Case Document 50-1 Filed 01/03/17

BRIAN J. STRETCH (CABN 163973)
United States Attorney

BARBARA J. VALLIERE (DCBN 439353)
Chief, Criminal Division

JOHN H. HEMANN (CABN 165823)
KATHERINE L. (CABN 252751)
Assistant United States Attorneys

450 Golden Gate Avenue, Box 36055
San Francisco, California 94102-3495
Telephone: (415) 436?7200

FAX: (415) 436-7234
john.hemann@usdoj.gov


Attorneys for United States of America
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF CALIFORNIA
SAN FRANCISCO DIVISION

 

Page 1 of 10

UNITED STATES OF AMERICA, Case No. CR 15-0454 HSG

Plaintiff, DECLARATION OF MARC L. TERBEEK IN
SUPPORT OF UNITED OPPOSITION
v. TO MOTION TO DISMISS

DANIEL RUSH, 
1
Defendant. 

1, Marc L. Terbeek, declare as follows:
1. Since 1993, I have been a licensed attorney in the State of California.
2. On January 7, 2015, I learned I was the target ofa federal criminal investigation when the

Federal Bureau of Investigation (FBI) executed a search warrant at my law offices located at 2648

International Boulevard in Oakland, California. Shortly thereafter, I retained counsel and began

cooperating with the FBI.

3. I make this declaration concerning my relationship with Daniel Rush, the defendant in the

above-captioned case. Unless otherwise noted, 1 make this declaration based on my own personal

TERBEEK DECLARATION
CR 15-0454 HSG 

 

W115

 

Case Document 50-1 Filed 01/03/17 Page 2 of 10

knowledge. With respect to those matters not personally known to me, I make this declaration upon
information and belief.

4. I ?rst met Rush at an Instituto Laboral de la Raza (Instituto) dinner celebrating James
Hoffa, Jr. at the Fairmont Hotel in late 2002 or early 2003, as I recall. I had just become a partner in the
law ?rm Mehlman Terbeek. My practice at the time focused mostly on real estate matters. One of
my clients introduced me to Rush at the dinner. Rush was on the Board of the Instituto. He also had a
private investigation business, Daniel J. Rush and Associates, and claimed that he often did work for
well?respected attorneys.

5. A few weeks after the dinner, Rush and I met for lunch. We talked about our respective
families and interests in Iaborjustice and civil rights. At that meeting or a subsequent one, I learned that
Rush was af?liated with the Local 5 of the United Food and Commercial Workers (UCFW). I also
learned that Rush was a recovering alcoholic/prescription pill abuser. I liked him and decided to hire
him to do some investigative work on one of my cases. I paid Rush a retainer for his services by check,
which I believed was in the amount of about $1,000. He completed the assignment and seemed
appreciative ofthe work. He expressed to me that I had provided signi?cant help to him in a time of
great ?nancial and emotional dif?culty.

6. I got to know Rush better over the next few years. Rush took an interest in my life, in
particular in my law practice, and we became friends, or so it seemed to me at the time. I would see him
a few times a month, including at Instituto dinners and political and union events. We would sometimes
meet for lunch at a pho restaurant in Oakland or other locations. I hired Rush to do investigative work
for me on a few occasions, the last of which was in 2008.

7. Beginning in 2003 and from time to time thereafter, Rush would refer small matters to
me without seeking anything in return. My understanding was that Rush met the referred clients
through his work as an investigator, or as a representative for the local chapter of the UFCW. Rush did
not ask for any compensation for the referrals until 2005 or 2006 when I secured a sizeable settlement in
a medical malpractice case he had referred to me. After he learned about the settlement, he asked for a

loan of about $15,000. I gave the money to him out of my share ofthe settlement and never asked for it

back. 

TERBEEK DECLARATION
CR 15-0454 HSG 2

 

 



Case Document 50-1 Filed 01/03/17 Page 3 of 10

8. Between approximately 2003 and 2006, I made personal loans to Rush on approximately
three occasions, in sums ranging from approximately $5,000 to $15,000. Rush paid each ofthese loans
back as agreed, with interest.

9. In 2004, there was a major change in California?s workers? compensation laws. One of
the new legal provisions allowed employers and unions to create their own networks of medical
providers to treat workers? compensation injuries outside of the state-administered workers?
compensation system. The idea was to improve medical care for workers by providing them with a
more accessible choice of physicians and a stream lined process for resolving claims. Rush envisioned
the UFCW setting up such a network for UFCW members, and other unions following the lead ofthe
UFCW. He traveled around the state promoting this idea, which he called Union Medicine, and seeking
donations from doctors who wanted to see unions like UFCW create provider networks. Rush asked me
to do a legal analysis regarding how to create Union Medicine, and I agreed. I also accompanied him to
some presentations, where I would comment on the law. There was no written retainer agreement.
Rush paid me $10,000 for my work. This was the ?rst and only time Rush himself ever paid me what
might be considered legal fees. He later suggested that the $10,000 could serve as a retainer if he were
sued down the line. My understanding was that the money Rush paid me came from the funds he had
collected from doctors.

10. In 2004, Rush ?rst raised the idea of my acquiring a workers? compensation practice
myself. I was not interested at that time, but in 2006, I decided I could take on such a practice. Rush
introduced me to Phil Weltin, a lawyer who had been doing workers? compensation cases referred to
him by the Instituto Laboral de la Raza. In October 2006, Weltin and I executed a formal letter
agreement transferring the practice to me in exchange for a 17% fee for active cases. There were about
300 active cases when I took over, many ofthem involving undocumented immigrants who had been
injured on thejob. As part of acquiring the workers? compensation practice, I also hired Leo Flores who
had previously been employed by Weltin as a hearing representative. (A hearing representative is a non-
lawyer who can perform the functions of a lawyer in the workers? compensation administrative law
system.) Mr. Flores had previously worked with Rush in connection with the Union Medicine project.

Once I took over the case load, I liked the mission ofthe case work, and with the Union Medicine 

TERBEEK DECLARATION
CR 15-0454 H36 3

 

 



Case Document 50-1 Filed 01/03/17 Page 4 of 10

project still appearing to be viable, Rush began to characterize us as partners in building a new model
for assisting injured workers. At first, Rush did not ask for a cut of the workers? compensation practice
income. Over time, following the dissolution of my marriage and my law partnership with Steve
Mehlman, and as the Instituto referred more workers? compensation cases to me, Rush began to pressure
me to compensate him for facilitating the referrals. 1 resisted this pressure initially, but eventually 
surrendered to this pressure, which included verbal and emotional abuse as well as threats of violence.
This compensation was in addition to charitable contributions Rush had previously directed me to make
to the Instituto, which I did willingly. Around this time, Rush began to describe us as business partners
because I had accepted his assistance, and he had helped build my practice.

1 I. In 2007, Rush?s uncle, Eugene Rush, died intestate. There were several heirs?Rush and
his cousins. Rush retained Mehlman Terbeek to represent the Eugene Rush estate during the probate
process. A formal engagement letter was executed, with Rush signing on behalf of the estate and me
signing on behalf of Mehlman Terbeek. (I concluded the representation under my own name
following the dissolution of Mehlman Terbeek.) Although Rush was the signatory, my client was the
estate itself and my ?duciary duties ran to the estate and all its bene?ciaries. The legal fees were paid
out of the estate. The probate process took about two years, during which time I met with Rush and the
other bene?ciaries to keep them apprised of the status of the matter. At the conclusion of the probate
process in January 2010, the probate court approved the creation of the 472 Rush Family Trust (Trust).
The deeds for several parcels of real property, including 472 West MacArthur Boulevard in Oakland,
were transferred into the Trust at its creation. Rush was the Trustee. I had no formal role in
administering the Trust and was not asked to do so at the time. Nevertheless, I made myself available to
assist as needed, though there was no formal retention agreement. In 20] l, for example, I handled a
foreclosure action that resulting in some property being deeded back to the Trust. When I did act in a
legal capacity on behalf of the Trust, the Trust was my client, not Rush personally.

12. My first personal representation of Rush was in the Matt Vasquez, et al. v. Dan Rush
a/k/a Daniel Rush d/b/a Daniel .1. Rush and Associates matter, Case No. CGC 08-481364. This action

was ?led in San Francisco Superior Court in September 2008 and it included breach of contract and

fraud claims. The plaintiffs were six individuals who had given Rush money in connection with his 

TERBEEK DECLARATION
CR 15?0454 HSG 4

 

 

 

 

Case Document 50-1 Filed 01/03/17 Page 5 of 10

promotion ofthe Union Medicine system. The case never got out ofthe pleading stage and was
eventually dismissed in or about June 2013. In connection with the case, I ?led demurrers and
discovery motions. There was no formal representation agreement for this matter and I was not
compensated beyond the $10,000 Rush had paid me circa 2005.

13. In 2007 my marriage of nearly 20 years ended. The following year, Mehlman Terbeek
collapsed after it was discovered that a long-time of?ce manager had been embezzling. Rush expressed
pleasure that I was now on my own, without a wife or law partner to distract me from developing my
law practice. I was deeply depressed. Since early 2007, Rush had repeatedly suggested that I might be
an alcoholic/addict. At his suggestion, I started going to Alcoholics Anonymous meetings with him
beginning in late 2008, with him acting as my sponsor. Throughout 2009 and 2010, Rush and I
regularly attended AA meetings together.

14. In 2009, I was rebuilding my life as a newly divorced and newly sober solo practitioner.
My workers? compensation practice was taking off and was becoming more profitable. Rush was
emerging from bankruptcy and dealing with the onset ofsome health problems. We were both taking
steps to develop business in the emerging medical marijuana industry. I was preparing to take on some
clients in that industry by familiarizing myselfwith local and state cannabis law. In 2010, Rush began
pitching the idea of unionizing medical marijuana workers through the UFCW. I shared Rush?s vision
of unionizing workers in a vulnerable industry and using the UFCW to drive forward cannabis
normalization. In late 2009 or early 2010, Rush began making increasingly aggressive demands for
?resources? from me. In doing so, he routinely reminded me ofall that he had done to build my practice
and said he could always find another lawyer to take on the business from the Instituto and employ Mr.
Flores. He also pointed out that I owed my sobriety to him, and because my sobriety was attributable to
him, everything I had was attributable in some manner to him. He noted that he was in a position to
keep an on me due to Mr. Flores?s position in my ?rm, his status as my AA sponsor and his role as
Treasurer for the Instituto.

15. Shortly after Thanksgiving 2009, Rush called me to ask for money. He said he was in

dire financial straits and could not buy Christmas gifts for his children. I loaned him $15,000, not

expecting him to repay it. About two weeks later, I learned that as administrator of the estate Rush had 

TERBEEK DECLARATION
CR 15-0454 HSG 5

 

 

Case Document 50-1 Filed 01/03/17 Page 6 of 10

encumbered the property at 472 West MacArthur with a $420,000 note from the Weisbach Family Trust,
which would be due in or around March 2010. Rush had a panicked desire to deal with the loan because
the property had been in the Rush property since the Civil War and he did not want be the one to lose it.
Rush did not inform me at the time he encumbered the property and did not consult with me prior to
doing so. Nor did he inform me what he had used the funds for.

16. At this time, 1 had a client named Martin Kaufman. Kaufman had been referred to me
by a tax preparer. Kaufman had signi?cant personal assets and wanted to invest in real estate. I knew at
least some ofhis money came from his work in the medical marijuana industry. I decided to put
Kaufman and Rush together to see if they could work out a deal. Between December 2009 and February
2010, they worked out an agreement whereby Kaufman would loan Rush $500,000 in cash, to be used to
retain and develop the property located at 472 West MacArthur Boulevard in Oakland. Rush promised
to pay Kaufman $3,000 per month in interest for 5 years (which Rush would generate through collection
of rent at the property), and then pay back the principal in January 2015.

17. Kaufman delivered the cash as promised in January 2010. Under intense pressure from
Rush, which included verbal and emotional abuse as well as threats of violence, I agreed to put the cash
into my accounts and then pay offthe note. I did this by making a series of deposits ofless than $10,000
at Bay Area Wells Fargo and Bank of America branches. At Rush?s suggestion, I structured the funds
into the banking system in this way in an effort to avoid arousing suspicion that might disrupt the payoff
ofthe Weisbach loan. Once 1 had deposited suf?cient funds, 1 obtained a cashier?s check for $420,000
and paid offthe note. Rush took the other $80,000 for his own use.

18. As for the interest payments, they were characterized in an agreement 1 drafted
as ?consulting fees? paid by the Trust to Kaufman. Almost as soon as the obligation to make the
interest payments arose, Rush told me he was unable to make them. I came to understand that
he could not make the payments because the tenants at 472 West MacArthur were family and friends
from whom he would not seek rent. Again under pressure from Rush, and in order to avoid a suit
against me and Rush by Kaufman, I transferred money from my law firm account to the Trust?s account

each month, and then cut a check from the Trust to Kaufman. was not reimbursed for these

expenditures. 

TERBEEK DECLARATION
CR 15-0454 H86 6

 

 

Case Document 50-1 Filed 01/03/17 Page 7 of 10

19. From 2010 forward. Rush and I devoted a signi?cant amount oftime and effort to our
shared goal oflegitimizing the medical marijuana industry. I helped develop a states? rights/Tenth
Amendment theory on medical cannabis which was that state regulation would provide some legal
protection from the risk of federal intervention. As part of this plan, if a cannabis operation was
associated with the UFCW, that would be an indication ofthe industry?s ability to comply with labor
law, bargaining, and structure. This, in turn, would provide some legitimacy to the industry, and the
union could help advocate for positive legislative changes.

20. With the permission ofthe UFCW, Rush tried to organize marijuana workers. He did
direct outreach and also proposed neutrality agreements to industry employers. He also engaged in
lobbying activity. Through this work, Rush encountered numerous people who ran marijuana and
marijuana?adjacent businesses. He referred many of these individuals to retain me as their lawyer to
assist them with obtaining permits, resolving disputes, and whatever other legal needs might arise. If
Rush learned that a referral had worked, and the client ended up retaining me, he would demand a
percentage of the initial retainer fee, sometimes amounting to the entire retainer fee, and on one
occasion, Rush wanted additional funds beyond the retainer. I was reluctant to pay these sums, but I
feared Rush?s response if I refused because Rush had previously made threats of physical harm and/ or
ofharm to my business (by disrupting referrals from the Instituto) when I resisted his requests. When I
could, I endeavored to keep him in the dark about the actual revenue stream from the workers?
compensation practice and the true amount of the fees I generated from his referrals, but I was
constantly fear?il that he might find out the truth from Mr. Flores or some other source.

In addition, sometime in 2010, furnished Rush with a credit card which he said he
would use for expenses when he was traveling for his organizing and lobbying activities. I initially
hesitated to provide the card, telling him that such an arrangement could be problematic given his
association in the UFCW. Rush responded angrily again by threatening me and my business, and he
also told me the UFCW lawyers had approved his receipt ofnon-UFCW funds to advance UFCW goals.
I told Rush he could charge a maximum of $2,000 per month on the card, but he often exceeded that
amount, sometimes by thousands of dollars. I noticed that a substantial portion of these charges
appeared to be personal and unrelated to UFCW business. We would frequently have arguments about

m8

TERBEEK DECLARATION
CR 15-0454 HSG 7

 

 



Case Document 50-1 Filed 01/03/17 Page 8 of 10

the card over phone and text messages, with Rush cajoling me and begging for funds to keep the card
current. These disputes resolved only when I paid offthe balance on the card using funds from my legal
practice, or otherwise ensured the card functioned by, for example, allowing the credit limit to be
increased. Given my prior experiences in dealing with Rush when his demands for resources were
rebuffed, I was afraid to terminate his access to the card. I was not reimbursed for Rush?s charges on the
credit card.

22. By 2014, medical marijuana was gaining traction nationally. Rush and I were expanding
ourjoint legitimization work to include clients in Nevada, Washington, Colorado and elsewhere.
Though things were going relatively well, Rush did not have the money to repay Kaufman the $500,000
Kaufman had loaned him in 2010. In addition, Rush had borrowed another $100,000 in cash from
Kaufman, so he now owed him $600,000. (I was unaware ofthe additional $100,000 at the time
Kaufman made that loan.) Kaufman believed I was responsible for the loan, owing to my introduction
ofhim to Rush and he suggested that he would sue not only Rush and the Trust over the matter but me
as well. I endeavored to help Rush get Kaufman to forgive the loan. To bring this about, between
January and October 2014, I had a series of meetings, some with Kaufman, and some with his close
business associate, Derek Peterson. Rush also participated in meetings with Peterson. During the
meetings, we highlighted the bene?ts Rush and I had provided over the last ?ve years, including
political introductions, lobbying, and facilitating Kaufman?s wife?s and Peterson?s dispensary Blum
Oakland taking over tenancy at 578 West Grand Avenue in Oakland.

23. In addition, Rush agreed that if Kaufman forgave the loan, Rush would get MediFarm, an
entity in which both Kaufman and Peterson had an interest, a modi?ed UFCW neutrality agreement.
This agreement would give MediFarm the full bene?ts ofa neutrality agreement?chie?y, UFCW
endorsement and promotion?without actually committing MediFarm to provide important information
other signatories would be called upon to supply in order to assist the UFCW in the negotiation process.
In addition, with Rush?s knowledge and consent, I prepared a fictional promissory note for Michael
Steele, whom I believed to be an associate of Kaufman. I understood Steele would use the note in the
event he was audited on a tax return, which falsely characterized the soon?to-be defaulted Kaufman-

Rush loan as a bad loan from Steele to Rush. My understanding was that Kaufman was concerned about

TERBEEK DECLARATION m6
CR 15-0454 HSG 8

 

 



Case Document 50-1 Filed 01/03/17 Page 9 of 10

helping Steele in this matter because, according to Kaufman, approximately $200,000 ofthe funds
loaned to Rush in 2010 had actually come from Steele, and Kaufman was concerned about Steele?s
potentially violent response to losing this sum. The neutrality agreement was executed in July, and
Kaufman-Steele tax fraud scheme was completed in October. On November 26, 2014, Kaufman came
to my offices to execute a settlement agreement releasing Rush, the Trust and myself from any liability
on the loan. 1 gave him a $50,000 check, and he signed a form releasing Rush from the debt obligation.

24. In 2012, 1 represented UFCW on a discrete project establishing a foundation that would
lobby the banking industry to start handling funds arising out ofmedical marijuana transactions. Rush
referred the UFCW to me and was aware of this representation. To my knowledge UFCW was not
aware of the financial relationship between Rush and me. UFCW paid me approximately $30,000 for
my work.

25. In July 2013, Rush and his wife Pamela Rush were sued in Los Angeles Superior Court
for defaulting on a promissory note they had signed in April 2009. The case was DFB, Inc. v. Daniel
Rush, et Case No. BC 514570. An associate in my law practice and represented the Rushes in this
matter. We ?led a demurrer on their behalf in October 2014. There was no written retainer agreement,
and my law ?rm was not compensated for its work. When the case did not resolve sought to transition the matter to another attorney who was representing the Rushes in an unrelated
lawsuit. Communications about the transition had begun before the FBI approached me about
cooperating. A substitution of counsel was effectuated in mid-January 2015.

26. Other than my Union Medicine legal analysis, my representation of the estate/Trust, and
my handling of the Vasquez and DFB cases, 1 did not perform any legal work for Rush between 2003
and 2015. I am aware that during this time Rush had different lawyers representing him in other
matters, including bankruptcy proceedings and a civil lawsuit related to an incident where a reckless
driver crashed into Rush?s home. I am also aware that Rush had a CPA and possibly attorneys assisting
him with tax matters. I believe he may also have had a lawyer representing him in ongoing family law
matters stemming from an earlier divorce. I never reviewed Rush?s personal tax returns before they
were filed or provided him with legal advice regarding his employment with UFCW.

ml}

TERBEEK DECLARATION
CR 15-0454 H86 9

 

 

Case Document 50-1 Filed 01/03/17 Page 10 of 10

27. I did not consider Rush to be my client with respect to our efforts to legitimize the
med ical marijuana industry. Instead, I was the unwilling supplier of resources that Rush was not
lawfully entitled to, and which I believed he used largely for his own purposes. Rush referred to us as
business partners, even going so far as to call us ?partners for life.?

28. After I decided to cooperate with the FBI, the ?les that had been seized from my of?ce
on January 7, 2015 were transferred from the FBI to my current legal counsel, where they remain. Upon
information and belief, no one from the government has reviewed those ?les other than the cursory
review performed by the agents who seized them. I have reviewed those ?les and they appear to be in
the same state they were in on the day they were seized, other than some loose materials have been
placed in envelopes. To date, the only documents that I have provided to the government are the
statements for the credit card I furnished to Rush as well as some other bank records.
Separately, I provided Special Agent Wynar with an old cellular phone containing some text messages
between Rush and me.

29. During the course ofmy cooperation with the FBI, no one ever instructed me to disclose
any privileged information. To the contrary, Special Agent Roahn Wynar cautioned me numerous times
to avoid doing anything that might violate anyone?s attorney client privilege.

30. I did not begin consensually monitoring any conversations with Rush until I had
withdrawn from the DFB matter. Once I began making consensual recordings, I understood that if I
believed a recording had captured a potentially privileged communication was to alert the FBI so that

recording could be segregated. I can only recall this happening on one occasion.

I declare under penalty of perjury that the above is true and correct to the best of my knowledge.

MARC L. TERBEEK

DATED: January 3, 2017

 

TERBEEK DECLARATION
CR 15-0454 HSG IO