2 Prosecutors Scolded in S.D. Trial of Hunter

SAN DIEGO —  The judge in Nancy Hoover Hunter’s fraud trial said Tuesday that prosecutors were in contempt of court for failing to turn over documents to the defense, but he later softened his language and ruled that they had only violated a court order.

U. S. District Judge Earl B. Gilliam turned down a defense motion for a mistrial and refused to dismiss the indictment against Hunter, but he warned the prosecutors that “continued government misconduct” could prompt him to reevaluate his decision.

Court Session Shelved

As arguments between the prosecutors and Hunter’s lawyers over prosecution documents escalated Tuesday, Gilliam canceled the day’s trial session and sent the jurors, who were waiting outside the courtroom, home about 9 a.m.

“I order you to go through your records and see if there’s any material that should be turned over to the defense,” Gilliam told S. Gay Hugo and Stephen P. Clark, the assistant U. S. attorneys on the case.

Hunter has been on trial since April 18 on a 234-count indictment stemming from her role as a top executive at the J. David & Co. investment firm, which bilked investors of $80 million in a huge Ponzi scheme.

The dispute over documents erupted Friday as Hunter’s lawyers finished cross-examination of a prosecution witness. Prosecutors then informed the court that they had neglected to give the defense attorneys, Richard Marmaro and Robert S. Brewer, 11 pages of notes and memoranda pertaining to the witness.

Under a federal law known as the Jencks Act, before defense attorneys begin their cross-examination of a prosecution witness, prosecutors must turn over to them reports and memoranda prepared by federal agents who interviewed the witness. The reports may contain information that defense attorneys find useful in their questioning of prosecution witnesses.

In the Hunter case, Gilliam had stepped up the deadline, ordering prosecutors to turn over the material by last March 15.

Blamed on ‘Dumb Stupidity’

Hugo, the chief prosecutor on the case, said after the court session Tuesday that the controversy arose because she had agreed to be “magnanimous” and turn over the documents far ahead of the deadline required by law. She said she had not expected her offer to move up the deadline to be turned into an official court order.

“It was done, truly, because of me and my dumb stupidity,” Hugo said. “Had I known that my agreeing to do this voluntarily, when I wasn’t required to do this, was going to become a court order and give the defendant rights under the act, I never would have agreed. . . . There’s no way I’m going to be generous again.”

At issue Tuesday were an unknown number of reports and memoranda prepared by FBI and Internal Revenue Service agents who interviewed potential witnesses in the case. One of those documents is a three-page FBI memorandum about Jane Sinclair, a former J. David employee who was to have been called to the witness stand Tuesday morning. Prosecutors said they combed their files over the weekend, discovered the memorandum and turned it over to the defense Monday.

“They gave us one document last night and admitted there are others,” Brewer said. He called the government’s action a “hemorrhage of misconduct” and asked Gilliam to hold a hearing so that FBI and IRS agents can be questioned about what other documents may not have been turned over and to determine whether there was any “willfulness” in withholding the documents.

Ruling Considered a Warning

“The government is in contempt of this court’s order,” Gilliam said after listening to the lawyers’ arguments. He added that he will reserve ruling on the penalty, which could be a fine or jail term. In the meantime, Gilliam said, the prosecutors could appeal the contempt finding.

But, later in the day, Gilliam’s law clerk, Gretchen Shepherd, said she had been instructed to tell news reporters that Gilliam did not hold the prosecutors in contempt but merely had ruled that his March 15 order had been violated. She said his ruling amounted to a warning that, “This is it, this is the end of the line.”

Hugo said Tuesday that she will turn over all documents relating to all potential witnesses as a precaution, even though she is not yet certain which witnesses she will call. She said investigators have been unable to locate some of the potential witnesses.

The trial is to resume today with testimony of Sinclair, the former J. David employee.