This story by Bob Audette was published by the Brattleboro Reformer on July 17.
[H]ARTFORD, CONN. — Details of a conversation between the conductor of “a high-tech Ponzi scheme” involving crypto-currency and an attorney representing investors who contest they lost upwards of $10 million in the scheme should be off limits to attorneys of the man accused of pulling the strings behind the scenes, lawyers say.
“[Stuart] Fraser is attempting to compel notes an attorney took while interviewing a witness,” wrote attorney Mark P. Kindall in documents filed July 6 in the U.S. District Court of the District of Vermont, referring to the man characterized as “behind the curtain” in the scheme. According to precedent, wrote Kindall, “an attorney’s notes from an interview with a witness are work product and can only be discovered in exceptional circumstances. Here, Fraser fails to explain why he has a substantial need for the notes and has put in little effort to obtain the substantial equivalent of the notes through the deposition of the witness.”
In May, Sarah Cave, an attorney for Fraser, requested an order that attorneys for investors alleging Fraser defrauded them out of millions of dollars “produce contemporaneous notes” of an interview conducted with Joshua Garza. In 2016, a handful of investors sued Fraser and Garza, accusing them of running a bitcoin Ponzi scheme that resulted in them losing more than $10 million. Several months after the filing, Garza, after meeting with an attorney for the plaintiffs, was dismissed from the suit.
In the May filing, Cave, of Hughes Hubbard & Reed, contended Fraser had a right to know what Garza said to get dropped from the civil suit.
Fraser, who has been characterized by the plaintiffs as Garza’s mentor and “the man behind the curtain,” has contested that he had very little, if any, control of Garza’s actions in the alleged Ponzi scheme. Fraser has claimed the plaintiffs made “a deal with the Devil, agreeing with the previously alleged mastermind of the fraud … Joshua Garza, to dismiss all the claims against him in exchange for purported information from him in the hope that it could cure the deficiencies in their claims against Fraser.”
Garza founded the now-defunct Optima Computers in 2002 and later with Fraser, Great Auk Wireless High Speed Internet, both in Brattleboro. In October 2016, Garza pleaded guilty to one count of wire fraud in a criminal action filed by the Securities and Exchange Commission. His sentencing was scheduled for January 2018, but has been rescheduled for September. In a civil action filed by the SEC, Garza was ordered to pay back nearly $10 million in restitution and fines.
“On a date in 2016 unknown to Mr. Fraser, one of Plaintiffs’ attorneys met with Garza and took detailed notes of Garza’s statements concerning his culpability, the Companies’ role in perpetuating fraud concerning cryptocurrency, and Mr. Fraser,” wrote Cave in her May filing.
However, Colin Watterson, of Susman Godfrey, has maintained his notes of the meeting between the plaintiffs and Garza constitute “attorney work product,” and reflect his “mental processes” and should not be given to Fraser’s attorneys.
“On October 26, 2016, I conducted an interview … in my capacity as an attorney representing plaintiffs in this case,” wrote Watterson. “The principal purpose of the interview was to learn information that would support plaintiffs’ claim that Stuart Fraser was a controlling person …”
Cave contends the notes are not protected because “Plaintiffs waived any protection by incorporating in the First Amended Complaint the statements and information Garza privately provided to them. When otherwise-protected information is put ‘at issue’ or relied on in a case, work product protection is waived.”
According to an analysis posted by the Boston Bar Journal, the “at issue” doctrine is a waiver of privilege “that occurs when a party puts otherwise privileged information … into a claim, counterclaim or defenses and an opposing party needs access to that information to respond properly.” According to the First Circuit, “when such a defense is raised, the pleader puts the nature of its lawyer’s advice squarely in issue, and, thus communications embodying the subject matter of the advice typically lose protection.”
“Fraser mistakenly cites case law relating to ‘at issue’ waiver,” wrote Kindall, of Izard, Kindall & Raabe LLP. “Those cases hold that when a party makes communications or documents protected by the attorney-client privilege or the workproduct doctrine a factual predicate in the case, privilege is waived. Here, plaintiffs are making historical facts, not legal advice, an issue in the case. ‘At issue’ waiver does not apply.”
The work-product doctrine “is intended to preserve a zone of privacy in which a lawyer can prepare and develop legal theories and strategy ‘with an eye toward litigation,’ free from unnecessary intrusion by his adversaries,” wrote Kindall. “The doctrine extends to notes, memoranda, correspondence, witness interviews, and other materials, whether they are created by an attorney or by an agent for the attorney.”
“It should be beyond dispute that notes prepared by an attorney documenting an interview with a witness during an ongoing lawsuit are work product,” wrote Kindall. Fraser’s attorneys argue that Watterson’s notes contain “factual information” relevant to his defense.
“Fraser has failed to show that the notes are … important to his defense,” wrote Kindall. “Fraser knows plaintiffs’ allegations from the amended complaint. That should be sufficient for him to prepare his defense through his own testimony, testimony of GAW Miners employees, through testimony from Garza, or from documentary evidence.”
Fraser is also welcome to “obtain the substantial equivalent of the notes through other means,” such as taking Garza’s deposition.
According to Kindall, Fraser’s attorneys have not made an adequate attempt to serve Garza, nor have they “hired a personal investigator or apparently taken any other steps to find Garza to serve him. And it simply is not the case that Garza cannot be found. Garza has pled guilty to wire fraud and is awaiting sentencing. While he is currently out of jail on bond, Garza is prohibited from leaving the continental United States and must advise a supervising officer if he moves.”
