D. B. Karron, Ph. D.

348 East Fulton Street

Long Beach, New York 11561
September 28, 2010
Hon. Naomi Reice Buchwald
United States District Judge
Courtroom: 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 Dunlevy’s 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 separate
counter 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 Dunlevy’s
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 of
source 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 as
an electronic Appendix 2 to Dunlevy’s 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).
A more complete response will be made by Dunlevy’s 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. Karron’s 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 clear
from Table 1 of Karron’s “56.1”s 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 Karron’s bona
fide after tax 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 Dunlevy’s
tracing analysis and other analysis is now indisputable to establish ground truth fiscal analysis
and damage accounting.

Sincerely,

D. B. Karron
pro se
cc: Michael Byars by e-mail to Michael.Byars@usdoj.gov
encl: Trial Transcript Excerpts, Docket Excerpts, Stipulations
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 in
21 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.
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 kind
16 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 - cross
1 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 that
12 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?
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 a
18 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.
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.
 OCT-12-2007 16:50 312126372527 9 1 2 1 ~ 3 ? 2 ,S ~ ; ~ - p : ) 3 I,T-
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U N I T E D STATES OF A M E R I C A

DANIEL B . KARRON, S 1 0 7 C r . 5 4 1 (RPP)

Defendant.

Upon t h e r e q u e s t o f D a n i e l 8 . K a r r o n , t h e d e f e n d a n t , b y

a n d t h r o u g h nis a t t o r n e y Ronald R u b i n s t e i n , E s q . , t o r e t r i e v e and

copy 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 f e n s e c u r r e n t l y

s t o r e d i n r h e computers, d a t a d r i v e s , and o t h e r e l e c t r o n i c

s t o r a g e d e v i c e s ( " t h e Computer Equipment") s e i z e d by f e d e r a l law

e n f o r c 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 , pursuant t o a

S e i z u r e W a r r a n t s i g n e d by M a g i s ~ r a t eJ u d g e D o u g l a s F. E a t o n on o r

about June 19, 2007:

I t i s f o u n d t h a t t h e d e f e n d a n t a n d t h e Government h a v e

a g r e e d t h a t t h e r e t r i e v a l and d u p l i c a t i o n o f t h e computer f i l e s

( " t h e d u p l i c a t i o n p r o c e s s " ) be h a n d l e d b y a q u a l i f i e d i n d e p e n d e n t
' .<
> ~
. ~ c o m p u t e r f o r e n s i c e x p e r t , A r t Ehuan of D i g i t a l F i r s t D i s c o v e r y ,
and h i s d e s i g n a t e d r e p r e s e n t a r i v e s ;

I t i s f u r t h e r found t h a t t h e d e f e n d a n t , by and t h r o u g h

h i s a t t o r n e y , has consented t o bear t h e f u l l c o s t of t h e

d u p l i c a t i o n p r o c e s s c h a r g ed by D i g i t a l F i r s t D i s c o v e r y , i n c l u d i n g

a n y a n d a l l a d v a n c e f e e s a n d / o r d e p o s i t s r e q u e s t e d by D i g i t a l

F i r s t Discovery t o begln t h e d u p l i c a t i o n process;

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

It is further f0un.a that the defendant, by and through

his attorney, has consented to provide the Government with exact
electronic copies of all documents and files that are retrieved
or duplicated;

Therefore, it is ORDERED that the retrieval and

duplica~ionof the computer files be begun forthwith and
coapleted no later than November 1, 2007:
it is further ORDERED that, while the defendant may be
present during the duplication process to assist Mr. Ehuan and

his designated representatives in identifying specific files to

be retrieved and duplicated, the defendant shall not operate any

of the Computer Equipment at any time, shall conduct himself in a

manner that does not interfere with the duplication process, and

shall comply with all instructions given by Mr. Ehuan and his
designated representatives.

Dated: New York, New York

october /$, 2007

-- .

UNiTED STATES DISTRICT JUDGE

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
------------------------------------------------------------------------)(
UNITED STATES OF AMERICA

-against- Indictment No. 07 CR 541 (RPP)

DANIEL B. KARRON, STIPULATION

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

IT IS HEREBY STIPULATED AND AGREED by and among the United States

of America, by Michael J. Garcia, United States Attorney for the Southern District of New York,
Chi T. Steve Kwok and Christian R. Everdell, Assistant United States Attorneys, of counsel, and
defendant 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 still
owed by Computer Aided Surgery, Inc. ("CASI") and Daniel B. Karron after
suspension of the NIST grant through December 31, 2005 to its vendors;

2. Defense Exhibit XXX-1 is a true and accurate reflection of the payments

made by CASI after suspension of the NIST grant for the period July 1,2003
through December 31, 2003, organized by date and alphabetical order;

3. Defense Exhibit ZZZ is a true and accurate reflection of the summary total
breakdown of payments made using Daniel B. Karron's personal MasterCard
number 5263-2710-0928-1872 during the period of the NIST grant from
October 1,2001 through December 31,2003, which are attributable to CASI
business expenses, and

4. Defense Exhibit ZZZ-l is a true and accurate reflection of all payments made
using Daniel B. Karron's personal MasterCard number 5263-2710-0928-1872
during the period of the NIST grant from October 1,2001 through December
31, 2003, which are attributable to CASI business expenses.
 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, 2008

MICHAEL J. GARCIA
United States Attorney for the
Southern District of New York

By:
Chi T. Steve Kwok
Christian R. Everdell
Assistant United States Attorneys

Ronald Rubinstein, Esq.

Attorney for Daniel B. Karron

2
 U.S. Department of Justice

United States Attorney

Southern District ofNew York

86 Chambers Street, 3'" Floor

New York, New York 10007

September 17, 2010

BY HAND
Hon. Naomi Reice Buchwald
United States District Judge
United States District Court
500 Pearl Street
New York, New York 10007

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

Dear Judge Buchwald:

Pursuant to Section 2B of Your Honor's Individual Practices, I enclose two courtesy

copies of the Government's reply brief with respect to its June 18, 2010 motion for summary
judgment (the "summary judgment motion").

I also write respectfully to request a pre-motion conference pursuant to Section 2.A of

Your Honor's Individual Practices regarding the Government's proposed motion to strike the
Declaration of Deborah A. Dunlevy and the 860 pages of exhibits thereto, filed in opposition to
the summary judgment motion (the "Dunlevy Declaration" or "Dunlevy Decl."). The Dunlevy
Declaration 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. Dunlevy

admits, she has no contemporaneous personal knowledge of the events of the CASI project at
issue in this case. See Dunlevy Decl. , 6 ("I was not involved with Karron or Computer Aided
Surgery or CASI in any way during the NIST ATP project period, or afterward until sometime in
2004."). Nor does the Dunlevy Declaration comport with the standards for admission of expert
witness testimony. Rule 702 of the Federal Rules of Evidence requires that "(1) the testimony is
based upon sufficient facts or data, (2) the testimony is the product of reliable principles and
methods, and (3) the witness has applied the principles and methods reli~bly to the facts ofthe
case." Fed. R. Evid. 702. As the Dunlevy Declaration contains hundreds of pages of
spreadsheets apparently prepared by Ms. Dunlevy, but almost no actual underlying
documentation, it is impossible to tell whether the requirements of Rules 702(1) or (3) regarding
Hon. Naomi Reice Buchwald, page 2

the sufficiency of the underlyfng information or reliability of the analysis are satisfied. I Nor is it
possible to tell from the Dunlevy Declaration what principles and methods have been applied to
arrive at her "comprehensive forensic reconstruction," as she has not provided basic information
required 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 law
and tax accounting, see, e.g., Dunlevy Decl. ,-r,-r 12-16; page 10 ("Rent"), she provides no
indication 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 for
the project. Finally, Ms. Dunlevy's declaration should be rejected because it is essentially an
effort to challenge Karron's criminal liability, which already has been determined by a jury. See
Dunlevy 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 reliable
or relevant to this case to be admitted. Accordingly, the Government respectfully requests a pre-
motion conference for the purpose of seeking leave to file a motion to strike the Dunlevy
Declaration or, in the alternative, respectfully requests that the Court accept this letter in lieu of
such a motion.

Respectfully submitted,

PREET BHARARA
nited States Attorney

By:
CHAEL J. BYA S
Assistant United States Arney
Telephone: (212) 637-2793
Facsimile: .(212) 637-2717
E-mail: michael.byars@usdoj.gov

I Although Dunlevy affirms that she prepared her analysis on "source documents,"
Dunlevy Decl. 4 ,-r 2, she attached few of those actual documents and those that she does attached
are not informative on the issues. For example, she includes nine monthly banle account
statements in exhibit group E2 but those statements are incomplete. While certain of these
statements fall within the period at issue in this case (i.e., October 2001 through June 2003), the
statements neither cover the relevant time period nor provide specific information such as the
payees 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, Dunlevy
includes 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 - February
23,2004), BAC484-88 (December 20,2003 - January 23,2004). The omission of these
documents from the Dunlevy Declaration may be explained by testimony at the criminal trial
from Robert Benedict, who testified that the defendant had directed that the original backup for
bills be shredded. See Trial. Tr. 982:20-984:25 (attached).
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