NEILSON UPDATE: Friday testimony continues U.S. side of case

(The following is the afternoon’s court action in the trial of Oxford FBI agent Hal Neilson, charged with 5 counts of lying about his financial interests in a building, which houses the Oxford FBI. It’s a rolling account, with the morning’s report below this one.)

(Click on News link for Friday’s round-up report on the trial.)

ABERDEEN – BACK FROM LUNCH, FRIDAY NOV. 12, 1010

1:20 P.M. – Judge re-enters courtroom.

Bourgeois asks court to receive “redacted” or amended FBI memo they discussed before the jury came in this morning. Defense says OK. It will be received under seal, the judge said.

MICHAEL D. TURNER – next witness / former Jackson FBI top legal guy until two years ago. Lives in Jackson, TN., retired.

Turner said: Knew Neilson in Jackson for 12 years, earlier in D.C.

Extensive testimony, basically says he repeatedly signed other intermediate reviewers’ names to confidential financial reports each year, to ensure they got certified on time. That he told a grand jury he “could not recall” a conversation with Neilson about part ownership of the Oxford FBI Building but would have told him no, if that conversation had happened.

Ultimately, Turner admitted he may not have been doing his job properly over the years and that, toward the end of his career, was kind of on auto-pilot, not paying attention to some details. That there were things he could not recall.

Earlier in his testimony, he said Neilson contacted him about propriety of owning rental property, asking if he remembered their conversation a while back. Then Turner said he was surprised to learn that Neilson owned part of the Oxford building. “I was obviously very surprised. I never knew it before.”

He repeatedly said Neilson never discussed that ownership with him, and if he had, he would have said no.

In taped recordings, Neilson was heard telling Inspector General attorney Susan Howell that Turner gave him the OK on the property. In a second tape, Neilson says to her that Turner said, you you can own it, but you can’t manage it.

Turner also said he had no involvement later with a construction “punch list” of items the FBI wanted completed on the building. He said the only property for Neilson that he knew about were a condo and a deer camp.

He told prosecutor Rene Salomon that if he had known about Neilson’s interest, he would have notified several layers of FBI superiors. “Nobody would have thougt that something like that could happen …. while on active duty.”

He said no one knew Neilson was a part owner during the construction project. He also said he had advised Neilson to do anything else for which he’s been cited as alleged wrongdoing.

On cross-examination by Michael, Turner went over testimony he gave to a federal grand jury last January. In it, he said he “couldn’t recall” giving Neilson the OK to own the property. He said he was trying to give Neilson the benefit of the doubt until Turner was absolutely sure of his recollection of the situation.

Michael said the phrase “don’t recall” implied to the grand jury that the conversation “could have occurred.” “I disagree. It never happened,” Turner said.

“What I’m telling you, if I had given him the authority to do that, I’d say I did,” Turner said.

Michael repeatedly questioned Turner about his practices, across several years, of signing signatures for intermediate reviewers on the financial disclosure reports, even when those people were available to make their own reviews.

Turner conceded that was true, but that he felt it was acceptable practice, especially when it got the reports certified on time.

“Is it more important to look good than to do it right,” Michael said. “No, the most important thing was to meet the deadline,” Turner answered.

About 3:25 p.m., Turner admitted he’d never been trained about the Conflict of Interest code section of law, and had never even heard of it until Neilson was accused in connection with it.

He also said that whatever Neilson was doing that related to the building, so long as Neilson wasn’t taking too much time away from his FBI duties, it wasn’t a problem.

And he said he never told Neilson he was doing anything wrong on his financial disclosure forms. He also said he never recalled giving anyone a written opinion about a question, and that verbal responses were his method of answer.

On re-direct questioning from Salomon, Turner re-read instructions on disclosure forms about why they are to be filed – go safeguard filer and agency from problems or potential problems with conflicts of interest. And Turner repeated that it’s the employee’s responsibility to file completely and truthfully.

DONE – 3:48

CHARLES GARY MORROW – Meridian FBI special agent, also holds law degree. Was acting division counsel in Jackson for four months after Turner’s retirement. Was responsibility for dealing with confidential financial disclosure reports. Helped by Deborah Madden.

He repeated similar testimony about who files the reports and what’s included in the information. Report covers 10/1/05 through 12/31/06. This was the new electronic report process referred to by other witnesses.

He testified to the contents of Neilson’s 2006 report, which said he had no debts over $10,000 or any reportable outside positions.

Morrow identified $2.5 million loan by C&G dated 10/1/05, and C&G LLC agreement dated 10/7/05, with Neilson as a signer on each. Also on other documents, including borrower certificate with Protective Life, which loaned C&G the money; and the management agreement of C&G. All occurred within 2006 reporting period, for which Morrow had FBI supervisory responsibilities.

C&G’s 2006 partnership tax returns also were identified with Neilson’s signature, as well as Neilson’s hand-written note to his Jackson accountant about his tax returns in which he describes himself as an “active” manager of the properties owned by C&G and ACM, which was a Sardis lake house.

Morrow said that if he had known about the FBI property or the $50,000 loan, he would have asked more questions. And that he would not have approved the ownership.

CROSS-EXAMINATION by McCoy.

Morrow said he received no formal training on his responsibilities about the disclosure forms, although he knew he had a deadline to complete the process, which was aimed at determining potential conflicts of interest.

Looking at one of Neilson’s reports, which listed three outside positions, McCoy asked him if that number or ownership in a mortgage company would have caused him concern. Yes, he said.

Morrow also said he had no knowledge that Neilson was associated in any way with C&G prior to October 2005. And he said he wasn’t aware of any effort by Neilson to try to conceal or hide anything from the FBI.

In the end, on re-direct, Morris said it is the report’s filer who is responsible for telling the truth on it, in this case, Neilson.

SUSAN HOWELL – Investigator for the Office of Inspector General, based in Florida. She said it’s IG’s job to “look into waste or abuse” within the Department of Justice.

Howell testified about her lengthy investigation into the process, which was in two phases, to select a new site for a building to house the Oxford FBI and some other federal agencies. One was in 2001, with no site chosen, and the other in June 2002, which resulted in selection of the University Avenue property owned by C&G Properties partnership.

She said she became interested in Neilson’s involvement because he was a C&G partner and worked in the building.

Prosecutors played clips from recordings of Howell’s official interviews with Neilson during her investigation. On them, he said he was an owner of the property in 2004, that the $50,000 check from ACM to him was an “internal loan,”

She also said Neilson did not mention the loan or outside positions on his 2005 financial report. She identified numerous C&G business documents on which Neilson signed his name as a member or member/manager.

Howell said Neilson told her he received permission from Mike Turner to be part of the C&G building project before the first site selection process began, which was before December 2001.

As for the site selection processes, Howell said Neilson told her his involvement was “a very general role,” that he drove people around Oxford and gave general answers to their questions.

But she identified numerous site-process documents that showed Neilson’s signature on locations rated to be considered or not, and that one of them on South Lamar – owned by C&G partners John Covington and Dino Grisanti – he described in a note as the “desirable” site, which the FBI hoped would be chosen.

In recorded conversations, which the jury heard, Neilson said the others on the committee were “very secretive” about deliberations, didn’t include him and he didn’t recall signing any documents related to the process. He also said he did not promote any properties owned by Grisanti and Covington.

This is “inconsistent” with the excited just discussed, Howell said.

She said his answers caused her to have to re-interview numerous others and “significantly delayed” her investigation.

At this point, about 6 p.m., Judge Aycock stopped testimony and sent the jury home for the weekend.

“Keep an open mind,” she told them.

She also advised everyone that she intended to complete the trial next week, despite its slow going so far, and promised extended hours to get that done – 8:30 a.m. until 6 p.m. each day, at least.

(Come back to NEMS360.com next week for more developments.)

* * * *

ABERDEEN – Today wraps up the first week of Oxford FBI agent Hal Neilson’s federal trial on five counts that he lied about his financial interests in a building, which houses the FBI and other agencies.

Below is a “rolling” account as things happen in court. Come back to NEMS360.com for updates, as it’s possible during court breaks, and read Saturday’s Daily Journal for other highlights.

Each segment will be topped by a more recent one.

9:00 A.M.

(The prosecution continues to present its case, and when it’s done, the defense will get its turn. At the trial’s start Monday, Judge Sharion Aycock told potential jurors she thought it might last two weeks, but maybe not. Today, with only five of the government’s 44 listed possible witnesses taking the stand, you’ve got to wonder if this trial can wrap up by the end of next week. Perhaps the judge will speak about that soon.)

Attorneys are:

GOVERNMENT – Rene Salomon, Richard Bourgeois Jr., from the Middle District of Louisiana.

DEFENSE – Christi R. McCoy of Oxford, Ronald D. Michael and Seth Pounds of Booneville.

9:06 – Judge Aycock enters the courtroom.

Michael immediately objects to govt. use of “secret” FBI document, which he says has “damned” Neilson’s character without specific findings. Objects to prejudice it has caused with jury and says it’s effect is tantamount to their asking court to declare a mistrial.

He presents Aycock with Aug. ’08 FBI document giving Neilson authority for expenses that prosecutors claim he didn’t have authority to make. She asks to give copy to prosecutors.

Michael says document contains no findings or conclusions – that it doesn’t say Neilson misspent or misappropriate money. He insists that if this issue is opened, the defense will have to bring in witnesses from D.C. to question how the document was prepared etc.

We have a memo that Mr. Neilson was authorized to make these expenses, he tells Aycock. But the jury has been led to believe that he was spending lavishly. “This has so tainted Mr. Neilson, that we’re entitled to a mistrial.”

Most of the characterizations to Mr. Gomez (on Wednesday) were that Mr. Neilson didn’t have the authority to do these things. The jury has the impression that he was the Kingpin – made them believe he was the bad guy, Michael said to the judge.

Bourgeois counted that the report’s findings show that Neilson traveled to D.C. inappropriately with a charter flight, spent lavishly and failed to obtain pre-approval. He sais his questions to Gomez were very general and asked if Gomez knew these findings occurred.

Michael came back, saying Bourgeois asked Gomez if these actions changed his opinion of Neilson. He also said that in Aug. ’08, the FBI authorized Neilson to make certain expenditures, including the flight for a DC-initiated meeting with the deputy director.

“We’re fixing to get into an entirely new issue,” Michael said. The jury has the impression that “my client has done something seriously wrong.

Aycock said the information is relevant to McCoy’s earlier questions to Gomez about his beliefs of Neilson’s character, which were positive. The government can attack those answers, she said.

She also said the report about Operation Second Hand Smoke does not indict Mr. Neilson but makes numerous references to unauthorized actions and abuse during the operation.
To the defense, she said they will have an opportunity for the jury to understand what is and isn’t in this report. She also said was is “not inclined” to allow any others, like people from D.C., to come in about the report. This is about Mr. Gomez’ opinion, you an’t make another case about that.

She agreed to allow the defense to bring in a memo from the D.C. FBI about Second Hand Smoke, but it will be under seal, like the report.

9:34 – The jury takes seats.

Aycock instructs them on 2 things: 1) the government is limited on questions about specific instances of conduct that may rebut Gomez’ testimony on Neilson’s character. 2) even though they will have recordings and transcripts of them, it’s the recordings that are the primary evidence, not the transcripts, which may or may not be correct.

9:40 – Steven Gomez, Neilson’s former supervisor in the Jackson FBI office, is on the stand.

Bourgeois walks him through questions about the Second Hand Smoke report. Gomez says that while he recommended Neilson for a job as chief division counsel in Memphis a few years ago, he would not do so now.

But on cross-examination, McCoy led Gomez to agree that the report, which was not definitive, and knowledge of FBI approval from Washington would not have affected his good opinion of Neilson.

DEBORAH MADDEN, next witness. 13 years with Jackson FBI division. Asst. to chief legal counsel and answers media questions.

Madden testified about the process of communicating with FBI employees who must fill out confidential financial disclosure forms, including Neilson. She also testified about turning those forms over to the CDC and, when the process was done, to informing FBI HQ,

She also testified that she handed out ethics regulations at the 2006 annual conference, although she said she did not maintain “official” sign-in about who was there. But, she said, anyone who wasn’t there was sent the documents they missed.

On cross-examination by Michael, she talked about the steps in review of the financial reports: first by the intermediate review and then by the final reviewer, at this point, that was Michael Turner.

While Madden denied any personal knowledge about whether Turner had signed Gomez’ name, without permission, to Neilson’s report, she identified Turner’s initials beside Gomez’ name on one report.

Salomon came back to have her repeat that it was the sole responsibility of the report’s filer – in this case Neilson – to list correctly and truthfully his assets, debts and outside positions on the reports. Not anyone else’s.

Asked by Michael about what she would have done, if she had known Turner was doing something incorrectly, she said, “I don’t know what I would have done.”

And she said that if Turner received a form that Gomez hadn’t signed as intermediate reviewer, it properly should have been sent back to Gomez for scrutiny.

LUNCH BREAK 11:58. Court to reconvene at 1:15 p.m.

• Come back for updates on NEMS360.com to be filed as possible. Read Saturday’s Daily Journal for details, too.

Patsy R. Brumfield / Daily Journal