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STEPHANIE YONEKURA Acting United States Attorney ROBERT E.
DUGDALE Assistant United States Attorney Chief, Criminal Division
STEPHEN I. GOORVITCH (California State Bar #199325) Assistant
United States Attorney Major Frauds Section
1100 United States Courthouse 312 North Spring Street Los
Angeles, California 90012 Telephone: (213) 894-2476 Facsimile:
(213) 894-6269 E-mail: [email protected]
Attorneys for Plaintiff UNITED STATES OF AMERICA
UNITED STATES DISTRICT COURT
FOR THE CENTRAL DISTRICT OF CALIFORNIA UNITED STATES OF
AMERICA,
Plaintiff, v.
KELLY GEARHART, Defendant.
Case No. 12-CR-631-ODW GOVERNMENTS SENTENCING POSITION [EXHIBITS
FILED UNDER SEPARATE COVER AND FILED UNDER SEAL] Sentencing
Hearing: June 1, 2015, at 11:00 a.m.
Plaintiff United States of America, by and through its counsel
of record, the United States Attorney for the Central District of
California and Assistant United States Attorney Stephen I.
Goorvitch, hereby files its sentencing position in this matter. The
governments sentencing position is based upon the attached
memorandum of points and authorities, the presentence investigation
report (the PSR), the files and records in this case, and any
evidence and argument that may be presented at the sentencing
hearing, which is currently scheduled for June 1, 2015, at 11:00
a.m.
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The government is seeking to file the exhibits under separate
cover, as some should be sealed, pursuant to the Courts sealing
orders or Federal Rule of Criminal Procedure 6(e). Defendant does
not object to filing the exhibits under seal. DATED: April 10, 2015
Respectfully submitted,
STEPHANIE YONEKURA Acting United States Attorney ROBERT E.
DUGDALE Assistant United States Attorney Chief, Criminal Division
/s/ Stephen I. Goorvitch_____ STEPHEN I. GOORVITCH Assistant United
States Attorney Major Frauds Section Attorneys for Plaintiff UNITED
STATES OF AMERICA
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MEMORANDUM OF POINTS AND AUTHORITIES I.
INTRODUCTION The government concurs with the findings and
conclusions in the PSR except as they relate to the number of
victims and, therefore, the loss amount. In fact, there are over
250 victims, and the losses are at least $14,718,690 (but less than
$20 million). Therefore, the total offense level is 33 (and not 29,
per the PSR), resulting in a sentencing range of 135 to 168 months
imprisonment. The government believes the sentencing enhancement
most in dispute is whether the Court should apply a two-level or a
six-level enhancement based upon the number of victims. The
disagreement over loss would not affect the Sentencing Guidelines
calculations, as both the PSR and the government believe the loss
is between $7 million and $20 million. The probation officer
recommends a sentence of 87 months imprisonment. See Recommendation
Letter. Defendant concedes that he should receive a sentence of at
least 57 months. See Plea Agreement at 2(i). However, the
government believes that a more stringent sentence is appropriate,
based upon the scope of the fraud and the devastating impact upon
the victims. Should the Court adopt the governments position and
find that the total offense level is 33, the government
respectfully recommends that the Court to sentence defendant to 135
months imprisonment. See Plea Agreement at 4(e)(1). Even if the
Court adopts the probation officers position and finds that the
total offense level is 29, the government respectfully recommends
that the Court sentence defendant to 108 months imprisonment. See
Plea Agreement at 4(e)(3).
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II. FACTUAL BACKGROUND
A. Defendants Business Defendant was a real estate developer in
San Luis Obispo County, California, and he funded his real estate
development projects through investment. See PSR 24. Defendant
raised money for his projects through a hard money lender called
Hurst Financial Corporation (Hurst Financial). See PSR 22. Hurst
Financial was owned and operated by James Hurst Miller Jr., who
pleaded guilty in Case No. 11-CR-793-ODW and will be sentenced on
July 27, 2015. See id. Millers daughter, Courtney Brard, also
worked at Hurst Financial. See PSR 23. Hurst Financial would act as
a middle man between individual investors and defendant. See PSR
22. Hurst Financial recruited investors, executed investment
contracts, collected the funds, disbursed the funds to defendant,
collected the payments from defendant, and paid the investors back.
See id. Miller and Brard promised investors that their money would
be earmarked for certain projects. See PSR 23. Defendant also
communicated directly with certain victims and made the same
promises as Miller and Brard, namely, that victims investments
would be used to develop specific projects and would be secured by
specific pieces of property. See PSR 26. Eventually, defendants
business failed, at which point the fraud came to light.
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B. Summary of the Fraud This case can be summarized in one
sentence: Defendant solicited funds from victims by making false
promises, which he did not honor. Defendant made three sets of
false promises. First, defendant told victims that he would use
their money to develop specific real estate projects, but instead
spent their money for other things, like making interest payments
to other investors. More important, defendant promised victims that
their investments would be secured by specific lots. Second,
defendant told victims that he would sell them specific plots of
land. This was fraud for two different reasons. Those lots were
being used to secure investments to develop the property, so
defendant was not authorized to sell them. Also, defendant sold the
same lots multiple times to different people. Third, after
defendant used the lots to secure investments and sold the same
lots to different people, defendant (with the assistance of Miller)
made it appear as though he owned the lots outright and used them
as collateral to obtain loans from two different banks. In other
words, defendant tricked the banks into loaning him money. C.
Defendants Misrepresentations to Develop Real Estate Projects 1.
Vista Del Hombre The focus of the governments case at sentencing
will be on one real estate development project called Vista Del
Hombre (hereinafter VDH), which was a golf course on which
defendant was going to build an office park. See Exhibit #5. As
discussed, defendant promised victims that he would use their money
to develop this project and
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that their investments would be secured by certain lots
underlying the VDH project. For example, defendant promised Del
Robasciotti and Nitsan Kolikant that their $190,000 investment
would be used to develop VDH and would be secured by Lot #18. See
PSR 38-40. It was important to Del Robasciotti that his investment
was secured by Lot #18, because it had a building on it, based upon
which he knew that he could recover something if defendants
business failed. See Exhibit #6 at pp. 156-62. Defendant promised
both Annette Le Duc and Joan Warnisher that each of their
investments of $50,000 would be used to develop VDH and would be
secured by Lot #10. See PSR 41-42.1 Defendant promised Jeanette
Gruidl (formerly known as Jeanette Paul) that her $400,000
investment would be used to develop VDH and would be secured by Lot
#26 through Lot #28. See PSR 43. Defendant promised Jeanette
Barnard that her $250,000 investment rolled over from other
projects would be used to develop VDH and would be secured by
certain VDH lots. See PSR 44. Defendant also promised Clotilde
Julien that her VDH investment would be secured by Lot #3. See PSR
45. As will be discussed below, defendant then tried to sell some
of those same lots (e.g., Lot #18) to other victims. Then,
defendant had Miller clear title to all of the lots lots that were
being used to safeguard victims investments and used them as
collateral to obtain bank loans.
1 The PSR incorrectly refers to this victim as Jennifer
Warnisher.
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2. Other Projects The bulk of the governments case focuses on
VDH because there is the strongest evidence of fraud. There are,
however, other projects and victims at issue in this case. For
example, Robert Olson invested $450,000 in a project located at
5901 East Mall Avenue in the City of Atascadero. See PSR 46.
Defendant promised him that the money would be used to purchase the
lot and construct a building. See PSR 46. However, nothing was
built on the lot, and Olson eventually foreclosed on the property.
See PSR 46. Similarly, Thomas Wooldridge invested a total of
$875,000 in two of defendants projects, one on Atascadero Avenue
and another on San Rafael Road. See PSR 48. The investments were
secured by Lot #6 of the Atascadero Avenue project and Lot #42 of
the San Rafael Road project. See PSR 48-49. However, then defendant
transferred Lot #42 of the San Rafael Road project to someone else
without Wooldridges knowledge. See PSR 51. 3. Summary The PSR finds
that there were 10 victims who communicated directly with defendant
and invested based upon his false promises. For purposes of
sentencing, the losses for these victims are $2,370,000. See PSR
67.2
2 The losses associated with the 15 victims who communicated
directly with defendant total $6,620,000. See PSR 67. Of this
total, $4,250,000 came from victims who thought they were
purchasing VDH lots. See PSR 27-36, 52. Therefore, the remaining
victims invested $2,370,000. See PSR 37-51.
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D. Defendants Misrepresentations to Sell Lots Then, defendant
sold certain Vista Del Hombre lots including those securing victims
investments to five victims. Defendant sold Lot #16 and Lot #18 to
Umer and Usman Iqbal for $1 million in total. See PSR 28-29.
Defendant did so, even though Lot #18 was securing Del Robasciotti
and Nitsan Kolikants investment, as discussed above. However,
defendant never transferred title to either of the brothers. See
PSR 30. Defendant sold Lot #16 and Lot #18 to Charles Liddell. See
PSR 32-33. These are the same lots defendant sold to the Iqbal
brothers, and Lot #18 was securing Del Robasciotti and Nitsan
Kolikants investment. Not only did defendant not transfer title of
those lots to Charles Liddell (or the Iqbal brothers), he gave
Liddell four contracts with the wrong lot numbers (specifically,
Lot #15, Lot #17, Lot #21, and Lot #22). See Exhibit #7 through
Exhibit #10. Defendant sold Lot #16 to Moe Abarghoei. See PSR 36.
This is the same lot that he sold to the Iqbal brothers and Charles
Liddell. However, defendant transferred title to Lot #17 to
Abarghoei, which is the same lot listed on Charles Liddells
contact. See PSR 36. Finally, defendant sold Lot #13 to Michael
Hawkins. See PSR 52. In total, defendant defrauded these victims
out of $4.25 million. See PSR 37-51. E. Defendants Fraudulent Loan
Applications Then, defendant applied for loans from Heritage Oaks
Bank and San Luis Trust Bank by misrepresenting that that he and/or
his limited liability corporation Vista Del Hombre LLC owned the
VDH
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lots that he pledged as collateral for the loans. See PSR 53.
Defendant persuaded Miller to clear title and reconvey those lots
back to defendant. See PSR 53. Specifically, Hurst Financial
reconveyed Lot #1 through Lot #20 and Lot #23 to Lot #37 back to
Vista Del Hombre, L.L.C. See PSR 55. Defendant then used those lots
the same lots that were securing victims investments and that
defendant sold (on multiple occasions to different victims) to
obtain $3,037,000 in bank loans. See PSR 53-59. Specifically,
defendant obtained: (1) a $1 million loan from Heritage Oaks Bank,
which was later increased to $1.5 million; (2) a $250,000 loan from
Heritage Oaks Bank; (3) a $350,000 loan from San Luis Trust Bank;
and (4) a $937,000 loan from San Luis Trust Bank. See PSR 58-59. F.
Defendant Misused Money Earmarked for Vista Del Hombre Defendant
also misused funds that were earmarked for the VDH project.
According to Millers Quickbooks accounting records, defendant
received $17,955,617 in investors funds relating to VDH. See
Exhibit #1. According to defendants Quickbooks records, defendant
spent only approximately $2,659,302 of those funds on developing
the VDH project. See id.; see also Exhibit #2. Defendants
Quickbooks show that defendant used approximately $7,890,148 to
make interest payments to VDH investors. See id. This is largely
confirmed by Hurst Financials Quickbooks accounting records that
indicate defendant paid approximately $7,865,125 in interest
payments. See Exhibit #1. Not only do the accounting records show
that defendant was making interest payments from other victims
investments, the VDH project never generated significant
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revenue, if any, so those payments necessarily came from other
sources. Of the funds that defendant received from Hurst Financial,
approximately $12,931,190 were transferred to accounts in the names
of defendant and his wife. See Exhibit #3 and Exhibit #4. The
governments position is not that defendant stole all of that money.
Rather, the evidence demonstrates that defendant commingled all of
his money. See Exhibit #1, Exhibit #3, and Exhibit #4. See also
Exhibit #11 at p. 446. Defendant may have spent some of the money
in his personal accounts on things related to VDH. See Exhibit #3
and Exhibit #4. However, a review of that account demonstrates that
defendant also spent money on things other than the VDH project,
including paying interest and expenses associated with other real
estate projects, in contravention of his promises. See Exhibit #3
and Exhibit #4. Perhaps more important, defendant took a draw from
the investments, which was his only source of income, see Exhibit
#11 at pp. 449-50. In that sense, defendant and his wife were
living off his failing business while making false promises to
victims. This is corroborated by Nancie Secher, who was defendants
accountant until 2004 or 2005. See Exhibit #11 at pp. 442-43.
Secher reported that defendant was losing money on a good majority
of his real estate development projects. See id. at p. 444. Secher
said that she reported that to defendant, but he continued to spend
money that he did not have. See id. at pp. 444-45. According to
Secher, defendant believed that he was entitled to spend all of his
revenue without regard to the expenses associated with those
projects. See id. at pp. 445. Secher reported that defendant
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continued to raise money for real estate development projects,
even after she told defendant that he was losing money. See id. at
pp. 449-450, 452. However, defendant continued to take an a draw
his only source of income during this same time period. See id. at
pp. 449, 454. Peggy Hutchins corroborated Sechers account. She
began working for defendant in September 2004. See Exhibit #12 at
p. 469. Hutchins remained until defendants business failed. See id.
at p. 473. She confirmed that defendant was transferring money into
his personal account. See id. at p. 471. Hutchins also confirmed
that defendant was borrowing money from Hurst Financial in order to
make interest payments to other investors, see Exhibit #12 at pp.
472-73, which contradicts his representations that money would be
used to develop certain real estate projects. Finally, Hutchins
corroborated that Secher informed defendant that he was losing
money on his projects. See id. at p. 479. Therefore, the evidence
demonstrates that defendant was raising money, even though he knew
he was losing money on his real estate development projects, and
that he used some of that money to live. The evidence also
demonstrates that defendant was spending money on things other than
the intended purposes. Regardless, how defendant spent the VDH
money is of less relevance to the sentencing proceedings, because:
(1) It would not change the Sentencing Guidelines loss enhancement;
and (2) Regardless of how he spent the money, defendant still stole
the lots securing the victims investments, sold them to different
people, and then used them to obtain bank loans that he could not
pay back. So, even if defendant
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spent every penny of the VDH money lawfully, there would still
be fraud upon the over 250 VDH investors.
III. OBJECTIONS TO PSR
The government raises two objections to the PSR. First, the PSR
finds that there are only 17 victims (the 15 individuals who
communicated directly with defendant and the two banks who loaned
him money). See PSR 78. Therefore, the PSR finds a two-level victim
enhancement under U.S.S.G. 2B1.1(b)(2)(A). The government objects
because there are over 250 victims, resulting in a six-level victim
enhancement under U.S.S.G. 2B1.1(b)(2)(C). Second, the PSR finds
that there $6,620,000 in losses to the 15 individual victims and
$3,037,500 in losses to the banks. See PSR 79. Therefore, the PSR
finds a 20-level loss enhancement under U.S.S.G. 2B1.1(b)(1)(K).
Because there are additional victims, the government believes that
the losses total at least $14,718,690 (but less than $20 million).
However, that would not change the loss enhancement recommended by
the PSR.
IV. SENTENCING GUIDELINES CALCULATIONS
A. Summary The government believes that the following Sentencing
Guidelines should apply to this case: Base Offense Level : 7
[U.S.S.G. 2B1.1(a)(1)] Losses Between $7M and $20M : +20 [U.S.S.G.
2B1.1(b)(1)(K)] Over 250 Victims : +6 [U.S.S.G. 2B1.1(b)(2)(C)]
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Over $1M from Financial Institutions : +2 [U.S.S.G.
2B1.1(b)(16)(A)] Money Laundering Enhancement : +1 [U.S.S.G.
2S1.1(b)(2)(A)] Acceptance of Responsibility : -3 [U.S.S.G. 3E1.1]
Total Offense Level : 33 The difference between the governments
calculations and those in the PSR is the victim enhancement. The
PSR finds that there are only 17 victims, resulting in a two-level
victim enhancement. The government believes that there are over 250
victims, resulting in a six-level victim enhancement. As far as the
government is concerned, this is the main Sentencing Guidelines
issue in dispute. B. Base Offense Level
Defendant pleaded guilty to mail and wire fraud charges, which
have a statutory maximum sentence of 20 years imprisonment.
Therefore, the PSR correctly finds that the base offense level is
7. See U.S.S.G. 2B1.1(a)(1). C. Number of Victims 1. Summary of
Issue The PSR limits the number of victims to only those people who
talked directly to defendant out of an abundance of caution. See
PSR 83. In doing so, the PSR excludes victims who relied on Miller
and Brards promises, which the government believes were made with
defendants knowledge and consent. In other words, the PSR concludes
that someone is not a victim for purposes of sentencing unless the
government can prove that they spoke directly with defendant (and
then finds that the evidence was insufficient in this regard).
While
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the government has great respect for the U.S. Probation Office,
the PSR is incorrect in this respect because defendant is
responsible for his relevant conduct, and losses from Miller and
Brards representations were entirely foreseeable to him. In fact,
there is ample corroboration for the fact that Miller and Brard
made those misrepresentations on behalf of defendant, especially
because defendant made those same misrepresentations himself.
Regardless, even accepting the PSRs view of relevant conduct and
limiting the number of victims to only those to whom defendant
communicated directly, there are still over 250 victims. Even if
defendant never spoke to the vast majority of the VDH investors, he
knew that their investments were secured by the VDH lots. When he
sold the lots out from under the victims and cleared title to those
lots and used them to obtain bank financing, he turned every VDH
investor into a victim. Finally, defendant attempted to lull the
VDH victims into maintaining their investments and not raise
issues. Therefore, there are over 250 victims.3 2. Relevant Conduct
The U.S. Sentencing Guidelines define an offense as the offense of
conviction and all relevant conduct under [U.S.S.G.] 1B1.3.
U.S.S.G. 1B1.1, Application Note #1(H). Relevant conduct includes
all acts and omissions committed, aided, abetted,
3 The government believes that defendant objects to the
argument
that every VDH investor is a victim. However, the government
does not believe that defendant disputes that there were, in fact,
over 250 investors in VDH. If the government is incorrect, it will
proffer evidence to establish that there were over 250 investors in
VDH.
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counseled, commanded, induced, procured, or willfully caused by
defendant. U.S.S.G. 1B1.3(a)(1)(A). Put another way, defendant is
responsible for all losses from his crime that are foreseeable to
him. See U.S.S.G. 2B1.1, n.3(A)(i). Defendant is responsible for
all losses associated with the VDH project because he induced
Miller and Brard to make misrepresentations on his behalf.
Specifically, defendant told Miller and Brard that the money they
raised would be used for specific projects, which they then
repeated to the victims. This is clear from the factual basis in
Millers plea agreement. See Exhibit #13. This is also clear from
the governments interview with Courtney Brard. See Exhibit #14 at
pp. 2-3. The government wishes to disclose that Miller pleaded
guilty in Case No. 11-CR-793-ODW and presumably expects to receive
a benefit under U.S.S.G. 5K1.1. It is also true that Courtney Brard
received immunity in this matter. However, their reports that
defendant stated that he would use money for specific projects are
corroborated by the fact that defendant personally told numerous
victims that he would use their money to develop VDH. For example,
defendant made that representation to Del Robasciotti, Nitsan
Kolikant, Annette Le Duc, Joan Warnisher, and Jeanette Gruidl. See
PSR 38-43. Simply, the fact that defendant made the same
misrepresentations to his victims confirms that he also made them
to Miller and Brard. Moreover, defendant deposited victims funds in
different checking accounts, each of which had the name of a
specific project. See Exhibit #11 at pp. 469-70; see also Exhibit
#3 and Exhibit #4. The fact that defendant deposited funds in
checking
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accounts named after each project corroborates that he was
supposed to spend the money to develop those projects. Finally,
logic dictates that if defendant was planning to develop VDH, he
likely told people that is what he intended to use the money for.
Therefore, there is ample corroboration that Miller and Brards
promises were sanctioned by defendant, or at least made with his
knowledge, making those losses foreseeable to defendant. 3. The
Security Interest Even if defendant did not personal communicate
with the vast majority of the VDH victims, he still victimized them
when he stole the security interest protecting their investments.
As discussed, the VDH victims investments were secured by the lots
underlying VDH. Defendant persuaded Miller to clear title to those
lots and reconvey them back to defendants limited liability
company. See PSR 53, 55. Defendant used those lots - the same lots
that were securing victims investments and that defendant sold
(sometimes on multiple occasions) to obtain $3,037,000 in bank
loans. See PSR 53-59. By doing so, defendant victimized all of the
VDH investors. While the government has great respect for the U.S.
Probation Office, the PSR does not address this reason why all VDH
investors are victims. 4. The Lulling Conduct Finally, defendant
victimized all of the VDH investors because he lulled them into
maintaining their investments. For example, defendant sent out a
lulling letter near the end of the fraud. See Exhibit #15. Lulling
conduct is part of the scheme charged in the indictment. See
Indictment at 2(c).
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5. Conclusion Based upon the foregoing, the government believes
that the Court should hold defendant responsible for all VDH
victims, as well as victims like Heritage Oaks Bank, San Luis Trust
Bank, Robert Olson, and Thomas Wooldridge because: (1) The losses
were relevant conduct and foreseeable to defendant; (2) Defendant
stole the VDH victims security interest; and (3) Defendant lulled
the VDH victims. Therefore, there should be a six-level victim
enhancement under U.S.S.G. 2B1.1(b)(2)(C). D. The Loss Amount The
PSR finds that the loss amounts for the 15 individuals victims who
communicated directly with defendant are $6,620,000. See PSR 78.
The PSR finds that the loss amounts to the banks are $3,037,500.
See PSR 79. Therefore, the PSR concludes that the total losses are
$9,657,500, resulting in a twenty-level loss enhancement, per
U.S.S.G. 2B1.1(b)(1)(K). As discussed above, the Court should find
that every investor in VDH is a victim for purposes of sentencing.
The additional losses would be $5,061,190, which raises the total
loss to $14,718,690. However, that would not change the loss
enhancement. E. Over $1 Million in Losses to Financial Institutions
As discussed above, defendant defrauded two banks out of
$3,037,500. Therefore, he is subject to a two-level enhancement for
deriving more than $1 million in gross receipts from one or more
financial institutions. See U.S.S.G. 2B1.1(b)(16)(A).
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F. Money Laundering Enhancement Defendant pleaded guilty to
money laundering, in violation of 18 U.S.C. 1957. Therefore, he is
subject to a one-level enhancement. See U.S.S.G. 2D1.1(b)(2)(A). G.
Acceptance of Responsibility Defendant pleaded guilty in a timely
fashion. Therefore, he is entitled to a three-level enhancement
under U.S.S.G. 3E1.1(a) and (b). H. Conclusion Based upon the
foregoing, the Court should find that the total offense level is
33. Because defendant falls within Criminal History Category I, the
Sentencing Guidelines range is 135 to 168 months imprisonment.
However, if the Court adopts the Sentencing Guidelines calculations
in the PSR, the total offense level would be 29, resulting in an
advisory sentencing range of 87 to 108 months imprisonment.
V. SENTENCING RECOMMENDATION
A. The Plea Agreement As discussed, the main issue in dispute as
far as the government is concerned is whether the total offense
level is 33 (with a six-level victim enhancement) or 29 (with a
two-level victim enhancement). The governments sentencing
recommendation is dependent on how the Court resolves this issue.
See Plea Agreement at 4(e). Should the Court find that the total
offense level is 33, the government would recommend a sentence at
the low-end of the applicable range, which in this case would be
135 months
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imprisonment. See Plea Agreement at 4(e)(1). Should the Court
find that the total offense level is 29, the government would
recommend a sentence within the applicable Sentencing Guidelines
range. See Plea Agreement at 4(e)(2). In this case, the government
would recommend a sentence of 108 months imprisonment. B. Analysis
of the Factors under 18 U.S.C. 3553(a) A sentence of 135 (or 108)
months imprisonment is warranted under the factors delineated in 18
U.S.C. 3553(a). This offense was serious, and a stringent sentence
is necessary to promote respect for the law and just punishment.
See 18 U.S.C. 3553(a)(1) & 2(A). Defendant lied to victims
either directly or through Hurst Financial about how their
investments would be spent and secured. Then, defendant sold the
same lots to different victims. Then, defendant took those lots
lots that were securing the VDH victims investments and that he
sold to multiple parties and used them to defraud two banks out of
a total of approximately $3 million. This reflects a pattern of
serious criminal conduct. This crime had a devastating impact on
the victims, as reflected by the victim impact statements, as well
as any victims who speak at the sentencing hearing. See 18 U.S.C.
3553(a)(2)(A). Many of the victims entrusted defendant with large
amounts of money, some of which the victims needed for retirement.
A long sentence is necessary to protect the public from defendant
getting back into the real estate development business or working
in fields that afford him unfettered discretion over how money is
spent. See 18 U.S.C. 3553(a)(2)(C). Simply, the longer
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defendant is in custody, the longer he is segregated from those
whom he might victimize. That having been said, the government does
not believe that a sentence in excess of 135 (or 108) months
imprisonment is necessary and respectfully requests that the Court
not sentence defendant in excess of the governments sentencing
recommendation. As an initial matter, defendant eventually pleaded
guilty, which saved the government (and the Court) considerable
resources in trying the case, so he is entitled to some amount of
leniency. Moreover, even though the evidence suggests that
defendant was losing money as early as 2004 and continued to
operate his business based upon new investments without disclosing
these losses, the government does not believe that defendant
started his business with the intention of committing fraud. That
distinguishes him from some fraud defendants prosecuted before this
Court. Finally, although defendant was taking a draw (a salary on
which he lived) while he continued to solicit new investments in
the face of his failing business, the government does not believe
that defendant stole the approximately $12.9 million that was
transferred to his personal account. These are mitigating factors
that would militate against the Court imposing a sentence in excess
of the governments recommendation. In consideration of both the
aggravating and mitigating factors, the government is recommending
a sentence of 135 (or 108) months imprisonment. Should the Court
adopt a lower Sentencing Guidelines range than that contemplated by
the government or the probation officer, the government reserves
its right to lower its sentencing recommendation pursuant to the
provisions of the plea agreement, as
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the government stands behind the recommendation in the plea
agreement. See Plea Agreement at 4(e).
VI. CONCLUSION
In conclusion, the government feels that the Court should impose
a meaningful sentence, in order to send a strong message to
defendant and his victims, as well as the community at large. The
government also recommends that the Court impose a term of
supervision of three years to afford the Court an opportunity to
monitor defendant following his release from custody. Therefore,
the government respectfully recommends a sentence of 135 (or 108)
months imprisonment, based upon a total offense level of 33 (or
29). DATED: April 10, 2015 Respectfully submitted,
STEPHANIE YONEKURA Acting United States Attorney ROBERT E.
DUGDALE Assistant United States Attorney Chief, Criminal Division
/s/ Stephen I. Goorvitch_____ STEPHEN I. GOORVITCH Assistant United
States Attorney Major Frauds Section Attorneys for Plaintiff UNITED
STATES OF AMERICA
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