainly does not disclose Trudeau’s MGM Grand casino account.2

1 See, e.g., CFTC v. Wellington Precious Metals, Inc., 950 F.2d 1525, 1530-31 (11th Cir.

1992) (quoting Simkin v. United States, 715 F.2d 34, 37 (2nd Cir. 1983)); see also In re Pantojas, 496 F. Supp. 344, 347 (D.P.R. 1980) (“[I]t is evident that there must be a strong and adequate showing to the effect that there is no reasonable likelihood that the continued incarceration will accomplish that for which the commitment ordered has been issued.”) (emphasis added).

2 The Court also indicated it would hear argument Thursday regarding the pending motion to intervene, which the FTC and the Receiver strongly oppose.

Case: 1:03-cv-03904 Document #: 814 Filed: 01/28/14 of 7 PageID #:14775


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II. ARGUMENT

A. Trudeau Has Not Complied With the Court’s Orders or Proven Compliance Is Impossible.

The Receiver’s December 17 report identified numerous instances in which the Receiver

requested Trudeau’s assistance regarding assets, but Trudeau refused to provide it.3 See DE805.

To the FTC’s knowledge, Trudeau has not satisfied any of these specific requests, nor has

Trudeau disclosed assets almost certainly hidden overseas. Thus, with respect to Trudeau’s

gross noncompliance, nothing has changed since last month.

B. Trudeau Has Not Proven There Is “No Realistic Possibility” That Coercive Sanctions Will Succeed.

Trudeau has not proven there is “no realistic possibility” that incarceration ultimately will

not have a coercive effect,4 as he must before release.5 The fact that Trudeau spent two months

incarcerated rather than disclose his assets does not satisfy this burden. For instance, in

Wellington Precious Metals, the Eleventh Circuit affirmed a District Court’s refusal to release a

contemnor after four months and—more important—the Eleventh Circuit endorsed the District

Court’s well-reasoned opinion:

3 The Receiver’s report also details one minor but noteworthy instance in which Trudeau provided requested assistance. Specifically, in violation of two Court orders, Trudeau wired his personal assistant (Brandy Burkhardt) 5,000 Swiss Francs. See DE805 (Dec. 17, 2013) at 6. After the Receiver discovered this and demanded Trudeau return the money, Trudeau contacted Winston & Strawn, which contacted Burkhardt, who returned the money almost immediately. See id. On information and belief, Burkhardt resides domestically and Trudeau sought to keep her out of this litigation. Although Trudeau was incarcerated at the time, once he made up his mind to surrender this money, he was able to affect its return almost immediately.

4 See, e.g., Wellington, 950 F.2d at 1530-31; Sanchez v. United States, 725 F.2d 29, 31 (2d Cir. 1984) (affirming finding that contemnor had not established no “realistic possibility” that continued incarceration would coerce compliance, despite contemnor’s hunger strike and year of incarceration); Pantojas, 496 F. Supp. at 347.

5 See, e.g., Simkin v. United States, 715 F.2d 34, 37-38 (2nd Cir. 1983) (“What is required of the judge is a conscientious effort to determine whether there remains a realistic possibility that continued confinement might cause the contemnor to [comply]. The burden is properly placed on the contemnor to demonstrate that no such realistic possibility exists.”) (internal citation omitted); United States v. Labato, No. 96-852-CIV-ORL-22, 1997 U.S. Dist. LEXIS 2246, *3-*4 (M.D. Fla. Feb. 24, 1997) (“Prison time, in and of itself, will not satisfy Labato’s burden of proving that there exists no ‘realistic possibility’ that he can comply with the court’s contempt order.”); see also King v. Department of Social Servs., 756 P.2d 1303, 1305, 1310 (Wash. 1988) (en banc) (“We reverse the Court of Appeals and reinstate the warrant of commitment”; lower court erred by allowing contemnor “to be free of the contempt citation without having to prove that it was no longer effective” as a coercive measure).



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The mere fact that [the contemnor] has spent some time in prison does not necessarily prove that [he] has been telling the truth all along and cannot, at this juncture, make restitution. To the contrary, it is far more plausible under the circumstances of this case that [the contemnor’s] refusal to pay means simply that [he] deems the detriments of incarceration outweighed by the concomitant benefits of holding onto his ill-gotten Wellington monies.6

950 F.2d at 1531.7 Accordingly, “[p]rison time, in and of itself, will not satisfy [the

contemnor’s] burden of proving that there exists no ‘realistic possibility’ that he can comply with

the court’s contempt order.” Id.; see also In re Grand Jury Investigation, 600 F.2d 420, 428 (3d

Cir. 1979) (concluding that “the relatively few months that [the contemnor] has been held in

coercive imprisonment” did not “necessarily mean that he will not succumb under the pressure of

further confinement”).

Furthermore, although the Court must make an individualized determination,8

discharging Trudeau after less than three months would be incongruous with coercive

incarceration authority generally. In fact, the FTC is unable to locate any published case in

which a coercively incarcerated contemnor satisfied the “no reasonable possibility” test in such a

short period:9

6 Notably, although the Wellington District Court considered the issue after more than

four months of incarceration (beginning on March 14, 1990, see 950 F.2d at 1531), the Eleventh Circuit did not issue its order affirming the District Court’s decision not to release the contemnor until January 14, 1992—twenty two months after coercive sanctions were initially imposed. See 950 F.2d 1525.

7 United States v. Labato is to the same effect: “The mere fact that [the contemnor] has now spent six months in prison does not necessarily prove that [he] has been telling the truth all along and cannot, at this juncture, produce the cashier’s check. It remains far more plausible under the circumstances of this case that [his] refusal to return the check means simply that [he] deems the detriments of incarceration outweighed by the benefits of holding onto his check.” 1997 U.S. Dist. LEXIS 2246 at *3.

8 See, e.g., Simkin, 715 F.2d at 39 (noting the importance of an individualized decision); Sanders v. Shephard, 645 N.E.2d 900, 906 (Ill. 1995) (stating that the court should consider “the record,” the contemnor’s “demeanor and credibility,” and “the significance of the underlying order”). In this instance, the underlying order is exceptionally important—more than $37 million in redress to more than 800,000 victims. It would be difficult to imagine a contemnor with less credibility, and the record is devoid of any evidence that Trudeau will not change his mind eventually and disclose his assets rather than remain incarcerated.

9 But see In the Matter of Parrish, 782 F.2d 325, 327 (affirming court’s decision that there was “no realistic possibility” that contemnor would comply with order compelling testimony after seven months); In re Jean-Paptiste, No. M 11-118, 1985 U.S. Dist. LEXIS 18189, *11 (S.D.N.Y. July 5, 1985) (finding “no realistic possibility” contemnor would be coerced to testify, and concluding incarceration after seven months). Notably, Tankersley v.



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Sanders v. Shephard, 645 N.E.2d 900, 906 (Ill. 1995) (affirming decision that

incarceration “remained coercive” in opinion issued more than seven years after incarceration began).

Catena v. Seidl, 321 A.2d 225, 229 (N.J. 1974) (reversing trial court’s decision to terminate coercive incarceration after four years when contemnor had not met “the burden of showing that there is no reasonable likelihood that continued incarceration” would coerce compliance).

King v. Department of Social Servs., 756 P.2d 1303, 1305, 1310 (Wash. 1988) (en

banc) (reversing lower court and reinstating coercive incarceration when contemnors failed to meet burden; contemnors incarcerated for approximately two years at the time of the decision).

In the Matter of State Grand Jury Investigation, 576 A.2d 900, 904 (N.J. App. Div.

1990) (affirming court’s decision to continue coercive incarceration that began nine months earlier, and distinguishing case from that of another contemnor released after he “had been confined in excess of five years and was over 73 years of age and in ill health”) (citation omitted).

United States ex rel. Thom v. Jenkins, 760 F.2d 736, 740 (7th Cir. 1985) (affirming decision to continue coercive incarceration for failure to pay approximately $115,000; Seventh Circuit issued affirmance after more than seven months of incarceration).

In the Matter of Cantazaro, 663 F. Supp. 1, 2 (D.D.C. 1985) (affirming continued civil

incarceration, after six months, of witness before organized crime commission who refused to testify, despite witness’ “vow[] not to testify regardless of further confinement”).

United States v. Labato, No. 96-852-CIV-ORL-22, 1997 U.S. Dist. LEXIS 2246, *3-*4

(M.D. Fla. Feb. 24, 1997) (declining to release contemnor after six months; “Many more months may pass before it becomes necessary to conclude that incarceration will no longer serve the purpose of the civil contempt order”) (mag. op).

Indeed, as the Seventh Circuit explained with respect the recalcitrant witness statute, 28 U.S.C. §

1826, which caps coercive confinement at eighteen months: “In the absence of unusual

circumstances, a reviewing court should be reluctant to conclude, as a matter of due process, that

a civil contempt sanction has lost its coercive impact at some point prior to the eighteen-month

period prescribed as a maximum by Congress[.]” In the matter of Crededio, 759 F.2d 589, 591

(7th Cir. 1985) (quotation omitted).

Fisher, No. 3:07cv154, 2007 U.S. Dist. LEXIS 76199 (N.D. Fla. Oc. 15, 2007), arose out of FTC v. Think Achievement Corp., 312 F.3d 259 (7th Cir. 2002) and involved a contemnor who refused to disclose assets to needed to compensate consumers he victimized, see Tankersley, 2007 U.S. Dist. LEXIS at *2-*4. In Tankersley, the contemnor satisfied the “no realistic possibility” test after thirty-two months. See id. at *8, *14.



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Here, Trudeau offers no evidence that could sustain a “no reasonable possibility” finding.

Equally important, given his exceptionally contumacious track record and well-documented

history of asset protection activities, it is unsurprising that he has not yet relinquished potentially

very substantial wealth held offshore. In short, the Court cannot find that there is “no reasonable

possibility” that Trudeau will comply with the Court’s order. Cf. United States v. Dien, 598 F.2d

743, 745 (2d. Cir. 1979) (“Whether [the contemnor] will change his mind depends upon future

events which we cannot at this time predetermine.”).

C. Trudeau’s Claim To Have Disclosed His MGM Grand Casino Account Is Patently False.

At the last status conference, Trudeau represented to the Court that he disclosed his

MGM Grand account to the FTC through a March 2012 letter Marc Lane wrote on his behalf.

Specifically, with respect to the allegation that Trudeau failed to disclose that he withdrew more

than $150,000 from the MGM Grand in 2012, Trudeau and his attorney argued:

TRUDEAU: I want to respond to this. I want to respond to this. I want to respond to this.

. . . . TRUDEAU: It was explained in full. COUNSEL: It was explained in full, he’s telling me. So this is not new money

that we’re talking about.

Also I want to point out that Mr. Trudeau, through counsel, sent a letter to the FTC in March of 2012 letting them know that he was going to partake in gambling activity with—in connection with his baccarat research—

TRUDEAU: At the MGM. COUNSEL: —at the MGM. Well, he’s saying, I don’t remember if the letter

said MGM in it, but it did mention gambling activity . . . .

PXA:2 at 7:19-8:18. As is apparent from the letter itself, however, Trudeau disclosed only that

he would conduct purported “research” at an unidentified “casino or casinos.”10 PXA:1. The

letter says nothing about Trudeau’s MGM Grand account.

10 The letter also did not identify Rivers Casino. Even crediting Trudeau’s convenient

new story (i.e., that he took approximately $150,000 from MGM and used it at Rivers Casino), he has not explained what happened to the money he left Rivers Casino with.



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III. CONCLUSION

Simply put, Trudeau has not complied, proven that compliance is impossible, or

established that continued incarceration will not coerce his compliance. Accordingly, the law

requires that coercive sanctions continue. Dated: January 27, 2014 David O’Toole ([email protected]) Federal Trade Commission 55 West Monroe Street, Suite 1825 Chicago, Illinois 60603-5001 Phone: (312) 960-5601 Fax: (312) 960-5600

Respectfully Submitted, /s/ Jonathan Cohen Michael Mora ([email protected]) Jonathan Cohen ([email protected]) Amanda B. Kostner ([email protected]) Federal Trade Commission 600 Pennsylvania Ave., N.W. M-8102B Washington, DC 20580 Phone: 202-326-3373; -2551; -2880 Fax: 202-326-2551



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CERTIFICATE OF SERVICE

I, Jonathan Cohen, hereby certify that on January 27, 2014, I caused to be served true copies of the foregoing by electronic means, by filing such documents through the Court’s Electronic Case Filing System, which will send notification of such filing to: Kimball Richard Anderson [email protected] Thomas Lee Kirsch, II [email protected] Katherine E. Rohlf [email protected] Blair R. Zanzig [email protected] Timothy A. Shimko [email protected] Daniel Stephen Shimko [email protected]

/s/ Jonathan Cohen Jonathan Cohen ([email protected]) Attorney for Plaintiff Federal Trade Commission



FTC EXHIBIT A

Case: 1:03-cv-03904 Document #: 814-1 Filed: 01/28/14 Page 1 of 9 PageID #:14782


FTC PXA:1


GIN Network Truth (the smart group)PXA:1



FTC PXA:2



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IN THE UNITED STATES DISTRICT COURTFOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

FEDERAL TRADE COMMISSION,

Plaintiff,

vs.

KEVIN TRUDEAU,

Defendant.

)))))))))

No. 03 C 3904

Chicago, IllinoisDecember 19, 201310:00 a.m.

TRANSCRIPT OF PROCEEDINGS - Motion

BEFORE THE HONORABLE ROBERT W. GETTLEMAN

APPEARANCES:

For the Plaintiff: UNITED STATES FEDERAL TRADE COMMISSIONBY: MS. ELIZABETH C. SCOTT55 West Monroe Street, Suite 1825Chicago, Illinois 60603-5001

For Defendant Trudeau, WINSTON & STRAWN LLPThe Law Offices of BY: MS. KATHERINE E. ROHLFMarc J. Lane PC 35 West Wacker Driveand Marc J. Lane: Chicago, Illinois 60601-9703

For the Defendant: LAW OFFICES OF DEBRA A. BUETTNER PCBY: MR. JUSTIN D. SCHEID8 Executive Court, Suite 3South Barrington, Illinois 60010

GORDON LAWBY: MR. ANDREW B. GORDON1 First Bank Plaza, #207Lake Zurich, Illinois 60047

Official Court Reporter: NANCY L. BISTANY, CSR, RPR, FCRR219 South Dearborn Street, Room 1706Chicago, Illinois 60604(312) [email protected]



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respect to those disclosures is the extent to which Mr. Trudeau

is making and demonstrating an effort to make a full disclosure.

Yes, during the course of his interview, he listed several

casinos that he had maintained -- that he had in the past 10

years done gambling at, but he certainly didn't disclose the fact

that as recently as -- with respect to MGM Grand, he talked about

transactions that he had done in the 2004, 2005 time frame. With

respect to the MGM Grand, he certainly never disclosed the fact

that he walked out of there with $153,000 of cash within -- since

April of 2012.

That's not the type of small disclosure that just

escapes you if you're trying to demonstrate and make a full

accounting to the Court of what's happened to all of your assets.

And it hampers the ability, you know, to ask questions then and

there of, well, what happened to that money? Where did that

money go? We never were able to ask that question at the time of

our interview because Mr. Trudeau wasn't making that full

disclosure.

THE DEFENDANT: I want to respond to this. I want to

respond to this. I want to respond to this.

MS. ROHLF: I understand. I understand, but we've

already discussed this, so --

THE DEFENDANT: But --

MS. ROHLF: My understanding about the MGM account and

the money that the receiver is bringing up right now is that it's



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not new money that hasn't been discussed in the past. The FTC

knows that Mr. Trudeau did some gambling at the Rivers Casino.

They subpoenaed the records from the Rivers Casino. It's my

understanding that this is basically the same money that -- it

was in the Rivers Casino, it was in the MGM Grand, and it went --

THE DEFENDANT: Yes.

MS. ROHLF: -- back to the Rivers Casino.

THE DEFENDANT: It was explained in full.

MS. ROHLF: It was explained in full, he's telling me.

So this is not new money that we're talking about.

Also I want to point out that Mr. Trudeau, through

counsel, sent a letter to the FTC in March of 2012 letting them

know that he was going to partake in gambling activity with -- in

connection with his baccarat research --

THE DEFENDANT: At the MGM.

MS. ROHLF: -- at the MGM. Well, he's saying, I don't

remember if the letter said MGM in it, but it did mention

gambling activity and told them that they could get ahold of him

if they had any additional questions. But the gambling activity

was disclosed, your Honor. March 2012 was the letter, so April

2012 is not a surprise that this activity occurred.

With respect to -- if your Honor is ready, I can go on

to some of the other points that the receiver made. With respect

to WSS, GSS, I hate to sound like a broken record, but we've

already asked for those records from Lee Kenny and from Barbara


trudeau civil case document 814 0 and 1 ftc statement in advance of the jan 30 status conference...

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