Free Sentencing Memorandum - District Court of Arizona - Arizona

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PAUL K. CHARLTON United States Attorney District of Arizona RACHEL C. HERNANDEZ Arizona State Bar No. 016543 GARY M. RESTAINO Arizona State Bar No. 017450 Assistant U.S. Attorneys Two Renaissance Square 40 N. Central Avenue, Suite 1200 Phoenix, Arizona 85004-4408 Telephone (602) 514-7500 [email protected] [email protected]

UNITED STATES DISTRICT COURT DISTRICT OF ARIZONA United States of America, Plaintiff, v. Harvey Sloniker, Jr., Defendant.
UNITED STATES' MOTION FOR DOWNWARD DEPARTURE AND SENTENCING MEMORANDUM

CR04-0820-001-PHX-FJM

The United States, through counsel undersigned, submits this memorandum for the 17 Court's consideration at sentencing. 18 recommends the following: 1) sentences of five years on Count 12 and five years on Count 50, 19 to run consecutively, for an aggregate sentence of ten years; 2) a downward departure of one 20 offense level and one month, to reduce the advisory Guideline sentence to the high end of the 21 plea agreement; 3) restitution as to the victims identified in the pretrial proceedings, in an 22 amount to be determined by U.S. Probation, restitution in an amount of $74,702.17 to Union 23 Bank and restitution in an amount of $290,000.00 to Western Security Bank; and 4) due to the 24 impracticality of determining restitution as to the remaining individual victims, a fine in the 25 amount of $25,000.00 payable to the United States Postal Inspection Service Consumer Fraud 26 Awareness Fund. 27 Investigation Report and the other papers filed in this case. 28 This memorandum is supported by the Indictment, the Presentence As set forth more fully below, the United States

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Factual Background Defendant Sloniker operated telemarketing boiler rooms in Arizona, in which Sloniker

3 and his companies pitched a scam presentation for a major credit card to consumers with 4 deficient credit, arranged with a third party processor to debit consumers' accounts, received 5 wire transfers from the third party processor, laundered the money and ultimately failed to 6 provide consumers with the benefit of the bargain they believed they had made. (Indictment at 7 ¶¶ 12-25.) He and other co-defendants arranged to obtain credit through the use of overstated 8 income figures from the scheme (Indictment at ¶ 45), and Sloniker failed to turn over withheld 9 FICA taxes to the IRS for payment into the Social Security trust fund. (Indictment at ¶¶ 50-51). 10 Sloniker left behind tens of thousands of duped victims. 11 B. 12 The Impact of Defendant's Mitigation Report Defendant attempts to place his crimes in some perspective through the filing of The inaccuracy of the very first

13 "Mitigation Materials for Consideration at Sentencing".

14 assertion ­ defendant's absence of a prior criminal history ­ places in doubt the overall accuracy 15 of the report and the credibility of the report's assertions. Harvey Sloniker has three prior 16 convictions, and although he was convicted only of misdemeanors, he spent time in jail or home 17 confinement on each one. The Court should consider the materials but decline to adjust the 18 sentence downward based on those materials because neither his upbringing nor his use of a 19 lawyer to perpetuate the scheme excuse Sloniker's actions. 20 Notwithstanding the report's claim of stress and anxiety over money, Sloniker's

21 upbringing is well within the heartland. He was not a victim of physical abuse. His father was 22 employed during Sloniker's youth, whether at a family farm (Report at § 5) or as a salesman for 23 a furniture company (PSR at ¶ 65), and Sloniker received the opportunity for post-secondary 24 education. Nothing in Sloniker's past justifies his fraud. 25 The report also asserts a potentially mitigating circumstance related to Sloniker's

26 connection to a "compliance" lawyer named Glenn Erickson. The government disputes the 27 characterization of Erickson as a compliance lawyer because a true compliance lawyer helps a 28
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1 company to abide by the law rather than to break the law. See, e.g. United States v. Cohn, 303 2 F. Supp. 2d 672, 683 (D. Md. 2003) (describing the actions of uncharged in-house lawyers ­ 3 including review of scripts, drafts of contracts and responses to legal inquiries ­ that contributed 4 to the telemarketing scheme and thereby vitiated the attorney-client privilege through the crime5 fraud exception). Based on information received from former employee sources, Erickson acted 6 primarily as a broker, connecting Sloniker to merchants and helping Sloniker to open new 7 telemarketing relationships. (Source Report of 6/30/05, previously disclosed to counsel and 8 attached as Exhibit 1, at page 1, ¶ 3.) This relationship is corroborated by the spread sheet of 9 payments from Sloniker to Erickson, attached defendant's mitigation report, which would appear 10 to pay Erickson a referral fee based on the number of sales in a given week rather than in 11 payment for legal services rendered. (See also Source Report at page 2, ¶ 1.) The mitigating 12 value of any legal review work performed by Erickson is negated by his active participation in 13 the scheme to defraud. (See Source Report at page 2, ¶ 2 and page 3, ¶ 2.) 14 C. 15 The Recommended Sentence of Imprisonment Pursuant to the plea agreement, the advisory Sentencing Guidelines and the statutory

16 sentencing factors outlined in 18 U.S.C. § 3553(a), the United States recommends that the Court 17 accept the plea agreement and impose an aggregate sentence of ten years imprisonment, to 18 include five years on Count 12 and five years on Count 50, to run consecutively.1 A sentence 19 of ten years reflects a sentence at the high end of the stipulated range within the plea agreement, 20 and a sentence below the advisory Guideline range. 21 The parties stipulated in the plea agreement to a sentence between 96 and 120 months.

22 The United States agrees with the calculations in the PSR, the total offense level of 33 as to 23 Counts 12 and 50, and the advisory Guideline range of 135-168 months. Pursuant to U.S.S.G. 24 The plea agreement recites a maximum penalty for Count 12 of twenty years rather than 25 five years. The twenty-year maximum for wire fraud became effective on July 30, 2002. Sarbanes-Oxley Act of 2002, P.L. 107-204, § 903, 116 Stat. 745, 805 (2002). Because July 30, 26 2002 is the second-to-last day of the indictment time period, the government agrees with U.S. Probation's calculation of a five-year statutory maximum on Count 12, to run consecutively to 27 Count 50, pursuant to U.S.S.G. § 5G1.2(d). 28
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1 § 5K2.0, and contingent on the Court's acceptance of the total offense level recommended by 2 U.S. Probation, the government moves for a downward departure of one level and one month 3 based on the savings to the government occasioned by defendant's plea, including the savings 4 in terms of time and expense that would have been incurred in arranging for elderly victims to 5 testify during an anticipated four-week trial. 6 A sentence of ten years is a reasonable sentence, takes into account the nature of the

7 offense and defendant's background, and provides deterrence to other criminals and protection 8 to the public. Harvey Sloniker suffered no apparent hardship in his upbringing. He failed to 9 learn any lessons from either his three prior convictions during his high school and college years, 10 or from his three short periods of incarceration and home confinement associated with those 11 convictions ­ indeed, on at least one occasion during his telemarketing years he repeated the 12 assaultive behavior from his past. (PSR ¶¶ 56-58, 60.) He defrauded tens of thousands of 13 individual victims prior to and during the indictment time period, and targeted his scheme at 14 people who most needed the promised credit card. He maintained "a close circle of friends and 15 family" in his operations (PSR ¶ 14), and in the process he subjected his younger brother, older 16 sister and a college friend to criminal liability. His victims stretch beyond individuals, to include 17 not just financial institutions but an already-underfunded Social Security system. Given the 18 length and breadth of defendant's criminal actions, the Guidelines take the statutory factors in 19 18 U.S.C. § 3553(a) into account. A sentence under the Guidelines (as adjusted downward by 20 one level and one month) would be a reasonable sentence under United States v. Booker, 125 21 S. Ct. 738, 765-66 (2005). 22 D. 23 The Recommended Restitution Amount Defendant Sloniker defrauded tens of thousands of victims through his telemarketing

24 scheme, including individuals, financial institutions and the government. As to individual 25 victims, the government acknowledges that a restitution award to each of the 57,000 individual 26 victims would be impractical and overly complex, and that this case therefore presents a property 27 crime exception to mandatory restitution. See 18 U.S.C. § 3663A(c)(3). The government has 28
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1 disclosed 26 representative victims in this case, and has sought specific comments on restitution 2 from those victims. Pursuant to the plea agreement and 18 U.S.C. §§ 3663, 3663A and 3664, 3 the United States therefore seeks restitution for 26 identified representative victims, in an amount 4 to be determined by U.S. Probation, as based on the victim responses. As set forth more fully 5 in Section E below, the Court may take into account the additional victimization through a fine 6 in lieu of restitution directed to consumer education efforts. 7 The PSR also includes awards of restitution for the financial institutions defrauded by

8 Sloniker and certain co-defendants, and the government accordingly seeks additional restitution 9 in an amount of $74,702.17 to Union Bank and restitution in an amount of $290,000.00 to 10 Western Security Bank. The government does not seek a restitution award as to the unpaid taxes 11 arising out of Counts 70-73, as there is no statutory right to restitution for Title 26 offenses, see, 12 e.g. 18 U.S.C. § 3663(a)(1)(A), and anticipates instead that defendant's admissions could form 13 the basis for civil tax proceedings to recoup the government losses. 14 E. 15 The Recommended Fine Sloniker's advisory Guideline fine range is $17,500.00 to $175,000.00. A fine in this

16 case would compensate for the pecuniary loss unaccounted for in restitution due to the large 17 number of victims. See 18 U.S.C. § 3572(a)(3). Given Sloniker's retention of counsel during 18 this action, his college education and the business skills obtained prior to his telemarketing 19 years, he cannot meet his burden to show that he is "not likely to become able to pay any fine." 20 U.S.S.G. § 5E1.2 and comment n. 3. In recognition of defendant's current finances and the 21 amount of restitution, and in contemplation of defendant's abandonment of the equipment seized 22 in the search warrants executed during the investigation, the government recommends a fine 23 towards the low end of the Guideline range, in the amount of $25,000.00. The government 24 further recommends that the Court direct the payment of the fine to the United States Postal 25 26 27 28
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1 Inspection Service Consumer Fraud Awareness Fund2 account, said monies to be used to support 2 activities which facilitate and support the prevention and investigation of frauds against the 3 public. 4 5 6 7 8 9 10 11 12 CERTIFICATE OF SERVICE Respectfully submitted this 24th day of March, 2006. PAUL K. CHARLTON United States Attorney District of Arizona s/ Gary M. Restaino RACHEL C. HERNANDEZ GARY M. RESTAINO Assistant U.S. Attorney

I hereby certify that on this date, 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 13 Filing to the following CM/ECF registrants: Bruce Blumberg, Jeanette Alvarado, Ivan Mathew, Tom Hoidal, Greg Parzych and Michael Bresnehan. 14 15 16 17 18 19 20 21 22 23 24 25 The Consumer Fraud Awareness Fund is a fund established to financially support consumer fraud awareness initiatives developed by the U.S. Postal Inspection Service and its law 26 enforcement partners. These initiatives include national fraud prevention campaigns designed to educate and inform consumers about various types of fraud schemes. The fund is also utilized 27 to finance continuing education and training for the federal law enforcement community. 28
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