Free Sentencing Memorandum - District Court of Arizona - Arizona

1 LAW OFFICES OF MICHAEL J. BRESNEHAN, P.C. Michael J. Bresnehan, Esquire 2 1761 East McNair Drive, Suite 101 Tempe, AZ 85283-5002 3 480-345-7032 [email protected] 4 State Bar No.: 009415 5 Attorney for Defendant 6 7 8 9 10 11 vs. 12 KINDY JONAGAN, 13 14 15 COMES NOW the defendant, Kindy Jonagan, by and through the undersigned attorney, and Defendant. United States of America, Plaintiff, IN THE UNITED STATES DISTRICT COURT DISTRICT OF ARIZONA Case No.: CR-04-00820-006-PHX-FJM SENTENCING MEMORANDUM

16 hereby submits the following sentencing memorandum. 17 18 19 20 21 22 23 24 25 26 27 28 Case 2:04-cr-00820-FJM Document 247 Filed 05/08/2006 Page 1 of 14 s/ Michael J. Bresnehan Attorney for Defendant RESPECTFULLY SUBMITTED this 8th day of May, 2006 by MICHAEL J. BRESNEHAN, P.C.

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MEMORANDUM OF POINTS AND AUTHORITIES

2 STATUTORY CONSIDERATIONS 3 4 5 6 In United States v. Booker, 125 S.Ct. 738 (2005), the Court held that the United States Sentencing Guidelines ("U.S.S.G.") violate the Sixth Amendment of the United States Constitution, unless courts consider them to be merely "advisory" in determining just punishment for criminal

7 offenses. Booker, 125 S.Ct. at 757. However, the Court explained that the advisory Guideline 8 range remains one of several factors which must be considered in formulating a sentence. Booker, 9 125 S.Ct. at 767. 10 11 12 13 With the advent of Booker, the statutory imperatives in 18 U.S.C. 3553(a) have become the pre-eminent source of guidance in determining an appropriate sentence. In applying the principles of Booker, the Ninth Circuit Court of Appeals has stated: "Sentencing discretion is not boundless,

14 however; it must be tethered to the congressional goals of sentencing as reflected in the Sentencing
th 15 Reform Act" as codified in 18 U.S.C. 3553(a). United States v. Ameline, 40 F.3d 1073, (9 Cir.

16 2005). In 18 U.S.C. 3553(a), Congress mandated that: 17 18 19 20 21 22 23 24 25 26 27 28 Case 2:04-cr-00820-FJM Document 247 Filed 05/08/2006 2 Page 2 of 14 (a) The court shall impose a sentence sufficient, but not greater than necessary, to comply with the purposes set forth in paragraph (2) of this subsection. The court, in determining the particular sentence to be imposed, shall consider ­ (1) the nature and circumstances of the offense and the history and characteristics of the defendant; (2) the need for the sentence imposed; (A) to reflect the seriousness of the offense, to promote respect for the law, and to provide just punishment for the offense; (B) to afford adequate deterrence to criminal conduct; (C) to protect the public from further crimes of the defendant; and (D) to provide the defendant with needed educational or vocational training, medical care, or other correctional treatment in the most effective manner; (3) the kinds of sentences available;

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(4) the kinds of sentences and the sentencing range established [pursuant to the United States Sentencing Guidelines]; (5) any pertinent policy statement issued by the Sentencing Commission pursuant to 28 U.S.C. 994(a)(2) that is in effect on the date the defendant is sentenced; (6) the need to avoid unwarranted sentence disparities among defendants with similar records who have been found guilty of similar conduct; and (7) the need to provide restitution to any victims of the offense. Emphasis added. More recently, the Ninth Circuit Court of Appeals in U.S. v. Juan Antonio Zavala, ____ F. 3d ________ (2006) (No. 05-30120), copy attached hereto as exhibit "A", held that the United States Sentencing Guidelines (U.S.S.G.) do not carry with them any presumption of appropriateness. Rather, they are simply one factor to consider when selecting the most appropriate

14 sentence for a particular defendant. They are not to be given any greater weight than their fellow 15 sentencing factors. 16 17 18 Under the applicable offense and sentencing statutes, Kindy Jonagan is eligible for probation, and the maximum prison term allowable is 5 years.

APPLICATION OF THE STATUTORY SENTENCING FACTORS TO KINDY 19 JONAGAN'S CASE 20 21 22 23 24 a. Nature and Circumstances of Offense: The indictment in this case arises out of the activities of Corporate Industries and certain 1. The Nature and Circumstances of the Offense and History and Characteristics of the Offender

25 affiliated (largely shell) corporations. Corporate Industries was the creation of Harvey Sloniker. 26 During 1997, Harvey Sloniker brought together a group of individuals who collectively put in place 27 all of the components of a large telemarketing enterprise. They acquired physical facilities from 28 Case 2:04-cr-00820-FJM Document 247 Filed 05/08/2006 3 Page 3 of 14

1 which to launch operations. They created complex systems to address the hiring and training of 2 employees, all aspects of accounting, including cost, tax and financial accounting, a payroll system, 3 4 5 6 a highly complex and automated marketing system, and a management team. Early on, Corporate Industries did telemarketing for other companies on a contract basis. Eventually, Corporate Industries began marketing its own products and services, including the

7 product that led to the indictment in this case. 8 Between September, 2001 and July, 2002, Corporate Industries, using the moniker

9 American Financial Savings, marketed a specific bundle of products and services by promising the 10 11 12 13 customers a "major credit card". Instead, the fulfillment package contained a catalogue credit card, an application for a major credit card, credit rehabilitation information and coupons for other products and services. Thousands of people paid between $219 and $239 for what most thought

14 was an actual MasterCard, Visa or other major credit card, only to get the above-described bundle 15 of products and services. Deceptive marketing practices were employed, including a sales script 16 used by the telemarketers that was grossly misleading. Although the customers were told what they 17 18 19 20 21 22 were actually getting during a second (tape-recorded) conversation between a sales verification representative and the customer, in many cases the sales verification representative read the verification script so quickly, the information conveyed was unintelligible. b. History and Characteristics of Offender: Kindy Jonagan came to the company in 1999 with no criminal history and no telemarketing

23 experience. She was a high school graduate, with a work history comprised of mostly clerical 24 25 26 27 work. She was relatively unsophisticated, and had no experience in sales. She had previously worked in the health care industry and was looking for a career change. She knew that her brother, Harvey Sloniker, owned a sales and marketing company, but, at the time, did not know what the

28 company sold. At that time, Kindy did not have a close relationship with Harvey, and, at family Case 2:04-cr-00820-FJM Document 247 Filed 05/08/2006 4 Page 4 of 14

1 get-togethers, Harvey never spoke to Kindy about his business. Despite their tepid relationship, 2 Kindy approached Harvey for a job. Initially, Harvey was not keen on her joining the company. 3 4 5 6 7 Nevertheless, he offered her a job. Kindy started at Corporate Industries as a telephone sales representative ("TSR"). Before beginning work there, she filled out application materials and, later, trained with other TSRs. Kindy worked as a TSR for approximately two weeks. She was paid hourly plus

8 commission, like the other TSRs. She believes she made only a few sales. She used the same 9 script throughout the two weeks. It was not the script used to sell the American Financial Savings 10 11 12 13 product. The program she was assigned to sell seemed legitimate. After working as a TSR, Kindy began doing clerical and administrative work at Corporate Industries. She remembers someone in management (not Harvey) informing her of the change, and

14 she does not know exactly why the change was made. She was required to keep a daily timecard 15 throughout her tenure at Corporate Industries. 16 17 18 19 20 Although unsure of her exact job title, Kindy did not attend policy or strategy meetings with the managers, and had no input, whatsoever, regarding the company's marketing-related policies and procedures. While she is depicted in some of the company documents as a "manager" and "director", she was more akin to a glorified clerk. She never hired, fired, managed or trained

21 employees, she did not create or approve sales scripts, and she had limited access to company bank 22 accounts. She worked under Elaine Morewitz, Harvey's personal assistant, and, later, under Lianne 23 Seltzer when Lianne took Elaine's place in 2002. 24 25 26 27 Kindy's primary duty at Corporate Industries was reconciling accounts. When Kindy arrived each day at work, she had two reports on her desk. The first was a list of sales from the previous day, which was essentially a list of customers who had agreed to purchase the product.

28 The report was compiled by another Corporate Industries employee and faxed each night to ACH, Case 2:04-cr-00820-FJM Document 247 Filed 05/08/2006 5 Page 5 of 14

1 which performed wire transfers for Corporate. The other report was created and faxed by ACH to 2 Corporate Industries each morning. It documented the sales (list of customers and their account 3 4 5 6 information) from the previous day and each customer's payment status. Next to each sale, ACH included a payment comment, such as "paid," "cancelled," "NSF," or "incorrect routing number." Kindy performed two main tasks with these reports, keeping track of information she

7 gathered about each sale (including customer name, address, and phone number) on an Excel 8 spreadsheet. First, she compared the reports, making sure the ACH list contained each and every 9 sale documented on the Corporate Industries list. If a customer was missing from the ACH list, 10 11 12 13 Kindy typed a note on the Excel spreadsheet, and a manager would later access and update the customer's computer file accordingly. Any sales that were to be post-dated were also noted on the spreadsheet. Second, Kindy reviewed the payment status notes on the ACH report. She then typed

14 the payment status of each sale on her Excel spreadsheet. If a sale was marked "incorrect routing 15 number," Kindy compared the routing number on the ACH report with the number in Corporate 16 Industries' database. If indeed a discrepancy existed, Kindy listened to the verification recording 17 18 19 20 21 (or "genie") for the customer's own recitation of his or her routing number. Often, numbers had been transposed by the TSR who had entered them into the database. Kindy would type a note on her Excel spreadsheet regarding the problem and include the correct routing number, if possible. Kindy believes the purpose of her reconciling accounts and entering data in the computer

22 was to ensure that the customer service representatives had a correct and up-to-date picture of each 23 account in case a customer called-in with questions or complaints. The reconciling process was 24 25 26 27 also a mechanism to check for double-billing. Kindy recalls one occasion when she realized certain customers had been double-billed. The customers were refunded immediately. Kindy assumes that accounts she inputted in Excel as "NSF" or "incorrect routing number" were reviewed by

28 management and resubmitted to ACH for payment at a later date. Case 2:04-cr-00820-FJM Document 247 Filed 05/08/2006 6 Page 6 of 14

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In addition to reconciling accounts, Kindy opened and distributed company mail on a daily

2 basis. She also sometimes signed for incoming packages, but did not open them. Kindy picked up 3 4 5 6 mail from the mailbox outside, stamped it with the date received, and sorted it. The majority of the mail went to Elaine Morewitz. Kindy kept letters from the Attorneys General Offices and Better Business Bureaus (BBB) to check for the payment status, and/or agreement to purchase, of the

7 named customers. In other words, she would check the customer's computer file to verify that the 8 customer had actually paid and been sent the fulfillment package. Sometimes, she also reviewed 9 the customer's "genie" recording, to check if the customer had said "yes" to purchasing a product. 10 11 12 13 Kindy made a handwritten note regarding payment status and/or agreement to purchase on each letter. Kindy put BBB letters on Elaine's desk, which Elaine then took care of. She faxed the Attorneys General letters to Glenn Erikson, the company compliance attorney. Using the

14 information Kindy gathered, Mr. Erikson responded to the Attorneys General letters. 15 Occasionally, Kindy assisted customer service representatives with calls from customers.

16 Both she and Elaine helped during particularly busy times, and with particularly difficult or 17 18 19 20 disruptive customers. During busy times, Kindy acted as a messenger for the customer service manager, relaying information about a customer to a manager in a different department. Kindy was used for this purpose because her office was near the customer service department, and the

21 customer service manager did not want to leave his area. When a customer became difficult and 22 disruptive, Kindy would help out by checking the customer's "genie" recording for an agreement to 23 purchase. If the customer clearly said "yes" to a product, Kindy would play the recording for the 24 25 26 27 customer over the phone. If the customer said "no" on the recording, Kindy would seek authorization to give the customer a refund. If the agreement to purchase was questionable, she would refer the call to a manager. Kindy, as well as the customer service representatives, made

28 detailed notes in the customer's computer file every time the customer called. They also kept a Case 2:04-cr-00820-FJM Document 247 Filed 05/08/2006 7 Page 7 of 14

1 handwritten log of each call, which the customer service manager reviewed each day for questions 2 only he could address. 3 4 5 6 Kindy's involvement with customer service, as well as her involvement with BBB and Attorneys General letters, gave Kindy the impression that Corporate Industries had an effective system for handling customer complaints. She denies that she was used simply to "run

7 interference" for Harvey Sloniker or Corporate Industries when customer complaints came in. She 8 recalls that when she first started working for Corporate Industries (prior to the indictment period), 9 customer complaints were handled by the fulfillment companies that created and shipped out the 10 11 12 13 product. She believes Harvey Sloniker created his own customer service department after learning that customers were having problems getting through to the other companies. Corporate Industries' customer service department consisted of 10-15 service representatives and 10-15 phone lines.

14 Representatives worked nights and Saturdays, although the department also had an answering 15 machine. 16 17 18 19 20 Kindy was also responsible for mailing refunds to customers. About once a week, one of the managers gave Kindy a list of customers who were entitled to refunds. She would check the computer for each customer's address and then fill out a request for cash to purchase money orders. Kindy then mailed the money orders to customers. Eventually, however, Corporate Industries used

21 ACH to electronically transfer funds back to a customer's account. 22 Kindy helped out at the front desk when the receptionist was absent or needed a break. At

23 the front desk, Kindy answered incoming calls, which were generally people calling about jobs. 24 25 26 27 The front desk phone did not receive customer calls. Kindy took messages for TSRs and managers on a message pad. Kindy was the contact person at Corporate Industries for the alarm company (because she

28 was "always available"). She also was the contact person for the company's insurance carriers and Case 2:04-cr-00820-FJM Document 247 Filed 05/08/2006 8 Page 8 of 14

1 the person who filled out insurance-related forms. She also completed and signed employment 2 verification forms ­ a task done by Elaine Morewitz and the receptionist, as well. Similarly, she 3 4 5 6 responded to Arizona Department of Economic Security and Arizona Department of Labor inquiries regarding unemployment compensation claims and employee pay. Kindy handled new employee packets and tax forms after employees had completed them.

7 Employees received these materials during training class. The receptionist checked completed 8 packets and tax forms for incorrect or missing information. Any incorrect or incomplete materials 9 were given to a manager. The receptionist gave the complete and correct packets to Kindy. She 10 11 12 13 double-checked them and signed the packets. She faxed the tax forms to accountant, John Desiderio. Finally, Kindy assisted Elaine Morewitz, and later Lianne Selzer, with the purchase of

14 office supplies, such as printer cartridges, pens, and phone message books. She also accompanied 15 Elaine and Lianne to the bank. 16 17 18 19 20 Kindy did not see the sales scripts that were being used by the TSRs to sell American Financial Savings. Indeed, she was not involved in the marketing end of the business at all. Obviously, she was familiar with the verification scripts (which, facially, appeared legitimate), but she was not aware of any editing that was done during the verification process. Eventually, it

21 became apparent to Kindy that the sales scripts used by the TSRs must have contained information 22 inconsistent with that in the verification scripts. 23 24 25 26 27 Kindy's culpability stems from her knowledge, at some point in time prior to the closure of the company, that customers were being promised a major credit card and were receiving something else. She acquired this knowledge through her involvement with the customer service arm of the company. At some point in time she also realized that customers were not receiving the

28 fulfillment packages, but she did not know why. Harvey Sloniker told her, and members of the Case 2:04-cr-00820-FJM Document 247 Filed 05/08/2006 9 Page 9 of 14

1 customer service department that there had been an interruption in the mailing of fulfillment 2 packages by the fulfillment company, but that the problem had been addressed and everything 3 4 5 6 7 would be fine. Thus, she and the members of the customer service department deflected customer complaints by making up excuses regarding the failed deliveries, and/or by promising delivery in the near future. In retrospect, Kindy believes she was in denial of the deceptive nature of Harvey Sloniker's

8 marketing program. She did not want to believe that her brother, whom she had come to perceive 9 as a brilliant and successful business man, was engaging in deceptive and, indeed, illegal business 10 11 12 13 practices. She also assumed that the legality of the company's marketing program had been endorsed and was being monitored by the company's compliance attorney, Glenn Erickson. Moreover, she did not see the sales scripts, and, at least early on, viewed many of the incoming

14 complaints as being motivated by simple buyer's remorse. This was, in part, because in so many 15 cases the "genie" recordings confirmed that the buyers had agreed to purchase the bundle of 16 products and services actually delivered. 17 18 19 20 Kindy is devastated by what has transpired, and is deeply remorseful for the harm she helped cause to so many people. She should have walked away from the company when it became apparent to her that it was engaging in deceptive marketing practices, but, like so many of the

21 company's other employees, she didn't. Having said that, Kindy had nothing to do with the 22 creation or genesis of the company. She had nothing to do with creating or implementing Harvey 23 Sloniker's deceptive marketing program. She was one of two-hundred or so employees who played 24 25 26 27 28 niche roles in the operation of the company. Kindy is now a valued administrative assistant at Santa's Christmas Theme Park in Gilbert, Arizona. She earns approximately $2,400 per month, and is trying to piece back together her life. Given Kindy's background and her limited role in Corporate Industries' deceptive

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1 marketing operation, a compelling argument can be made that incarceration is not called for under 2 18 U.S.C. § 3553(a)(2-7). Placing Kindy on probation with supervision, together with the 3 4 5 6 recommendations advanced by the Probation Department would provide a measured response to Kindy's role in the offense. No credible argument can be mustered that Kindy poses an on-going threat to the community. She has neither the desire nor the knowledge to create her own marketing

7 company, and, frankly, has no desire to work as an employee in that industry. Such a sentence 8 would also be proportionate, relative to the actual and anticipated sentences of the co-defendants, 9 given their relative involvement in the marketing scheme. 10 11 12 13 GUIDELINES CONSIDERATIONS Under the U.S.S.G., Kindy Jonagan's guidelines sentencing computation calls for a prison sentence of 60 months (before departures) per the Probation Department, and between 37 and 46

14 months (before departures) per the defense calculation. Probation is not available under the 15 guidelines. 16 17 18 19 20 GROUNDS FOR DOWNWARD DEPARTURE 1. Substantial Assistance to Authorities: Under § 5K1.1 Kindy Jonagan is entitled to a downward departure for her agreement to testify against the co-defendants, including, at least in theory, her two indicted brothers, who had already entered into plea agreements, but who had not

21 yet been sentenced. Her agreement to testify arguably provided some additional leverage for the 22 government in settling the remaining unresolved cases. Kindy also cooperated by allowing the 23 prosecutors and the investigators to "debrief" her. It is very likely that at least some of the 24 25 26 27 28 information she provided was useful to the authorities. The Court is not bound by the government's recommended departure, if any, and may, in fact, depart, sue sponte. U.S. v. Khoury, 62 f.3d 1138 (9th Cir. 1995). 2. Aberrant Behavior: By all reports, Kindy Jonagan was a model citizen prior to taking

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1 employment with Corporate Industries. She was a productive and law-abiding member of the 2 community with a steady employment history. Kindy joined the company believing it was a 3 4 5 6 legitimate and lawful marketing company. It was not until very late in her tenure with the company that she realized that the company's practices were suspect. Even then, her perceptions were clouded by denial. She has moved beyond that episode in her life, and is, once again, gainfully

7 employed by a legitimate business. Even though her crime involved more than a single incident, 8 under § 5K2.20, (particularly against the backdrop of Booker) she is entitled to a downward 9 departure. 10 11 12 13 3. Loss Table Overstates Seriousness of Defendant's Offense: The base offense level for Kindy's offense is 6. That offense level would normally result in a probationary term rather than prison. Eighteen (18) levels were added because of the alleged loss by victims of over

14 $2,500,000. However, Kindy arguably benefited very little from that loss. She was paid at the rate 15 of approximately $39,000 per year toward the end of her tenure at the company. That salary was 16 reasonably commensurate with her duties, and similar to what she could have earned elsewhere. It 17 18 19 20 would appear that any windfall arising from the defrauding of the victims was realized exclusively by Harvey Sloniker, who drove expensive cars, owned a fancy boat and was building an expensive house prior to his arrest. In U.S. v. Walters, 87 F.3d 663 (5th Cir. 1996), the district court departed

21 downward where the defendant did not personally benefit from the fraud. Lack of benefit was not 22 considered by the guidelines, so § 5K2.0 authorized a departure. Also, see U.S. v. Broderson, 67 23 F.3d 452 (2nd Cir. 1995), U.S. v. Monaco, 23 F.3d 793 (3rd Cir. 1994) and U.S. v. Gregorio, 956 24 25 26 27 F.2d 341 (1st Cir. 1992). In the heartland of cases contemplated by the offense to which Ms. Jonagan pled guilty, the defendants are motivated by a desire for, and anticipation of, financial gain. That was not really the case here. Kindy was never promised an ownership interest in the

28 business, or any other financial windfall. This case, at least as it pertained to Kindy Jonagan, was Case 2:04-cr-00820-FJM Document 247 Filed 05/08/2006 12 Page 12 of 14

1 atypical of the cases normally subject to U.S.S.G. § 2B1.1(b)(1). Thus, a downward departure is 2 appropriate, particularily in light of the 18-point step up for the victims' loss amounts. See, U.S. v. 3 4 5 6 Rothberg, 222 F. Supp. 2d 1009 (N.D. Ill. 2002). 4. Minimal Role in the Offense: The Court may depart downward beyond the 4 points allowed under U.S.S.G. § 3B1.2. See, e.g., U.S. v. Restepo, 936 F. 2d 661 (2nd Cir. 1991). In the

7 instant case, Ms. Jonagan was a non-managerial administrative clerk in a company of over 200 8 people, and had nothing to do with the marketing end of the business. 9 10 11 12 13 CONCLUSION The presentence writer is recommending a downward departure from the guidelines that would result in a 5-year term of probation, with conditions, inter alia, that Ms. Jonagan serve 180 days on house arrest, pay a $12,500 fine, and do community service. It should be noted that Kindy

14 Jonagan currently resides with and provides financial support for her sister-in-law and her nieces, 15 who are struggling financially. She has a good job and is a valued employee. She is currently an 16 asset to the community. She would remain so, and continue to give back to the community if the 17 18 19 20 presentence writer's recommendations were followed. The proposed combination of sentencing features includes a fair and reasonable balance of punishment, deterrence, rehabilitation, and restitution to the community for Kindy's role in the offense. On the other hand, a prison sentence

21 would interrupt the progress Kindy has made in rejoining productive society. It would prevent 22 Kindy from giving back to the community, it would probably detract from her rehabilitation, and it 23 would be entirely unnecessary for the protection of the community. 24 25 26 27 28 . . . WHEREFORE, for the aforementioned reasons, the defendant respectfully requests that this Court follow the recommendations of the Probation Department in all respects.

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1 2 3 4 5 6 7 8 9 s/ Michael J. Bresnehan Attorney for Defendant CERTIFICATE OF SERVICE MICHAEL J. BRESNEHAN, P.C. RESPECTFULLY SUBMITTED this 8th day of May, 2006 by

X I hereby certify that on May 8, 2006, I electronically transmitted the attached document to the Clerk's Office using the CM/ECF System for filing and transmittal of a Notice of Electronic Filing 10 to the following CM/ECF registrants: Craig W. Haraga 11 Gary Restaino, Esq. Assistant U.S. Attorney US Probation Office 12 X I hereby certify that on May 8, 2006, I served the attached document as a courtesy copy by 13 COURIER SERVICE on the following: 14 Honorable Frederick J. Martone 15 United States District Judge 16 X I hereby certify that on May 8, 2006, I served the attached document by Mail on the following, who are not registered participants of the CM/ECF System: 17 Kindy Jonagan 18 Defendant 19 20 21 22 23 24 25 26 27 28 Case 2:04-cr-00820-FJM Document 247 Filed 05/08/2006 14 Page 14 of 14 s/ Michael J. Bresnehan