Transcript of Proceedings, Detention Hearing — United States v. James Theodore Polzin, No. 21-00052MJ-001-PHX-MHB (Dkt. 17, D. Ariz.)
Summary
Magistrate Judge John Z. Boyle conducted this detention and preliminary hearing for James Theodore Polzin by video on March 24, 2021 in the District of Arizona; the transcript was filed April 5, 2021 as Document 17 in Case 2:21-cr-00264-JJT. Defense counsel Jason Mark Silver waived the preliminary hearing. For the government, Kevin M. Rapp said investigators traced money from fraudulently obtained EIDL loans to the purchase of a Porsche, and Silver said the complaint alleged three counts of wire fraud for $450,000. Judge Boyle detained Polzin as a flight risk, citing evidence of substantial cash and PPP loans that could reach upwards of $500,000.
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Case 2:21-cr-00264-JJT Document 17 Filed 04/05/21 Page 1 of 37
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF ARIZONA
_________________
United States of America, )
)
Plaintiff, ) 21-00052MJ-001-PHX-MHB
)
vs. ) Phoenix, Arizona
) March 24, 2021
James Theodore Polzin, ) 2:33 p.m.
)
Defendant. )
)
______________________________)
BEFORE: THE HONORABLE JOHN Z. BOYLE, MAGISTRATE JUDGE
TRANSCRIPT OF PROCEEDINGS
DETENTION HEARING/PRELIMINARY HEARING
APPEARANCES:
For the Government:
U.S. Attorney's Office
By: KEVIN M. RAPP, ESQ.
40 North Central Avenue, Suite 1800
Phoenix, AZ 85004
For the Defendant Polzin:
Silver Law
By: JASON MARK SILVER, ESQ.
7033 East Greenway Parkway, Suite 200
Scottsdale, AZ 85254
Transcriptionist:
Linda Schroeder
Sandra Day O'Connor U.S. Courthouse, Suite 312
401 West Washington Street, Spc. 32
Phoenix, Arizona 85003-2151
(602) 322-7249
Proceedings Recorded by Electronic Sound Recording
Transcript Produced by Transcriptionist
Case 2:21-cr-00264-JJT Document 17 Filed 04/05/21 Page 2 of 37
2
1 THE CLERK: Case number 21-00052MJ, United States of
2 America versus James Theodore Polzin, set before the Court for
3 detention and preliminary hearings.
4 MR. RAPP: Good afternoon. Kevin Rapp on behalf of
5 the United States.
6 THE COURT: Good afternoon.
7 MR. SILVER: Good afternoon, Your Honor. Jason Silver
8 for James Theodore Polzin.
9 THE COURT: Good afternoon. Good afternoon,
10 Mr. Polzin. Sir, can you hear me and see me?
11 THE DEFENDANT: Yes, sir.
12 THE COURT: Good. I can hear you and see you as well.
13 We're here for a detention hearing and preliminary hearing.
14 You have a right to be here in person. We are trying to keep
15 people separated so we don't spread the virus around.
16 We need your permission to handle this hearing over
17 the television. Do we have your permission to handle this
18 hearing -- actually both hearings over the television?
19 THE DEFENDANT: Yes, sir.
20 THE COURT: Mr. Silver, did your client discuss that
21 with you as well?
22 MR. SILVER: Yes, Your Honor.
23 THE COURT: All right. The Court finds it's in the
24 interests of justice to go forward through the VTC.
25 All right. Let me first turn to you, Mr. Silver. How
UNITED STATES DISTRICT COURT
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1 do you wish to proceed, before we talk about what we're doing,
2 on both the detention and preliminary hearing?
3 MR. SILVER: That's fine, Your Honor. After review of
4 the complaint and other information, we decided to now waive
5 the preliminary hearing and would like to go forth with the
6 detention hearing.
7 THE COURT: All right. Anything --
8 MR. SILVER: And we --
9 THE COURT: Go ahead.
10 MR. SILVER: We've submitted a response to the
11 government's motion for detention hearing, and that was
12 submitted yesterday. I assume that --
13 THE COURT: I reviewed all of it.
14 MR. SILVER: Okay. Great. Thank you.
15 THE COURT: Okay. Anything to address, Mr. Rapp,
16 before I talk with Mr. Polzin about waiving his preliminary
17 hearing?
18 MR. RAPP: No, Your Honor.
19 THE COURT: All right. Mr. Polzin, you're entitled to
20 a preliminary hearing. You can give up your right to that
21 hearing. Your attorney says that he's talked to you, and
22 you're giving up your right to the preliminary hearing. Is
23 that what you choose to do?
24 THE DEFENDANT: Yes, sir.
25 THE COURT: All right. The Court accepts the waiver
UNITED STATES DISTRICT COURT
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1 of the preliminary hearing. All right. On the issue of
2 detention, I've reviewed the government's motion, the pretrial
3 report, Mr. Polzin's response. I think for Mr. Polzin's
4 purposes, Mr. Silver, why don't you identify who's here on his
5 behalf.
6 MR. SILVER: That's fine. In the courtroom we have
7 his wife.
8 THE COURT: Make sure he can hear it. This is really
9 for his benefit.
10 MR. SILVER: Yeah. In the courtroom we have his wife,
11 Svitlana Popsii, and then we have a friend of his, a business
12 associate, Leonard -- I don't recall his last name. He's also
13 sitting next to his wife.
14 THE COURT: Okay. Thank you.
15 MR. SILVER: Thank you.
16 THE COURT: Mr. Polzin, there are two people here on
17 your behalf, one of whom is your wife. All right. The
18 government has the burden of detention here, so, Mr. Rapp.
19 Maybe I should preface this with the Court's initial
20 thoughts, and then we can direct --
21 MR. RAPP: Sure.
22 THE COURT: And you're welcome to stay at the table.
23 You can stand there if you wish. I may be inclined to detain
24 Mr. Polzin as a flight risk because I don't know more about his
25 finances, and I have a number of questions in that regard. I
UNITED STATES DISTRICT COURT
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1 read the government's motion as requesting detention unless and
2 until the government was satisfied that they had a better sense
3 of his accounting. Is that the government's position?
4 MR. RAPP: Well, so that's -- That was filed
5 pre-arrest, and then post-arrest we've come into information
6 that gives us even further concerns about the availability of
7 monies to use as flight. And I can proceed by a proffer on
8 that when the Court is willing to take that evidence.
9 But at this point we are requesting detention in light
10 of this additional information that gives us real concerns
11 about his finances.
12 THE COURT: Okay. I did want to know if there had
13 been a material change, so it looks like we're just going
14 forward with the straight detention hearing. Why don't you
15 make your presentation.
16 MR. RAPP: Yes. So in addition to what we have laid
17 out in our detention motion, a couple other things have come
18 into -- have come to our attention during the course of the
19 investigation. And one is following the arrest, there were
20 some statements by the defendant to his wife. She was
21 inquiring about what she was supposed to do for finances. And
22 he advised her that there were a number of accounts that had --
23 at least characterized as having a significant amount of money
24 in them.
25 And so we even, as quickly as the agents are moving on
UNITED STATES DISTRICT COURT
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1 this case, we don't have our hands around those accounts. And
2 so those monies would be available for this defendant to flee.
3 Second, that is reiterated on the initial jail calls
4 between the defendant and his wife where he's pointing her to
5 finances.
6 The third one and what is even more concerning to us
7 is in the investigation we traced monies from the EIDL loans to
8 the purchase of a Porsche. It was a Porsche dealership that
9 the defendant purchased a Porsche for about a hundred and
10 forty --
11 THE COURT: I read through that.
12 MR. RAPP: -- four thousand dollars, right.
13 The -- What we've now learned is in going to the
14 Porsche dealership to try to ascertain where that, you know, in
15 terms of forfeiting the asset, I don't think the Court is
16 surprised that if we can trace money from illegally obtained
17 loans, we certainly have the right to seek a forfeiture of the
18 asset.
19 And in talking to the Porsche dealer, he advised that
20 shortly before Mr. Polzin was to leave on a one-way ticket to
21 the Ukraine --
22 THE COURT: He sold the Porsche.
23 MR. RAPP: -- he sold the Porsche.
24 THE COURT: For $120,000.
25 MR. RAPP: For $120,000. And we're unable to locate
UNITED STATES DISTRICT COURT
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1 that money right now. And so that gives us a concern.
2 So those are the three things regarding the existence
3 of money that this defendant might have available to him if he
4 chooses to flee.
5 The other area of --
6 THE COURT: Let me go back to the three points. It
7 shouldn't be a surprise that he has bank accounts, that he
8 would be talking with his wife about her accessing bank
9 accounts. He has significant assets. He's had a business.
10 Is there something in the calls that suggested that
11 there was something unusual about him giving her information
12 that they had bank accounts?
13 MR. RAPP: No. It's just that based upon our
14 investigation, his legitimate money would not be characterized
15 as so significant that she would be able to access the money.
16 That's based upon our investigation of his legitimate business
17 activity here in the United States. Then of course there's the
18 information in the declaration where he's coming through a port
19 of entry, and he's -- the CBP is questioning him about these
20 light switches that he has in his possession. There's several
21 of them. And they're valued at about $70 a light switch.
22 And he represents that he manufactures these switches,
23 these switches that are European or Ukrainian type light
24 switches, and he represents that he manufactures those in the
25 Ukraine.
UNITED STATES DISTRICT COURT
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1 So our concern is that he might have not only monies
2 here in the United States but also business interests and
3 monies in Ukraine that would allow him to reside there with
4 that money.
5 The third area of concern -- I didn't -- The Court
6 wanted --
7 THE COURT: So do you have any real information that
8 these are significant assets? Compared to $120,000 in cash for
9 a Porsche, the fact that he might have an account somewhere
10 because of light switches, is there any real information he has
11 significant assets abroad?
12 MR. RAPP: Only based on what -- I mean, if he's
13 manufacturing -- You know, I mean, if he's manufacturing these
14 light switches --
15 THE COURT: Do you know how many he's manufacturing
16 and how many he's sold?
17 MR. RAPP: We can only go on what he tells CBP, which
18 is -- And I'll quote it from their actual report.
19 THE COURT: The reason I ask is if you want me to
20 consider that, I have to have some basis to believe that that's
21 an actual concern that there's enough money there that that
22 would be alluring to someone to leave.
23 MR. RAPP: Well, the comments on January 29th of 2021:
24 Traveling to Phoenix where they have a vacation home that they
25 are currently renovating. Bag exam revealed personal goods and
UNITED STATES DISTRICT COURT
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1 European style smart home light switches which were larger and
2 shaped differently than U.S. switches. Subject stated his
3 company manufactures the switches, and he's bringing them for
4 personal use to attempt an install in his vacation home here.
5 He had five switches valued at 70 each and several inexpensive
6 covers.
7 So the concern is that -- Let's just -- Based --
8 If he is telling the truth -- questionable whether he
9 is, but let's just say he is -- he's got some type of business
10 interest, you know. To have a company that manufactures light
11 switches is not inconsequential. That would conceivably throw
12 off enough money that he would have that money available to him
13 in a foreign country if he wanted to flee to that country.
14 THE COURT: Or he could live abroad --
15 MR. RAPP: Yes.
16 THE COURT: -- and have a living somewhere else. All
17 right. I understand the point.
18 MR. RAPP: So the other area of concern post the
19 filing of our detention motion is the pretrial service report.
20 And that's, to put it mildly, gives us a great deal of concern.
21 Just in two pages there are five contradictions about
22 the information that he was providing to pretrial services.
23 And as the Court, I'm sure, is aware that the touchstone of his
24 compliance under pretrial service conditions is his honesty and
25 candor with his pretrial service officer.
UNITED STATES DISTRICT COURT
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1 And in the first paragraph of what on the docket on --
2 is Page 2, when they're seeking to verify just simply his
3 family information, she -- his wife states, contrary to what
4 the defendant reported, she informed the defendant's only
5 sibling is alive and resides in Canada as opposed to what
6 Mr. Polzin told pretrial that his sibling was deceased.
7 And in the second paragraph on Page 2, contrary to
8 what the defendant reported, Mr. Pennock and Ms. Popsii
9 informed for the last five years the defendant resides between
10 Ukraine and Arizona. Mr. Pennock reported the
11 defendant resides primarily in the Ukraine and twice yearly
12 returned to the United States for a two-month period.
13 So what the defendant was telling pretrial was
14 inaccurate.
15 And on --
16 THE COURT: Do we know that? Let me ask. Do I know
17 where he's been living primarily? I mean, even though there's
18 a discrepancy between these descriptions, do we actually know
19 which one of those is true? I thought he lived primarily here.
20 MR. RAPP: Well, we don't really know.
21 THE COURT: Do you know or can you avow that, based on
22 your investigation, you have reason to believe he lives here
23 primarily?
24 MR. RAPP: Well, here's what we know, is that he
25 purchased a house for about $375,000 in Gilbert in cash, and
UNITED STATES DISTRICT COURT
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1 that money is traceable to EIDL loans.
2 THE COURT: Sure.
3 MR. RAPP: Fraudulently obtained EIDL loans. We know
4 that he's living in an apartment with his wife and this
5 individual Mr. Pennock while they're renovating this --
6 THE COURT: Well, it seems to me you just check his
7 travel history -- I don't know if that's been done -- to
8 determine based on his passport when he's left and returned to
9 the United States as a United States citizen.
10 MR. RAPP: Well, his travel is significant, as you
11 know from the --
12 THE COURT: Yes. 24 times last two years.
13 MR. RAPP: Yeah.
14 THE COURT: But that didn't tell me how long he lives
15 here. Does he spend most of his time in the Ukraine or most of
16 his time in the United States?
17 MR. RAPP: We don't know, but we can only go -- We can
18 only -- Well, I mean, he's traveled extensively based upon the
19 TECS log that you see in Agent Luethans' declaration that has
20 extensive international travel.
21 That coupled with the two people who they're the only
22 two -- they're the only two people here today and the only two
23 people that had -- a pretrial service officer had access to,
24 they're telling us something completely different.
25 The defendant reported -- Mr. Pennock and Ms. --
UNITED STATES DISTRICT COURT
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1 informed for the last five years the defendant resides between
2 Ukraine and Arizona.
3 That's not you reside --
4 THE COURT: Sure. The response is going to be, well,
5 they just don't know his travel history accurately. Of course
6 he knows it accurately. I don't know which one is true. But I
7 would think that the travel documents might tend to tell us his
8 travel history, his entry and exit from the United States, how
9 long he actually lives here. If he in fact lived in the
10 Ukraine ten months out of the year, that would be significant.
11 I didn't do that work, but --
12 MR. RAPP: Right. So the only other thing we know is
13 he had a one-way ticket to the Ukraine, leaving on March 18th,
14 no return trip. It isn't as if you're just going to the
15 Ukraine for a couple weeks. He's going to the Ukraine maybe
16 for the rest of his life. We have no idea.
17 But what the defense is arguing -- and I'm sure
18 they'll clear this up because it's confusing to me -- is that
19 the exhibit that they --
20 So not to get too far afield of what the questions
21 that the Court is asking is that in terms of the travel, this
22 CNN report comes out on March 5th, which is this article where
23 CPA clients of the defendant have grievances about the returns
24 he prepared on their behalf. But also it talks about getting
25 six PPP loans fraudulently. And then you have a one-way ticket
UNITED STATES DISTRICT COURT
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1 on -- to the Ukraine. But I think what the defense is going to
2 argue is no, not so fast; that was booked before this article
3 came out. And the argument is that that article might have
4 given him the impetus to flee the United States on a one-way
5 ticket, but the ticket that we have attached to the defense
6 response isn't for Mr. Polzin. It's for Ms. Popsii. And we
7 don't -- It's not clear, and I'm sure the defense would point
8 this out, if that's the case, but we -- this only shows one
9 passenger flying, her, not him.
10 So, in any event, getting back to the pretrial service
11 report, there is a substantial amount of contradictory -- The
12 only two people that know him the best is his wife, who he's
13 been married to for some time, and Mr. Pennock, who's some type
14 of a business associate with him. They're the ones who are
15 telling us that he resides between the Ukraine and Arizona.
16 It's not -- He's not saying that he resides permanently in
17 Arizona and just travels to the Ukraine. And that contradicts
18 his own information, which he's saying, hey, I have a
19 manufacturing business in the Ukraine, and, guess what, I just
20 have a vacation home in the United States. So that gives us a
21 great deal of concern.
22 Then you go on to the third paragraph where, again,
23 his wife contradicts what Mr. Polzin is telling pretrial.
24 Contrary to what the defendant reported, she advised he
25 maintains daily contact with his oldest child when he is
UNITED STATES DISTRICT COURT
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1 actually saying that he's had very little contact with his
2 child. But he's got a child that lives in another country,
3 Canada, not here.
4 Then you get down to paragraph four, again, contrary
5 to what the defendant reported to -- Mr. Pennock informed the
6 defendant owns and operates two additional businesses for
7 accounting and home automation.
8 This is contrary -- This is of course important to
9 know what his business interests are. He has this TSP Imports
10 that he avows, but then Mr. Pennock, who is on some of the
11 business interests that Mr. Polzin has, he's saying that he
12 owns and operates two businesses, accounting and home
13 automation. And I would just hit the pause button on this
14 accounting company, because this actually is significant for
15 the EIDL loans.
16 There is this -- these companies, these CPA companies.
17 One is Transparen, and the other is -- Transparen, LLC, and the
18 other is Transparen, sole proprietorship. The owner is
19 Mr. Pennock. Mr. Polzin is the member of these two companies.
20 I believe in just a brief discussion with Mr. Pennock,
21 he's saying that Mr. Polzin shouldn't be on those companies in
22 any fashion. But the account associated with those two
23 companies where the money -- the EIDL loans were actually going
24 to the bank account, Mr. Polzin is the only signatory on those
25 accounts rather than Mr. Pennock, who apparently owns the
UNITED STATES DISTRICT COURT
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1 company.
2 The other contradiction is on Page 3, the second
3 paragraph of Page 3. Contrary to what the defendant reported,
4 Mr. Pennock informed the defendant operates four bank accounts.
5 He advised he's not aware of the balance for these accounts
6 where Mr. -- Mr. Polzin is saying he just has one account.
7 And Ms. Popsii, his wife, also says she's, contrary to
8 what the defendant reported, she's informed she is employed and
9 owns and operates a TSP export out of Ukraine.
10 So the business interests are a little bit convoluted.
11 There's a TSP that is some type of an import company but
12 also an export company, which I guess lends itself to maybe the
13 fact that he does have some manufacturing interests of these
14 light switches that he advised CBP about over in the Ukraine.
15 So these are the facts that we've obtained after he
16 was arrested and obviously after we filed our detention motion
17 seeking some type of explanation of his finances and requesting
18 at a minimum a significant bond to secure his attendance.
19 There's all these other conditions that we would require.
20 But at this point, given all the contradictions and
21 the opaque nature of his finances, at this point we would
22 request that he be detained.
23 THE COURT: And when would that change in your mind?
24 MR. RAPP: Well, first he would have to come forward
25 with a bond. As you see in all these other white collar
UNITED STATES DISTRICT COURT
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1 case --
2 THE COURT: That's fine. What else?
3 MR. RAPP: Well, a full accounting that can be
4 confirmed by pretrial services. And just so the Court's clear,
5 this isn't to further our investigation.
6 THE COURT: I understand. I'm just trying to get your
7 position.
8 MR. RAPP: Yeah. We're doing, as you can imagine, our
9 own investigation to drill down on some of these other
10 fraudulent acts, including the PPP loans that are not part of
11 the complaint at this point. But he needs to be -- and he
12 hasn't been -- he needs to be candid with pretrial about his
13 business interests and his finances. And he's a long way from
14 that.
15 THE COURT: Let me ask you about those loans. They're
16 listed in the complaint fact section $740,000 over a two-month
17 period. There's a June 10th $218,000 loan. Are those under
18 investigation by the government at this point?
19 MR. RAPP: Yes. So what's set forth, if I'm
20 understanding what the Court is asking --
21 THE COURT: The reason I'm asking is is there a
22 suggestion then that he may have access to even much greater
23 quantities than the $450,000 that's charged?
24 MR. RAPP: Yes.
25 THE COURT: Okay.
UNITED STATES DISTRICT COURT
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1 MR. RAPP: Yes.
2 THE COURT: All right. Thank you. I may come back to
3 both of you twice.
4 So, Mr. Silver.
5 MR. SILVER: Yes, Your Honor. Before I lose it,
6 there's not a lot of power left on this phone. So we didn't
7 have Mr. Polzin -- May I take this off?
8 THE COURT: You can.
9 MR. SILVER: Thank you. We didn't have Mr. Polzin's
10 phone, so I inquired with his wife regarding their travel
11 plans. And I received her itinerary. I have on his phone here
12 it shows the same itinerary going from Kiev to Phoenix and then
13 Phoenix back to Kiev on the 13th. The trip was later pushed
14 back to the 18th. I can show that to the government. I can
15 bring it up to the Court, and you can see it, or I can just
16 make an avowal to the Court.
17 THE COURT: You can make the avowal. It's less of a
18 concern than --
19 MR. SILVER: I'd just like to show it to Mr. Rapp so
20 he can see it here. Thank you.
21 Okay. So the government, in their complaint they've
22 alleged three counts, which, you know, wire fraud for $450,000.
23 I don't know this because I don't have all the information on
24 this, but in my brief discussions with Mr. Rapp, the government
25 has already taken actions to forfeit the house, which is now
UNITED STATES DISTRICT COURT
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1 worth in excess of $450,000, which would be the amount of
2 alleged fraud in this case.
3 They've also forfeited or frozen several bank
4 accounts. I don't have the information what's in those bank
5 accounts. The dollar amounts, we have been unable to access
6 that without Mr. Polzin's help in that regard.
7 As far as the Porsche goes, I don't have evidence from
8 him because I haven't met with him on where those monies have
9 gone, you know. Why was the Porsche sold? The Porsche was
10 sold because they bought it. They thought they were going to
11 use it. It was sitting in the garage. It wasn't being used.
12 And like a lot of people during this COVID times, people
13 weren't using their vehicles as much, so it was just taking up
14 space, and they sold it. So it's pretty innocent.
15 But I think we have to go back and look at it and say
16 why is he traveling to Kiev? Well, he's been with his wife now
17 approximately five years. And she has a daughter there, a
18 14-year-old daughter. I believe she's 14. And they go back
19 and forth to Kiev. His wife travels there to visit her
20 daughter, who also lives with the father. And Mr. Polzin also
21 travels with her back and forth.
22 And every time they come back to the United States,
23 over and over and over again. Mr. Polzin knew about the CNN
24 article. In fact, the CNN reporter came to his house and
25 wanted to talk with him.
UNITED STATES DISTRICT COURT
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1 And then we get the -- the article comes out on March
2 5th.
3 So what would most people normally do?
4 Well, they would normally, if they knew about this,
5 they would have -- and they thought they committed a crime and
6 they were going to flee the country, they would have taken off
7 immediately.
8 But what did he do?
9 He was set to leave on the 13th -- I mean, sorry --
10 the, yeah, the 13th, and he had some more business things he
11 needed to attend to, so he even pushed his -- back his trip
12 five more days and stayed here five more days.
13 So he wasn't trying to flee. They didn't catch him
14 with, you know, a pile of cash in his pocket trying to flee the
15 country or any receipts or anything else showing he's wiring
16 funds or doing other things to a foreign country.
17 He was going there on the second leg of his trip with
18 his wife, as he has done many, many, many times over the last
19 several years.
20 So I think you have to look at that and say there's
21 nothing untoward with that. He's not trying to escape this
22 country. Okay.
23 Now, upon information and belief, in speaking with his
24 wife, she's no Ukrainian law expert, but she tells me, as I put
25 in our papers, you can't own a business in Ukraine unless
UNITED STATES DISTRICT COURT
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1 you're a Ukrainian citizen. He's not. So --
2 THE COURT: I'll assume he made those statements to
3 the Customs and Border Protection that he -- for the purposes
4 of this hearing. They could be wrong. But let's assume that
5 he said that he owned a business there that was making these
6 switches. Should I or should I just assume that was a
7 miscommunication? Is it your point that he does not own a
8 business there?
9 MR. SILVER: I don't have any knowledge one way or
10 another that he does or he doesn't. I mean, we can ask him
11 here today if he does. We're not going to do that.
12 But I don't have any information that he has it. The
13 government has information that was written by somebody in ICE.
14 Whether or not it's accurate or not, we don't know.
15 THE COURT: Right. So if his wife says you can't own
16 a business there, we don't actually know if that's true. I
17 leave this as an open question is the point.
18 MR. SILVER: It's an open question.
19 THE COURT: Okay.
20 MR. SILVER: So we have to look at this and say we
21 want to come back to court. Right? The government has made
22 all kinds of allegations in their papers, most of which are not
23 relevant here. They're making allegations that he has
24 committed PPP loan fraud.
25 THE COURT: Isn't that relevant, considering the
UNITED STATES DISTRICT COURT
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1 amount of money that's at issue? If in fact he might be
2 connected to PPP loan fraud and it's in an amount approaching
3 $900,000, wouldn't that be relevant to his access to cash if in
4 fact he was involved in that?
5 MR. SILVER: Well, as far as I know, the government
6 seized his accounts.
7 THE COURT: They seized the accounts they know of.
8 You can't -- No one here knows they seized everything.
9 MR. SILVER: Right. Well, right. At this point in
10 time they're allegations. I don't know if he's used some of
11 that money or all that money, what he's done with that money.
12 I know they have a house in Mesa that they purchased this last
13 year, and they're fixing that house up, and they put a
14 tremendous amount of money into that house. So that might be
15 where some or a lot of the money has gone. I don't know. I
16 haven't seen any receipts for that.
17 But we have to look at this defendant and say is he
18 going to come back? Is he going to come back? Is he going to
19 show up?
20 And you look at the pretrial service report, yeah,
21 there's inconsistencies. We can all see that. Why there are
22 inconsistencies, I don't know. You don't know. But I think
23 there's things that we can do here to guarantee he's going to
24 come back. I think all the conditions that pretrial services
25 has put in there are reasonable conditions. And the Court
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1 seems to be a little bit concerned whether he's going to come
2 back or not. I think if you threw an ankle monitoring system
3 on him, I think that would also help.
4 But as far as a bond goes, if the government hasn't
5 already seized, they're going to seize the rest of his assets,
6 and that will leave him, as I put in my papers, without any
7 monies to post a bond, thereby, you know, keeping him in,
8 detained, which would be very difficult to mount a defense,
9 because it appears as though the government may be bringing
10 other charges against him. We have two IRS special agents here
11 in the courtroom with us here today. They arrested him.
12 So I would anticipate some sort of maybe tax charges.
13 I don't know. But I think an ankle bracelet in addition to the
14 conditions as requested by pretrial services would be adequate
15 to ensure that he comes back for any additional hearings in
16 this case.
17 And a bond, like I said, I think that's -- once the
18 government finds whatever assets he has and seizes them, he's
19 not going to have the money to be able to post in that regard.
20 THE COURT: When I looked through the government's
21 exhibit, this is document 8-2 at 2, it's the listing of the
22 inbound and outbound of the United States. This is just my
23 cursory review, but based on what I have here, let me draw your
24 attention to an event. It says outbound July 9th. Looks like
25 it left Atlanta, goes overseas, comes back to JFK on 11-19. I
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1 mean, if I read this record accurately, it would indicate that
2 he spent four months out of the United States. I'm not saying
3 you know that for sure right now, but from what you can tell,
4 am I reading this accurately?
5 MR. SILVER: You know, I don't know what information
6 the government used to put this together, so I don't know if
7 it's accurate or not.
8 THE COURT: Fair enough. I'll ask them. But the
9 point I'm making -- And there's another entry, if you go up to
10 October 22nd and a return on January 29th, a three-month stay.
11 The point I wish to make is just that so far it would seem to
12 indicate that when he goes overseas, he does so for more than
13 just a week or two like a tourist, but he's in fact there for
14 months at a time, depending on why he's there.
15 Do you want to comment on it? You don't have to. But
16 based on what I have now, the point is that if you have what
17 would amount to almost a dual residence, the U.S. and the
18 Ukraine, that would potentially increase someone's risk of
19 flight because they could easily go somewhere where they've
20 already spent half of the year the year before. I'd say that
21 to you because it's a concern. It wasn't really brought up as
22 clearly before.
23 Do you have any response to any of that?
24 I know you don't have all the information in this
25 case, and we're early, but if I'm going to use this --
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1 MR. SILVER: I think every time you look here, he has
2 come back.
3 THE COURT: Okay.
4 MR. SILVER: He has come back just not for a week or
5 two weeks. I mean, based on his coming back in January, so he
6 would have been here, you know, a month or so. So he is
7 coming -- Every time he does come back to Arizona. He does
8 come back to the United States. He's not staying there for one
9 or two years at a time and then coming back for a week. He
10 does have business interests here. He does have this home that
11 he's recently purchased, and they're making this a smart home,
12 which is going to be part of the business that he has here in
13 the United States to try to sell smart home systems.
14 And he's going to be using this home as a showroom for
15 that. And maybe that's the reason he had these European
16 switches or plugs or whatever they were with him. I don't
17 know. But that's part of his business plan that he has here,
18 you know.
19 The government is trying to make hay of the fact that
20 the CNN article says, oh, he's a fake tax return preparer.
21 Well, you know, Your Honor, as I indicated, you don't have
22 to -- you know, anybody can be a return preparer. And it's
23 just more mud they're throwing up against the wall.
24 THE COURT: Let me stop you.
25 MR. SILVER: But I think there are things we can do
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1 here to make sure he does come back.
2 THE COURT: Hold up. I understood that. Let me get
3 to some more questions. I understand your argument. I'm
4 bringing these up so you can address them. I know they're not
5 easy questions.
6 MR. SILVER: I appreciate it, Your Honor.
7 THE COURT: But at least you get a chance to respond
8 if you have one. The second one is about the house. June 19th
9 pays $385,000 in cash for the house. Now, that's somewhat
10 unusual. It's not completely unusual. If he had sold another
11 home and received funds and bought this home, that would
12 explain why it was in cash. There's an argument that these PPP
13 loans from April to June of $740,000, maybe those were
14 converted into cash for the house.
15 The question I have is do you have anything you'd like
16 to add as far as whether or not I should or not consider the
17 $385,000 in cash for the house on June 19th as indicative of
18 him using cash freely or was connected to something else?
19 MR. SILVER: Well, Your Honor, what we don't have here
20 is we don't have his bank statements. So we don't know how
21 much money was in that bank account at the time he made that.
22 We don't know if these are from other business interest
23 accounting things or other things that he had. I don't have
24 the bank statements. I don't know what went into it. We have
25 no analysis on that. So I can't comment on saying, I mean, the
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1 government wants to say he had four hundred -- at least
2 $450,000 in EIDL loans that were fraudulent, and then he took
3 part of that, and he purchased this house, and then he took
4 part of that and purchased a Porsche.
5 Well, if we add those two together, you know, we're
6 well over -- we're in the $500,000 range. So -- And the
7 government's only made allegations about $450,000 EIDL loans.
8 They haven't made -- They've -- They've talked about it, but
9 they haven't actually come out and said it. They haven't
10 amended the complaint. They haven't indicted him yet because
11 of obvious reasons to allege other items.
12 But I would have thought they had been investigating
13 these, and, you know, once they do the indictment or maybe
14 they're going to supersede and add these, but right now they
15 haven't done that. So we don't know what's in the bank
16 account. We don't know what went into the bank account. We
17 don't have any bank statements, so we can't do an analysis on
18 that account.
19 But the government's already taken actions to forfeit
20 the house anyways, which is worth more than the $450,000 that
21 they allege is the fraud here.
22 THE COURT: Okay. I may come back to you for the
23 final word since you are -- you may have some things to add.
24 In that regard, is that correct? The house, there has been a
25 forfeiture action in some regard regarding the house?
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1 MR. RAPP: Yes.
2 THE COURT: So you think that that money that was put
3 toward the house, they think the money was unlawful proceeds,
4 or it's just it's an asset?
5 MR. RAPP: Oh, no. We've traced the money to the
6 purchase of the house, and we've placed a lis pendens on the
7 house. With respect to bank accounts, we have not frozen any
8 bank accounts, so that's not -- that's not accurate. If we do
9 a tracing analysis and we find that the bank accounts, once we
10 look at the bank accounts, I mean, the Court knows that you
11 have to get subpoenas out.
12 THE COURT: Of course.
13 MR. RAPP: Compliance has to be returned. And some of
14 that's delayed during this time.
15 Then we will be in a better position to seek a
16 forfeiture of those accounts. I would just say that, you know,
17 the article comes out on May 5th, not in some sort of obscure
18 newspaper but on CNN, and all of a sudden on May 18th it's a
19 one-way ticket.
20 I will tell you that he buys the Porsche. I think
21 it's actually a hundred -- It's $157,000, right?
22 UNIDENTIFIED MALE SPEAKER: One hundred fifty-nine
23 with tax, title, and --
24 MR. RAPP: Okay. It's a hundred -- The Porsche is
25 actually paid in cash for $159,000 a day or two after he
UNITED STATES DISTRICT COURT
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1 receives a fraudulent EIDL loan. And this person who is a
2 business person, after this article comes out, he sells it at a
3 fairly considerable loss. Usually Porsches don't depreciate in
4 value in a year time frame when he purchased it in 2020. He
5 sells it at nearly a $40,000 loss a day before he's taking a
6 one-way ticket -- a one-way trip to the Ukraine -- to Ukraine.
7 So that's a concern. What we have right now, in
8 addition to all the stuff that we have set forth in our
9 detention motion, all the factors that would militate for
10 detaining this defendant, we have him lying.
11 First, it's our position that he lies on the EIDL
12 loans to the United States Government under the penalty of
13 perjury.
14 He clearly lies to pretrial because he's contradicted
15 quickly by his wife and his putative business partner.
16 And then he lies -- Do I think he has a manufacturing
17 business -- if I had to take a bet on it, I would say probably
18 not -- a manufacturing business in the Ukraine?
19 It doesn't matter. This is what he tells a law
20 enforcement agent, which, as the Court knows, is a crime to lie
21 to him. That's what he tells him.
22 So we've got about seven or eight lies to law -- to an
23 arm of the court, to law enforcement, and to government
24 agencies that are making these loans available for people who
25 really need these loans.
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1 So with all that, this defendant should be held
2 pending trial until he can come forward with a substantial bond
3 that is not traceable to illegitimate funds that would clearly
4 secure his attendance here at future court appearances plus a
5 whole host of other conditions that would include a full
6 disclosure to pretrial services of his financial background.
7 THE COURT: All right. Thank you.
8 Mr. Silver, the final word.
9 MR. SILVER: Yeah, thank you, Your Honor. I addressed
10 most of those issues --
11 THE COURT: You did.
12 MR. SILVER: -- that Mr. Rapp has talked about.
13 But it just occurred to me that pretrial services,
14 they're supposed to be a neutral party. They're supposed to
15 look at all the evidence and information from all the parties.
16 And we have this neutral party, and what does this
17 neutral party find?
18 That defendant shall report as directed to pretrial
19 services.
20 Okay. That's easy enough.
21 Shall not travel outside Arizona.
22 That's easy enough. You guys have their passport.
23 He's not going to leave Arizona. If he needs to, we can ask
24 for permission.
25 Shall not obtain a passport or other travel documents.
UNITED STATES DISTRICT COURT
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1 That's simple.
2 Shall reside at the address on file.
3 That's where he's going to live anyways because
4 they're fixing up the house.
5 And shall not obtain any new financial accounts
6 without prior notification and approval of pretrial services.
7 Standard things.
8 So we have somebody at pretrial services, a neutral
9 third party, has looked at all this, and this is what they come
10 up with.
11 I understand the Court has some reservations about his
12 frequency with travel to the Ukraine. But I think if we put an
13 ankle bracelet on him, I think that would alleviate the Court's
14 concern. And I think a bond would effectively keep him in
15 detention and not allow him to be out and to assist in his
16 defense of this case, which appears as we're going to be having
17 some new charges brought. Thank you.
18 THE COURT: Mr. Polzin, as you can tell, I've reviewed
19 all of this closely. I read through every document. You know
20 from my questions I took close notes.
21 I am going to detain you as a flight risk. There is
22 something I will add at the end of this because there is a
23 number of -- well, there are a number of things I don't know
24 yet. But let me tell you the Court's reasoning first.
25 So there are four factors for the Court to consider:
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1 The nature and circumstances of the offenses are
2 serious. They involve substantial amounts of money. They
3 involve fraud. These are significant. I wish to make that
4 clear that these are serious offenses, each one of them.
5 Next, your history and characteristics. You have no
6 prior history, criminal history. You have worked in industry.
7 You have a business. You have a family. You have ties here.
8 There are a number of things that are a credit to you.
9 You also are allegedly involved in these offenses.
10 You are presumed innocent. But at a hearing like this, the
11 Court is required to look at the type of offense and what it
12 concerns and just get a sense of the overall nature of your
13 potential risk of flight or danger when looking at the entire
14 case.
15 And this one involves fraud on more than one occasion
16 involving cash, disbursements from the government. And the
17 fact that it happened on more than one occasion means, you
18 know, not only the premeditation of applying for these loans
19 and submitting them and taking the money, there's also
20 information here that you were connected with substantial
21 amounts of cash. Those things increase your risk of flight.
22 And then your ties to the Ukraine. Now, there's
23 nothing wrong of course with traveling, and you have your wife,
24 who's a citizen, and you have reasons to travel. There is
25 nothing wrong with that. But you have lived there off and on
UNITED STATES DISTRICT COURT
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1 for months at a time it appears. And that means that you do
2 have a location out of the United States that you have been
3 comfortable residing in before.
4 So anyone who had the ability to go somewhere and live
5 for months at a time, that would increase their risk of flight
6 because it would be less difficult for them to leave.
7 So those factors, when I weigh them, they do slightly
8 favor your detention in this matter.
9 The first one definitely favors your detention.
10 The weight of the evidence of the government is the
11 least important factor, but that also favors detention here.
12 This type of offense, based on the information in the probable
13 cause statement, shows compelling evidence on behalf of the
14 government.
15 And, finally, the nature and danger -- nature of the
16 danger to the community if you were released. This one's
17 mixed. It slightly favors release. You have been involved in
18 fraud. I'm leaving out all the allegations of outside parties
19 saying that you didn't prepare taxes or you might have been
20 involved in other fraud. I'll just leave that to the side and
21 not consider any of it.
22 Despite the fact that you have allegedly been involved
23 in fraud, there would be conditions the Court could fashion to
24 minimize your economic danger to the government or the
25 community.
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1 But when I weigh all three of those, this is not a
2 close call. The government has established by more than a
3 preponderance of the evidence that you're a flight risk.
4 So here's the second half of my point. There's
5 evidence of substantial quantities of cash being involved,
6 whether it was the Porsche being sold, a sizable amount of
7 money, $120,000 in cash being given to you, the house purchased
8 in cash, which is now apparently potentially an asset that
9 could be forfeited, these bank accounts. There's nothing wrong
10 with you talking with your wife about bank accounts, but I
11 don't think there's a clear understanding from the Court about
12 what your finances are and where the cash has been and where
13 it's going.
14 Now, you don't have any burden here. The government
15 has the only burden of establishing these items. And they've
16 established them. They've established these cash transactions,
17 your access to cash, your travel internationally.
18 I bring this point up because if I'm going to look at
19 the other side of this to establish whether or not there's
20 enough information to mitigate that evidence, it's not here.
21 If anything, there are a number of question marks, and there
22 are more outstanding facts like these PPP loans, which could be
23 certainly upwards of $500,000 or even approaching a million
24 dollars in cash from the government, which would give you more
25 cash, give you more incentive to flee, and more ease to stay
UNITED STATES DISTRICT COURT
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1 out of the United States.
2 Now, your attorney knows that as this case develops --
3 He hasn't had this for very long. He hasn't had nearly the
4 time the government's had to prepare.
5 When he gets information, he may have new information.
6 You certainly might, when you get a chance, actually,
7 Mr. Silver, to go through all this, you could potentially file
8 a motion in the future and say: Now we know more. We have new
9 information we didn't have at this hearing, and we can explain
10 some of these things.
11 And you may have a good argument.
12 On the other hand, the government may have a mountain
13 of evidence they have obtained since then, and they'll have
14 more information about cash and where it went. I don't know.
15 But I have to make a decision now. I can't postpone
16 it. There's no doubt that there are significant issues
17 regarding where the cash has been and your assets, and those
18 increase your risk of flight because it's an uncertainty.
19 I don't need to get too far into the pretrial report.
20 You are required to be honest with pretrial services. Some of
21 these discrepancies can be explained. People don't know you as
22 well. There are some that are more concerning.
23 But I don't have to go into the report. What I can
24 rely on here is the allegation of fraud in the complaint and
25 the information in the probable cause statement. And those
UNITED STATES DISTRICT COURT
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1 allegations of fraud are significant enough that they are by
2 far the more compelling factor here.
3 So that is the Court's ruling. You will remain in the
4 custody of the marshal service while your matter goes forward.
5 If your attorney and the government continue to
6 work -- The government will be required to give them
7 disclosure. But if there's new information, either party can
8 approach the Court in the future.
9 Mr. Silver, that's the Court's ruling. Is there
10 anything you wish to make as a record now?
11 MR. SILVER: Nothing further at this time.
12 THE COURT: I don't know that there would be. And
13 anything else for today's hearing?
14 MR. SILVER: No, Your Honor.
15 THE COURT: Mr. Rapp, on behalf of the government,
16 anything else?
17 MR. RAPP: No, Your Honor. We've turned over the
18 passport to pretrial services.
19 THE COURT: Okay. Finally, Mr. Silver --
20 MR. RAPP: Or we're going to do that.
21 THE COURT: Pardon me.
22 You don't have to, but did you want to say anything to
23 Mr. Polzin before we adjourn?
24 MR. SILVER: Yes. I want to say I understand you're
25 going to be in a 14-day pod there for quarantine. At the end
UNITED STATES DISTRICT COURT
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1 of 14 days, I'll make arrangements to come down and meet with
2 you, and then we can discuss things that aren't going to be
3 overheard by other people. Okay?
4 THE DEFENDANT: Okay.
5 THE COURT: Mr. Polzin, we're done for this afternoon.
6 You can go ahead and knock on the door behind you and let them
7 know that we're concluded.
8 All right. Thank you, all. We're adjourned.
9 (Proceedings recessed at 3:20 p.m.)
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UNITED STATES DISTRICT COURT
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1 C E R T I F I C A T E
2
3 I, LINDA SCHROEDER, court-approved transcriber,
4 certify that the foregoing is a correct transcript from the
5 official electronic sound recording of the proceedings in the
6 above-entitled matter.
7
8 DATED at Phoenix, Arizona, this 2nd day of April,
9 2021.
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s/Linda Schroeder
12 Linda Schroeder
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UNITED STATES DISTRICT COURT
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