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United States of America v. Irving Cohen

February 15, 2012

UNITED STATES OF AMERICA, PLAINTIFF,
v.
IRVING COHEN, THE WINDSOR ORGANIZATION, INC., AND 3-B STORES, INC., DEFENDANTS.



The opinion of the court was delivered by: Richard Mills, U.S. District Judge:

E-FILED

Wednesday, 15 February, 2012 03:33:39 PM

Clerk, U.S. District Court, ILCD

OPINION

The Court now considers the following motions in limine: the Plaintiff's motion for judicial notice of the alleged fact that Liechtenstein and the British Virgin Islands are widely regarded as tax havens [d/e 182]; the Plaintiff's motion for judicial notice of certain matters of public record [d/e 183]; Defendant Windsor Organization's motion for judicial notice of various State Department documents [d/e 188]; and the Plaintiff's motion for judicial notice of the Schengen Agreement of 1985 [d/e 195].

I. Motion for Judicial Notice of Fact that Countries are Tax Havens

(A)

Plaintiff United States of America has filed a motion for judicial notice of the fact that Liechtenstein and the British Virgin Islands are widely regarded as tax havens. It notes that Defendant The Windsor Organization, Inc. claims that it is wholly-owned by a British Virgin Islands corporation, TI&M Services, LTD. Moreover, Defendant Irving Cohen and Windsor both allege that Cohen had in-person meetings with Markus Kolzoff, a citizen of Liechtenstein and alleged member of TI&M's Board of Directors. The Plaintiff claims that, because Kolzoff refused to be deposed and refused to produce any documents at the hearing before the Principality of Liechtenstein's Princely Court of Justice, the United States was unable to take any discovery from TI&M or Kolzoff. The Plaintiff thus requests that the Court take judicial notice at trial of the fact that both the Principality of Liechtenstein and the British Virgin Islands are widely regarded as "tax havens."

The Federal Rules of Evidence require that the Court take judicial notice of an adjudicative fact "if a party requests it and the court is supplied with the necessary information." See Fed. R. Evid. 201(c)(2). A court may take judicial notice of a fact not subject to reasonable dispute in that it: "(1) is generally known within the trial court's territorial jurisdiction; or (2) can be accurately and readily determined from sources whose accuracy cannot reasonably be questioned." Fed. R. Evid. 201(b). Judicial notice may be taken at any stage of the proceeding. See Fed. R. Evid. 201(d).

In support of its motion, the Plaintiff notes that the Organisation for Economic Co-Operation and Development ("OECD") has defined "tax haven" as follows:

[A] tax haven is a jurisdiction that imposes no or only nominal taxes itself and offers itself as a place to be used by non-residents to escape taxes in their country of residence. A tax haven can offer this service because it has laws or administrative practices that prevent the effective exchange of information on taxpayers benefitting from the low-tax jurisdiction.

See Slemrod & Wilson, Tax Competition with Parasitic Tax Havens, NBER Working Paper Series (May 2006), p.2 (available here: http://www.nber.org/papers/w12225). The Plaintiff asserts that the OECD published criteria that qualified a country as a "tax haven" in its 1998 report, Harmful Tax Competition: An Emerging Global Issue. See http://www.oecd.org/dataoecd/33/0/1904176.pdf. In 2000, the OECD published a list of 41 tax haven countries that met the 1998 criteria: the list identified both Liechtenstein and the British Virgin Islands as tax havens. See Towards Global Tax Co-Operation: Report to the 2000 Ministerial Council Meeting and Recommendations by the Committee on Fiscal A f f a i r s , O E C D 2 0 0 0 ( a v a i l a b l e h e r e http://www.oecd.org/dataoecd/9/61/2090192.pdf).

The Plaintiff further asserts that the National Bureau of Economic Research ("NBER") has noted that Liechtenstein and the British Virgin Islands are tax havens as defined by the OECD, as well as under the more narrowly-tailored Hines-Rice text. See Dharmapala & Hines, Which Countries Become Tax Havens?, NBER Working Paper Series (December 2006), p. 34 (available here: http://www.nber.org/papers/w12802). Moreover, the Tax Justice Network has identified Liechtenstein and the British Virgin Islands as tax havens. See Identifying Tax Havens and Offshore Finance Centres, Tax Justice Network, (July 8, 2007), p. 8 ( a v a i l a b l e h e r e http://www.taxjustice.net/cms/upload/pdf/Identifying_Tax_Havens_Jul_0 7.pdf).

The Plaintiff contends that even William Reed, the former president of Asset Protection Group, Inc.--the entity Cohen hired to incorporate Windsor in Nevada--recognized Liechtenstein and the British Virgin Islands as tax havens. In his book, Bulletproof A$$et Protection, Reed wrote, "The BVI has a good infrastructure and would always make my short list of best offshore havens." See William S. Reed, Bulletproof A$$et Protection, p. 145. As for Liechtenstein, Reed states, "Liechtenstein still has some of the best bank secrecy laws in the world," and "[i]n spite of this waiver, Liechtenstein is still one of the best offshore havens in the world." See id. at 153-54.

The Plaintiff contends that Defendants put the countries of Liechtenstein and the British Virgin Islands at issue by virtue of the defense they have asserted: that Cohen met with a citizen of Liechtenstein to discuss investing in the property, and that the purported owner of Windsor is TI&M, a British Virgin Islands corporation. The Plaintiff further asserts that, because of Windsor's and Cohen's defense and because the United States was unable to take any discovery about Kolzoff's or TI&M's actual interest in the Springfield property, the issue of Liechtenstein's and British Virgin Islands' status as a tax haven is relevant.

Based on the foregoing, the Plaintiff claims there can be no reasonable dispute that Liechtenstein and the British Virgin Islands are widely-regarded as tax havens. Accordingly, it asks the Court to take judicial notice.

(B)

In its response, Windsor asserts that the parties had reached an agreement as to a possible protective order and a potential location of Markus Kolzoff's deposition (Switzerland), when the Plaintiff filed its motion for issuance of Letters Rogatory to the Principality of Liechtenstein, which ended the possibility of obtaining Kolzoff's voluntary deposition. Windsor questions the Plaintiff's assertion that it has been foreclosed from obtaining discovery from TI&M, the sole shareholder of Windsor, when the Plaintiff did not, either through a Letter of Request through this Court or the Liechtenstein Court, pursue the matter further and did not seek an appeal of the Regional Court's ruling that "[t]he refusal to give testimony of witness, Dr. Markus Kolzoff, is legitimate."

Windsor further asserts that Plaintiff's assertion is subject to reasonable dispute and is not known within the territorial jurisdiction of this Court or capable of accurate and ready determination by resort to sources whose accuracy cannot reasonably be questioned. Windsor notes that, in support of the Plaintiff's motion, it has cited persuasive authority consisting of William Reed's book, Bulletproof A$$et Protection, in addition to Committee Reports of an international organization, a national non-profit research organization and a research and advocacy committee launched in the British Parliamentary. According to Windsor, these documents are not proper subjects of judicial notice and fail to satisfy the standard of Rule 201. Moreover, Windsor has objected to the admissibility of Reed's book and other marketing tools in its first motion in limine. Additionally, Windsor contends that some of the documents that Plaintiff has relied on were not properly disclosed.

Windsor further alleges that Plaintiff has not explained NBER's and OECD's connection to their role with the federal government and their role in obtaining the information cited by the Plaintiff. Moreover, Windsor claims that much of the information cited is purported expert opinion which was not disclosed, and hearsay. Additionally, Windsor asserts that Plaintiff has not established foundation for admission of the contents of the documents.

(C)

Windsor has raised a number of issues pertaining to the admissibility of the documents on which the Plaintiff relies. The status of Liechtenstein and the British Virgin Islands as alleged tax havens appears to be relevant. However, "[j]udicial notice merits the traditional caution it is given, and courts should strictly adhere to the criteria by the Federal Rules of Evidence before taking judicial notice of pertinent facts." Doss v. Clearwater Title Co., 551 F.3d 634, 640 (7th Cir. 2008).

The language of the rule makes it clear that courts must use caution in taking judicial notice of adjudicative facts. "In order for a court fact to be judicially noticed, indisputability is a prerequisite." See Hennessy v. Penril Datacomm Networks, Inc., 69 F.3d 1344, 1354 (7th Cir. 1995).

Because it is unable to determine that the issue is beyond "reasonable dispute," the Court declines at this time to take judicial notice of the alleged fact that Liechtenstein and the British Virgin Islands are widely regarded as tax havens. The parties may litigate the issue through the introduction of any admissible evidence at trial.

Therefore, the Court will Deny the Plaintiff's motion in limine. The motion may be renewed at an appropriate time. See Fed. R. Evid. 201(d).

II. Motion for Judicial Notice of Public Records

Plaintiff United States has filed a motion for judicial notice of matters of public record relating to William Reed and the Asset Protection Group, Inc. This includes two civil cases against Reed and Asset Protection Group. See FTC v. Neiswonger, Civil No. 96-2225-SNL (E.D. Mo. Nov. 13, 1996); United States v. Reed, Civil No. 07-1471 (E.D. Mo. Aug. 20, 2007). It also includes the recent criminal indictment against William Reed and Wendell Waite, CPA. See United States v. Reed et al., 11-cr-00247 (D. Nev. July 5, 2011). The Plaintiff further asks the Court to take judicial notice of the lawsuit against Defendant Irving Cohen, Marvin Rosenbaum, and Herman Schwartzman in Morley v. Cohen, 610 F. Supp. 798, 804 (D. Md. 1985), as well as the jury verdict entered against Cohen in that case. See Morley v. Cohen, 888 F.2d 1006, 1008 (4th Cir. 1989).

(A)

In support of the motion as to William Reed and the Asset Protection Group (APG), the Plaintiff states that Irving Cohen hired Reed's company, APG, to incorporate Defendant The Windsor Organization, Inc. in Nevada. Reed served as the nominee President of Windsor, which meant that APG served as the registered agent. The Nevada Secretary of State would see Reed's name as officer and director. The Plaintiff notes that Reed testified that he sold "privacy" as one of the benefits of a Nevada corporation, and that clients who wanted "total privacy" would ask Reed to serve as the nominee. Based on the foregoing, the Plaintiff asserts that the services provided by Reed and APG are relevant to the question of whether Cohen created Windsor to hold the Springfield Property as his nominee.

The Plaintiff further claims that, starting in 2006, Reed and APG came under scrutiny for its involvement with Reed's business partner, Richard Neiswonger. In April of 2007, the Eastern District of Missouri found Reed and APG in contempt for violating a 1997 permanent injunction against Neiswonger. See FTC v. Neiswonger, 494 F. Supp.2d 1067 (E.D. Mo. 2007). Subsequently, the Department of Justice sued to permanently enjoin Reed from promoting fraudulent tax schemes. See United States v. Reed, Civil No. 07-1471 (E.D. Mo. Aug. 20, 2007). In October of 2007, Reed consented to the entry of a permanent injunction against him. See id., Docket No. 5.

Although Windsor does not dispute these matters, Windsor asserts that these cases and their holdings are irrelevant under Rules 402, 403 and 404 of the Federal Rules of Evidence. Thus, it alleges these are not proper subjects of judicial notice. Windsor contends the fact that Neiswonger, Reed and APG were found to have violated an injunction entered in 1997 (five years before the incorporation of Windsor) in a case brought by the Federal Trade Commission is completely irrelevant to whether Windsor is holding property in Springfield as the nominee or alter ego of Irving Cohen. Moreover, Reed's alleged misleading ...


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