Free Response - District Court of Arizona - Arizona

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PAUL K. CHARLTON United States Attorney District of Arizona John R. Lopez IV Assistant U.S. Attorney Arizona State Bar No. 019182 Two Renaissance Square 40 North Central, Suite 1200 Phoenix, Arizona 85004-4408 Telephone: (602) 514-7500

UNITED STATES DISTRICT COURT DISTRICT OF ARIZONA 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 The United States of America, through undersigned counsel, hereby files its Response to Defendant's Sentencing Memorandum. For the reasons set forth in the attached Memorandum of Points and Authorities, the government respectfully requests that this Court adopt the sentencing calculation set forth in the Presentence Investigation Report and impose a sentence at least at the high-end of the Guideline range. Respectfully submitted this 3rd day of November, 2005. PAUL K. CHARLTON United States Attorney District of Arizona /S/John R. Lopez, IV JOHN R. LOPEZ, IV Assistant U.S. Attorney v. Andrew Taylor, Defendant. United States of America, Plaintiff, CR-04-0809-PHX-NVW UNITED STATES' RESPONSE TO DEFENDANT'S SENTENCING MEMORANDUM

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MEMORANDUM OF POINTS AND AUTHORITIES In the interests of clarity and convenience, the government will adopt Defendant's sentencing memorandum format while responding to each of his statements or objections concerning the Presentence Investigation Report ("PSR"). A. With respect to paragraph 4 of the PSR, Defendant argues that the Maricopa County

Superior Court judgement in favor of Barat Lal ("Lal") and against the Defendant for unpaid rent was "a nullity" because it was entered after an automatic stay was in effect in one of Defendant's Chapter 13 bankruptcies. Because Defendant's objection does not impact his calculated

Guideline range, the government takes no position with respect to Defendant's assertion. However, the government agrees that Defendant's bankruptcy served to defeat Lal's ability to collect on his judgement against Defendant for unpaid rent on Lal's rental property. B. With respect to paragraph 6 of the PSR, Defendant argues that the $8,500 judgement

against Defendant in favor of Lal represents the entire loss that Lal incurred as a result of Defendant's failure to pay rent to Lal. The government disputes Defendant's claim and will address this issue in detail below. C. With respect to paragraph 10 of the PSR, the government does not dispute that

Defendant is involved in civil litigation with respect to allegations that he fraudulently opened a bank account in the name of AIS and obtained a $100,000 revolving line of credit without AIS' knowledge or consent. D. With respect to paragraph 12 of the PSR, the government disputes each of Defendant's

objections to the calculated loss amount of $59,905.83 as follows: 1. Catholic Credit Union Debt: Defendant contends that this $10,790.47 debt is his wife's sole and separate debt because it was incurred prior to their marriage. However, Defendant listed this debt in his bankruptcy schedules, arguably because it bolstered his claim that his bankruptcy filing was legitimate. Defendant did not indicate that this was not his debt. In addition, when Defendant returned the vehicle to Catholic Credit Union, he reported this resolution to the bankruptcy court. In short, Defendant adopted this debt and represented it as his own when it 2

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advanced his interests. Defendant should be estopped from characterizing this debt as his wife's sole and separate liability. Accordingly, the government submits that the Catholic Credit Union debt should be included in the loss amount for sentencing purposes. 2. Lal's: Defendant contends that he is not responsible for Lal's losses which exceed the $8,500 stipulated judgment which he failed to satisfy even after he negotiated a settlement for this reduced amount. The government contends that Defendant is responsible for $11,400 in losses because Lal was awarded judgments in this amount. 3. IRS: Defendant argues, without support, that he is not responsible for his $36,768.36 debt to the IRS because the IRS owes him money for prior tax years. The government submits that Defendant's position does not merit consideration because he has failed to produce any evidence to support his claim. In addition, Defendant contends that he is not responsible for his long-standing unpaid IRS debt because the debt is fully secured by liens on his residence. Defendant does not cite any authority to support his proposition. In short, Defendant's position lacks merit. He has failed to satisfy his tax debt for many years and, as an IRS witness testified at trial, Defendant successfully evaded IRS attempts to collect this debt for several years. Defendant must be held accountable for this debt and it should be included in the loss amount for sentencing purposes. 4. Arizona Department of Revenue: Defendant argues that this $947 tax debt should not be included in the loss amount because, like the IRS, the ADR could collect this debt once Defendant's bankruptcy proceedings are complete. The government submits that Defendant's position lacks merit. Accordingly, this debt should be included in the loss amount for sentencing purposes. E. With respect to paragraph 15 of the PSR, Defendant argues, citing U.S. v. Sacedo-

Lopez, 907 F.2d 97 (9 th Cir. 1990), that Lal is not entitled to restitution for attorneys' fees. Defendant is incorrect as a matter of law. It is well-settled that, "[g]enerally, investigation costs ­ including attorneys' fees ­ incurred by private parties as a `direct and foreseeable result' of the defendant's wrongful conduct `may be recoverable.'" U.S. v. Gordon, 393 F.3d 1044, 1056-57 3

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(9 th Cir. 2004) (citing U.S. v. Philips, 367 F.3d 846, 863 (9 th Cir. 2004); see also U.S. v. Cummings, 281 F.3d 1046, 1051-53 (9 th Cir. 2002). The case Defendant cites pre-dates the Mandatory Victim's Restitution Act of 1996 ("MVRA"), which mandates full restitution of all loss amounts, including attorneys' fees, as set forth in Gordon, Phillips and Cummings. In this case, Lal's attorneys' fees were incurred because he was forced to resort to litigation to have Defendant removed from his rental property because Defendant failed to pay rent or vacate the property. This is precisely the sort of "direct and foreseeable result" of Defendant's wrongful conduct which entitles Lal to restitution for attorneys' fees. Defendant also offers unsubstantiated and self-serving commentary regarding Lal's personal life as the "real source of his attorneys' fees, mental anguish and medical problems." Although Defendant attempts to shift the blame for his own criminal conduct, it is undisputed that he resided in Lal's rental property for an extended period of time, brokered agreements to pay pastdue rent which he failed to honor, continued to reside in Lal's rental property even though he continued to fail to pay rent, and then manipulated the legal system to avoid paying Lal for his (Defendant's) use of Lal's rental property. F. With respect to paragraphs 16-18, Defendant reiterates his previous objections

concerning restitution. The government repeats its responses. G. With respect to paragraph 24 of the PSR, Defendant argues that the specific offense

characteristic pursuant to § 2B1.1(b)(1)(D) ­ the loss amount of $59,905.83 ­ is incorrect. Specifically, Defendant argues that the total loss should be only $8,500. Defendant defers discussion of this matter to another paragraph in his memorandum. The government submits that the loss amount of $59,905.83 is calculated correctly. However, the government will address Defendant's arguments set forth in subsequent paragraphs. H. With respect to paragraph 34 of the PSR, Defendant contends, citing Carnley v.

Cochran, 369 U.S. 506 (1962), that there is an insufficient record to support a finding that Defendant's 1980 felony conviction for unlawful issuance of a bank check in Island County,

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Washington, was obtained after he knowingly, voluntarily, and intelligently waived his right to counsel. Sentences resulting from convictions that are shown to be constitutionally invalid may not be counted when assessing a defendant's criminal history score. U.S.S.G. § 4A1.2, Application Note 6 (2001). However, "in the `context of considering a constitutional challenge to a prior conviction in the criminal history calculation . . . the ultimate burden of proof in demonstrating the constitutional infirmity of the . . . conviction lies with the defendant.'" U.S. v. Allen, 153 F.3d 1037, 1041 (9 th Cir. 1998) (citing U.S. v. Newman, 912 F.2d 1119 (9 th Cir. 1990)); see also United States v. Dominguez, 316 F.3d 1054, 1056-57 (9 th Cir. 2003). "A defendant must prove the invalidity of a prior conviction by a preponderance of the evidence." Id. In order to prevail, "the defendant must present evidence sufficient to overcome the presumption that there was a valid waiver of counsel." Id. (citing U.S. v. Malloy, 3 F.3d 1337, 1339-40 (9 th Cir. 1993), for the proposition that there exists "`a presumption of regularity' of prior convictions offered for purposes of sentencing enhancement, thereby preventing a defendant from proving the constitutional invalidity of a prior conviction merely by pointing to a missing or silent transcript."). "To overcome the presumption and `bar the use of [a prior] conviction for sentence enhancement,' the defendant must make `[a]n affirmative showing that the prior conviction is invalid . . . ." Id. (Citation omitted.) Moreover, self-serving statements are insufficient to establish that a conviction was constitutionally infirm. Id. (citing Cuppett v. Duckworth, 8 F.3d 1132, 1139 (7 th Cir. 1993)). A conviction in which a defendant knowingly and intelligently waives assistance of counsel is not constitutionally infirm, and may be included in the criminal history calculation. Id. In this case, the "Judgement and Sentence," filed August 10, 1983, which documented Defendant's revocation of probation and pronounced his guilt for the crime of "felony Unlawful Issuance of Bank Check," states that Defendant "knowingly, voluntarily, and intelligently waived his right to counsel." Defendant's simple reference to the absence of court documents concerning

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his original plea and conviction is not sufficient to overcome the presumptive validity of his conviction. I. With respect to paragraph 40 of the PSR, Defendant argues that, under § 4A1.2(c)(1),

he should not have been assessed one (1) criminal history point for his misdemeanor conviction because his conviction for engaging in aeronautics without appropriate rating and engaging in aeronautics without a pilot's license was akin to driving without a license and because he received only a seven (7) day sentence of imprisonment. Defendant's argument fails for the reasons discussed below. Under the Guidelines, sentences for misdemeanor and petty offenses are counted, except under certain limited circumstances, namely, where a defendant receives a sentence of probation less than one year or a term of imprisonment under thirty days for enumerated offenses. Guidelines § 4A1.2(c)(1)(A). In this case, Defendant was properly assessed one (1) criminal history point for his misdemeanor conviction because his prior offense of engaging in aeronautics without appropriate rating and engaging in aeronautics without a pilot's license was not akin to driving without a license. The consequence of operating an aircraft without a proper license and certification is not similar to driving a vehicle without a license. Consequently, Defendant's misdemeanor conviction should be counted in calculating his Criminal History Category. Even if the Court were to conclude that Defendant's misdemeanor conviction is similar to driving without a license, Defendant was properly assessed one (1) criminal history point for his misdemeanor conviction because his prior offense was similar to the instant offense. Guidelines § 4A1.2(c)(1)(B). As described in the PSR, Defendant's misdemeanor conviction arose from his fraudulent provision of flight lessons for profit to a student pilot even though he was not licensed by the FAA. (PSR ¶ 40.) As a result, the victim paid Defendant $1,015 for lessons that were worthless. (PSR ¶ 40.) The original charge against Defendant, before he entered a plea agreement, was theft. (PSR ¶ 40.) As such, Defendant's conviction is similar to the instant offense because it arose from his fraudulent activities. Accordingly, Defendant was properly assessed one (1) criminal history point for his misdemeanor conviction. 6

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J.

With respect to paragraph 44 of the PSR, Defendant asserts that he has no knowledge

concerning violation of the no contact order. This criminal conduct does not impact Defendant's sentencing calculation. Therefore, the government takes no position with respect to Defendant's objection. K. With respect to paragraph 45 of the PSR, the government takes no position with respect

to Defendant's objection because his criminal conduct does not impact his sentencing calculation. However, the government urges the Court to strike Defendant's unfounded statements regarding trial evidence concerning Defendant's dealings with AIS or Thomas Robinson. The trial record includes no evidence regarding Mr. Robinson's alleged "misappropriations or malfeasances." Moreover, the government also requests that the Court reject Defendant's unsupported commentary concerning the Maricopa County Attorney's Office's decision to dismiss criminal charges against Defendant without prejudice. L. With respect to paragraph 47 of the PSR, the government takes no position with

respect to Defendant's objection because his criminal conduct does not impact his sentencing calculation. M. With respect to paragraph 53 of the PSR, the government takes no position with

respect to Defendant's objection because his criminal conduct does not impact his sentencing calculation. N. With respect to paragraph 57 of the PSR, the government maintains that the facts set

forth in the PSR concerning Defendant's fraudulent activities involving the sale of an aircraft are accurate. II. LEGAL ANALYSIS 1. Offense Level The PSR states that the loss amount for sentencing purposes is $59,905.93, resulting in a sixlevel enhancement pursuant to § 2B1.1(b)(1)(D). (PSR ¶¶ 12, 24.) As discussed previously, Defendant argues that he should be assessed only a two-level enhancement because the loss amount is allegedly only $8,500, the amount of the stipulated judgment in favor of Lal which 7

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Defendant never paid. In urging the Court to adopt his argument, Defendant requests that the Court ignore the losses to the Catholic Credit Union, the IRS and the Arizona Department of Revenue. For the reasons discussed below, the government submits that the PSR loss amount calculation is accurate. For purposes of § 2B1.1(b)(1)(D), the total loss concerning Lal is $11,400, which essentially represents the total of the judgments against Defendant in favor of Lal. (PSR ¶ 8.) Defendant's suggestion that the Court limit the loss amount to the fraudulently-induced and unsatisfied $8,500 judgment is untenable. With respect to IRS debt, Defendant argues that his $36,768.36 debt, which he has successfully and fraudulently evaded for years, should not be included in the § 2B1.1(b)(1)(D) loss amount because it is secured with his real estate holdings. His assertion that the real estate security somehow assures payment to the IRS is more than suspect, in light of Defendant's past course of dealing, and the fact that he has owed the IRS for over ten years, yet has not paid despite having liquid assets several times during that period. Moreover, Defendant offers no legal authority for his contention. Defendant should be held accountable for his IRS debt, and it should be included in the loss amount for sentencing purposes. For purposes of § 2B1.1(b)(1)(D), the total loss concerning the Catholic Credit Union is $10,790.47. (PSR ¶¶ 12, 17-18.) Defendant argues that this debt is attributable solely to his wife and should not be included in the loss amount for sentencing purposes. However, Defendant included this vehicle debt in his bankruptcy schedules without any claim that it was his wife's sole and separate debt. At that time, it served Defendant's interests to maximize his debt to asset ratio in order to support his bankruptcy petition. Nonetheless, when Defendant returned the vehicle to the Catholic Credit Union, he promptly reported the transaction in his amended bankruptcy schedules. In sum, Defendant's argument that he bears no responsibility for the vehicle debt, even though he had adopted it as his own, is unpersuasive. Defendant should be held accountable for this debt for sentencing purposes.

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Finally, Defendant argues that his $947 debt to the Arizona Department of Revenue should not be considered for sentencing purposes because this tax debt is a priority claim. Defendant's argument lacks merit. Defendant intended to cause this loss, as well as to the IRS, when he engaged in bankruptcy fraud. Consequently, this debt should be included in the loss amount for sentencing purposes under the same analysis as the IRS debt. Accordingly, the government submits that the loss amount of $59,905.83 set forth in the PSR is accurate and warrants a six-level enhancement pursuant to § 2B1.1(b)(1)(D). 2. Criminal History Category The government addressed (in paragraph H herein) Defendant's arguments concerning his convictions described in paragraphs 34 and 40 of the PSR. To reiterate, Defendant was properly assessed three (3) criminal history points for his conviction described in paragraph 34 because his conviction is presumptively valid, especially in light of the conviction document which pronounces his conviction and states that Defendant validly waived counsel during revocation of his probation. Defendant was also properly assessed one criminal history point for his misdemeanor conviction described in paragraph 40 of the PSR because (1) the misdemeanor offense was not similar to a conviction for driving without a license or, alternatively, (2) he was prosecuted for conduct that was similar to the instant offense, namely fraudulent activity designed to result in financial gain. Accordingly, the government submits that Defendant was properly assessed seven (7) criminal history points which result in a Criminal History Category IV. 3. Restitution For all of the reasons discussed above, the government submits that Defendant was properly assessed restitution in the amount of $75,873.83.

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4. Defendant's Serial Financial Fraud Warrants a Sentence at the High End of the Guideline Range During the past thirty (30) years, Defendant has engaged in a systematic pattern of criminal

3 conduct involving various form of financial fraud. During this time, Defendant has incurred 8 4 criminal convictions, including four felonies. (PSR ¶¶ 33-40.) Of these eight (8) convictions, 5 six involved theft or fraud. (PSR ¶¶ 33-37, 40.) In addition, Defendant has been involved in 6 fourteen (14) other contacts with law enforcement, most of these involving fraud or theft. (PSR 7 ¶¶ 42-55.) Defendant has also been involved in numerous civil law suits involving his alleged 8 fraud and deception. (PSR ¶¶ 56-57.) 9 Defendant represents a long-standing and continuing economic threat to the community and 10 has not been deterred by his previous law enforcement contacts. To the contrary, Defendant has 11 exhibited a pattern of transferring blame for his criminal conduct. This demonstrates that 12 Defendant is unable or unwilling to acknowledge or accept what was apparent to a jury in this 13 case, and is apparent to many other individuals who have come into contact with him ­ that he 14 has lived much of his life as a financial predator and is incapable of accepting responsibility for 15 his misconduct. 16 The result of Defendant's strategy ­ say whatever is necessary to obtain credit, and then force 17 individuals or institutions to come after you to collect ­ is a shockingly comfortable lifestyle for 18 a bankrupt: ownership of a Scottsdale house worth more than a third of a million dollars, and by 19 the PSR writer's account, "furnished and appointed nicely;" nearly $850,000 in liquid business 20 inventory; total assets of over $1.3 million, and a net worth over $833,000 ­ all while under the 21 protection of his sixth bankruptcy in seven years. This lifestyle is only possible because of, and 22 directly traceable to, the losses suffered by the victims in this case, among others. 23 For these reasons, the government respectfully requests that the Court impose a sentence at 24 least at the high-end of the applicable Guideline range. 25 26 /// 27 28 10

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III.

CONCLUSION For the reasons set forth above, the government respectfully requests that the Court deny

Defendant's objections concerning the offense level and criminal history category. In addition, the government requests that the Court impose a sentence at least at the high-end of the applicable Guideline range.

Respectfully submitted this 3rd day of November, 2005.

PAUL K. CHARLTON United States Attorney District of Arizona /S/John R. Lopez, IV JOHN R. LOPEZ IV Assistant U.S. Attorney

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CERTIFICATE OF SERVICE

I hereby certify that on November 3, 2005, 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 to the following CM/ECF registrants: Cameron Morgan 4295 North 75 th Street Scottsdale, AZ 85251

/ S/ JOHN R. LOPEZ IV

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