In re Sanctuary Belize Litigation
Filing
946
MEMORANDUM OPINION. Signed by Judge Peter J. Messitte on 5/12/2020. (ybs, Deputy Clerk)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
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IN re SANCTUARY BELIZE
LITIGATION
Civil No. PJM 18-3309
MEMORANDUM OPINION
The Court considers the FTC’s Omnibus Motion to Strike, ECF No. 896, Defendants’
Motions to Strike, ECF Nos. 904, 906-915 and 940, the FTC’s Omnibus Opposition to Defendants’
Motions to Strike, ECF No. 922, and Defendants’ responses in Opposition to the FTC’s Omnibus
Motion to Strike, ECF Nos. 942, 944 and 9451. What is quite clear is that if, the Court had
attempted to rule on the admissibility of each and every document, piece of testimony, or argument
at the time they were offered during the trial, the proceedings—even apart from the disastrous
COVID-19 interruption—might yet be going on. Accordingly, the Court stands by its decision
(recognizing that occasionally it also made some rulings during trial) to allow in all evidence, but
directing the Parties to file post-trial Motions to Strike any evidence they believe was
inappropriately received during trial. Even then, in their post-trial motions, the Parties have
identified a myriad of objections to evidence they ask the Court to rule on. The task is formidable,
but for the most part the Court finds its unnecessary to rule on the objections item by item.
To begin, some perspective:
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Pukke e-mailed his response to the Court two days after the deadline to respond set forth in ECF No. 890.
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1. This was a non-jury trial. One of the fundaments of the law of evidence was not in play.
There was no need during the proceeding to keep lay jurors from in any way hearing about,
much less relying upon, arguably questionable evidence that might materially affect their
decision-making, whether it be hearsay, irrelevancies, immaterialities, documents of
questionable authenticity or the like. A judge sitting in a non-jury case is presumed to know
the law and is therefore deemed capable of sorting out what evidence should or should not
be admitted. See, e.g., Schultz v. Butcher, 24 F.3d 626, 632 (4th Cir. 1994) (adopting the
Fifth Circuit’s position in Gulf States Utils. Co. v. Ecodyne Corp., 635 F.2d 517 (5th Cir.
Unit A Jan. 1981) that “excluding relevant evidence on the basis of ‘unfair’ prejudice is a
useless procedure. Rule 403 assumes a trial judge is able to discern and weigh the improper
inferences, and then balance those improprieties against probative value and necessity.
Certainly, in a bench trial, the same judge can also exclude those improper inferences from
his mind in reaching a decision.”); United States v. Hassanzadeh, 271 F.3d 574, 578 (4th
Cir. 2001) (finding a district court did not abuse its discretion in admitting evidence of a
defendant’s prior conviction under Federal Rule of Evidence 404 because “we have
confidence that at the bench trial, the experienced district judge was able to separate the
emotional impact from the probative value of this potentially prejudicial evidence.”). In
fact, the Fourth Circuit has actually directed that “in the context of a bench trial, evidence
should not be excluded under 403 on the ground that it is unfairly prejudicial.” Id.
2. There is, moreover, a self-regulating feature in this particular case. Following the Court’s
present ruling on the Motions to Strike, the Parties will be submitting Proposed Findings
of Fact and Conclusions of Law, citing to evidence they feel either supports their case or
undermines that of their opponent(s). That means that much evidence, the admissibility of
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which is presently under challenge, may ultimately not be relied upon by a party in the
party’s final submissions. Beyond that, to the extent that a party may cite challenged
evidence, the Court may well deem the evidence of marginal relevancy or materiality (i.e.
not potentially outcome-determinative). Indeed, even if evidence may be objectionable and
potentially outcome-determinative, the Court may still decide that other, indisputably
better-grounded evidence, outweighs the challenged evidence. In this regard, the credibility
of the proponent of the challenged evidence is likely to play an important role in assessing
the strength of the objection.
3. All this is to say: it is essentially an academic exercise, demanding an excess of effort for
the Court, to rule on each and every objection before it can see how the evidence will
ultimately be deployed in the case.
4. One additional preliminary observation: a trial judge always hopes to conduct as error-free,
or perhaps better said, as non-reversible a trial as possible. Evidence that could be kept out
may nevertheless be let in, on the fair possibility that its admission will at most eventually
be deemed harmless. Accordingly, a general inclination on the judge’s part to let in as much
of the proffered evidence as possible, without seriously prejudicing a party, would seem to
be a reasonable guiding principle. None of this is intended to diminish the importance of
the Motions to Strike that the Parties have obviously spent considerable time crafting. At a
minimum, the Motions to Strike and the responses in Opposition will help the Court, along
with its own recollection of the evidence, focus on the weight the Court should give the
evidence if and when it is evaluated.
II.
That said, some categories of objections are easily ruled upon.
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1. The Court indicated it would receive all evidence duly received during the Preliminary
Injunction hearing, and confirms that proposition but, in fairness, this does not include
hearsay, such as affidavits or excerpts of affidavits.
2. Opening arguments, closing arguments, and in-between arguments of counsel or pro se
parties, including charts prepared by FTC counsel or pro se parties, are clearly not evidence
and will not be considered as such. However, charts or summaries based on otherwise dulyreceived evidence will be considered. Statements of fact made during any arguments at
trial but not made during the evidentiary phase of the trial where they were subject to crossexamination, will not be considered. However, evidence that was actually received during
the evidence phase of the trial but referred to in the arguments, of course, remains in play.
Moreover, that category of evidence and any reasonable inferences based on that evidence
may be referred to in the argument portions of the Parties’ final submissions.
3. The Court is well aware that Messrs. Pukke and Chadwick (to a lesser extent) pleaded the
Fifth Amendment during their pre-trial depositions, then sought to testify at trial and/or to
offer exhibits on topics that they declined to testify about on deposition. As to any and all
matters these Defendants refused to answer in their depositions on Fifth Amendment
grounds, their attempted trial testimony and any documents covering the matters they
declined to be deposed on will be struck because it “is well established that a witness, in a
single proceeding, may not testify voluntarily about a subject and then invoke the privilege
against self-incrimination when questioned about the details.” Mitchell v. United States,
526 U.S. 314, 321 (1999). On the other hand, as the Court has already ruled, the Court will
permit the FTC to argue that appropriate negative inferences should be made as to the
matters covered by the Fifth Amendment assertions. ECF No. 725 (citing Baxter v.
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Palmigiano, 425 U.S. 308, 318 (1976) and ePlus Tech., Inc. v. Aboud, 313 F.3d 166, 179
(4th Cir. 2002)). But, and this is important, the Court will not strike the testimony that
Baker may have given about the activity of Pukke or Chadwick when Baker was on the
stand, nor will the Court strike documents offered by Defendants that were created by any
Co-Defendant or agents or employees of said Co-Defendants, even though they may be
self-serving. These responses, of course, will be carefully weighed as possibly self-serving.
4. The Court understands that hearsay evidence, as a rule, should not be admitted; that is,
testimony or exhibits offered for the truth of the matter when the declarant did not appear
live in court subject to cross-examination should not be received. For instance, the Court
has ruled several times that affidavits and letters of SBE lot owners—satisfied or
dissatisfied—will not be considered and they will continue not to be considered. But there
was live testimony at trial by certain lot owners during trial on their satisfaction or
dissatisfaction, and that testimony, of course, will be considered insofar as the issue of lot
owners’ satisfaction or dissatisfaction is an issue. The Herskowitz letter, AP 411 and PB
35, bears special mention. Clearly it is hearsay because Herskowitz, the author, did not
testify at the trial nor was he duly deposed and his deposition offered in evidence.
Nevertheless, Pukke and Baker apparently intend for the Court to accept the letter for the
truth of the statements contained therein. But the Court clearly recalls testimony pertaining
to the circumstances surrounding the drafting of the letter, particularly insofar as Pukke
and Baker did not reveal those circumstances to the Court during trial until pressed by it.
The background of the Herskowitz letter clearly demonstrates why the hearsay rule is
important. Thus, while the letter will not come in for the truth of the statements contained
therein, it will come in insofar as it reflects on how the letter came about as well as Pukke
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and Baker’s candor and credibility in the case. As to all other hearsay evidence, the Court
will await the future filings of the Parties to see how, if at all, it is deployed and how
outcome-determinative it may be before evaluating it. Again, this is not to say that any
hearsay evidence will be deemed conclusive of the matters covered.
5. Somewhat more problematic is ruling on the admissibility of documents the FTC says
Defendants failed to produce before trial, despite one or more requests for production
having been made. Determining whether certain documents in a document-heavy case such
as this were in fact produced, then determining whether any non-production was
intentional, invariably present difficult tasks for a trial judge. Certainly the three remaining
active Defendants—Pukke, Baker, and Chadwick (at least to some extent)—did not have
the same advantages the FTC had in accessing documents and quite possibility they were
not, in every instance, able to get their hands on certain documents in timely fashion after
their production was requested. The Court will therefore receive all documents the FTC
says were not produced. (At the same time, the Court will also admit the Consumer
Committee Minutes insofar as they may be relevant, which, candidly, seems to be
marginally so, though it does not accept Pukke’s and Baker’s claims that they were
withheld by the FTC during discovery)2. Again, this is not to say that the documents are
authentic, non-hearsay, relevant or material. Nor of course are the documents necessarily
conclusive as to the matters they purport to address. Other evidence, more solidly
grounded—whether documentary or testimonial—will no doubt be cited in contradiction
to the non-produced documents. The Court will leave it to the FTC, in its opposition to
Baker, in his response to the FTC’s Omnibus Motion to Strike, once again asks the Court to impose sanctions on the
FTC for allegedly not producing documents it used at trial. The FTC filed a limited opposition, pointing out, again,
that Baker’s contention is baseless. ECF No. 930. The Court has already denied Baker’s and Pukke’s previous Motions
for Sanctions, ECF Nos. 929 and 943, and will DENY this instant motion as well.
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Defendants’ Proposed Findings of Fact and Conclusions of Law, to challenge the validity,
relevance, materiality or, weight to be given to any of the alleged non-produced documents.
6. A special word is in order about the Kanantik evidence. The FTC has proceeded on the
theory that Kanantik was at all relevant times intimately involved with SBE in terms of
marketing, sales, personnel, and other shared activities. Ample evidence to that effect was
presented at trial and the Court allowed the FTC to pursue both the theory and evidence in
support of it throughout the trial. Chadwick in particular has objected to virtually any
evidence relative to Kanantik being received and has asked the Court to strike virtually
wholesale all evidence pertaining to it. That request is rejected. At this juncture, arguably
at least, everything Kanantik is in play. Chadwick therefore may find himself at sea without
an anchor if he refuses to confront this reality in his future filings.
7. Out-of-court statements made by employees or agents of any and all Defendants, individual
or corporate, including Defendants who have settled the FTC’s claims against them, and
offered by the FTC, will be received as admissions of a party opponent, pursuant to Federal
Rule of Evidence 801(d)(2). Accordingly, there is no basis for Baker’s request to exclude
statements attributable to Usher, Kazazi, Costanzo (aka Connelly), and Greenfield. The
“missing witness” rule has no application in this case. But as indicated in Section II.3,
supra, certain documents offered by Defendants will also be received.
8. Pukke’s request to strike all depositions is totally groundless and is rejected. Any PartyDefendant, including an active, settling, or defaulting Defendant, may be deposed and their
depositions may be used in any way at the trial including as affirmative evidence or to
impeach the deponents’ testimony. Fed. R. Civ. P. 32. As to the use of the depositions as
affirmative evidence, designated excerpts or counter-designated excerpts of the depositions
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set forth in the Pre-Trial Order will be considered pursuant to the same rule and Local Rule
106. This includes depositions of nonparties, who may be deposed if opposing parties or
their counsel have been given notice of their depositions, and excerpts of such depositions
may be read into the record if previously designated or counter-designated in the Pre-Trial
order. Id.; Fed. R. Civ. P. 30.
9. All other exclusions requested by Defendants are denied. The Court finds that such
evidence has potential relevance to the allegations against Sanctuary Belize and one or
more Defendants. Such evidence is not excludable merely because Defendants are
displeased with what conclusions the evidence might lead to. Without limitations, this
evidence includes:
a. The Receiver’s Reports (these are court records and business records).
b. The Mathis Investment Agreements with Kanantik and her dealings with
Chadwick.
c. Any and all scripts, marketing materials, brochures or the like of Sanctuary Belize
and Kanantik seized from 3333 Michaelson Drive, Irvine, CA.
d. Testimony of Paige Reneau (but not including the e-mail purportedly sent by her
post-trial).
e. Testimony of Eric Lioy (presumably also Richard Peiser, the expert Pukke
apparently means to refer to).
f. Evidence pertaining to Baker’s purchase of items, including personal items, using
the funds of one or more corporate Defendants. (Arguably, this goes to Baker’s
activity as a knowing and active operative of one or more of the corporate
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Defendants. Baker was free at trial to explain some or all of the purchases and
indeed he undertook to do so.)
g. Any and all evidence pertaining to AmeriDebt, DebtWorks, and the so-called Parcel
Contempt. (The FTC may fairly argue that certain actions of Pukke and Baker taken
in and for Sanctuary Belize violated court orders and agreements related to these
cases. Chadwick’s involvement in the Pukke supervised release proceeding,
measured against evidence of his knowledge of Pukke’s involvement in and use of
aliases in the Sanctuary Belize enterprise offered at the recent trial, arguably
suggests possible perjury on his part in the earlier cases, hence reflects upon his
credibility in the present litigation.)
h. The “Hey Buddy” e-mail from Pukke to Chadwick (PX 663). (Though Chadwick
argues that “the FTC placed heavy reliance in its closing arguments on some
evidence that had not been previously used at trial,” including this e-mail, this email was in fact introduced at trial. Trial Tr. 2/6/20 afternoon, 105:9-106:2.) 3
i. Baker’s objection to evidence pertaining to Gordon Barienbrock. (Among other
things, Barienbrock apparently loaned money that allowed one or more Defendants
to purchase land for the Sanctuary Belize project. One or more Defendants or
related entities took back a purchase money mortgage. This transaction occurred at
the same time Defendants were purportedly representing to lot purchasers that the
SBE project was “debt-free.” Barienbrock might well have been added as a Relief
Defendant in this case, but in any event, despite Defendants’ suggestion that he was
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Chadwick also argues that he had no opportunity to cross-examine Pukke about the e-mail or explain the e-mail
himself when called by the Government as a witness. Chadwick did not call Pukke as a witness, and though the Court
left open the possibility that Chadwick might re-take the stand during the third week to supplement his original
testimony, he did not request to do so. Trial Tr. 1/28/20, 220:5-220:14.
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threatened and coerced, Barienbrock has signed a Settlement Agreement with the
Receiver, the approval of which is pending before the Court. The Parties are free to
argue the specific effect that the Settlement Agreement might have on the
litigation.)
j. “Old and outdated evidence,” or evidence supposedly “outside the Statue of
limitations,” or res judicata arguments. (These arguments are meaningless. If
evidence is relevant and material, it is not disqualified by reason of its age or the
passage of time. This might go to the weight of the evidence, not its admissibility.)
k. So called “unused” exhibits, of the FTC will not, at this juncture be excluded. (All
were marked and delivered to Pukke, Baker and Chadwick before trial, none of
whom objected to their authenticity when given an opportunity to do so by the
Court. Defendants, for the most part have not specified which “unused” exhibits
they have in mind, some of which may in fact have been used at trial. It remains to
be seen how, if at all, any exhibits not expressly introduced at trial will be deployed
by the FTC in the Proposed Findings of Fact and Conclusions of Law.) Baker
argues that the FTC did not disclose certain exhibits that it introduced at trial
pursuant to Federal Rule of Civil Procedure 26. However, Rule 26 does not require
exhibits used solely for impeachment purposes to be disclosed ahead of time, and
Baker has not specified which exhibits he believes were not disclosed ahead of trial
and were not used for impeachment purposes. Furthermore, the Court recalls that
many of the exhibits added to the FTC’s exhibit list during trial were in fact
documents the FTC had asked for, and which had not been received, or as to which
the Parties stipulated, or the Court took judicial notice of.
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A separate Order will issue.
May 12, 2020
/s/_______________
PETER J. MESSITTE
UNITED STATES DISTRICT JUDGE
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