Trial for Yellow House owner Carrie Neighbors starts

A federal trial is under way this week for a Lawrence woman who prosecutors say knowingly purchased stolen goods and later sold them on eBay in a wire fraud and money laundering case.

The trial in Kansas City, Kan., of Carrie Neighbors, owner of the Yellow House Store, comes after more than five years of investigations, court motions, and defendants accusing prosecutors and investigators — including Lawrence police — of corruption.

Neighbors and her husband, Guy Neighbors, face 18 counts of wire fraud, conspiracy and money laundering, but Carrie Neighbors is the only one currently on trial. Guy Neighbors has not been declared mentally competent to stand trial.

In a brief and in proposed jury instructions filed last week, Assistant U.S. Attorney Marietta Parker outlined several examples of evidence the government intends to present at this week’s trial, including recorded conversations that undercover officers and witnesses had with Carrie Neighbors, along with financial records.

“The United States reasonably believes that the evidence will establish that the defendants knew or were deliberately ignorant of the fact that many of the items they were selling via wire transmissions on the eBay website during the period of the conspiracy were stolen,” Parker wrote.

Prosecutors accuse the couple of selling items like tools, a flat-screen monitor, binoculars, men’s Armani jeans, musical instruments and computers.

In one instance, Parker alleges that in June 2006 Carrie Neighbors purchased items from a man named Joey Cadenhead. Cadenhead voluntarily recorded the transactions, and police later warned Neighbors about a person matching the Cadenhead’s description suspected of stealing from local retailers.

Neighbors denied any knowledge of Cadenhead, but authorities allege she purchased more items from him three days later.

“This evidence will be offered to establish the defendant’s willingness to purchase stolen property and to hide the identity of her suppliers from members of the law enforcement community,” Parker wrote in the brief.

The Neighborses have repeatedly said they did not knowingly purchase stolen goods.

The witness list in the current trial includes representatives of some Lawrence retailers and dozens of Lawrence police officers, including Capt. Tarik Khatib, now the department’s interim chief. Khatib was a sergeant involved in investigations in 2005 when police served a search warrant at the couple’s store and home.

Earlier this year Carrie Neighbors briefly served as her own attorney, but defense attorney John Duma has been reinstated as her counsel.

The trial began Monday and is expected to last two weeks in U.S. District Judge Carlos Murguia’s courtroom.

The couple also face two other pending federal cases. In those, prosecutors accuse the couple of manufacturing marijuana and obstructing a theft investigation.