Jonathan Anderson

USA TODAY NETWORK-Wisconsin

EAGLE RIVER - The state Department of Justice is trying to unconstitutionally silence two Northwoods brothers accused of financial crimes and the journalists who are covering their case, according to legal documents filed this week by a coalition of news organizations including USA TODAY NETWORK-Wisconsin.

The media coalition seeks to intervene in the prosecution of Brian and David Eliason of Vilas County to challenge the state's attempt to limit the defendants and their lawyers from speaking with reporters.

The proposed gag order would illegally restrict the "constitutionally guaranteed right to gather news regarding the case," wrote Steven Mandell, a Chicago lawyer representing the press groups.

State lawyers on Thursday defended the gag request, arguing that they were seeking to strike a balance "between the important constitutional rights of a fair trial and free speech."

The brothers were each charged in late February with 10 felony counts of securities fraud. They live and work in Vilas County but have done business throughout the state and country, including in Wausau and Appleton.

Department of Justice lawyers serving as special prosecutors claim the Eliasons misled investors by failing to disclose that their firm, Eliason Inc., was hemorrhaging millions of dollars and that auditors had questioned its ability to remain in business during last decade's economic recession. The company lost more than $8 million in 2006, $18 million in 2007 and nearly $28 million in 2008, when it was $63 million in debt, according to court records.

The financial condition of the firm mattered, prosecutors allege, because the brothers promised investors in 2009 that they were guaranteeing mortgages used to buy rental properties and had promised monthly payments backed by reserves. In fact, the company was insolvent, and in March 2009, one of the brothers told a bank that the company would not be able to cover operating expenses without an injection of between $3 million and $4 million, court records show.

At least 31 people had invested millions of dollars in a fund that was intended to generate revenue by renting out commercial and residential properties, according to court records. That fund filed for bankruptcy in 2011.

DOJ lawyers charged the brothers on Feb. 26 in Vilas County Circuit Court.



Days after the charges were filed, the Eliasons' lawyer, Milwaukee defense attorney Stephen Kravit, issued a four-page press release blasting the decision to prosecute. Kravit acknowledged that Eliason Inc. had financial challenges, but he asserted that the charges were “wrongly and unjustly brought." Kravit claimed the Eliasons had made requisite disclosures to investors about the company's money troubles, and that they had done so after consulting a lawyer.

“The criminal charge says the poor financial condition of Eliason Inc. wasn’t disclosed,” the press release reads. “That is not true."

It continues: "We encourage all observers to watch this case closely, as it is an example of abuse of discretion in the use of criminal prosecution. This case is an object lesson of government overreaching and misjudgment."

Kravit also is preparing to challenge the constitutionality of the state law that prosecutors have accused the Eliasons of violating, saying that enforcement of it has been "arbitrary and discriminatory," according to court records.

Local and state news outlets subsequently reported on the case, and on March 4, the state filed a request that a judge issue a gag order. The request initially sought to broadly prohibit the Eliasons and their attorneys from talking with the press and public about the court proceedings. Later in the request, the Justice Department asked to prohibit statements that would "have the likelihood of materially prejudicing" the proceedings, including tainting the jury pool in Vilas County, which has a population of about 21,000 people.

“There is a legitimate concern that, without an order limiting statements made to the public, publicity in this case could have a substantial effect on the ability to empanel a fair and impartial jury from the citizens of Vilas County,” state attorneys wrote in the request for the gag order.

The media coalition is opposing the proposed gag order because it would violate the First Amendment and hamper the flow of information about the case, according to Mandell, the coalition's lawyer.

“In making a clumsy attempt to muzzle its opponents, the state would impinge the rights of the parties, the press and the public,” Mandell wrote in court documents filed Monday.

Aside from USA TODAY NETWORK-Wisconsin, the media coalition includes publishers of the Milwaukee Journal Sentinel; Wisconsin State Journal and The Capital Times in Madison; The Lakeland Times in Minocqua; television stations in Wausau and Rhinelander; and the Wisconsin Newspaper Association and Wisconsin Broadcasters Association.

The coalition argues that the Justice Department has proposed “only the most extreme measure” to preserve juror integrity, and has failed to consider existing rules that govern lawyers' conduct. Those rules already prohibit lawyers from making statements that "have a substantial likelihood of materially prejudicing" proceedings. The rules also allow lawyers to speak publicly about legal claims and defenses, information that is public record and the status of cases.

The Eliason brothers also oppose the gag request.

Department of Justice lawyers responded to that opposition on Thursday. In a new court filing, the state clarified that it was not seeking a total ban on statements to the press, but rather a "narrowly tailored" gag order that would not let the Eliasons and their attorneys:

Identify witnesses and any testimony they might give

Second-guess the department's decision to prosecute

Discuss claims of innocence

Put forward legal arguments

Such an order has solid legal footing and would be less burdensome than moving a possible trial outside of Vilas County or calling in jurors from elsewhere, the state said. It also would help keep a lid on information that might not be admissible in court.

Since the charges were filed, Brian Eliason has retained a separate defense attorney, which is common in criminal proceedings involving multiple defendants. His new attorney is Dean Strang, who represented Steven Avery and gained fame this winter after the release of the Netflix series “Making a Murderer.”

The brothers each face up to 95 years in prison and fines in the six figures if convicted.

Even though the Department of Justice sought the gag order, Wisconsin Attorney General Brad Schimel commented on the case to the Milwaukee Journal Sentinel in March. The proposed gag order, he said, is to prevent the case from being tried in the media.

A Department of Justice spokesman declined comment for this story.

A court hearing is scheduled for next week.

Jonathan Anderson: 715-898-7010 or jonathan.anderson@gannettwisconsin.com; on Twitter @jonathanderson.