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June 26, 2001
Investors testify for defense, say they still trust Diamond
Diamond to decide today whether she will testify on own defense
BY CARL WALWORTH
URBANA - Most of the nine defense witnesses, including a medical researcher and a clinical psychologist who gave Arlene Diamond tens of thousands of dollars to "loan" to Omega Trust and Trading, testified Monday they still trust the California woman and believe they could receive return on their investment.
The foundation of the defense case appears to be a contention that Diamond believed Omega was a legitimate program, and that she honestly promoted Omega to people who still say Diamond is a believable, trustworthy person.
Defense attorney Diana Lenik on Monday completed all of the witnesses she plans to call in Diamond's defense in the first of two trials related to the Mattoon-based Omega program, which prosecutors describe as a prime bank scam that defrauded more than 10,000 people out of more than $20 million.
Diamond is to tell federal Judge Mike McCuskey this morning whether she'll testify in her own defense. If she doesn't testify, the defense is expected to rest its case, meaning closing arguments could begin as early as this morning.
Diamond is one of 19 people charged with a role in the offshore investment program called Omega. She's accused of soliciting money from investors, then helping to divert that money to personal uses of some of the co-conspirators. Fifteen people have pleaded guilty to one or more charges.
Those who testified in Diamond's defense described Diamond's lifestyle as modest. She drove an old car, slept on a mattress on the floor of a cramped apartment, attended free concerts and didn't display large amounts of cash.
But in some instances, Diamond's witnesses appeared to strengthen parts of the prosecution's case that was presented the past two weeks. For example, some witnesses testified they invested in other programs promoted by Diamond and so far have received no return on their investment.
All of those testifying, however, said they continue to believe in Diamond and spoke favorably of their dealings with Diamond, who prosecutors describe as a close associate and protege of Clyde D. Hood, the Mattoon man who has pleaded guilty in the case and agreed he had a lead role in a program Hood now calls a scam.
Barbara Pegram, a Ph.D. who worked in cardiovascular medical research for 18.5 years, said she flew to California for about five months in 1998 to volunteer to help Diamond with record-keeping and other Omega-related office tasks. Pegram testified she's invested about $20,000 in Omega, and also put money in a program involving wireless communication licenses she learned about through Diamond.
"I talked to very few (Omega) people who were disgruntled," Pegram said of her time working in Diamond's Los Angeles apartment/office. Pegram said she was and is impressed that Diamond is a Christian businesswoman.
Pegram said she isn't surprised that $1.5 million of $1.8 million deposited in the New Hope Trust account controlled by Diamond was withdrawn in cash because much of the money sent to Diamond was forwarded to Michael Kodosky, another alleged co-conspirator whose trial is set for July. Pegram said much of her information about Omega came from conversations with Kodosky.
"I can be very patient," Pegram said when asked when she thinks Omega will pay out.
"Good," replied lead prosecutor Esteban Sanchez.
Maurice Rapkin, an 85-year-old clinical psychologist from Santa Monica, Calif., who specializes in anger management therapy, testified he loaned more than $20,000 to Omega, and put a similar amount into other programs he heard about through Diamond. Those programs came "close" but didn't pay out after program organizers died, he said.
Rapkin said he "invited others to share the (Omega) goodies," and between 60 and 90 acquaintances decided to invest, sending the money to Kodosky, typically in cash.
"I thought the program was good and I still do," Rapkin said. "That's why I didn't ask for it (his investment) back. ... I expected to get a good return. It made sense to me up and down the line," although promoters said details of the program were secret.
Sanchez showed Lelah "Neena" Lockett of Columbia, Mo., a Diamond friend who works in the banking business, a copy of a $12,000 check Lockett sent to Omega last summer. The check was endorsed by Chris Engel and apparently deposited in Engel's construction business account. Engel has pleaded guilty to a money laundering charge.
Lockett said she's never heard of a program like Omega through banks she's worked at. But despite that, and evidence that her check was deposited in the account of someone she's never heard of, Lockett said she trusts Diamond and her investment.
Tom Hogshead, a contractor from Murfreesboro, Tenn., also went to California to meet with Diamond. He "loaned" more than $25,000 to Omega because of his trust in Diamond. "I still do (trust and believe in her)," Hogshead said.
Don Owens, a retired teacher from Florissant, Mo., estimated his deceased wife helped solicit Omega loans of more than $1 million after meeting Diamond. Owens said he and his family have about $7,000 in Omega.
Owens and his wife told people having personal financial difficulty that Omega could be the "answer to their prayer."
Beverly Swann of Inglewood, Calif., said she both lent money to Omega and volunteered to help with Diamond's office duties during 1998. She said she helped make out deposit tickets, and never saw Diamond keep any investor money for herself. Swann said she loaned more than $10,000 to Omega. Like the others, she's yet to receive any return but remains hopeful.
"Are you unhappy you lent money to Omega?" Lenik asked Swann. "No," was the reply.
One of Diamond's brothers, Ronald Foust, said Arlene mentioned to him a business venture called Omega, but he declined to invest and she didn't push the issue.
June 20, 2001
documents belonging to Diamond questioning legality of program
BY CARL WALWORTH
URBANA - Check by check, account by account and document by document, prosecutors on Monday took investigators through a series of transactions involving Arlene Diamond before resting their federal criminal case against the California woman.
The tedious set of testimony from IRS agent Vonnie Hinesley and FBI agent Rebecca Prather was a part of the government's effort to show that Diamond knew the Omega Trust and Trading program she was involved in was a scam.
Throughout six days of testimony from government witnesses, defense attorney Diana Lenik tried to show that Diamond didn't know the Omega program that offered 50-to-1 returns in about nine months was phony. No one received the promised return during the more than six years of Omega operations. More than 10,000 people worldwide were defrauded of more than $20 million, prosecutors say.
Diamond is accused of eight different counts in connection with Omega, including mail/wire fraud and conspiracy to commit money laundering. Prosecutors said money people put in Omega never was invested in any "offshore" program. Rather, it was diverted for personal use by Omega leaders and their friends.
Hinesley identified several items that question the legality of the Omega program that were seized from Diamond's modest Mattoon apartment during a search executed after 19 people were arrested last August. The documents include "cease and desist" orders involving Omega leaders in Missouri and Hawaii, a complaint lodged with the Michigan attorney general, and letters and correspondence from disgruntled investors.
Hinesley also testified about a series of transactions involving cash withdrawals from Diamond's "New Hope Trust" account at the Bank of America. The cash was converted to cashier's checks that were deposited into an account with other Omega money at the State Bank of Farina. Some of the money that originally came out of Diamond's account was later placed into the Miller Hardwood business account in Missouri. Other checks traced to Diamond's account were deposited into the Mattoon account of the Our Original Bakery, a business that never opened.
Hinesley testified that Diamond's "New Hope Trust" account had about $1.8 million go through it during a three-year period. About $1.5 million was withdrawn in a series of checks and cash transactions, but none of the checks were for typical household expenses such as food, utility bills, etc. About $250,000 in cash went to Omega founder Clyde D. Hood of Mattoon.
The search also led investigators to copies of a phony U.S. bond and Mexican certificate deposit in Diamond's files.
Hinesley said that Diamond's passport shows that Diamond's overseas travel since 1998 included trips to the United Arab Emirates and England. Diamond has an account at a bank in Dubai about which United States authorities were unable to obtain any information.
After Hinesley's testimony, prosecutors said they finished their case. Judge Mike McCuskey denied the routine motion from Lenik asking for a directed verdict in which defense attorneys contend prosecutors didn't meet minimum standards for a guilty finding.
The jury gets the rest of the week off and returns on Monday when the defense begins to present its evidence.
Lenik said she plans to call about 10 witnesses, but that could change after rulings late Tuesday afternoon regarding use of character witnesses. McCuskey said if Diamond has people testify about her honesty, character or related issues, it would open the door for prosecutors to ask about things such as Diamond's anti-government views, Diamond falsely representing herself as a foreign diplomat with immunity and Diamond representing herself to a co-defendant as an attorney (which she is not).
Prior to trial, McCuskey barred prosecutors from raising those issues because of their limited relevance and prejudicial nature.
The closest prosecutors came to such issues so far is a list of books and other items that were on one of the documents seized from Diamond's records. The list included a variety of cosmetics and then a series of books ranging from "How To Hide Your Assets and Disappear," to "How To Make Love All The Time."