Judge Buchwald Government Canard Rebuttal Letter

8/8/2019 Judge Buchwald Government Canard Rebuttal Letter

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D. B. Karron, Ph. D.

348 East Fulton Street

Long Beach, New York 11561

September 28, 2010

Hon. Naomi Reice Buchwald

United States District JudgeCourtroom: 21A

Daniel Patrick Moynihan United States Courthouse

500 Pearl St.

New York, NY 10007-1312

BY FAX TO CHAMBERS at +1 (212) 805 7927

RE: United States vs. Daniel B. Karron, 08 Civ. 10223 (NRB)(DFE)

Dear Judge Buchwald;

This letter is a direct rebuttal to the accusations leveled at myself by the Government in

their most recent letter of 17 September, 2010. They attempt to impeach the credibility and

admissibility of the sworn declaration of Dunlevy (amongst other allegations) because of

implied improper shredding of backup source documents. The Government hypothesizes (in its

footnote 1) that this is because the defendant had directed that the original backup for bills be

shredded. This implies that Dunlevys analysis is (amongst other allegations) incomplete and

should be removed from evidence, contrary to her sworn statements, because of the omission of

complete source documents.

This is factually incorrect. This can be disproven conclusively by three independent and separatecounter statements.

1) As is well known by anyone who has worked with myself, Dr. Karron has an annoying habit

of scanning into daily logs every document she has come into contact. Trial Transcript Page

48, Line 18 et seq, Page 601 Line 3 et seq, Page 674 Line 22 et seq.Trial Transcript Exerpts

Attached Exhibit 1. Despite the governments over seizure of all CASI computers in 2007, I paid

some $30,000 to recover image copies of all of the CASI business computer disks. Order

Docketed 10/15/07 attached as Exhibit 2. An exact copy was provided to the Government.

From there I was able to reconstruct the file systems, and from that, all of my daily log files.

Therefore; there are no missing source documents.

2) The discovery provided to the criminal defense team by the government at the first trial

consisted of 6,636 pages of Bates number stamped sheets. This consists mostly of bank and

credit card statements, vendor billing, and cancelled checks. This was entered into the criminal

trial record by stipulation as Government Exhibits 80, 81, 82, 90, 100, 101, 102, 103, 104,

120, 120A. Stipulation Attached as Exhibit 3. Additionally, components parts of Dunlevys


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forensic analysis were previously included as Defense Exhibit XXX, XXX-1, ZZZ, ZZZ-1.

Trial Transcript Page 1168 Line 1 et seq.Stipulation Attached as Exhibit 4. Her qualifications

as expert witness were not contested in the criminal trial. Trial Transcript Page 1173 Line 24-

25: THE COURT: She's -- therefore, she's an expert witness doing things in hindsight. See

also Trial Transcript Page 1165 Line 15 et seq. Between all of the Government and Defense

exhibits, there are no missing documents.

3) The Government is in possession of the each and every original physical paper check and

other documents from Computer Aided Surgery and CASI LLC. An additional scanned copy of

these documents (available on request and collated into the master reference collection) were

made on site at the Department of Justice by the defense lawyer William DiCenzo on May 27,

2008, prior to the first trial. The government has a set of original, un-shredded cancelled checks

and other documents.

Conclusion) Governments allegation of a deficiency in Dunlevy reconstruction due to the

unavailability of source documents is baseless. Both Government and Defendant have full set ofsource documents.

The defense has collated multiple sources for each document into a single reference copy of

each and every document. A reference document exists for each check, credit card receipt, bank

statement and credit card statement. These are filed by check number, and by statement closing

date for all accounts. This master reference collection contains original source document

records and Bates Stamped government provided records for the entire grant period, the run up

and aftermath where there are relevant transactions. We propose to the court to submit this asan electronic Appendix 2 to Dunlevys analysis.

The language used in attempting to impeach Dunlevy contains accusatory non sequitur

comments, and out of context quotations, but no salient facts or hard evidence.

1) Contemporaneous personal knowledge is not a requirement or even an issue; a thorough

document review is an issue. See Trial Courts comment above.

2) Culpability or Exculpation is not an issue. Admissibility of evidence is.

3) Rule 702(1): sufficiency of fact and documents is attested to by Dunlevy.

3) Rule 702(2) : the principles and methods are reliable accounting industry standard practice.

These principles and methods will be quoted from various accounting textbooks and American

Institute of Certified Public Accounting specifications and detailed in Dunlevy follow on

Declaration.4) Rule 702(3): these industry methods were used to prepare this particular exhibit testimony.

5) Rule 25(a)(2): Dunlevy is expert, experienced and knowledgeable. She will include a

copy of her resume in her follow on Declaration, and she has recited her experience in her

first Declaration. She was accepted as a witness in the criminal trial by the Trial Court. Trial

Transcript Page 1165 Line 15 et seq. (See above).


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A more complete response will be made by Dunlevys in her follow on Declaration and Source

Document Appendix 2.

The Plaintiff questions the relevance of Dunlevy Declaration to the establishment of Falsity

of Dr. Karrons certifications that she [Karron] was spending CASI funds according to the

budget provided for the project[Emphasis Added]. Plaintiff Letter of 17 September. It is clearfrom Table 1 of Karrons 56.1s opposing submission (Exhibit 5), that Karron did in fact

spend CASI funds to supplement the NIST ATP funding, in accordance with the co-funding

specification of the various approved grant budgets.

The truth or falsity of this CASI co-funding clearly requires tracing funds from Karrons bona

fide aftertax net take home salary- back to CASI. These monies were co-funding contributions

whether they were cash, checks deposited to the bank or monies advanced for the NIST ATP

project via credit card or personal checks of Karron. Because the government questions CASI

co-funding spending relative to (any of) the approved budgets, the relevance of Dunlevys

tracing analysis and other analysis is now indisputable to establish ground truth fiscal analysisand damage accounting.

Sincerely,

D. B. Karron

pro se

cc: Michael Byars by e-mail to [email protected]: Trial Transcript Excerpts, Docket Excerpts, Stipulations


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Exhibit 1 Criminal Trial Transcript Excerpts Cited

Page 48: Opening - Mr Rubinstein

18 He had four different color checks for each different

19 company that he had that was related to this. He then scanned

20 every single document, every single document he ever came in21 touch with. He didn't hide anything. I call upon them to

22 prove. They said it, that he changed records. He scanned

23 every single document he had, and they were in the computer,

24 and he hid nothing, nothing. How do you steal when you keep

25 records?

Page 601: Riley - cross

3 Q. And in fact every check was scanned into this system,

4 correct?

5 A. Yes, they scanned in checks and invoices.

6 Q. And the checks, invoices and backup, correct?7 A. Yeah, the invoices would be the backup. They scanned into

8 the computer and destroyed the original invoice.

9 Q. And in your audit of reviewing whenever a check was issued

10 and cashed was there an invoice that backed up that particular

11 item?

12 A. I don't remember specifically what it looked like, what

13 that record looked like.

14 Q. I'm not asking you what the record looked like, ma'am.

15 A. You're asking me if there was a check backing up the

16 invoice attached to each invoice.

17 Q. Right.18 A. I don't remember specifically in the instance of CASI if

19 they had copies of checks and copies of invoices attached to

20 each other. It's possible, but I don't specifically recollect

21 if they did or not.

22 Q. Well, if they had an expense that they wrote a check for

23 and there was no invoice as a backup, would you make a note of

24 that as an auditor?

25 A. Yes.

Page 602 Riley - cross

1 Q. And in fact in this case you made no notes of missing

2 invoices to match with checks, correct?3 A. Right, I don't think so, right.

4 Q. Now --

5 A. For the sample reviewed.

6 Q. That was the first review, the sample review, correct?

7 A. Both of them -- yes, they would have sample review.

8 Q. Did you ask questions of Dr. Karron?

9 A. Yes.


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10 Q. And did you ask him for specific information?11 A. Yes.

12 Q. And give us an illustration of something you asked Dr.

13 Karron for.

14 THE COURT: If you remember.

15 A. Well, I know I asked him what the employees did. That kind16 of information? I mean --

17 Q. Did he respond to you?

18 A. Yes.

19 Q. Did he respond to any question you asked him?

20 A. I think so.

21 Q. Did he offer to let you use the -- excuse me one second --

22 and did they actually show you on a computer screen documents

23 that had been stored in the computer --

24 A. Yes, yes.

25 Q. -- to show the expenses that were incurred and the backup

Page 603 Riley - cross1 why it was legitimate? Right?

2 A. They showed, documents --

3 MR. KWOK: Objection to form.

4 Q. Well, backup to explain what the expense was for.

5 THE COURT: Overruled. Could I hear the question

6 back.

7 (Record read)

8 THE COURT: It doesn't sound like a complete answer.

9 THE WITNESS: There was an objection, so I didn't know

10 if you --

11 A. They showed documents. They showed copies of invoices that12 they had scanned into the computer.

Page 674 Gurfein - cross

7 Q. And also were you aware that there was a program in effect

8 to scan all documents into that same computer system?

9 A. Yes.

10 Q. Did you participate in scanning documents into --

11 A. No.

12 Q. Did you participate in that Quick Book system generating

13 its own checks?14 A. No.

15 Q. Did it?

16 A. That it generated its own checks? Did I take part in that?

17 No.

18 Q. No, no, but did the system generate a check?

19 A. I'm sorry?

20 Q. The Quick Book system, did it generate checks?


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21 A. I don't know that.22 Q. Is it fair to say that Dr. Karron would have virtually

23 every piece of paper that came into the CASI --

24 MR. EVERDELL: Objection.

25 Q. -- grant scanned?

1 THE COURT: Objection sustained.2 Q. Well, who did you see scan documents into that computer

3 system?

4 A. Dr. Karron for the most part, and maybe some other people.

5 Q. Well, Margaret Ferrand, did you see her scan anything?

6 A. No.

Page 1165 Dunlevy Expert Witness Discussion

THE COURT: So just I know, who is the -- what's the

15 name of the witness?

16 MR. RUBINSTEIN: Deborah Dunlevy. And the only thing

17 I want to do is put the Master -- I didn't expect to have a18 problem, Judge, because these are records that --

19 THE COURT: Defendant can put in the Master Card.

1 ... She went over these

2 records. The government has never looked at these records

3 before I made an issue about it with Riley, and I think that

4 it's goes to the heart of the defense. Here he spent almost

5 $50,000 on his Master Card for grant items, and I think that

6 the defense should have the opportunity to put that into

7 evidence.

8 MR. KWOK: No, your Honor. This is --9 MR. RUBINSTEIN: Just like they put in the American

10 Express with my stipulations.

..

25 THE COURT: Just a second. I understood from the

1 testimony to date, that all the original transcripts of all

2 were destroyed and instead they relied on scanned documents.

3 MR. RUBINSTEIN: That's correct, Judge, scanned -- the

4 scanned Master Card bills. The monthly statements are -- you

5 know, in the modern era of paperless world, this is what people

6 do.

7 THE COURT: I just wanted to --8 MR. RUBINSTEIN: These are the Master Card --

9 THE COURT: So these are scanned, they're not Master

10 Card -- but they're the records of the -- business copies of

11 Master Card invoices.

12 MR. RUBINSTEIN: Right.

13 THE COURT: That have been scanned in, is that it?

14 MR. RUBINSTEIN: That's correct, your Honor.


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15 THE COURT: All right.16 MR. RUBINSTEIN: I've given them to the government.

17 THE COURT: They're not the originals. Go ahead.

Page 1169

1 MR. RUBINSTEIN: How could the government --2 THE COURT: I see. I'm sorry.

3 MR. RUBINSTEIN: I'm going to ask for the continuance

4 to get Master Card here. You know, for the government to have

5 the records -- and they had the Master Card records before, and

6 I mentioned the Master Card a long time ago. They have all of

7 this. For them to try to keep out of evidence legitimate

8 evidence that would show the defendant is innocent is, frankly,

9 Judge, not professional.

10 THE COURT: Well --

11 MR. RUBINSTEIN: Okay, it's not professional. I

12 expect more than from the representatives.13 THE COURT: I hear that. I'm not going to get into

14 that. But I've got to determine whether they're admissible,

15 and also whether the Government's had a fair opportunity. What

16 is -- where are the records? Let me see a copy of these

17 things --

18 MR. RUBINSTEIN: Okay, sure.

19 THE COURT: -- that you're talking about.


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OCT-12-2007 16:50 312126372527 9 1 2 1 ~ 3 ? 2 S ~ ; ~ - p : ) 3 T, ' \ I I, -, ,( I . . ~ . ..A -.USDC SDNY

' . ,

' ! OCT 1 5 Z(j97.U F J I T ~ D S T A T E S D I S T R I C T C O U R T , EI,EGPON:CAI.,LY FILED . .SOUTHERN DISTRICT OF N 3 W YOR I DOC #: ' , I >, . , I ; . .~- - - - - - - - - - - - - - . .~ .U N I T E D STATES OF A M E R I C A

D A N I E L B . KARRON, S 1 0 7 C r . 5 4 1 (RPP)D e f e n d a n t .

Upon t h e r e q u e s t o f D a n i e l 8 . K a rr o n, t h e d e f e n d a n t , b ya n d t h r o u g h nis a t t o r n e y Ro na ld R u b i n s t e i n , E s q . , t o r e t r i e v e andcopy c e r t a i n f i l e s p u r p o r t e d l y m a t e r i a l t o h i s d e fe n s e c u r r e n t l ys t o r e d i n r h e c om pu te rs , d a t a d r i v e s , a nd o t h e r e l e c t r o n i cs t o r a g e d e v i c e s ( " t h e C om pute r E qu ip me nt ") s e i z e d by f e d e r a l la we n f o rc e m e n t a g e n t s on o r a b o u t J u n e 2 6 , 2 0 0 7 , p u r su a n t t o aS e i z u r e Wa rr an t s i g n e d b y M a g i s ~ r a t e u d g e D o ug la s F. E a t o n on o ra b o u t J u n e 1 9 , 2 0 0 7 :

I t i s f ou n d t h a t t h e d e f e n d a n t a n d t h e G ov ernm en t h a v ea g r ee d t h a t t h e r e t r i e v a l a nd d u p l i c a t i o n o f t h e c o m pu t e r f i l e s( " th e d u p l i c a t i o n p r o c e s s ") b e h a nd l e d b y a q u a l i f i e d i n d e p e n de n t

' > ~


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It is further f0un.a that the defendant, by and throughhis attorney, has consented to provide the Government with exactelectronic copies of all documents and files that are retrievedor duplicated;

Therefore, it is ORDERED that the retrieval anddu pl ic a~ io n f the computer files be begun forthwith andcoapleted no later than November 1, 2007:

it is further ORDERED that, while the defendant may bepresent during the duplication process to assist Mr. Ehuan andhis designated representatives in identifying specific files tobe retrieved and duplicated, the defendant shall not operate anyof the Computer Equipment at any time, shall conduct himself in amanner that does not interfere with the duplication process, andshall comply with all instructions given by Mr. Ehuan and hisdesignated representatives.

Dated: New York, New Yorkoctober /$, 2007-- .

UNiTED STATES DISTRICT JUDGE

Case 1:07-cr-00541-RPP Document 16 Filed 10/15/07 Page 2 of 2


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UNITED STATES DISTRICT COURTSOUTHERN DISTRICT OF NEW YORK------------------------------------------------------------------------)(UNITED STATES OF AMERICA

-against-DANIEL B. KARRON,

Defendant------------------------------------------------------------------------)(

Indictment No. 07 CR 541 (RPP)STIPULATION

IT IS HEREBY STIPULATED AND AGREED by and among the United StatesofAmerica, by Michael J. Garcia, United States Attorney for the Southern District ofNew York,Chi T. Steve Kwok and Christian R. Everdell, Assistant United States Attorneys, of counsel, anddefendant DANIEL B. KARRON, by and with the consent of his attorney, Ronald Rubinstein,Esq. that:

1. Defense Exhibit XXX is a true and accurate reflection of the monies stillowed by Computer Aided Surgery, Inc. ("CASI") and Daniel B. Karron aftersuspension of the NIST grant through December 31, 2005 to its vendors;2. Defense Exhibit XXX-1 is a true and accurate reflection of the paymentsmade by CASI after suspension of the NIST grant for the period July 1,2003through December 31, 2003, organized by date and alphabetical order;3. Defense Exhibit ZZZ is a true and accurate reflection of the summary totalbreakdown of payments made using Daniel B. Karron's personal MasterCardnumber 5263-2710-0928-1872 during the period of the NIST grant fromOctober 1,2001 through December 31,2003, which are attributable to CASIbusiness expenses, and4. Defense Exhibit ZZZ-l is a true and accurate reflection of all payments madeusing Daniel B. Karron's personal MasterCard number 5263-2710-0928-1872during the period of the NIST grant from October 1,2001 through December31, 2003, which are attributable to CASI business expenses.


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IT IS FURTHER STIPULATED AND AGREED that defense exhibits XXX,XXX-I, ZZZ, and ZZZ-l may be received in evidence as defense exhibits at trial.Dated: New York, New York

June 10, 2008MICHAEL J. GARCIAUnited States Attorney for theSouthern District ofNew York

By: Chi T. Steve KwokChristian R. EverdellAssistant United States Attorneys

Ronald Rubinstein, Esq.Attorney for Daniel B. Karron

2


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U.S. Department of JusticeUnited States AttorneySouthern District ofNew York

86 Chambers Street, 3'" FloorNew York, New York 10007September 17, 2010

BY HANDHon. Naomi Reice BuchwaldUnited States District JudgeUnited States District Court500 Pearl StreetNew York, New York 10007

Re: United States v. Karron, 08 Civ. 10223 (NRB) (DFE)Dear Judge Buchwald:

Pursuant to Section 2B ofYour Honor's Individual Practices, I enclose two courtesycopies of the Government's reply briefwith respect to its June 18, 2010 motion for summaryjudgment (the "summary judgment motion").

I also write respectfully to request a pre-motion conference pursuant to Section 2.A ofYour Honor's Individual Practices regarding the Government's proposed motion to strike theDeclaration ofDeborah A. Dunlevy and the 860 pages of exhibits thereto, filed in opposition tothe summary judgment motion (the "Dunlevy Declaration" or "Dunlevy Decl."). The DunlevyDeclaration purports to provide the Court with a "comprehensive forensic reconstruction"accounting for how "every penny" was spent on the CASI project. Dunlevy Decl." 3 1, 8 31.

The Dunlevy Declaration is inadmissible as fact testimony because, as Ms. Dunlevyadmits, she has no contemporaneous personal knowledge of the events of the CASI project atissue in this case. See Dunlevy Decl. , 6 ("I was not involved with Karron or Computer AidedSurgery or CASI in any way during the NIST ATP project period, or afterward until sometime in2004."). Nor does the Dunlevy Declaration comport with the standards for admission of expertwitness testimony. Rule 702 of the Federal Rules of Evidence requires that "(1) the testimony isbased upon sufficient facts or data, (2) the testimony is the product of reliable principles andmethods, and (3) the witness has applied the principles and methods r e l i ~ b l y to the facts ofthecase." Fed. R. Evid. 702. As the Dunlevy Declaration contains hundreds of pages ofspreadsheets apparently prepared by Ms. Dunlevy, but almost no actual underlyingdocumentation, it is impossible to tell whether the requirements ofRules 702(1) or (3) regarding


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Hon. Naomi Reice Buchwald, page 2

the sufficiency of the underlyfng information or reliability of the analysis are satisfied. I Nor is itpossible to tell from the Dunlevy Declaration what principles and methods have been applied toarrive at her "comprehensive forensic reconstruction," as she has not provided basic informationrequired under Rule 26(a)(2) of the Federal Rules of Civil Procedure, such as her qualifications,publications and prior testimony. Although Dunlevy repeatedly references principles of tax lawand tax accounting, see, e.g., Dunlevy Decl. ,-r,-r 12-16; page 10 ("Rent"), she provides noindication of how such principles are relevant to the issue here, which is the falsity of Dr.Karron's certifications that she was spending CASI funds according to the budget approved forthe project. Finally, Ms. Dunlevy's declaration should be rejected because it is essentially aneffort to challenge Karron's criminal liability, which already has been determined by a jury. SeeDunlevy Decl. ,-r 10 ("I think Dr. Karron is a kook, but not a criminal.").

For these reasons, it does not appear that the Dunlevy Declaration is sufficiently reliableor relevant to this case to be admitted. Accordingly, the Government respectfully requests a premotion conference for the purpose of seeking leave to file a motion to strike the DunlevyDeclaration or, in the alternative, respectfully requests that the Court accept this letter in lieu ofsuch a motion.

Respectfully submitted,PREET BHARARAnited States Attorney

By:CHAEL J. BYA S

Assistant United StatesArneyTelephone: (212) 637-2793Facsimile: .(212) 637-2717E-mail: [email protected]

I Although Dunlevy affirms that she prepared her analysis on "source documents,"DunlevyDecl. 4 ,-r 2, she attached few of those actual documents and those that she does attachedare not informative on the issues. For example, she includes nine monthly banle accountstatements in exhibit group E2 but those statements are incomplete. While certain of thesestatements fall within the period at issue in this case (i.e., October 2001 through June 2003), thestatements neither cover the relevant time period nor provide specific information such as thepayees for the checks listed. See BAC429-32 (August 22- September 23, 2002), BAC433-35(September 24 - October 22, 2002), BAC436-39 (October 23 - November 22, 2002), BAC403-06(April 22 - May 21,2003), BAC407-411 (May 22 - June 20, 2003). In addition, Dunlevyincludes bank records outside of the period in question. See BAC421-25 (July 23 - August 21, .2003), BAC467-71 (December 20, 2003 - January 23,2004), BAC472-75 (January 24 - February23,2004), BAC484-88 (December 20,2003 - January 23,2004). The omission of thesedocuments from the Dunlevy Declaration may be explained by testimony at the criminal trialfrom Robert Benedict, who testified that the defendant had directed that the original backup forbills be shredded. See Trial. Tr. 982:20-984:25 (attached).


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Karron 56.1 Counterstatement Page 35 of 36 Pages total

15 C.F.R 14.25 (Karron Decl. Exhibit 160) below. Snowden in the Trial Transcript page 351

line 5 9 further confounds the court:

[SNOWDEN] THE WITNESS: It's not usually done, but the 10percent rule said he canmove it.THE COURT: Does he need prior approval for that?

THE WITNESS: No. We ask that we be notified, but he does not need prior approval.Moreover, notified they clearly were. Karron Decl. Exhibit Group 3. However, the

notification does not require a formal written application and response. Karron Decl LAW

Ex.303, Eisen Decl.

4. ADDITIONAL REFUTATIONSGROUND TRUTH QUARTERLY SPENDING BY REVISED SF269A

Table 1 Ground Truth Grant Spending for First Year by

Quarter cast in SF269A terminology.

This chart is the culmination of extensive forensic analysis of CASI-ATP spending by

quarter for the first year.Karron Decl. Exhibit 17-21 contains these figures in restated SF269A

Short Forms. The co-funding exceeded the spending except for Q2. The overall co-funding

SF269A Review

Corrected Figures Q1 Q2 Q3 Q4 x suma Total Outlays 258,320.00$ 190,036.00$ 214,071.00$ 223,545.00$ 885,972.00$

b Recipient Share of Outlays 41,682.00$ 1,365.00$ 17,053.00$ 18,104.00$ 78,204.00$

c Federal Share of Outlays 210,000.00$ 240,000.00$ 140,000.00$ 210,000.00$ 800,000.00$

d Total Unliquidated Obligations 6,638.00$ (51,329.00)$ 57,018.00$ (4,559.00)$ 7,768.00$

b+c+d 258,320.00$ 190,036.00$ 214,071.00$ 223,545.00$ 885,972.00$

Zero Check(b+c+d-a) -$ -$ -$ -$ -$

Original Date Signed 1/31/2002 4/21/2002 7/12/2002 10/28/2002 149,660.00$

a Total Outlays 219,573.00$ 188,203.00$ 208,727.00$ 212,977.00$ 829,480.00$

b Recipient Share of Outlays 9,573.00$ 8,214.00$ 8,727.00$ 2,979.00$ 29,493.00$

c Federal Share of Outlays 210,000.00$ 180,000.00$ 200,000.00$ 210,000.00$ 800,000.00$

Over Cofunding 48,320.00$ (49,964.00)$ 74,071.00$ 13,545.00$ 85,972.00$

Judge Buchwald Government Canard Rebuttal Letter

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