IN THE UNITED STATES DISTRICT COURTFOR THE EASTERN DISTRICT OF PENNSYLVANIA

UNITED STATES OF AMERICA :

CRIMINAL NO. 08-592

JOHN P. KAROLY, JR.

DEFENDANT’S MOTION FOR DISMISSAL OF INDICTMENT FOR VIOLATIONS OFTHE FIFTH AND SIXTH AMENDMENTS AND DUE PROCESS OF LAW

AND NOW COMES defendant John P. Karoly, Jr., by his attorney, Robert E. Goldman,

Esquire, and respectfully submits as follows:

1. On September 23, 2008, defendant and his codefendants were charged by a federal grand

jury in the Eastern District of Pennsylvania.

2. Defendant was represented by counsel continuously throughout the 17-month long

investigation and counsel developed with defendant a defense strategy to obtain an

acquittal in the instant prosecution.

3. The defense was convinced from the beginning of the investigation that the government

was predisposed to bringing an indictment in this case. Therefore, the government was

repeatedly advised by defense counsel throughout the investigation that defendant was

represented by counsel and that defendant would exercise his Fifth Amendment rights

and refuse to be questioned by the government,

4. Less than five days prior to indictment, the government prosecutor and case agent

solicited an individual, then under indictment and cooperating with the government, to

surreptitiously meet with Karoly to learn the defense strategy at trial. During the course

of the meeting, the agent of the government questioned the defendant on defense strategy

WHEREFORE, it is

instant indictment.

and repeatedly counseled the defendant not to disclose the meeting or substance of the

meeting to defense counsel.

The agent of the government disclosed to the prosecutor and case agent the defense

strategy developed by defense counsel and defendant.

The conduct of the prosecutor and case agent violated the Fifth and Sixth Amendments to

the U.S. Constitution and the due process rights of the defendant.

The appropriate remedy given the intentional violation by the government, the damage to

defendant’s case that cannot be remedied, and the outrageous nature of the government’s

actions, is dismissal of the indictment.

respectfully submitted that this Honorable Court should dismiss the

Respectfully submitted,

Robert E. Goldman, EsquireCounsel for DefendantJohn P. Karoly, Jr.

Dated: March 10, 2009

IN THE UNITED STATES DISTRICT COURTFOR THE EASTERN DISTRICT OF PENNSYLVANIA

UNITED STATES OF AMERICA :

CRIMINAL NO. 08-592

JOHN P. KAROLY, JR.

DEFENDANT’S MEMORANDUM IN SUPPORT OFTHE MOTION FOR DISMISSAL OF INDICTMENT FOR VIOLATIONS OFTHE FIFTH AND SIXTH AMENDMENTS AND DUE PROCESS OF LAW

Summary

Undersigned counsel Robert E. Goldman (Goldman) was known by the prosecutor,

AUSA Seth Weber (Weber), and the case agent, F.B.I. SA Thomas Marakovits (Marakovits), at

least since May 17, 2007, to be the legal counsel for Karoly in the federal criminal investigation

into allegations concerning the 2006 Wills of Peter J. Karoly and his wife, Lauren B. Angstadt.

Between that date and the day of indictment, September 23, 2008, Goldman was in regular

contact with the government in his capacity as attorney for Karoly, a target of the investigation.

On a multitude of occasions, the government was advised and became aware that Karoly

exercised, and would continue to exercise, his Fifth Amendment rights against self incrimination

in connection with this investigation. Specifically, Karoly declined an offer by the government

to engage in a proffer interview, declined to testify before the grand jury, and declined to

produce records to the grand jury that were protected by the Fifth Amendment. The government

was also aware that Karoly, upon advice of his counsel, asserted his Fifth Amendment rights in

related civil litigation in Orphans Court in Northampton County, Pennsylvania.

In September 2008, defense counsel for the defendants in this indictment requested and

arranged for a meeting with the U.S. Attorney’s Office (USAO) to convince the office that an

indictment should not be brought in this case. The Chief of the Criminal Division, Linda Dale

Hoffa, agreed to meet with counsel on September 19, 2008. The meeting was arranged, in part,

by Weber who also attended. Despite the meeting, the USAO proceeded with indictment, a fact

not learned by the defense until notified by the media after the fact.

Only in discovery did the defense learn for the first time that the government used the

pretext of the meeting at the USAO to gather evidence against Karoly and to learn his defense

strategy in a manner which violated the Constitution. Specifically, the government persuaded an

active client of Attorney Karoly, Mark Mendelson (herein described as the "agent"), to lure

Karoly to the residence of the agent on the eve of tile USAO meeting. At the agent’s residence,

the F.B.I. installed a video and audio recording device to capture the conversations between the

agent and Karoly. Following a prep session with government agents, the agent carried a script

into the meeting and specifically questioned Karoly on defense strategies and attorney privileged

communications and counseled Karoly not to disclose to counsel the sum and substance of the

meeting. The government’s conduct violated the Fifth and Sixth Amendments to the

Constitution and violated the due process rights of the defendants. Further, the government

stated to Karoly through its agent that a former U.S. Attorney for this district and a U.S. Senator

could be bought by Karoly to intervene in the prosecutorial decision making to the benefit of

Karoly. To the extent that any government attorneys participated in setting up this meeting or

preparing the agent, serious ethical violations of the Pennsylvania Rules of Professional

Responsibility were similarly committed.

Since the harm perpetrated against the defendant is irreparable and cannot be undone or

responded to by the Courts by other means, dismissal of the case is dictated by Justice.

Background of legal representation of Karolyand the exercise of his Fifth Amendment Privilege

Beginning in the Spring of 2007, Attorney Goldman was retained by Karoly to represent

him in connection with Orphans Court litigation in Northampton County, Pennsylvania in a Will

contest matter involving the estates of Peter J. Karoly and Lauren Angstadt, Karoly’s deceased

brother and sister-in-law. That litigation involved a dispute between family members as to

which of two Wills presented to the County Register of Wills should be probated, Wills executed

by decedents in 1985 or in June of 2006. The litigation pitted Karoly family members on two

opposing sides. Karoly, his brother, two sons, two nephews and a niece, advanced the legitimacy

of the more recent wills. Karoly’s sisters were Caveators in that action challenging the

legitimacy of the 2006 Wills and the fights of their own children to receive beneficial interests.

The case was assigned to Northampton County President Judge Kimberly McFadden who then

appointed the well-respected retired Judge Isaac S. Garb as Special Master to determine the facts

and make recommendations to Judge McFadden concerning the validity of the competing Wills

and the distribution of the estate.

John Morganelli, the District Attorney of Northampton County, had been contacted by

the Karoly sisters who were advocating their position. Consequently, the D.A. was monitoring

the Orphans Court litigation in his county. In May of 2007, Morganelli learned that the USAO

in Allentown had opened a federal grand jury investigation and protested the federal usurpation

of the investigation to then U.S. Attorney Patrick L. Meehan. The federal investigation however

continued, headed by Weber.

On May 17, 2007, Goldman was advised that the F.B.I. were at the residence of Karoly

executing a search warrant. During the search, Goldman advised the F.B.I. by telephone that he

represented Karoly in connection with the investigation. On that same day, Weber became

aware of Goldman’s representation of Karoly. A letter dated May 25, 2007 confirmed to Weber

that representation. See Exhibit "1"

It quickly became apparent to the defense that Karoly was a Subject and then a Target of

the federal grand jury investigation. During the course of the 17 month investigation, Weber and

the case agent, F.B.I. SA Thomas Marakovits (Marakovits), dealt with Karoly solely through-

Goldman as requested and directed by Goldman. Weber and Marakovits found an ally in Robert

Boote, Esq., counsel for Caveators in the Will contest case which continued in litigation at the

same time that the federal grand jury progressed. Weber and Marakovits closely monitored the

Orphans Court litigation and, on a regular basis, Boote kept Weber advised of the progress of

that litigation, including the discovery obtained in the civil litigation. In the Will contest, the

Special Master was advised by Goldman, in the presence of Boote, that Karoly and his son, John

P. Karoly, III (JP Karoly), would exercise their Fifth Amendment rights and not testify at

depositions given the parallel ongoing federal grand jury investigation. In fact, JP Karoly was

subpoenaed by Boote to a deposition that required J.P. to invoke his privilege on the record. The

Special Master, recognizing the parallel grand jury investigation, ordered that Karoly would not

be deposed nor be required to invoke his Fifth Amendment privilege on the record until the

federal grand jury matter was concluded. The Special Master recognized this legitimate right of

Karoty. Boote informed Weber of these developments.

In addition to the fact that the civil litigation clearly demonstrated that Karoly would not

waive his .Fifth Amendment rights and be questioned on the Will contest subject matter, the

government quickly learned during the course of the criminal investigation that Karoly would

continue to assert his privilege in the criminal case. In fact, Weber and Marakovits learned that

Karoly and his counsel would not participate in any off-the-record or other proffer with the

government, would not produce personally held records protected by the Fifth Amendment

which may be argued to incriminate Karoly (Exhibit "2") and Karoly would not accept an

invitation to testify before the grand jury. Simply stated, the government and agent knew that

Karoly was represented by counsel and that no questioning of Karoly could occur. As will be

seen, the government willfully and wantonly circumvented this restriction through the directed

actions of their agent, Mark Mendelson.

Background of prosecutorial misconduct

It is important to understand the background of the investigation and the overly zealous

nature of the investigation.

John P. Karoly, Jr. is a very successful criminal defense and civil rights plaintiffs counsel

in the Lehigh Valley. He is an influential member of the Democratic Party. He has been

victorious in numerous lawsuits against local law enforcement members for violations of the

rights of many in the community. His litigation has recovered significant verdicts for those

abused by police misconduct. Consequently, Karoly is negatively viewed by some in the law

enforcement community and, as aresult, police and a county prosecutor have made several

baseless and unsuccessful efforts to bring down Karoly. The federal government’s involvement

with Karoly began when the USAO in Allentown learned of the Will contest matter and

remarkably opened an investigation into that case. The legal community in the Lehigh Valley,

whether they be friends, foes or neutrals with regard to Karoly, uniformly recognize that the

federal criminal intercession into a Will contest is solely due to the fact that the case involves

John P. Karoly Jr. It is also interesting to note that although Will contests and allegations of

fraud and forgeries in Wills are commonplace in the United States, there has never been a federal

indictment of a defendant for forgery of a Will. Equally clear is that this is a first for the USAO

in the Eastern District.

AUSA actively becomes a witness in future proceedings

As the USAO investigation developed, it became clear to the defense that the

investigation was biased against Karoly and was dearly calculated to indict him, ad initio.

Weber became personally involved in the investigation to a level unprecedented by federal

prosecutors in this district. Weber traveled alone with the case agent to potential witnesses’

residences to interview them concerning the Will contest matter. In most instances, Weber is the

sole witness to the F.B.I. agent’s interview. As a result, Weber placed himself as a potential

witness in court should the testimony of any witness and agent vary as to the content of the

witness’ statement. At this time, the defense is aware that the testimony of key defense witnesses

will almost certainly be contrary to that of Marakovits. Therefore, Weber will lend his

credibility to Marakovits by disclosing that he was present at the interviews, the contents of

which will be highly contested.

A specific instance of this follows. Prior to the search of Karoly’s residence, Weber and

Marakovits went to defendant Dr. John Shane’s residence to interview him. They falsely

represented to Shane that Weber was an F.B.I. agent and that Karoly and JP Karoly had

acknowledged their involvement in preparing fictitious 2006 Wills and told Shane that they had

clearly and directly implicated Shane in the scheme. [Shane is the signed witness on the 2006

Wills]. Despite the false statements by Weber and Marakovits, Shane continued to state that the

2006 Wills were legitimate and that he had witnessed them, no matter what the two Karoly’s

allegedly contended. In a Jtme letter to Weber, Goldman pointed out the obvious,

"This has thrown you now into the potential role as a witness in this case if there is areturn of an Indictment .... If you remain the prosecuting attorney in this case, you willnot be able to dispute the version of Dr. Shane or vouch for the contrary position taken bythe F.B.I .... An attorney who is a witness should not also wear the hat of investigator,prosecutor and trial attorney in the same case: If there is a dispute that the statement wasmade to Dr. Shane, you would be thrust during the grand jury investigation into theposition of gathering witnesses to support your future credibility as a witness ....Ibelieve your office may have to refer this investigation to an attorney in Main Justice,totake over the grand jury investigation and bring this matter to a conclusion." Goldmanletter to Weber dated June 11, 2007. See Exhibit "3".

Within days, Weber used Mendelson to meet with Karoly and tape record the meeting in an

attempt to solicit admissions fi:om Karoly and preview the defense to be used by Karoly and his

counsel. Despite the resources of the government, the defense has yet to receive an audible tape

recording of that meeting between Karoly and Mendelson.

Again in August 2007, Goldman complained of Weber’s continued presence as sole

witness to critical interviews.

"In earlier correspondence, I discussed with you my concerns about your ability to headthe ongoing grand jury investigation while, at the same time you placed yourself in thecase as a witness... It is equally true that you Would be motivated to cast doubt on thecredibility of others whose testimony is at odds with yours. Despite the concerns I raised,no action was taken by you or your office to rectify this problem. In fact, since then, youhave continued to travel alone with SA Marakovits to interview individuals. Many ofthese potential witnesses have stated that a part of the interview process consists of youattempting to convince them of Mr. Karoly’s involvement in criminal activity. Shouldthere be issues as to what was stated during these interviews, you would be brought againinto the case to dispute the recollection of the witnesses." Goldman letter to Weber datedAugust 14, 2007. See Exhibit "4".

Government’s sole focus on Karolyand failure to pursue criminal case against Karoly’s antagonists

The defense’s fear that Weber would seek out only evidence which he could argue

implicates the Karolys, proved true. Weber’s unwavering intent to indict Karoly became very

clear to the defense when Weber ignored defense requests to investigate and prosecute violations

of the criminal law committed by opponents of Karoly in the Orphans Court litigation.

Specifically, the defense learned that one of Karoly’s sisters had embezzled money from Peter

Karoly and may be making false allegations against Karoly to cover her criminal misdeeds. See

Exhibits "5" and "6." The defense has learned through discovery that the government failed to

pursue this investigation and obtain the evidence of the criminal activity.

In addition, the sole "direct" witness who will appear at trial in this case to implicate the

defendants is Jeffery Fischl. The defense has advised the government of Fischl’s course of

conduct of engaging in deception and fraud including his wife’s sworn admission that she and

Fischl engaged in criminal tax violations of non-reporting over a period of at least twenty (20)

years. See, Deposition of, Shelly Fischl, October 11, 2007, p. 71 et seq. The government ignored

this information, failed to involve the IRS in the investigation of Fischl and failed to bring a

criminal charge against Fischl, the government’s premier witness. Instead, the government

opened a subsequent tax investigation against Karoly, we believe in part because of the

government’s recognition of the weakness of their will based case.

Prosecutor’s grand jury abuses

On at least two occasions, Weber subpoenaed Rebecca Karoly, the spouse of Karoly to

appear as a witness against Karoly in the grand jury proceedings. Those efforts were protested

by the spouse, Karoly and Goldman. See Exhibits "7" and "8." Weber at first demanded that

Rebecca appear but ultimately excused her appearance. Weber however again issued a subpoena

for her to appear in a continuing tax investigation they opened against Karoly. Again, the

spouse, Karoly and Goldman protested the subpoena. Weber rejected the protests, asserted a

conflict on the part of Goldman and thereby required Karoly to expend additional counsel fees to

retain separate counsel for Rebecca. Weber then relented in his position and excused Rebecca’s

appearance after Karoly had to spend additional funds to have new counsel set forth the same

legal arguments to Weber.

Weber also issued grand jury subpoenas to targets and subsequent defendants Shane and

JP Karoly to appear for testimony before the grand jury even though Weber knew that they

would refuse to testify based upon their Fifth Amendment rights against self incrimination. See

Exhibits "8" and "9". Goldman again objected on behalf of Karoly to the dragging of these

targets before the grand jury to exercise their Fifth Amendment privilege before the same body

that would determine whether indictment would be issued.

"This letter is to state my objection to the government’s requirement that these or othersubpoenaed witnesses be required to exercise their Fifth Amendment Rights or Spousalprivilege before the very body that will be determining whether the evidence is sufficientto return an indictment. To require them to do so will prejudice my client, John Karoly,in the eyes of the grand jury, even should curative instructions be provided. ’Thelayman’s natural first suggestion would probably be that the resort to privilege in eachinstance is a clear confession of crime.’ 8 Wigmore, Evidence, 3d Ed., # 2272, p. 426.The parading of witnesses, who are friends, associates and family members of my client,before the grand jury when you know that they will assert their privilege not to testify isextremely inflammatory conduct before the grand jury." Goldman letter to Weber datedJune 6, 2007. See Exhibit "8".

Weber was also advised by then counsel for Shane, George Heitczman, that Shane would

exercise his Fifth Amendment rights and requested that he be excused from appearing before the

grand jury. Weber rejected this request and required that Shane exert his privilege before the

grand jury. The defense protested this action.

" ..... by prior letter dated June 6, 2007 and enclosed, I requested that you not drag beforethe grand jury individuals who assert their Fifth Amendment Privilege not to testify sincetheir appearance before the body that has the power of indictment would be prejudicial tomy client. Despite that request, you have had at least one key person, Dr. John Shane,required to repeatedly exercise the Fifth before the grand jury." Goldman letter to Weberdated August 14, 2007. See Exhibit "4".

Despite the repeated requests and cautions, Weber moved on to require that JP Karoly, a

target, appear before the grand jury to exercise his Fifth Amendment rights. Weber was

requested not to require the personal presence of JP Karoly before the grand jury to do so.

" .... please note that Mr. [JP] Karoly would exercise his Fifth Amendment privilege not totestify. It is important therefore to reiterate a prior position that I have taken in this casethat it is not appropriate for government counsel to parade a series of witnesses,particularly targets, before the grand jury to exercise their Fifth Amendment rights. Icontinue to object to the government’s requirement that J.P. Karoly or any othersubpoenaed witnesses be required to exercise their Fifth Amendment Rights before thevery body that will be determining whether the evidence is sufficient to return anIndictment. To require them to do so would prejudice J.P. Karoly and his father, JohnKaroly ..... the prejudice to John and J.P. Karoly is insurmountable." Goldman letter toWeber dated August 21, 2007. See Exhibit "9".

Weber rejected this request and compelled JP Karoly to personally appear before the

grand jury to exercise his .privilege.

In addition, Weber has engaged, according to witnesses, in presenting non-existent

evidence before the grand jury. Heather Kovacs, a secretary at the Karoly law office was

questioned before the grand jury in a way that suggested that Karoly had non-existent offshore

bank accounts, that Karoly was the principal beneficiary under the 2006 wills and stood to gain

millions from their preparation including millions of dollars from the business known as E-Rad.

All of these are false representations made to the grand jury in order to secure an indictment

which otherwise might not be returned. See Exhibit "4".

The USAO meeting to discuss declination of case

Despite a 17 month long investigation, the government’s case became no better than it

was from the inception. In fact, as the investigation progressed, facts emerged which clearly

pointed to the complete innocence of the defendants. The defense reached the unavoidable

conclusion that the case warranted a declination based upon insufficient credible evidence to

indict. By correspondence dated September 5, 2008, Weber advised the defense that the

investigation of the Will case was coming to an end. Goldman, who had requested a meeting

with your office to discuss a declination, was directed to contact Linda Dale Hoffa to schedule a

meeting regarding same. See Exhibit "10". The meeting was ultimately set for Friday,

September 19, 2008, a fact known to Weber. See Exhibit "11".

The meeting between defense counsel and Hoffa, Weber and Supervisory AUSA Richard

Zach took place on the 19th of September and it was followed by a letter from defense counsel to

Hoffa on September 22, 2008. See Exhibit "12". On September 25, 2008, the defense learned

from an Associated Press reporter that their clients had been indicted. Following that, Weber

advised defense counsel of the rejection of the defense request for non-prosecution by email at

the end of the business day of September 25, hours after indictment and only after the press was

previously notified. See Exhibit "13".

The Constitutional Violations

With constantly reinforced knowledge that Karoly would not speak with government

agents about the Will investigation, Weber and the F.B.I. staged a meeting between Karoly and

Mark Mendelson, a long-standing client of Karoly, on the evening immediately preceding the

September 19th meeting between counsel and Hoffa. Mendelson pled guilty in a prosecution by

the USAO on a bank fraud based prosecution and had been sentenced but was not yet

incarcerated. At the behest of the government, Mendelson, now acting as agent of the

government (agent), lured Karoly to his residence which was now equipped with video and audio

recording devices placed by the F.B.I. and Marakovits. Prior to the recorded meeting, the agent

was prepared by Marakovits, and possibly Weber, as to the nature of the discussion that he was

to engage Karoly in. The agent came to the meeting with notes to be used during the Karoly

meeting. Weber was aware of, and authorized, the meeting and recordings.

The meeting between the agent and Karoly violated the Fifth and Sixth Amendments and

the due process rights of the defendants. To truly understand the outrageous nature of the

conduct, one must listen to the hour and one-half recorded meeting. We have had a first draft of

the transcription made of the recording to assist in the review. A copy of the transcript is

attached as Exhibit "15" and a CD of the recorded conversations is attached as "Exhibit 16." We

have also had a legal expert in ethics rules for attorneys in Pennsylvania review the conduct

under discussion here. His opinion letter is attached as Exhibit "14". It is his expert opinion that

an attorney of the government who participated in the planning or preparation for this meeting,

or who permitted it to occur, has committed serious ethical violations under the Pennsylvania

Rules of Professional Responsibility. The scope of the nature of the government’s violations of

the rights of the defendants is readily apparent. It is simply abominable that the government

engaged in this conduct. Government prosecutors are held to an especially high standard of

conduct. "The government, which represents us all, should strive to be beyond reproach in the

conduct of a prosecution; to expect less damages the sinews of our legal structure." U.S.v.

Ariza-Ibarra, 651 F.2d 2, 17 (1st Cir. 1981).

The issues for consideration by this Motion include: whether there were Fifth and Sixth

Amendment violations by the USAO; whether the due process rights of the defendants were

violated; whether serious ethical violations were committed; and what remedies are mandated by

the conduct and violations.

The planned attack by the government’s "Trojan Horse" scheme to pierce the defense

camp and learn the defense strategy begins almost immediately when the agent, a then active

client of Karoly’s (Tr. 3), engages Karoly in a discussion as to Karoly’s defenses to the Will

investigation/prosecution.

"I have stuff to tell you but I don’t remember -- this was a year ago,., that we sat down..¯ I remember some of what you told me but the part where -- where they say you forgedyour brother’s will?.., tell me what’s important for me to know." (Tr. 3).

Following that solicitation, Karoly then disclosed to your agent the defenses which would

be asserted by the defense team in any prosecution. These included, inter alia:

Karoly’s defense concerning the limitations of what he actually would have receivedunder the 2006 Wills. (Tr. 5, 30, 31);the financial motivations of various accusers of Karoly who are potential witnesses forthe government. (Tr. 5);how the defense would rely on the expert testimony that it obtained regarding ink dating(Tr. 5, 6, 12) and handwriting (Tr. 6, 12);the proof that the defense would introduce to establish that the 2006 Wills werelegitimate (Tr. 5, 6);the proof that the defense would introduce to establish the 1985 wills were outdated andwould have likely been replaced (Tr. 6);how the defense would attack the credibility of government witnesses (Tr. 11, 13, 16, 18,19);the health condition of Karoly at the time of the alleged criminal activity which wouldmitigate against his involvement (Tr. 14);the estranged relationship between Peter Karoly and his sisters (Tr. 14);the intended disinheritance by the sisters of their own children’s inheritance under PeterKaroly’s 2006 Will (Tr. 14);the bizarre and irrational claims by Karoly’s sisters including the allegation that Karolystaged Peter’s burial and kept his ashes on his pool table at home.(Tr. 15);the embezzlement of money by government witnesses (Tr. 17); anda selective.prosecution defense (Tr. 24, 25, 27).

Not satisfied with the information provided by Karoly, the agent then asked Karoly how

he would defend against the main government witness, Jeff Fischl. In response, Karoly then

disclosed to the government our defense as to Fischl’s allegations. Karoly explained the defenses

including:

the mental instability ofFischl (Tr. 8, 10);Fischl’s false claim to being related by blood to Karoly (Tr. 8);Fischl’s federal income tax violations (Tr. 8,9);the role Fischl’s wife played in instigating the false allegations against Karoly (Tr. 9);Fischl’s wife’s attempt to assist Karoly’s sisters in surreptitiously removing documentsdamaging to the antagonists of Karoly from Peter Karoly’s office (Tr. 9);Karoly’s alibi defense (Tr. 9-11);

- the lack of any relationship between Karoly and Fischl which negates the allegation thatKaroly would solicit Fischl as a confidant to assist in falsifying a Will (Tr. 10); and

¯ the fact that Fischl’s wife herself believes that Fischl is a liar (Tr. 24).

The agent then solicited from Karoly information concerning Karoly’s defense in the

ongoing tax investigation (Tr. 19). The agent had Karoly discuss what he believed to be the tax.

problems he faced (Tr. 19), his defenses of lack of intent (Tr. 23, 24), and his reliance on the

advice of his accountant (Tr. 24). The agent then asked Karoly to describe the amount of money

involved in the tax delinquency (Tr. 32, 34, 35), Karoly’s use of charitable deductions (Tr. 32-34)

and a non-profit foundation at the apparent heart of the government’s threatened tax prosecution

(Tr. 33-35).

The foregoing examination clearly establishes the government’s Fifth Amendment

violations since the government directly and surreptitiously interrogated Karoly when it knew for

17 months that he was represented by counsel and would not submit to such questioning.

The agent also instructed Karoly not to disclose the meeting to his counsel (Tr. 21, 22,

47-48) which "would cause nothing but real f...ing problems.., it would cause you problems."

(Tr. 48). "I don’t trust any lawyer in Philadelphia. That community is so f...ing small... If you

think you have somebody, you never really have somebody. Trust me, you don’t because they

are trading. They are always trading.., they all feed off each other.., they will pick who is

going down out of the group." (Tr.48-50). The agent also spent considerable time convincing

Karoly that he wasn’t playing on an even playing field, and encouraging Karoly to enter a guilty

plea just for the sake of saving his son (Tr. 36, 50, 51, 64-67), to pay a fine to end the tax

investigation (Tr. 37, 38, 40), and avoid a jury trial ("you are dealing with...that f...ing jury

pool down here is a nightmare." (Tr. 41).

In this case it is clear that the agent’s admonishments to Karoly not to discuss with

counsel the nature or the existence of the government’s meeting, had the intended effect on

Karoly. Goldman did not become aware of the meeting and discussions until recently in

discovery.

To further establish the depths of the government’s actions to get Karoly, the prosecutor

and case agent, solicited through their agent a bribe to be paid to former U.S. Attorney Patrick L.

Meehan (Tr. 28), who the agent describes as "a politician ... who wouldn’t have had anybody go

after me." (Tr. 29). According to the agent, "Republicans really deliver." (Tr. 38). He

continued, "Pat is not cash and carry. You can’t pay Pat off. But you know, there’s -- he did send

me that thing for the political contribution, you know, ’and then he called me personally about it

and said, you know, can’t make it, you know, it’s ten fucking grand for Arlen Specter. That’s

what they do. That’s how they do it." (Tr. 46). "Arlen is another option. But all these mother

f....ers want one thing, and you know what they want. I just thought Pat was a more direct hit."

(Tr. 53). "...[I]f you wanted to talk with him I could arrange that. He would do that for me."

(Tr. 54). ’.’He’s a politician...he’s a politician, period. His aspiration isn’t to be a federal judge.

His aspiration is to be governor...Pat would be a solution, absolutely would be a solution." (Tr.

55). "Let’s say you didn’t want to write the check...There are ways to do it, you know that,

without your fingerprints being on it." (Tr. 56). The agent continues, "He’s creating a war chest

for himself or they are using the RNC to create the war chest for him. Do you follow what I

mean... Because this thing Specter is showing up at, so it’s Specter, Pat, me on it, this is big. It’s

a really private, exclusive thing, 10,000 bucks... But I could have Pat come here and meet

me ...." (Tr. 57).

The agent then ended the meeting reminding Karoly, "John do not tell anybody we met.

..It would make me impotent to help you. I want to help you." (Tr. 59). As earlier stated,

defense counsel only learned that the government had surreptitiously questioned and tape

recorded Karoly a few weeks ago when counsel received a copy of the recording in discovery.

Had the defense known of the recording, the USAO and its supervisory staff would have been

advised prior to indictment that when Karoly met with a trusted client and had every opportunity

to either pay a bribe or acknowledge criminal activity, he resoundly did the opposite. He refused

to engage in criminal conduct and laid out his innocence to the government’s secret agent,

despite repeated attempts, including those which were calculated to exploit his fatherly love for

his son.

A brief sampling follows:

"I mean, I know I am innocent. I know I am 110 percent innocent. If I thought I washanging out, I would tell you where I am hanging out, and maybe you could give mesome clues how to protect myself. I am not. I didn’t do anything. If they are seeinganything in the taxes that they think is improper, it’s a pure by-chance shit, you knowwhat I mean, pure not paying attention. There’s nothing criminal there." (Tr. 22-3).

"This is what I don’t want Mark. I don’t want to do something that would get me introuble when I am so innocent on everything. That would get me in trouble when Iam so innocent on everything. That would be an insane thing to do." (Tr. 39).

[To make a contribution to have the charges disappear.] "It would go against anythingI ever stood for, if I did that. Plus I would never give them ammunition to use againstme .... I know what they got is bullshit. Who knows how they will spin it or whatthey will turn it into. Let them do what they want to do. I am not going to commit acriminal act or something they could turn into a criminal act because they are unjustlyaccusing me of a criminal act. That would not only run against my grain and myethics and my upbringing but it would be stupid on top of it." (Tr. 45).

[Going to Meehan or Specter.] "But the last thing Mark I want to do is give them. ammunition for something that is questionable." (Tr. 58).

"If the only way to do it is to do something they can spin into some real criminalactivity, that’s the last thing I want to do. That’s absolutely the last thing I want to do.I guess if I did something criminally wrong, okay, it would be easy for me to justify.

What the hell is the difference? I will do something else and hope it works out. Ididn’t I didn’t do any of that...It’s like me trading my innocence .... then they willhave their pound of flesh, if they get me to do something illegal while I am defendingmy innocent conduct..." (Tr. 63).

[You know what will happen to your son if you don’t say you did something wrongeven if you didn’t.] "Even if I was to lie [to save my son from indictment] and say,okay, I did something wrong, okay, and it makes no sense how I even could have, sookay, lie to make him safe. He would never live with himself-- live with himself.He would know - - that would be just as bad for him because he would know I waslying.., that would hurt JP as much as anything." (Tr. 67).

Legal Discussion

The foregoing facts demonstrate the government’s violations of the Fifth and Sixth

Amendment and defendant’s right to due process of law. The government brazenly invaded the

defense camp and manipulated a meeting between defense counsel and the government to obtain

a preview of the defense strategy at trial. The government interfered with Karoly’s right to the

unimpeded and unobstructed representation of counsel and attempted to preemptively disarm the

defense of Karoly. The timing of the government’s trampling of the defendant’s rights is telling.

It acted practically on the eve of indictment apparently in an attempt to avoid the attachment of

the Sixth Amendment’s protections. By doing so, the government has ignored basic tenets of our

jurisprudence. "A fair trial in a fair tribunal is a basic requirement of due process. Fairness of

course requires an absence of actual bias in the trial of cases. But our system of law has always

endeavored to prevent even the probability of unfairness, and that ’to perform its high function in

the best way, justice must satisfy the appearance of justice’" In re Murchinson, 75 S.Ct. 623

(1955) citing Offutt vaunted States, 75 S.Ct. 11, 13 (1954). "The basic concept of due process

is fair play. The test of our system of legal jurisprudence should be measured by the interest we

take in safeguarding the fundamental rights of an accused. A defendant is entitled to a fair

determination of his guilt. Fair trials insure our concern with due process and contribute to what

we believe is the proper administration of criminal justice. It is only in this way that we prevent

the undermining and mockery of justice. The most fundamental of a reviewing court’s duties is to

see to it both that the end result in a case is just and correct and that the means utilized are fair

and proper. Such is the essence of due process of law." United States v. Rispo, 460 F.2d 965,978

(3rd Cir. 1972).

We anticipate that the government’s reply to this motion will be short sighted by its

reliance on a mantra that there can be no Sixth Amendment violation pre-indictment. Should it

do so, such a claim is overbroad and misguided. While we recognize that the Sixth Amendment

protections do not normally attach until a prosecution is commenced (Rothgery v. Gillespie

County, 128 S.Ct. 2578, 2583 (2008)), a line of cases recognize that "there is merely a rebuttable

presumption, not a per se rule, that no right to counsel exists before adversarial proceedings

formally commence." See U.S.v. Rosen, 487 F.Supp. 721,732 (E.D.VA 2007). A defendant

may rebut this presumption by proving the government, prior to indictment, crossed "the

constitutionally significant divide from fact finder to adversary." U.S.v. Larkin, 978 F.2d 964,

969 (7th Cir. 1992). "Simply because there is no right to court appointed counsel at a particular

stage of an investigation, it does not follow that the government has carte blanche to interfere in

pre-existing attorney-client relationships at that stage." U.S.v. Rosen, 487 F.Supp. at 733. To

conclude otherwise would enable the government, wl~ich controls the timing of the indictment, to

delay the indictment to invade the defense camp and learn the defense strategy, thereby crippling

a defendant’s ability to obtain an acquittal.

government’s conduct occurs pre-indictment.

1062 (9th Cir. 1994).

The Sixth Amendment can apply when the

In re Grand Jury Proceedings, 33 F.3d 1060,

It is frankly difficult to contemplate facts more egregious than those in the instant matter.

The government prosecutor was well aware of the long-term relationship between counsel and

client and the defense intent to defend any case brought against the defendant. Defense counsel

repeatedly informed the prosecutor that his client exercised his Fifth Amendment rights and

would vigorously defend the anticipated indictment. Using a meeting between the USAO and

defense counsel as a screen, the prosecutor sent in an agent who was an active client of the

defendant’s to probe into the defense strategy not only of the Will contest case but also the

ongoing tax investigation. The principle of blind and balanced justice was turned on its head.

The government intruded into the attorney-client relationship and acted intentionally to garner

confidential and privileged strategy, while doing so to beat the Sixth Amendment at the gate.

The government has chosen to ignore that the court’s have found that even if the Sixth

Amendment had yet attached at the time of the government’s interference, it "does not follow

that the interference did not cause constitutional harms to defendants’ Sixth amendment rights.

To the contrary, it is entirely plausible that pernicious effects of the pre-indictment interference

continued into the post-indictment period, effectively hobbling defendants’ Sixth Amendment

rights." Rosen at 735. The district court in U.S.v. Stein, 435 F.Supp. 2d 330 (S.D.N.Y. 2006)

concluded that the government’s pre-indictment conduct had post-indictment effects of Sixth

Amendment significance. It observed, "the fact that events were set in motion prior to

indictment with the object of having, or with knowledge that they were likely to have, an

unconstitutional effect upon indictment cannot save the government.[i[n these

circumstances, it is not unfair to hold [the government] accountable." Id. at 336. On appeal, the

Second Circuit endorsed this analysis. "Although defendants’ Sixth Amendment rights attached

only upon indictment, the district court properly considered pre-indictment state action that

affected defendants post-indictment. When the government acts prior to indictment so as to

impair the suspect’s relationship with counsel post-indictment, the pre-indictment actions ripen

into cognizable Sixth Amendment deprivations upon indictment. As Judge Ellis explained in

United States v. Rosen, 487 F. Supp. 2d 721 (E.D. Va. 2007), ’it is entirely plausible that

pernicious effects of the pre-indictment interference continued into the post-indictment period,

effectively hobbling defendants’ Sixth Amendment rights ...ld.at 734." United States v. Stein,

541 F.3d 130, 153 (2d Cir. 2008).

For the government to state as an absolute truism that an individual does not have the

constitutional right to have counsel until charges are filed, does not mean that the government

can run amuck over the defendant’s relationship with his counsel pre-indictment and invade the

defense camp and surreptitiously preview and obtain the defense strategy. "Even guilty

individuals are entitled to be advised of strategies for their defense. In order for the adversary

system to function properly, any advice received as a result of a defendant’s disclosure to counsel

must be insulated from the government." United States v. Levy, 577 F.2d 200, 209 (3rd Cir.

1978).

Once this Court determines that there has been a Sixth Amendment violation, the Court

must determine whether the violation caused prejudice to the defense. United States v.

Morrison, 101 S.Ct. 665, 668 (1981). In United States v. Levy, 577 F.2d 200, the Third Circuit

held that dismissal of the indictment was warranted because law enforcement officials used a

government informer to obtain confidential information concerning defense strategy, including

attorney-client confidences. The Court stated, "Where there is a knowing invasion of the

attorney-client relationship and where confidential information is disclosed to the government,

we think that there are overwhelming considerations militating against a standard which tests the

sixth amendment violation by weighing how prejudicial to the defense the disclosure is.

Id. at 208. The D.C. Circuit has adopted a per se rule that a criminal defendant’s proof of mere

possession of improperly obtained trial strategy information by the prosecution constitutes proof

of prejudice. Briggs v. Goodwin, 698 F.2d 486, 494-5 (D.C. Cir. 1983). In the First and Ninth

Circuits, a two-step analysis is used. In both circuits, where it is shown that the government

affirmatively intruded into the attorney-client relationship, a prima facie showing of prejudice is

established and the burden shifts to the government to prove there has been no prejudice. United

States v. Mastoianni, 749 F.2d 900, 908 (1st Cir. 1984); United States v. Danielson, 325 F.3d

1054, 1071 (9th Cir. 2003). Danielson describes the burden as "a heavy burden of showing non-

use." Id. at 1073.. The government must show that all of the evidence was derived from

independent sources, "and that all of its pre-trial and trial strategy was based on independent

sources. Strategy in this context is a broad term that includes, but is not limited to, such things as

decisions about the scope and nature of the investigation, about what witnesses to call (and in

what order), about what questions to ask (and in what order), about what lines of defenses to

anticipate in presenting the case in chief, and about what to save for possible rebuttal." Id. at

1074. The "prosecution team can avoid this burden either by not improperly intruding into the

attorney-client relationship in the first place, or by insulating itself from privileged trial strategy

information that might thereby be obtained." Id. at 1072.

In this case, the prosecutor ignored the safeguard of establishing a "taint team" to deal

with the cooperating individual and the information he obtained. The government therefore has

the burden at a hearing to be scheduled to show that is has not used the defense strategy that it

obtained.

In addition to the foregoing analysis, this Court has supervisory powers which permit the

court to supervise the "administration of justice" in order to deter "illegal conduct," and to

protect "judicial integrity." United States v. Lopez, 4F.3d 1455, 1463 (gth Cir. 1993). "Indeed

federal courts have an independent interest in ensuring that criminal trials are conducted within

ethical standards of the profession and that legal proceedings appear fair to all who observe

them." Wheat v. U.S., 108 S.Ct. 1692 (1988). To preserve judicial integrity, a district court may

exercise its supervisory powers to dismiss an indictment based upon ethical misconduct. U.S.v.

Tucker, 8 F.3d 673,674 (9th Cir. 1993). Dismissal is also separately justified where, as here, the

prosecutor’s ethical violations have substantially prejudiced the defendants and constitutes

outrageous conduct.

Transgressions against Karoly here also transfer to his codefendants~ Where the

government’s conduct affecting one defendant detrimentally affects all defendants, each of the

defendants has standing to challenge the governments conduct. United States v. Spitz, 678 F.2d

878, 880 n.2 (10th Cir. 1982); see also United States v. Valencia, 542 F.2d 618, 621-22 (6th Cir.

1976).

By now, the damage cannot be remedied. The government has the equivalent of the

defendants’ play book for trial and has also intentionally learned key information concerning the

defense to the ongoing tax investigation should it ripen into an indictment. This knowledge can’t

be purged. This bell cannot be un-rung.

Respectfully submitted,

Dated: March 10, 2009

Robert E. Goldman, EsquireCounsel for DefendantJohn P. Karoly, Jr.

CERTIFICATE OF SERVICE

I certify that a true and correct copy of the foregoing Defendant’s motion To Dismiss Indictment has been

served electronically through the District Court Electronic Case System and by first class mail upon:

AUSA Seth Weber504 W. Hamilton, StreetAllentown, PA.

Thomas Bergstrom, Esq.138 Davis RoadMalvern, PA 19355

Brian McMonagle, Esq.1 Penn5Sthquare West30 S. 1 Street, Suite 701Philadelphia, PA 19102

DATE: March 10, 2009

Robert E. Goldman, Esq.P.O. Box 239Fountainville, PA 18923Counsel for DefendantJohn P. Karoly, Jr.