[00:00:08] Speaker 04:
Thank you, Your Honor.

[00:00:09] Speaker 04:
May it please the Court, my name is Katherine Kimball Windsor, and I represent the appellant, Philip Layfield.

[00:00:15] Speaker 04:
I'd like to reserve four minutes for rebuttal.

[00:00:17] Speaker 04:
Okay, please watch the clock.

[00:00:19] Speaker 04:
I will do.

[00:00:19] Speaker 04:
This case raises some very technical and complex claims, but I wanted to say at the outset that we recognize that the charges in this case are very serious, and I don't mean by my arguments to minimize them in any way.

[00:00:33] Speaker 04:
We tried to focus our arguments on those

[00:00:46] Speaker 04:
violations.

[00:00:47] Speaker 04:
Unless the Court has a different request, I thought I would start with the nine counts that we've challenged under Parvy, United States, where we – our argument is that the government didn't prove that the wires into the IOLTA were in furtherance of the fraud.

[00:01:22] Speaker 02:
as a practical matter, even if we grant relief on these nine counts, what difference does it make?

[00:01:28] Speaker 04:
I think that this court would remand the case for resentencing for the judge to reconsider the sentence in light of whatever counts the court does dismiss.

[00:01:39] Speaker 04:
If you agreed with every single argument I've made, then all of them would be dismissed.

[00:01:44] Speaker 04:
But it may be that there are only some of them

[00:01:50] Speaker 04:
I guess it would be vacated or dismissed.

[00:01:55] Speaker 04:
The convictions would be overruled.

[00:01:58] Speaker 02:
If it was in the nine counts, we'd vacate the convictions and order them dismissed.

[00:02:02] Speaker 02:
But he would still stand convicted of multiple counts of mail and wire fraud on which he received a concurrent sentence.

[00:02:10] Speaker 04:
I think that the court could still remand it for re-sentencing at that point where the judge could

[00:02:19] Speaker 04:
of just the counts that are remaining.

[00:02:23] Speaker 04:
And I do think that would be an issue for the district court to address.

[00:02:26] Speaker 04:
I'm sure the government would be arguing that the amount of loss just based on one count could result in the same sentence.

[00:02:40] Speaker 04:
Would the court like me to start with the PAR arguments?

[00:02:44] Speaker 04:
Okay, and I also plan to try to jump to the speedy trial claim as well.

[00:02:53] Speaker 04:
So our argument is that this case is like par v United States in that it involved an ongoing embezzlement scheme and in an embezzlement

[00:03:06] Speaker 04:
received are received lawfully.

[00:03:10] Speaker 04:
And in this case, these were settlement funds.

[00:03:14] Speaker 04:
This was a functioning law firm.

[00:03:17] Speaker 04:
There was no concern that the settlements were padded or that they were received through fraud.

[00:03:24] Speaker 02:
If you exclude how we divide up the expenses.

[00:03:47] Speaker 04:
Well that, those counts are, that's actually a different argument.

[00:03:52] Speaker 04:
Those, that's, these are the nine counts that were based on the wirings into the IOLTA account.

[00:03:58] Speaker 04:
Those, that miscellaneous charge concerns count ten.

[00:04:16] Speaker 04:
Well, for these counts that I'm discussing, these were legitimately earned settlement funds.

[00:04:20] Speaker 04:
For Count 10, it's a different situation.

[00:04:23] Speaker 04:
And what I would say about Count 10 is that for this particular client, the witness who testified, Todd Wakefield, said that those were just charges that didn't fit under any other category.

[00:04:40] Speaker 02:
And so they were miscellaneous claims.

[00:04:43] Speaker 02:
What alcohol rates are supposed to be based

[00:04:57] Speaker 02:
general firm overhead.

[00:04:59] Speaker 04:
Well, I mean, so just talking, this is just an issue for Camp 10, and I can jump there.

[00:05:05] Speaker 04:
Yeah, so, I mean, this was the way the firm sent the client a bill that had this miscellaneous charge and taught that for $25,000.

[00:05:16] Speaker 02:
Oh, we have no idea what those charges are for.

[00:05:19] Speaker 02:
They weren't

[00:05:32] Speaker 00:
But if I could interject on Count 10, I mean, we're here just talking sufficiency of the evidence here, right?

[00:05:38] Speaker 00:
So it's just a question whether a reasonable jury could conclude that Mr. Blevins, I think it was, was charged for things that were not legitimately expenses to him.

[00:05:50] Speaker 00:
I mean, we don't have to figure it out.

[00:05:52] Speaker 00:
We just have to say if it's reasonable to reach that conclusion, why wasn't it reasonable?

[00:05:58] Speaker 04:
well there wasn't any evidence that it was that it was um that there was anything improper um you know maybe we might say that's not the best practice to have this large miscellaneous um charge on on a bill but there wasn't any evidence that it was there was um something well i thought um mr layfield says

[00:06:31] Speaker 04:
well week mister wakefield test i think that happened on a different bill but then on this bill when he was asked about it he said that he thought that this was proper and uh... that he didn't it i agree with you that on other bills that that happened but i

[00:07:03] Speaker 02:
the banks when your client, in essence, dipped into the client trust account money.

[00:07:10] Speaker 04:
The government didn't charge those.

[00:07:12] Speaker 02:
I understand, but did the jury hear any evidence about how he actually received the funds?

[00:07:19] Speaker 02:
Because that would have triggered the use of the wires, would it not?

[00:07:24] Speaker 04:
That was, those weren't the wires that the government charged.

[00:07:27] Speaker 04:
I'm not, I can't answer, I'm not sure.

[00:07:34] Speaker 04:
had evidence of specific wires that were the actual embezzlement, which is how we believe this case should have been charged.

[00:07:41] Speaker 02:
I agree with that last point, but I just wondered how much the jury heard about how he got the money out of the IOLTA account.

[00:07:51] Speaker 04:
I mean, there may have been some evidence about that.

[00:07:55] Speaker 04:
There were some other counts as well, but I'm not aware of... Well, I agree with that.

[00:08:00] Speaker 02:
I don't think the government ever charged any of the wire fraud counts on the basis of those...

[00:08:13] Speaker 02:
it would be foreseeable that when he withdrew the money that was wrongfully removed from his client trust account, it necessarily triggered and it should have been foreseeable that there would have been wire transfers through the banks in order to get the money into his personal account.

[00:08:34] Speaker 04:
Well, with wire fraud, though, the government has to allege specific

[00:08:45] Speaker 04:
these counts where they were alleging the transfers into the IOLTA, those are not sufficient under PAR.

[00:08:51] Speaker 00:
So the government argues that putting the money into the IOLTA account was a lulling gesture to lull clients into thinking that their money was safe in the IOLTA account when in fact it was

[00:09:11] Speaker 00:
try to distinguish PAR on that basis, or at least one of the bases.

[00:09:17] Speaker 00:
Why doesn't that work?

[00:09:19] Speaker 04:
I'm not aware.

[00:09:20] Speaker 04:
There were some lulling payments, I think, on different counts.

[00:09:23] Speaker 04:
I'm not aware that there's any question that these IOLTA transfers, they wouldn't have been lulling payments.

[00:09:32] Speaker 04:
They were just the receipt of settlement funds that were legitimately earned.

[00:09:45] Speaker 01:
these fraudulent representations were made to clients.

[00:09:47] Speaker 01:
They said, we're the honest lawyers, we're great lawyers, your money's safe with us, sign up with us.

[00:09:53] Speaker 01:
So then clients signed up with your client.

[00:09:57] Speaker 01:
And then settlements are received and they're paid into the IOLTA.

[00:10:00] Speaker 01:
He's going to say, well, yes, the payments to IOLTA, that is required under state law, but none of this would have happened but for the false representations made by

[00:10:14] Speaker 01:
He's saying that the transfers here were after the false representations.

[00:10:19] Speaker 01:
What's your response to that?

[00:10:20] Speaker 04:
Well, I think that would be true if the law firm was just a Ponzi scheme and if it had not been functioning as a legitimate law firm.

[00:10:30] Speaker 04:
But it was.

[00:10:31] Speaker 04:
I mean, there were clients, they had clients who were injured and they went to trial or they negotiated settlements and there were many lawyers at

[00:10:45] Speaker 04:
he earned, and it wasn't that it was a fraudulent law firm, it was just that Mr. Layfield was embezzling.

[00:10:52] Speaker 01:
I appreciate that the settlements were legitimately earned, but the clients did not have to go with Mr. Layfield's firm.

[00:10:58] Speaker 01:
He's going to say the reason why they went with this firm was because he lied to them about what the firm would do with their money.

[00:11:04] Speaker 01:
And that overarching umbrella of lies subsequently led to all of these other transfers.

[00:11:10] Speaker 01:
And there are cases like Mitchell and Bernhardt from our court that

[00:11:15] Speaker 04:
I would say that that would be then true of any business where somebody was embezzling because if they were advertising that they were a legitimate going entity and this firm was doing that.

[00:11:37] Speaker 04:
found that Mr. Layfield didn't intend when he set up the firm to take his client's money.

[00:11:44] Speaker 04:
That was, you know, it was when all the sudden costs and expenses were growing and he couldn't pay them that he was, you know, robbing Peter to pay Paul.

[00:11:53] Speaker 02:
But why isn't that like a Ponzi scheme?

[00:11:55] Speaker 02:
Because as I understand the state of the record, when the House of Cards came crashing down, there was only $137 left in the IOLTA account.

[00:12:22] Speaker 04:
I mean, what I would just say was that there were a lot of lawyers who were working for this firm, and they were doing good work, and the intent when the money was received was that the clients would get the funds.

[00:12:35] Speaker 04:
That didn't happen, ultimately.

[00:12:37] Speaker 02:
But the rule is that you can't commingle your client's funds with firm expenses.

[00:12:42] Speaker 02:
You can't take money out of a client trust account to pay your electric bill or your rent.

[00:12:47] Speaker 02:
Absolutely.

[00:12:49] Speaker 04:
This money was not being handled correctly.

[00:12:55] Speaker 04:
Can I just jump very briefly?

[00:12:58] Speaker 04:
What I wanted to say with this media trial act is that I realize that this court has addressed this provision in the context of clients who are out of custody.

[00:13:08] Speaker 04:
And what I would submit is just that it's really different when we have a custodial

[00:13:13] Speaker 04:
defendant, and those cases never considered this one provision, the transportation provision, that only 10 days are told after the order of removal.

[00:13:26] Speaker 04:
And that only works if the clock has started beforehand.

[00:13:31] Speaker 04:
And so even though I realize that there is precedent for clients who are out on bail, it's a very different situation for someone who's in custody.

[00:13:42] Speaker 04:
It really goes to the heart of what the Sixth Amendment and the Speedy Trial Act is all about, that we don't want somebody just sitting in custody and that there's no remedy at all.

[00:13:52] Speaker 04:
And, you know, it was, in certain cases, it could be, if the government is correct, you could sit in custody for years.

[00:14:14] Speaker 04:
I mean, there might be some other sort of remedy, but this is really the core Sixth Amendment concern that the founders were concerned about.

[00:14:54] Speaker 03:
who referred cases to him.

[00:14:56] Speaker 03:
He testified at trial that he did this because he was suffering a financial crisis.

[00:15:01] Speaker 03:
The evidence overwhelmingly showed that this crisis was largely of his own making because he was simply a profligate spender.

[00:15:22] Speaker 03:
For years, this was not a one-off.

[00:15:24] Speaker 03:
It wasn't a one-shot deal.

[00:15:25] Speaker 03:
It was business as usual.

[00:15:27] Speaker 03:
For the defendant to deal like every Ponzi schemer, he could no longer find new victims.

[00:15:33] Speaker 03:
His reputation had fallen apart.

[00:15:34] Speaker 03:
He'd been sued, and there was no way anybody else was going to his law firm.

[00:15:39] Speaker 03:
So he moved to Costa Rica and left the smoldering firm in the hands of others.

[00:15:43] Speaker 00:
Okay, so we're familiar with the facts.

[00:15:45] Speaker 00:
I'm having problems distinguishing parts.

[00:15:52] Speaker ?:
So, PAR, the Supreme Court itself in PAR, limited it to the unique facts of that case.

[00:15:59] Speaker 03:
There were two cases in this circuit, Kellogg and LaCardi, that are closer.

[00:16:03] Speaker 03:
I like LaCardi in particular.

[00:16:05] Speaker 00:
So both of those said that the mailing itself was fraudulent.

[00:16:10] Speaker 03:
Distinction without a difference.

[00:16:12] Speaker 03:
Because the law of wire fraud and or mail fraud and mail fraud

[00:16:37] Speaker 00:
receipt were required by law, it was all part of the scheme to take money out of the bank account where the money was placed.

[00:16:46] Speaker 03:
I think a major distinguishing feature in terms of the facts would be in par, the crux were not part of the

[00:17:04] Speaker 00:
involved in doing the tax assessments.

[00:17:06] Speaker 00:
They were the board of the school district and the like.

[00:17:09] Speaker 03:
But again, it was just a, it was a ministerial act of having to basically create documents to send out to taxpayers that they were responsible to respond with.

[00:17:18] Speaker 00:
That they were responsible for that.

[00:17:20] Speaker 00:
They got the money and they put it in the account and then they stole from it.

[00:17:24] Speaker 00:
Correct.

[00:17:24] Speaker 00:
So what's the difference here?

[00:17:26] Speaker 00:
Right.

[00:17:27] Speaker 00:
It isn't taxes.

[00:17:28] Speaker 00:
I mean, the only thing I saw was a factual difference, which is in part was taxes in here

[00:17:48] Speaker 03:
money and that he had always expected there would be yet another client in the door and therefore again from the beginning of time which preceded all of the action in this case he'd misused that rule and misused the trust account.

[00:18:02] Speaker 00:
So how is that distinguishing it from PAR?

[00:18:06] Speaker 00:
The taxes might have been legitimate before this scheme was put together.

[00:18:20] Speaker 03:
He got himself in hot financial order and needed a way by which he could get that money.

[00:18:56] Speaker 00:
the mailing would not have occurred absent the fraudulent scheme.

[00:19:03] Speaker 00:
Whereas in par, the court said that the taxes would have occurred regardless.

[00:19:08] Speaker 00:
And similarly here, I assume that the Zellman amounts would have been put in the IELTA account regardless of the fraudulent scheme.

[00:19:16] Speaker 00:
So Schmuck specifically distinguishes par on a basis that doesn't seem applicable here.

[00:19:46] Speaker 00:
I think he did have a choice, he didn't have to use an IOLTA.

[00:20:01] Speaker 00:
I think that

[00:20:05] Speaker 03:
I think that haunts the question to what was on his mind.

[00:20:11] Speaker 03:
I don't think he cared because he said so.

[00:20:13] Speaker 03:
Whether there was such a law, he ignored it.

[00:20:15] Speaker 03:
He could have put the money anywhere so long as he had ready access to it, could conceal its activity.

[00:20:20] Speaker 00:
So the distinction, so I don't understand the distinction from PAR.

[00:20:25] Speaker 00:
I mean, the individuals and defendants in PAR wanted to get their hands on

[00:20:35] Speaker 03:
I think, as to this case, it's not a binary question.

[00:20:41] Speaker 03:
It's not, if I follow the law, I'm innocent, and if I don't, I'm guilty.

[00:20:45] Speaker 03:
You can do both.

[00:20:47] Speaker 03:
And Layfield intended, as any rational juror would have found, to have used and exploited his trust account to carry out his fraudulent scheme.

[00:21:03] Speaker 00:
I don't see how that's a distinction.

[00:21:05] Speaker 03:
Because under Schmuck, the question is what was conceived at the time by the perpetrator and the evidence in this case shows in any rational

[00:21:32] Speaker 01:
had promised and maintained the pretense, in other words, it was not true, that he and his law firm would use the money in a certain way.

[00:21:41] Speaker 01:
When I asked opposing counsel the same question, it seems to me the way to distinguish par of this case, but correct me if I'm wrong, is that in par, step one was the money that was deposited into those accounts.

[00:21:52] Speaker 01:
In this case, the deposit and sale to accounts was step two or step three.

[00:21:56] Speaker 01:
The fraudulent scheme already existed, and your client used

[00:22:07] Speaker 01:
The money just happened to be in the account and they got it out.

[00:22:09] Speaker 01:
It seems to me the way to distinguish bar, unless I'm missing something here, is to say that the fraudulent scheme was the umbrella and the IELTA was a means to make that happen.

[00:22:19] Speaker 01:
That's how I read the indictment.

[00:22:20] Speaker 03:
I wish I could have said it like that, but that's what I mean.

[00:22:26] Speaker 00:
The opposing counsel says this was a legitimate law firm.

[00:22:30] Speaker 00:
that it wasn't set up merely to get high hold of funds.

[00:22:33] Speaker 00:
Do you disagree with that?

[00:22:34] Speaker 03:
I don't disagree as a matter of fact.

[00:22:36] Speaker 00:
So that's not true then.

[00:22:37] Speaker 00:
So step zero was we're setting up a legitimate law for

[00:22:51] Speaker 00:
account despite California law and the IELTA account wasn't set up until Mr. Layfield decided that he would embezzle from that account.

[00:23:01] Speaker 03:
The IELTA was set up in approximately 2010 or 2009.

[00:23:04] Speaker 03:
The embezzlement that is relevant here first started in around April of 2016.

[00:23:10] Speaker 00:
As Layfield said... Was it an illegitimate IELTA account from the beginning or was it an illegitimate IELTA account?

[00:23:20] Speaker 03:
never intended for... 2016, but what about 2010?

[00:23:23] Speaker 00:
Was it illegitimate in 2010 when it was set up?

[00:23:26] Speaker 03:
Again, by his own account, by his own statement, the answer is yes.

[00:23:29] Speaker 03:
He always intended to misuse it to pay client A with client B's money.

[00:23:34] Speaker 00:
And so he started misusing it in 2010 or not?

[00:23:37] Speaker 00:
He didn't start abusing it until 2016.

[00:23:40] Speaker 00:
Was it used legitimately in 2010?

[00:23:42] Speaker 03:
I don't know because that wasn't evidence at the trial.

[00:23:46] Speaker 00:
Okay, but you said he didn't start embezzling until

[00:24:02] Speaker ?:
questions to respond to.

[00:24:03] Speaker 03:
So, yes, Exhibit 25 and 26, there was an extensive financial analysis of every penny of the IOLTA.

[00:24:14] Speaker 03:
We traced every penny, and Special Agent Chan testified as our summary witness to describe some of the use of those funds that related to the specific victims who were part of the alleged accounts of the wires that are relevant now.

[00:24:29] Speaker 03:
For example, settlement money would be deposited at the IELTA, and then some would go to the operating account, some would go to Mr. Layfield's personal account, some would go to a billing entity called bill.com, and then from there we could... As the opposing counsel says, the government didn't rely on money going out of the account for the wire, the use of the wire as element of the wire fraud count.

[00:24:53] Speaker 00:
Is that correct?

[00:24:54] Speaker 03:
That's correct.

[00:24:55] Speaker 03:
We didn't allege those.

[00:25:09] Speaker 03:
the jury saw how it was – how that tracing occurred with respect to the specific victims who were – et cetera.

[00:25:18] Speaker 03:
And how it not only moved from the IOLTA account to the operating account, and then to pay bills associated with some clients and also to keep the firm afloat, but also to Mr. Layfield's personal account and what he did with that money, as well as, in some cases, of course, to the clients.

[00:25:35] Speaker 03:
But more importantly, as to the Ponzi scheme,

[00:25:39] Speaker 03:
to client A from client B's money.

[00:25:44] Speaker 03:
There was seldom a situation in the record that indicated that a client whose settlement money came and got that very money.

[00:25:51] Speaker 03:
Instead, they typically got, if anything, somebody else's money, to which the firm owed them, you know, from an earlier arrangement.

[00:25:58] Speaker 03:
I'd like to return a couple of things to the corporates.

[00:26:01] Speaker 03:
With regard to what happens if the court were to accept the wiring argument, what would happen at sentencing?

[00:26:12] Speaker 03:
I think maybe this is appropriate for a 28-jail letter for the parties to go back to the drawing board and decide whether you would have to remand for re-sentencing.

[00:26:20] Speaker 02:
My recollection is that – and this is old knowledge – my recollection is that at one time, Ninth Circuit law was

[00:26:36] Speaker 02:
The district court obviously considered all of the mail and wire fraud counts, but ordered each count of conviction to be sentenced concurrently with one another.

[00:26:47] Speaker 02:
So I don't understand what, if anything, the district court would do on remand other than announce the same sentence with regard to the remaining count.

[00:26:55] Speaker 01:
Okay.

[00:26:56] Speaker 01:
I assume there'd be a refund of the special assessment money, so it may have to go back for that.

[00:27:00] Speaker 01:
I think it's $100 per count, so.

[00:27:10] Speaker 01:
not have to work off in the prison account.

[00:27:13] Speaker 01:
Right.

[00:27:14] Speaker 01:
Right.

[00:27:15] Speaker 02:
But if you could find a case that could help us, a 28-jail letter would be appropriate.

[00:27:23] Speaker 03:
Will do.

[00:27:24] Speaker 03:
I'd like to respond to the question related to the Speedy Trial Act and whether there's a difference between custody and bond.

[00:27:30] Speaker 03:
The answer is no.

[00:27:38] Speaker 03:
clock starts to tick.

[00:27:40] Speaker 03:
And there are several cases that involve bond situations.

[00:27:44] Speaker 03:
We cited one which was Munoz.

[00:27:46] Speaker 03:
That's First Circuit decision.

[00:27:48] Speaker 03:
Again, it's based on the same rationale and the same plain language reading of 3161C.

[00:27:53] Speaker 03:
So I don't think that's an issue.

[00:28:51] Speaker 04:
to clarify that mister layfield's testimony was really that he was a poor account that it just always worked out and that he you know he hadn't been keeping he was a cpa but that he was not that the iota account not a very good one in the iota account it just always worked out it wasn't that he had intended from the beginning and i think and the court found that as well

[00:29:16] Speaker 04:
To answer your question, I do think that you would have to remand for re-sentencing on the entire case.

[00:29:24] Speaker 04:
And I would also say, in part, the defendants there were the people who administered the tax scheme.

[00:29:31] Speaker 04:
I think that was a question that came up.

[00:29:33] Speaker 04:
They were very much the people who administered it.

[00:29:37] Speaker 04:
And I would say, I really do think that under the Speedy Trial Act, this is a distinct

[00:29:48] Speaker 04:
which Bloat, the Supreme Court in Bloat said that needs to happen, that every provision of the Speedy Trial Act needs to have effect.