Free Letter - District Court of Delaware - Delaware

Case 1:07-cr-00124-SLR

Document 44

Filed 08/29/2008

Page 1 of 8

Charles M. Oberly, III
Direct Dial: (302) 777-6925 Direct Fax: (302) 778-7905 E-mail: [email protected]

August 29, 2008 The Honorable Sue L. Robinson United States District Court of Delaware 844 North Kign Street Wilmington, DE 19801 Re: U.S.A. v. James L. Cheeseman - Cr.A. No. 07-124-SLR

Dear Judge Robinson: At the conclusion of the hearing on the forfeiture sought by the United States on August 11, 2008, counsel for the Government requested an opportunity to respond to my letter to the Court dated August 8, 2008. Your Honor agreed and counsel then agreed to submit simultaneous letters by August 29, 2008, which would also address the hearing testimony. The legal issue before your Honor has been addressed in Mr. Cheeseman's letter to the Court dated August 8, 2008. Mr. Cheeseman, through counsel, first contends that a forfeiture of the firearms in issue is not permissible in that the firearms were neither "involved in or used" in a knowing violation of the statute. Because the case law and argument are fully addressed in the August 8, 2008 letter, counsel will not restate the argument.1 In determining either the applicability of the forfeiture statute to the facts of this case or whether the seizure of the firearms would be an excessive fine under the Eighth Amendment, the testimony elicited during the hearing is helpful. It is submitted that the Government's case completely failed to link Mr. Cheeseman to any active involvement concerning his operation of X-Ring Supply. While the evidence presented by the Government showed that Mr. Cheeseman may have spent nights either inside the main portion of the store or the warehouse and raises, by implication, that either he or a girlfriend used cocaine (the warehouse is where the Government's exhibits primarily focus upon the use of cocaine), there is no evidence of record that Mr. Cheeseman was actively engaged in the operational end of the business. In fact, it is clear that
1

The Government in its letter memorandum to the Court dated August 6, 2008, relies upon the "involved in" wording as justification for the seizure. Shortly after the hearing, Mr. Rosen advised counsel that it would now raise the "used" wording in its response filed today (Exhibit 1, attached hereto). Mr. Cheeseman's letter of August 8, 2008, addresses both the "involved in or used" wording.
WIL:126028.1/CHE210-831049

Case 1:07-cr-00124-SLR The Honorable Sue L. Robinson August 29, 2008 Page 2

Document 44

Filed 08/29/2008

Page 2 of 8

Mr. Cheeseman's addiction to cocaine had rendered him unable to operate the business. His sister, Nancy Macknatt, the current owner of the business, actually operated the business with other employees and since 2006, had been given a power of attorney for Mr. Cheeseman. (Transcript pages 77-79, attached hereto as Exhibit 2). The following testimony given by Nancy Macknatt sums up the actual situation in the years 2006 and 2007: "Q: During this period of time in 2007, I'm going to focus on that year, was Mr. Cheeseman participating in the sale of the guns actually on the counter, selling to people? I never observed him doing that. Was he participating in the purchase of firearms at that time, personally? Our store manager does that. Okay. Was he participating in the day-to-day management of the business at that time? No. Pretty much the store manager and I were doing it. We were -- I was paying all the bills and Bob and Dave Johnson -Dave did certain parts of the store. He ordered things and Bob ordered, like, the guns, that sort of thing. Was your brother engaged in any active part of running the business during that period of time, to the best of your knowledge? Did he -- I'm sorry? Other than the fact that the license was in his name, was he engaged in the day-to-day management of the business at any time in the preceding two or three months before his arrest? Not that I'm aware of. How long had it been since he effectively engaged in the business? About a couple years. So he really wasn't engaged much in the day-to-day

A: Q: A: Q: A:

Q:

A: Q:

A: Q: A: Q:

WIL:126028.1/CHE210-831049

Case 1:07-cr-00124-SLR The Honorable Sue L. Robinson August 29, 2008 Page 3 operations? A:

Document 44

Filed 08/29/2008

Page 3 of 8

No. I mean, if I needed him for something, I would just call him." (Exhibit 2, Transcript pages 80-81)

The evidence from the hearing clearly portrays Mr. Cheeseman as an absentee owner/ operator of a gun shop who held a federal firearms license. Other than helping himself to money apparently generated by the business through the use of his ATM card2 to feed his addiction, Mr. Cheeseman was not actively engaged in the business. There is simply no evidence that he ever used or involved a firearm in any manner to facilitate his cocaine addiction. The Government did present evidence that Mr. Cheeseman had designated certain firearms as being part of his personal collection. Agent Iardella, through an administrative inspection in January, 2007, identified a number of firearms noted as being part of his personal collection. This list of firearms was introduced as Exhibit 11 at the forfeiture proceeding. Agent Iardella described the process as to how it was determined that a firearm was part of Mr. Cheeseman's personal collection. "Q: A: And could you explain what disposed to personal collection means? It's in the acquisition and disposition record of the gun dealer, the guns that are acquired by the business. The other side of the books is disposition side. He logs them out to himself. So on the disposition side, it would have James L. Cheeseman. So it would come into the store as X-Rings and then be logged out to the owner's personal collection." (Exhibit 2, Transcript page 32) Mr. Cheeseman does not dispute that there were a number of firearms that he logged out as being his personal property and not part of the store's inventory. Mr. Cheeseman does, however, question the accuracy of Agent Iardella's testimony that some twenty-six (26) firearms logged out to Mr. Cheeseman's personal collection could not be accounted for. Although not stated in so many words, the Government seems to imply or suggest that the missing or unaccounted for firearms are proof that Mr. Cheeseman either "used" or "involved" these firearms in his addiction. That assumption or suggestion is simply inaccurate. Agent Iardella

2

Testimony of ATF Agent Diane Iardella and Nancy Macknatt (Exhibit 2, Transcript pages 36-38, and 88).

WIL:126028.1/CHE210-831049

Case 1:07-cr-00124-SLR The Honorable Sue L. Robinson August 29, 2008 Page 4

Document 44

Filed 08/29/2008

Page 4 of 8

admitted she only checked records back to 1995. Regardless, her testimony is both incomplete and in error. Exhibit 13 introduced by the Government at the hearing purports to list twenty-six (26) firearms that were listed on the January, 2007 inventory list (Government's Exhibit 11 introduced at the hearing) that were not recovered from the store. Twelve (12) of the allegedly missing firearms can be accounted for in the Acquisition and Disposition records and only three (3) of those firearms accounted for in the books pre-date 1995. For example, the following firearms from the Government's Exhibit 13 have been located in Mr. Cheeseman's records: 1. Norinco/Sile, Model 565-1, Serial No. 409998 - re-acquired by X-Ring on November 17, 1993, and transferred to third party on the same date Ruger, Model 10/22, Serial No. 23683609 - re-acquired by X-Ring on September 10, 1994, and transferred to third party on October 24, 1994 Walther, Model GSP, Serial No. 62702 - re-acquired by X-Ring on October 23, 1995, and transferred to a third party on the same date Knight Stoner, Model SR25 match, Serial No. 24098 - re-acquired by X-Ring on August 30, 1995, and transferred to third party on the same date Ruger, Model Mini 14, Serial No. 18252031 - re-acquired by X-Ring on July 23, 1997, and transferred to a third party on August 30,1997 Remington, Model XP-100, Serial No. 87518040 - re-acquired by X-Ring on November 14, 1997, and transferred to third party on same day Winchester, Model 1897, Serial No. H9452 - re-acquired by X-Ring on December 9, 2000, and transferred to third party on same day Springfield ALR Ord., Model M1 Tanker Garand, Serial No. 394914 - re-acquired by X-Ring on March 20, 1998, and transferred to third party on March 21, 1998 Polytech, Model AK47, Serial No. 8799 - re-acquired by X-Ring on March 20, 1998, and transferred to third party on March 21,1998

2.

3.

4.

5.

6.

7.

8.

9.

WIL:126028.1/CHE210-831049

Case 1:07-cr-00124-SLR The Honorable Sue L. Robinson August 29, 2008 Page 5

Document 44

Filed 08/29/2008

Page 5 of 8

10.

Polytech, Model AKS-762, Serial No. CF-10658 - re-acquired by X-Ring on April 9, 1998, and transferred to third party on April 11,1998 Mitchell Arms, Model GS45, Serial No. M951613 - re-acquired by X-Ring on July 31, 1998, and transferred to third party on the same date Para Ordance, Model P12, Serial No. RS4691 (listed as RJ in X-Ring records) - re-acquired by X-Ring on December 22, 1994, and transferred to third party on the same date (Exhibit 3, attached hereto)3

11.

12.

Even though Mr. Cheeseman held a federal firearms license, he was not required to record the transfer of a firearm held by him for personal use if he had it for at least a year. Moreover, it is submitted that Mr. Cheeseman could likely account for all the alleged missing firearms if he had access to the records seized by the Government. The firearms listed as recovered in the Government's Exhibit 12 introduced at the hearing are firearms belonging to Mr. Cheeseman and were not part of the seized inventory. While it is contended that none of the firearms can be forfeited for the reasons already noted, Mr. Cheeseman submits that the Court can distinguish between the inventory of X-Ring Supply and the personal collection of firearms held separately by Mr. Cheeseman4. The value of the personal firearms still in the possession of the Government is approximately $67,000.005. Two of the firearms identified by the Government as having been recovered (United States, Exhibit 12 Forfeiture Hearing), the Kimber Classic K770 Models K0012 and K0005, are very rare and valuable. Mr. Cheeseman estimates these rifles are worth between $10,000.00 and $40,000.00 and $15,000.00 and $50,000.00, respectively. The $67,000.00 figure estimated as the value of the personal firearms uses the lower end valuations for the Kimber firearms. If they

3

Exhibit 3 consists of the acquisition page and corresponding disposition pages taken from Mr. Cheeseman's state books. The Government seized most of Mr. Cheeseman's records precluding him from tracing the whereabouts of all the alleged missing firearms. Additionally, Mr. Cheeseman can account for 2 other firearms on the list - the Colt 1991 Compact and Caspian Arms LTD, Hi Cap Kit 1911. The Colt was sold to a friend some time in 1994 and the Caspian Arms firearm was re-acquired by XRing on February 21, 1998, and logged in. See last page of Exhibit 3. 4 The firearms held personally by Mr. Cheeseman were for several years kept at the home of his former wife. Even after he retrieved them and brought them back to X-Ring Supply, these firearms were segregated from the store inventory (Exhibit 2, Transcript pages 70-71 and 90-92). 5 This figure utilizes the estimated value of the firearms as determined by the Government and the estimated value of some of the personal firearms, including the 2 Kimber firearms, which was supplied to the Government by letter in early June of 2008 and has not been disputed.

WIL:126028.1/CHE210-831049

Case 1:07-cr-00124-SLR The Honorable Sue L. Robinson August 29, 2008 Page 6

Document 44

Filed 08/29/2008

Page 6 of 8

are valued at the high end, the personal firearms may have an estimated value of approximately $132,000.006. The Government allows that it has seized firearms valued in excess of $371,500.00 (F.N. 2, page 2 of the Government's letter to the Court dated August 6, 2008), but it does not contest the fact that when unaccounted for ammunition and collector value is included, the total value of the seized property may be in excess of $500,000.00. It is contended that the seizure of such a valuable collection of firearms, the large majority of which are indisputably the inventory of XRing Supply, has "absolutely no correlation to any damages sustained by society or to the cost of enforcing the law". Austin v. U.S., 509 U.S. 602, at 622, citing U.S. v. Ward, 448 U.S. 242 (1980). Even though Mr. Cheeseman's sentencing will not occur until this matter has been resolved, the fact that Mr. Cheeseman is a first-time offender will likely impact upon the amount of fine, if any, imposed by this Court. The fine range for Mr. Cheeseman is $7,500.00 to $75,000.00 pursuant to U.S.S.G. § 5E 1.2(c)(3). Despite this fact, the Government proposes a seizure having a value nearly seventy (70) times in excess of the minimum guideline recommended fine7. The Government intends to destroy all forfeited firearms and ammunition.. (Exhibit 2, Transcript pages 3 and 4). Such forfeiture and destruction are completely unnecessary in this case for the reasons argued in counsel's letter to the Court dated August 8, 2008 and stated herein. The firearms and ammunition are not in and of themselves contraband. They are lawfully sold in every state in America. The forfeiture, at least in this case, is not associated with any unlawful use or trade of the firearms. The firearms and ammunition are being sought by the Government simply because Mr. Cheeseman held a Federal Firearms License ("FFL") at the time of his arrest. Shortly after his arrest, Mr. Cheeseman sought to transfer all the assets of X-Ring to his sisters, who have purchased the business and its inventory (including the seized property) (Exhibit 2, Transcript pages 81-83) and obtained a FFL8. If the firearms are returned to X-Ring Supply, they would be handled in a lawful manner, subject to the laws and rules applicable to the sale of firearms. When asked how the seized property would be handled if returned to X-Ring Supply, Nancy Macknatt stated as follows: "A: Just like we do with any other firearm. They would be logged into our books, and any guns that are sold, they must fill out paperwork, state and federal paperwork, and

6

Considering the extremely valuable nature of the 2 Kimber rifles, if the Court determines that equitable principles should govern in the determination whether the Government's proposed seizure is an excessive penalty under the Eighth Amendment, it is submitted that these 2 firearms should be excluded from seizure. If excluded, the forfeiture of the remaining firearms held by the Government would still be valued at approximately $42,000.00. 7 The weakness of the Government's position is best evidenced by the somewhat bizarre assertion that had the Government charged Mr. Cheeeseman with six hundred (600) offenses, as it apparently could under a literal interpretation of the law, he would have faced possible statutory fines amounting to $150,000,000.00. Therefore, the Government argues the seizure of the inventory and personal firearms, even if valued in excess of $500,000.00, is well within the sense of fairness. 8 Mr. Cheeseman has no interest in X-Ring Supply LLC (See Exhibit 4, Affidavit of Nancy Macknatt).

WIL:126028.1/CHE210-831049

Case 1:07-cr-00124-SLR The Honorable Sue L. Robinson August 29, 2008 Page 7

Document 44

Filed 08/29/2008

Page 7 of 8

then we call into the state so that they can do a background check, and we call into the federal, and then they do a background check, and they're the ones that tell us, yes or no, if that particular person can have a gun or not. Q: A: Q: A: Q: A: Q: A: And your brother would have absolutely no contact with those firearms, would he? No. And you understand he's a person prohibited -Yes. -- as of he entered the guilty plea? Yes. If the firearms and ammunition were returned to you, would you be able to sell them in the normal course of business? Yes." (Exhibit 2, Transcript page 85) The Court ultimately must determine whether the Government has the statutory authority to forfeit the firearms and ammunition that was seized. Counsel for both Mr. Cheeseman and the Government have argued their respective positions regarding the statute in issue. In interpreting whether the wording of 18 U.S.C.A. § 924(d)(1), "involved in or used in any knowing violation" is applicable to the factual situation before the Court, it is submitted the wording is ambiguous at best. In such situations, the law must be interpreted in favor of the defendant, Mr. Cheeseman. In a somewhat analogous situation, the United States Supreme Court recently rejected the Government's argument that the term "proceeds" in the money-laundering statute, 18 U.S.C. § 1956, included receipts. In rejecting the argument of the Government, the United States Supreme Court in an opinion authored by Justice Scalia stated: "Under either of the word's ordinary definitions, all provisions of the federal money-laundering statue are coherent; no provisions are redundant; and the statute is not rendered utterly absurd. From the face of the statute, there is no more reason to think that 'proceeds' means 'receipts' than there is to think that 'proceeds' means 'profits'. Under a long line of our decisions, the tie must go to the defendant. The rule of lenity requires ambiguous criminal laws to be interpreted in favor of the defendants subjected to them [citations omitted]. This venerable rule not only vindicates the fundamental principle that no citizen should be

WIL:126028.1/CHE210-831049

Case 1:07-cr-00124-SLR The Honorable Sue L. Robinson August 29, 2008 Page 8

Document 44

Filed 08/29/2008

Page 8 of 8

held accountable for a violation of a statute whose commands are uncertain, or subjected to punishment that is not clearly prescribed. It also places the weight of inertia upon the party that can best induce Congress to speak more clearly and keeps courts from making criminal law in Congress's stead. Because the 'profits' definition of 'proceeds' is always more defendantfriendly than the 'receipts' definition, the rule of lenity dictates that it should be adopted." United States v. Santos, 128 S.Ct. 2020, 2025 (June 2, 2008) In conclusion, it is submitted that all the firearms should be returned to X-Ring Supply LLC now owned by Nancy Macknatt and Pam Rhoades rather than destroyed. The forfeiture statute is not applicable to the facts of this case as the seized property was neither "used" nor "involved" with Mr. Cheeseman's drug addiction. In the alternative, if the Court determines the forfeiture law covers this situation, it is submitted the penalty the Government seeks to impose upon Mr. Cheeseman is grossly excessive and unfair and that the seized property should be returned to X-Ring Supply as the Court deems just. Respectfully submitted, /s/ Charles M. Oberly, III, #743 Charles M. Oberly, III (ID# 743) CMO,III/mdm Attachments cc: Keith M. Rosen, AUSA

WIL:126028.1/CHE210-831049

Case 1:07-cr-00124-SLR

Document 44-2

Filed 08/29/2008

Page 1 of 50

Case 1:07-cr-00124-SLR

Document 44-2

Filed 08/29/2008

Page 2 of 50

Case 1:07-cr-00124-SLR

Document 44-2

Filed 08/29/2008

Page 3 of 50

Case 1:07-cr-00124-SLR

Document 44-2

Filed 08/29/2008

Page 4 of 50

Case 1:07-cr-00124-SLR

Document 44-2

Filed 08/29/2008

Page 5 of 50

Case 1:07-cr-00124-SLR

Document 44-2

Filed 08/29/2008

Page 6 of 50

Case 1:07-cr-00124-SLR

Document 44-2

Filed 08/29/2008

Page 7 of 50

Case 1:07-cr-00124-SLR

Document 44-2

Filed 08/29/2008

Page 8 of 50

Case 1:07-cr-00124-SLR

Document 44-2

Filed 08/29/2008

Page 9 of 50

Case 1:07-cr-00124-SLR

Document 44-2

Filed 08/29/2008

Page 10 of 50

Case 1:07-cr-00124-SLR

Document 44-2

Filed 08/29/2008

Page 11 of 50

Case 1:07-cr-00124-SLR

Document 44-2

Filed 08/29/2008

Page 12 of 50

Case 1:07-cr-00124-SLR

Document 44-2

Filed 08/29/2008

Page 13 of 50

Case 1:07-cr-00124-SLR

Document 44-2

Filed 08/29/2008

Page 14 of 50

Case 1:07-cr-00124-SLR

Document 44-2

Filed 08/29/2008

Page 15 of 50

Case 1:07-cr-00124-SLR

Document 44-2

Filed 08/29/2008

Page 16 of 50

Case 1:07-cr-00124-SLR

Document 44-2

Filed 08/29/2008

Page 17 of 50

Case 1:07-cr-00124-SLR

Document 44-2

Filed 08/29/2008

Page 18 of 50

Case 1:07-cr-00124-SLR

Document 44-2

Filed 08/29/2008

Page 19 of 50

Case 1:07-cr-00124-SLR

Document 44-2

Filed 08/29/2008

Page 20 of 50

Case 1:07-cr-00124-SLR

Document 44-2

Filed 08/29/2008

Page 21 of 50

Case 1:07-cr-00124-SLR

Document 44-2

Filed 08/29/2008

Page 22 of 50

Case 1:07-cr-00124-SLR

Document 44-2

Filed 08/29/2008

Page 23 of 50

Case 1:07-cr-00124-SLR

Document 44-2

Filed 08/29/2008

Page 24 of 50

Case 1:07-cr-00124-SLR

Document 44-2

Filed 08/29/2008

Page 25 of 50

Case 1:07-cr-00124-SLR

Document 44-2

Filed 08/29/2008

Page 26 of 50

Case 1:07-cr-00124-SLR

Document 44-2

Filed 08/29/2008

Page 27 of 50

Case 1:07-cr-00124-SLR

Document 44-2

Filed 08/29/2008

Page 28 of 50

Case 1:07-cr-00124-SLR

Document 44-2

Filed 08/29/2008

Page 29 of 50

Case 1:07-cr-00124-SLR

Document 44-2

Filed 08/29/2008

Page 30 of 50

Case 1:07-cr-00124-SLR

Document 44-2

Filed 08/29/2008

Page 31 of 50

Case 1:07-cr-00124-SLR

Document 44-2

Filed 08/29/2008

Page 32 of 50

Case 1:07-cr-00124-SLR

Document 44-2

Filed 08/29/2008

Page 33 of 50

Case 1:07-cr-00124-SLR

Document 44-2

Filed 08/29/2008

Page 34 of 50

Case 1:07-cr-00124-SLR

Document 44-2

Filed 08/29/2008

Page 35 of 50

Case 1:07-cr-00124-SLR

Document 44-2

Filed 08/29/2008

Page 36 of 50

Case 1:07-cr-00124-SLR

Document 44-2

Filed 08/29/2008

Page 37 of 50

Case 1:07-cr-00124-SLR

Document 44-2

Filed 08/29/2008

Page 38 of 50

Case 1:07-cr-00124-SLR

Document 44-2

Filed 08/29/2008

Page 39 of 50

Case 1:07-cr-00124-SLR

Document 44-2

Filed 08/29/2008

Page 40 of 50

Case 1:07-cr-00124-SLR

Document 44-2

Filed 08/29/2008

Page 41 of 50

Case 1:07-cr-00124-SLR

Document 44-2

Filed 08/29/2008

Page 42 of 50

Case 1:07-cr-00124-SLR

Document 44-2

Filed 08/29/2008

Page 43 of 50

Case 1:07-cr-00124-SLR

Document 44-2

Filed 08/29/2008

Page 44 of 50

Case 1:07-cr-00124-SLR

Document 44-2

Filed 08/29/2008

Page 45 of 50

Case 1:07-cr-00124-SLR

Document 44-2

Filed 08/29/2008

Page 46 of 50

Case 1:07-cr-00124-SLR

Document 44-2

Filed 08/29/2008

Page 47 of 50

Case 1:07-cr-00124-SLR

Document 44-2

Filed 08/29/2008

Page 48 of 50

Case 1:07-cr-00124-SLR

Document 44-2

Filed 08/29/2008

Page 49 of 50

Case 1:07-cr-00124-SLR

Document 44-2

Filed 08/29/2008

Page 50 of 50