Number range CHAPTERUpdated June 2007 to input current (2006)
Application Note citations.

**This is a letter analyzing loss under U.S.S.G. 2B1.1 (2006). The 2B1.1
guideline applies to offenses begun, completed, or continued after
November 1, 2001.**

Note: this letter assumes that you have or can obtain a declaration from
the case agent which provides:

-average high and low mileage on vehicles whose odometers were rolled
back;

-the average mileage rollback;

> -total number of vehicles whose odometers were rolled back (Section
> III C below discusses how to estimate this number); and
>
> -retail price information for the vehicles clocked (or at least
> information which can be used to estimate retail price).

Often these numbers are derived from only a portion of the vehicles
involved in a case, since \"perfect\" information is seldom available.
References to the declaration should be incorporated in the letter where
these numbers (average rollback, number of vehicles, price information)
are used.

**Early in the case, try to have your agent know he or she needs to
obtain this type of information.**

**\[DATE\]**

**\[name\]**

Probation Officer

United States Probation Office

**\[ \]** District of **\[state\]**

**\[address\]**

**\[city, state zip\]**

Re: United States v. **\[name\]**, et al.,

Criminal No. **\[docket number\]**

Dear **\[ \]**:

This letter will provide background on the defendant**\[s\]** in this
case and **\[his/her/their\]** crimes. It will also discuss pertinent
considerations under the Sentencing Guidelines, and outline the United
States\'s views on a Guidelines\' analysis. I trust the information will
be of value to you.

I. [THE INDICTMENT]{.underline}

On **\[date\]** a federal grand jury in **\[city\]** returned a
**\[#\]** count indictment against **\[#\]** defendants. All charges
stemmed from an odometer rollback scheme. All defendants were

charged in each count **\[[except]{.underline} . . . .\]**.

The offenses charged in the indictment were as follows:

**\[Describe the charges in the indictment.\]**

II\. [THE PLEA AGREEMENTS]{.underline}

The defendants pled guilty to the following counts:

**\[List the counts to which the defendants pled guilty.\]**

Enclosed are copies of the plea agreements which each defendant entered.
As set out more fully in each of the agreements, the United States has
agreed to recommend **\[describe any provisions in the plea agreement
relating specifically to recommendations on terms of sentences,
departures, substantial assistance, sentencing at the bottom or top of
the range\]**.

III\. [FACTUAL DISCUSSION]{.underline}

A. [The Odometer Fraud Scheme]{.underline}

All odometer-tampering enterprises, of necessity, involve several
interrelated activities. First, a late-model, high-mileage vehicle is
purchased at a low price that reflects the significant wear and tear on
the vehicle. This vehicle will then be \"reconditioned\" to remove many
outward appearances of long use, and the odometer will be reset, often
more than 40,000 miles below its true reading.

In addition to the cosmetic \"reconditioning\" of the car, the odometer
tamperer must also \"recondition\" the paperwork accompanying the
vehicle. Most automobile titles include a declaration of the vehicle\'s
mileage at the time ownership was transferred to the individual involved
in odometer fraud. To hide the actual mileage that is declared on the
title when the car was sold to the odometer tamperer, the individual
must take one of several measures.

First, the odometer tamperer may simply alter the mileage figures
appearing on the vehicle\'s title documents so as to cause the documents
to reflect the false, lower mileage figure after the rollback. In so
doing, the odometer tamperer may also create one or more transfers of
the vehicle to fictitious dealerships, thereby seeking to make it
unclear which entity was responsible for the odometer rollback and title
alteration.

Second, the odometer tamperer may destroy the original certificate of
title documents indicating the vehicle\'s true high mileage, and obtain
a duplicate certificate of title, upon which the false, lower mileage
figure is entered.

Third, the odometer tamperer may engage in a practice known as
\"washing\" the automobile titles. Here, the odometer tamperer transfers
ownership of the vehicle on paper to a \"straw\" dealership, which may
exist or be fictitious. This \"straw\" dealership uses the altered title
documents to obtain a new replacement title listing the false low
mileage reading.

Under each of these scenarios, the result is the same. The odometer
tamperer now possesses an altered, forged, or replacement title
document(s) (which are securities under federal law) containing a false
low mileage reading. He uses these documents to sell the car (for
several thousand dollars above its actual value) to a purchaser who is
deceived regarding the vehicle\'s remaining useful life by the altered
odometer, by the vehicle\'s outward appearance, and by the counterfeit,
low-mileage paperwork (title and odometer statement).

B. [The Defendants\' Scheme]{.underline}

The charges in this case focus upon **\[lead defendant\]** and his
associates.

1\. [**\[name of lead defendant\]** \-- the Ringleader]{.underline}

Defendant has been in the used car business in **\[place\]** for many
years. He has conducted business under a variety of names, including
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_. For the most part, defendant
has not dealt directly with the public, but has purchased and sold
vehicles at wholesale. He has acquired used motor vehicles from numerous
sources, both in **\[name of state where he did business\]** and out of
state. Similarly, he has sold vehicles to firms as near to home as
**\[place\]**, and as far away as **\[place\]**.

Defendant gave direction to his co-conspirators, deciding what cars to
purchase, how much to pay for them, and how far to roll back their
odometers. He also arranged and paid for the rollbacks, as well as the
falsification of title documents to show false low mileage on the
titles. He personally sold many of the vehicles. In short, he was in
control of the conspiracy.

**\[Describe lead defendant\'s role with any details we have showing the
number of vehicles involved; evidence of knowledge of wrongdoing;
evidence of profits; and examples of controlling the conspiracy, such as
giving directions to others.\]**

2\. [**\[name\]** \-- the \"Spinner\"]{.underline} **\[if the spinner
was charged\]**

A \"spinner\" is a person who does the physical work of altering an
odometer. Defendant was a professional spinner. **\[Describe how we know
the number of vehicles he rolled, and how he was paid (e.g., in cash).
Outline any cooperation provided, and admissions in debriefing, unless
this last item is precluded by the plea agreement.\]**

3\. [**\[name\]** \-- Document Alterations]{.underline} **\[if the title
alterations person was charged\]**

This defendant performed the work of altering the titles to reflect each
vehicle\'s new, lower mileage, after the odometers were rolled back.
This work is essential to a rollback scheme because mileage is recorded
on the title or title reassignment on sale of a car, and when an
odometer is rolled back, title documents relating to the car have to be
altered to reflect the false low mileage.

**\[Describe how long this defendant was involved in alterations;
estimate the number of titles altered, and provide the basis for this
estimate. Describe who paid this person, and how (e.g., paid in cash).
Describe any cooperation during investigation, and admissions in
debriefing, unless this last item is precluded by the plea
agreement.\]**

4\. **[\[name\] \-- \[role\]]{.underline}**

**\[Provide similar information for any other defendant, describing
their role, the number of vehicles with which they were involved, their
cooperation, if any, and admissions made in debriefing.\]**

C. [Total Cars Purchased and Sold with Rolled-back
Odometers]{.underline}

**\[Describe how the government knows the total number of clocked cars.
It may be that we checked for rollbacks on 300 cars, and found 200
rollbacks. This may be all we use for sentencing.**

**But if there is reason to believe this understates the defendants\'
criminal activity, explain why that is so and provide a reliable
estimate of the total number of cars clocked. For example, provide the
number of vehicles the government knows the defendants purchased and on
which we checked for rollbacks, and state the number of rollbacks found
among those vehicles. Such as, \"Defendants purchased 300 vehicles for
which the government checked for rollback activity, discovering 200
rollbacks. This is 67% rollback rate for vehicles the defendants
purchased.\"**

**Then explain how many vehicles we believe the defendants actually
purchased and sold during the period they were clocking cars. For
example, \"Defendants produced no records to the United States showing
their total volume. Moreover, they did business in numerous places and
dealt with multiple banks and other institutions, making it difficult to
collect records showing a complete picture of their operation over the
entire period of illegal activity. Nevertheless, bank records, auction
records, dealer records, and witness interviews establish that
defendants purchased and sold at least 900 cars during the conspiracy
period.\" Explain the basis for this conclusion.**

**[United States v. Berndt]{.underline}, 86 F.3d 803, 811 (8th Cir.
1996), supports this type of estimation. In [Berndt]{.underline},
although the government could identify only 67 cars involved in the
fraud, the court held that the estimate of 90 vehicles was not
unreasonable. In support of this holding, the court noted: \"Considering
that fraud involves the element of deceit and secrecy, it is likely that
there are more automobiles involved in this odometer-tampering scheme
than the government can track down.\" [Id.]{.underline}**

**Provide sufficient information to draw this sort of conclusion: \"From
the above, we know that defendants handled 900 vehicles during the
period they were clocking cars, and that their rollback rate was 67%.
Thus, the best estimate of the number of cars defendants clocked is 67%
of 900 vehicles, for a total of 600 rollbacks.\"\]**

D. [Victim Impact]{.underline}

The primary victims of the defendant**\[s\]**\' odometer fraud scheme
were the consumers who ultimately purchased the cars with altered
odometers. The harms suffered by odometer-tampering activities generally
fall upon those persons least able to afford them. Buyers of used cars
include elderly people on fixed incomes, younger people who have not yet
earned enough to afford new cars, and others who, for many reasons, are
simply unable to buy new cars. Additionally, rolling back a car\'s
odometer directly affects the safety of the car. Indeed, in enacting the
federal odometer laws, Congress expressly found that \"an accurate
indication of the mileage assists a buyer in deciding on the safety and
reliability of the vehicle\[.\]\" 49 U.S.C. § 32701(a)(3).

As explained further below, each purchaser was harmed in several ways.
First, the consumers were provided an inaccurate indication of the
mileage previously traveled by the vehicle, which impeded their ability
to determine the vehicle\'s value, safety, and reliability. Accordingly,
the consumer paid a higher price for the vehicle than its fair market
value. Second, cars with altered odometers have substantially reduced
resale value once the fact that the odometer has been altered has been
made known (as must occur when the consumer attempts to resell the car).
Thus, consumers will lose significant money when they sell their cars.
Third, cars with higher mileage are more costly to maintain, and more
likely to require extensive repairs. Thus, consumers will lose
significant money if they do not sell their cars. Fourth, consumers
incur increased expenses (such as higher insurance premiums, lost time)
than they would have if they had known the cars\' true mileage.

IV\. [SENTENCING UNDER THE GUIDELINES]{.underline}

In this letter, the United States discusses elements of analysis under
the United States Sentencing Guidelines (U.S.S.G.) that are common to
all defendants. We discuss elements that pertain only to one defendant,
and application of general principles to individual defendants, in
separate attachments applicable to each defendant.

A. [U.S.S.G. § 2B1.1, Involving Theft, Fraud, and Deceit,
Applies]{.underline}

Each defendant pled guilty to violations of odometer tampering and
related statutes (failure to keep odometer records, providing false
odometer statements), in violation of **\[cite applicable statutes\]**.
Guideline § 2N3.1, \"Odometer Laws and Regulations,\" cites to these
statutory provisions. The background for this guideline explains that it
applies only where \"a single vehicle\" was involved. It goes on to
provide: \"If more than one vehicle was involved, § 2B1.1 (Theft,
Property Destruction, and Fraud) is to be applied because it is designed
to deal with a pattern or scheme.\"

Finally, all counts of conviction should be grouped together. This is
because all counts of conviction were part of a common scheme or plan
(U.S.S.G. § 3D1.2(b)), and because the fraud guideline applies to each
count and determines an offense level largely on the basis of total loss
(U.S.S.G. § 3D1.2(d)).

Thus, U.S.S.G. § 2B1.1 applies, with a base offense level of six.
U.S.S.G. § 2B1.1(a).

B. [Amount of Loss Increase]{.underline}

Guideline 2B1.1(b)(1) provides for an increase in offense level based on
the amount of loss incurred by a scheme or course of conduct such as
that here.[^1] All that is required is a \"reasonable estimate of the
loss\" that is to be based upon \"available information.\" Application
Note 3(C). That Note, entitled \"Estimation of Loss,\" specifically
contemplates an estimate based on the \"approximate number of victims
multiplied by the average loss to each victim.\" Application Note
3(C)(iii). **\[NOTE: in the 2001 and 2002 editions of the Guidelines,
this was Application Note 2(C)(iii) -- a new Application Note 2 and
other changes inserted in 2003 changed the numbering of the Application
Notes to 2B1.1. This letter uses the 2006 numbering system, which in
this instance is the same as in 2003.\]**

In this case, the amount of loss is estimated by multiplying a figure
representing the average loss per victim by the number of cars with
rolled-back odometers. **\[Describe any sentencing stipulations
regarding amount of loss here. Even when amount of loss is stipulated,
it is valuable to include a rationale for the agreed upon loss amount,
so some or all of the following analysis remains relevant. Similarly, it
is important that the Court be provided with a rationale for stipulated
loss amounts, either in the PSR or through a sentencing brief from the
government.\]**

1\. [Average Loss Per Victim - \$4,000]{.underline} **\[The loss may be
higher, depending on retail prices. \$4,000 is based on 40% of
retail.\]**

The loss to the ultimate purchaser of each car the defendant**\[s\]**
sold with a rolled odometer can conservatively be estimated as \$4,000.
This is based on case law and other factors that establish the validity
of a loss per vehicle based on 40% to 50% of the retail price paid by
consumer victims. There are a number of approaches that reach this same
conclusion.

a\. [Courts Consistently Find Loss to be \$4,000 to \$6,000 per
Vehicle]{.underline}

Several Federal Courts of Appeals have affirmed sentences in odometer
fraud cases where the trial court found consumer loss of \$4,000 per car
or more under the old fraud guideline, 2F1.1. The analysis under § 2B1.1
is significantly similar to that under former § 2F1.1, so the case law
remains relevant. Several of these cases are \"unpublished,\" but most
are available on Westlaw. Some are also published in the Federal
Reporter series, as indicated below. These decisions provide guidance in
this area based on other courts which have examined these issues.
Moreover, the guidelines specifically permit estimating loss \"based on
. . . the scope and duration of the offense and revenues generated by
similar operations.\" Guideline 2B1.1, Application Note 3(C)(v).

[United States v. Whitlow]{.underline}, 979 F.2d 1008, 1012 (5th Cir.
1992), explicitly affirms a loss finding of \$4,000 per vehicle based on
40% of retail price consumers paid. In [Whitlow]{.underline}, the
district court had noted that the National Automobile Dealers
Association guide for used car values stated that \"High Mileage\"
deductions should not reduce the value of a vehicle by more than forty
percent. Accordingly, the district court calculated the loss per vehicle
as forty percent of the average \$10,000 retail purchase price of the
cars. This resulted in a loss per car of \$4,000, which the Fifth
Circuit said was plausible in light of the record as a whole. 979 F.2d
at 1012. The analysis of the Fifth Circuit in [Whitlow]{.underline} is
directly applicable. Here, the cars the defendant sold had an average
retail sale price of approximately \$\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_. If
the loss per vehicle is calculated at forty percent of the average
retail purchase price, the loss per vehicle here will be \$
\_\_\_\_\_\_\_\_\_\_\_\_\_ **\[40% of avg. retail sale price\].**

[United States v. Berndt]{.underline}, 86 F.3d 803, 811 (8th Cir. 1996).
The defendant rolled back the odometer on 80 - 100 cars. The loss
finding of \$4,000/car was not contested, but is mentioned in the
opinion.

[United States v. Jarrahi, et al.]{.underline}, Nos. 97-4289, 4311 (4th
Cir., May 11, 1998), 1998 WL 230825. Defendants appealed sentencing
guideline loss findings. The Fourth Circuit held that the district court
did not commit clear error by holding the defendants responsible for
rollbacks committed by others even though the defendants were in a
rather \"loose-knit\" association in which they purchased vehicles for
each other. The loss finding was just over \$4,800 per car on a total of
364 cars.

[United States v. Carroll, et al.]{.underline}, Nos. 97-4022, 4259 (4th
Cir., November 19, 1998), 1998 WL 801880. Richard Carroll and Charles
Granata were convicted after trial and sentenced to prison. The court
found that the ultimate consumer purchaser was the real victim of the
crime, and that a loss estimate of \$6,000 per car was reasonable.

[United States v. Alami]{.underline}, 1997 WL 570867 (4th Cir.,
September 16, 1997). The court upheld a loss finding under the
Sentencing Guidelines of \$6,000 per car. That was the average
difference between the price defendants paid for the cars, and the
ultimate consumer purchase prices.

[See]{.underline} [United States v. Sprague]{.underline}, 35 F.3d 559
(5th Cir. 1994) (table) (affirming \$4,000 loss per vehicle estimate);
[United States v. David Allen Hatley]{.underline}, Crim. No.
SA-96-CR-230 (W.D. Tex. December 13, 1996) (applying \$6,000 los per
vehicle); [United States v. Hampton]{.underline}, No. SA CR 96-40-GLT
(C.D. Cal. Oct. 16, 1996) (rejecting PSR recommendation of \$3,200 per
vehicle loss estimate and holding that loss estimate should be \$4,000
per vehicle); [United States v. Sadeghi]{.underline}, No:95CR00267-001
(M.D.N.C. May 7, 1996) (loss of \$4,000 per victim); [United States v.
Rossi]{.underline}, Cr. No. 94-506 (E.D. Pa. Aug. 1, 1995) (loss finding
\$4,000/car loss on 1,600 cars; \$6.4 million total loss);
[see]{.underline} [also]{.underline} [United States v.
Welch]{.underline}, Crim. No. 93-30004-F (D. Mass. October 19, 1993)
(adopting PSR loss estimate using \$4,000/car figure); [United States v.
Cooper]{.underline}, Cr. No. HCR 92-0149 (N.D. Ind. March 3, 1993)
(same); [United States v. Coker]{.underline}, Cr. No. H-92-00089 (S.D.
Tex. Aug. 7, 1992) (same).

b\. [Loss of Value at Resale]{.underline}

As indicated above, the guidelines contemplate determining the amount of
loss on the basis of a reasonable estimate of loss per victim. Guideline
2B1.1, Application Note 3(C); [see]{.underline}, [e.g.]{.underline},
[United States v. Tardiff]{.underline}, 969 F.2d 1283, 1288 (1st Cir.
1992). \"Actual loss\" is defined as \"the reasonably foreseeable
pecuniary harm that resulted from the offense.\" Application Note
3(A)(i). \"Pecuniary harm\" means harm \"that is monetary or that
otherwise is readily measurable in money,\" but does not count
non-economic harm such as emotional distress. Application Note
3(A)(iii).

The guidelines provide a rule of construction for product substitution
cases. Odometer fraud is a type of product substitution case: the
defendant substituted high-mileage vehicles for the low-mileage vehicles
he claimed to be selling. In product substitution cases, pecuniary harm
includes \"reasonably foreseeable costs of making substitute
transactions and handling or disposing of the product delivered . . .
.\" Application Note 3(A)(v)(I). For an odometer fraud victim, this
would be the cost of obtaining a low-mileage vehicle (the substitute
transaction) less a credit for what the consumer could receive for the
vehicle with an altered odometer (the proceeds of disposing of the
product delivered).

This approach is consistent with the spirit of the guideline which gives
the defendant credit for value actually given to the victim of the
offense. [See]{.underline} Application Note 3(E). It is also consistent
with the general rule that loss can be estimated as \"\[t\]he fair
market value of the property unlawfully taken or destroyed; or, if the
fair market value is impracticable to determine or inadequately measures
the harm, the cost to the victim of replacing that property.\"
Application Note 3(C)(i). Determining the amount of the purchase price
that was unlawfully taken requires calculating the value of what the
victim actually received, versus what he or she paid.

Alternatively, loss in a product substitution case should *include*
\"the reasonably foreseeable costs . . . of retrofitting the product so
that it can be used for its intended purpose . . . .\" Application Note
3(A)(v)(I). With respect to the odometer fraud victim, a high-mileage
car can be used for transportation. The costs the consumer will face
that may be considered relevant to \"retrofitting\" are increased
maintenance costs during the life of the car, and loss of resale value
at the end of the victim\'s ownership of the vehicle.

When the odometer on a motor vehicle is altered, and the vehicle resold,
it becomes impossible to know the vehicle\'s true mileage. As a result,
such vehicles must be sold with notice to the buyer of an odometer
discrepancy. [See]{.underline} 49 U.S.C. § 32705(a) and 49 C.F.R. Part
580.[^2] Not surprisingly, consumers resist purchasing cars branded as
having an odometer discrepancy, which diminishes their value
dramatically.

A study of odometer fraud conducted by the Pennsylvania Attorney
General\'s Bureau of Consumer Protection (copy attached) explains:
\"Many consumers and dealers have told the Pennsylvania Bureau of
Consumer Protection and NHTSA odometer fraud investigators that they
simply would not knowingly purchase a rolled back vehicle regardless of
price.\" (Section D of the study, \"Monetary Damage to Consumers,\" page
13.) The United States Department of Transportation contracted for this
study.

Richard Diklich, an Instructor of Automotive Technology at Longview
Community College in Lee's Summit, Missouri, has quantified the effect
of this consumer resistance. Mr. Diklich has extensive experience in the
automobile industry, and has developed expertise in evaluating the
diminution of value that arises when a vehicle is sold with notice that
its odometer has been rolled back. (Diklich Dec., attached, ¶¶ 1 - 8.)
Mr. Diklich states:

> A vehicle with a Not Actual Mileage title does not have the same value
> in the marketplace as does a vehicle with the same odometer reading
> and a clean title. The diminution in value in most cases will be 40%
> to 50% of fair market value. This is true whether the vehicle is being
> sold at wholesale or retail.

[Id.]{.underline}, ¶ 8. Mr. Diklich\'s Declaration goes on to explain
the reasons for this decline in value. [Id.]{.underline}, ¶¶ 9 - 11.

Thus, consumers have lost 40 to 50% of what they paid for the vehicle as
a result of the diminution in value caused by the necessity of
disclosing the rollback on the title. This is precisely what the
Application Notes to Guideline 2B1.1 discussed above provide should be
the measure of loss, and the measure approved in [Whitlow]{.underline}.

c\. [Actual Expenses While Operating Clocked Vehicle]{.underline}

Another approach to showing consumer loss is to look at the types of
actual expenses a consumer pays as a direct result of this type of
fraud. A typical rollback in this scheme was **\[avg. rollback\]**
miles. [See]{.underline} Declaration of case agent, attached. In
addition to paying a fraudulent purchase price, a consumer who purchases
a vehicle with a rolled-back odometer incurs a series of costs which
stem directly from the fraud perpetrated by the defendant. These
increased costs include the following:

[Maintenance Costs]{.underline}: increased maintenance costs are not
always reflected in purchase price considerations, as some owners have
vehicles that are virtually worthless as the result of a rollback.

[Lost Time]{.underline}: buyers of high mileage vehicles frequently
spend considerable time dealing with unexpected maintenance\--often time
is lost from work when a car is the person\'s method of transport to his
or her employment.

[Taxes]{.underline}: the sales tax imposed on the amount of a purchase
price attributable to the rollback, and annual property taxes imposed
based on a falsely inflated purchase price.

[Finance Charges]{.underline}: the cost of financing the portion of a
vehicle\'s cost that stems from the rollback.

[Insurance Costs]{.underline}: unnecessary insurance carried due to a
false belief that a vehicle is low mileage.

The Pennsylvania Attorney General\'s study attempts to quantify losses
that consumers face. The study reaches a figure of \$6,653 as the total
loss, not including amounts for various losses that are difficult to
quantify (Pennsylvania Attorney General study, page 17).[^3]
Consideration of all of these factors--some of which
([e.g.]{.underline}, property taxes and insurance costs) are
recurring--demonstrates that the \$4,000 per vehicle the government
suggests is rather conservative, particularly so when one considers that
the Pennsylvania Attorney General\'s study was released in 1993, and has
not been adjusted for inflation.

d\. [Loss per Mile Rolled Back Alternative]{.underline}

Another approach to viewing loss is through the use of \"book value.\"
The Pennsylvania Attorney General\'s study cites automotive industry
publications that provide deductions from \"book\" value that are
associated with mileage. The figures cited are six cents and ten cents
per mile.[^4] For a **\[avg. rollback\]** mile rollback, this deduction
would convert to a \$\_\_\_\_\_\_\_\_\_\_\_ (at six cents per mile) or a
\$\_\_\_\_\_\_\_\_\_\_\_\_ (at ten cents per mile) fraud.

However, for reasons discussed above, and in the Pennsylvania Attorney
General\'s study itself, such \"book\" value deductions underestimate
the impact of this type of fraud. \"Book\" values compare two vehicles
with honest odometers. At most, this reflects only loss associated with
purchase price as such.

Nevertheless, support for conservatively evaluating loss at ten cents
per mile removed can be found in a February 1993 bulletin published by
the National Association of Fleet Resale Dealers (NAFRD). The bulletin
reported a 1992 study by Associates Leasing which showed that resale
value of cars fall off markedly after 60,000 miles (copy attached, page
2). The NAFRD bulletin reported an 18% drop in value at about 60,000
miles, and another 10% reduction at about 70,000 miles. In other words,
this report indicates a drop in value of 28% at these two marks alone.

The NAFRD bulletin also included a table (on page 2) showing that
variable costs per mile for a car increase slowly to about ten cents per
mile at about 45,000 miles, but reach twenty cents per mile after about
80,000 miles. Using the average involved in this case, rolling an
odometer from **\[avg. pre-rollback mileage\]** to **\[avg.
post-rollback mileage\]** ([see]{.underline} Declaration of case agent)
would thereby push a car from being a high cost per mile vehicle to
falsely appearing to be a low cost per mile vehicle. The costs of
operating such a vehicle will thus be considerably higher than expected
as a result of the fraud. If these excessive operating expenses are ten
cents per mile to repeat the **\[avg. rollback\]** miles rolled off the
odometer, the consumer would be paying another \$\_\_\_\_\_\_\_\_ in
costs attributable to the fraud.

[United States v. Fraaza]{.underline}, No. 97-3863 (7th Cir., March 12,
1998), 1998 WL 122159, involved low-value vehicles. In that case, the
Seventh Circuit agreed with an approach to loss based on six cents per
mile rolled back. Such old vehicles can give rise to particularly
difficult valuation issues because consumers pay relatively small
amounts for the cars. Fraaza pled guilty to one count of making false
odometer disclosure statements, and received a 10-month jail term. He
had altered odometers on nine cars which were 9-13 years old, and sold
at retail for a total of less than \$30,000, which means each car cost
the consumer around \$3,000. The Seventh Circuit upheld the district
court\'s loss finding, which was based on 50% of consumer price or six
cents per mile removed, which led to a loss of \$10,000 to \$20,000.
(This case thus also supports 50% of retail as being a good measure of
loss.)

Since the defendant here was not selling very old cars as in
[Fraaza]{.underline}, a loss of ten cents per mile removed from the
odometer, consistent with the Pennsylvania Attorney General\'s study and
the NAFRD bulletin discussed above, would be more appropriate. This
would lead to an average loss of more than \$4,000 per vehicle.

e\. [Total Loss Alternative]{.underline}

Guideline 2B1.1, Application Note 3(C)(i) states that ordinarily fair
market value of property taken is used to evaluate a loss. However, \"if
the fair market value is impracticable to determine or inadequately
measures the harm, the cost to the victim of replacing that property\"
can be used as the measure of loss. The cost of replacement would be
equal to the consumer purchase price of the vehicle. Thus, the Probation
Office is not obligated to calculate a precise fair market value for the
TMU cars, and may consider replacement cost if it determines that market
values are impracticable to determine.

The Pennsylvania Attorney General\'s study of odometer fraud agrees that
one measure of damages to consumers is the entire price paid for the
car:

> Many consumers and dealers have told the Pennsylvania Bureau of
> Consumer Protection and NHTSA odometer fraud investigators that they
> simply would not knowingly purchase a rolled back vehicle regardless
> of price. Therefore, the proper measure of damages would often be the
> entire price the consumer paid for the car.

Pennsylvania Attorney General Study, page 13. This method to calculate
loss is applied by some state courts. [See]{.underline},
[e.g.]{.underline}, [People v. Ross]{.underline}, 25 Cal. App. 3d 190,
195, 100 Cal. Rptr. 703 (1972) (treating odometer fraud as theft and
holding that proper determination of theft amount is full purchase price
paid by the victim).

Given that many defrauded purchasers of cars with rolled-back odometers
will be unable to sell their cars at all, this translates into a
consumer loss figure that equals the consumer\'s full purchase price of
the used vehicle. In comparison to this amount, a loss figure of only
\$4,000 as suggested by the government is an extremely conservative
means of calculating loss under U.S.S.G. 2B1.1.

f\. [Summary]{.underline}

In sum, the government\'s loss figures are well-founded yet
conservative. They are based on methodology embraced by the courts. The
loss estimate reflects the loss of value when a car is resold as well as
expenses that are incurred when a vehicle is kept and maintained. The
loss per vehicle is conservative, when compared to the Pennsylvania
Attorney General\'s study and the total loss analysis set forth above.

The substantial loss consumers face results from the reality that
clocked vehicles have but a fraction of the value of cars with known low
mileage, which is what the consumers believed they had purchased. A
consumer with a clocked car is in a poor position to discover the true
mileage of the vehicle, and faces the fact that dealers simply do not
want to purchase clocked cars at all.

In light of all these factors, an estimate of \$4,000 per vehicle is
truly a highly conservative estimate of the losses suffered by a
consumer who purchases a rolled-back car.

**\[Note: Defendants frequently ask that the court use \"Blue Book\"
values to determine loss. To some extent \"book values\" can be used to
support our evaluations, as is done above, and in another respect book
values underestimate loss, for reasons discussed above. In addition, OCL
has obtained declarations from the publishers of Kelley\'s Blue Book and
the N.A.D.A. Official Used Car Guide which state that their publications
are not appropriate to use in attempting to estimate the loss in value
caused by an odometer rollback.**

**Nevertheless, DOT\'s National Highway Traffic Safety Administration in
2002 released a study that uses high and low-mileage figures from the
N.A.D.A. Official Used Car Guide (\"book value analysis\") to conclude
that consumers pay about \$2,336 more for a clocked car than they
should. The study makes it clear that this figure is merely an estimate
of increased purchase price, and does not include other losses consumers
suffer from odometer fraud. The Executive Summary of the study states:**

> **That sum \[\$2,336\] does not include inflated financing, insurance
> and tax costs; additional amounts consumers pay for vehicle repairs;
> other consequential damages; the decreased resale value due to the
> vehicle having an altered odometer; or the many indirect or intangible
> costs of odometer fraud: time spent waiting for vehicle repairs and
> road service, consumers' anger and frustration at being cheated and
> getting a car they wouldn't have wanted, and costs of government
> programs to detect and deter odometer fraud.**

**Study, p. vii. [See]{.underline} [also]{.underline} [id.]{.underline}
at p. 35.**

**Thus, the most significant items beyond purchase price that contribute
to consumer loss are not considered by the NHTSA report: repair costs
and loss of resale value. These items are properly counted in measuring
loss under U.S.S.G. § 2B1.1. Accordingly, the figure in the NHTSA study
only measures a portion of what constitutes loss under U.S.S.G. § 2B1.1,
making the study essentially irrelevant to loss analysis under the
Guidelines. Note that U.S.S.G. § 2B1.1, Application Note 3(D)(i), states
that interest is excluded from loss; and Application Note 3(A)(iii)
states that emotional distress and other non-economic harm is not
included in loss. Thus, nothing can be added to loss under U.S.S.G. §
2B1.1 for these items.**

**As mentioned above, OCL has declarations from the authors of the
N.A.D.A. Official Used Car Guide and Kelley\'s Blue Book which state
that using their publications to try to establish losses caused by
odometer fraud is not appropriate. The Diklich declaration (¶ 9) makes
the same point. If you need a copy of these declarations or the NHTSA
study to use at a sentencing, contact OCL.\]**

2\. [The Total Number of Vehicles Involved in the Fraud]{.underline}

As discussed above, the evidence indicates that defendant should be held
accountable for \_\_\_ vehicles.

3\. [Total Loss Caused by Defendant\'s Fraud]{.underline}

Thus, there were \_\_\_ vehicles involved in the fraud, at \$4,000 loss
per vehicle. The total fraud is \$\_\_\_\_\_\_\_\_\_\_\_, an extremely
conservative figure. An additional \_\_\_\_ offense levels should be
added to a defendant\'s total offense level under 2B1.1(b)(1)(**\_**).

C. [Multiple Victim Increase]{.underline}

The offenses here required involved more than **(10/50/ or 250)**
victims. Accordingly, the upward adjustment of **(2/4/ or 6)** offense
levels provided by U.S.S.G. § 2B1.1(b)(2) applies.

**D. [Sophisticated Means]{.underline}**

**\[Under U.S.S.G. § 2B1.1(b)(9)(C), there is an increase of 2 offense
levels if an offense involved \"sophisticated means.\" \"Sophisticated
means\" is defined in Application Note 8(B) to include \"especially
complex or especially intricate offense conduct pertaining to the
execution or concealment of an offense.\" The Application Note provides
as examples telemarketers who locate the main office of the scheme in
one jurisdiction, but locate soliciting operations in another. Further,
conduct \"such as hiding assets or transactions, or both, through the
use of fictitious entities, corporate shells, or offshore financial
accounts also ordinarily indicates sophisticated means.\" Application
Note 8(B).**

**In odometer fraud schemes, the use of bogus dealer names and straw
transactions, or bank accounts in bogus dealer names, to hide
responsibility for the offense suggests \"sophisticated means.\" In
addition, operating in multiple states, creating victims in different
jurisdictions than where cars are purchased and the defendant does
business, would also indicate the applicability of this enhancement.\]**

E. [Acceptance of Responsibility]{.underline}

In each plea agreement, the United States agreed to a **\[2 or 3\]**
level downward adjustment for acceptance of responsibility under
U.S.S.G. § 3E1.1. These agreements stemmed from both the
defendant**\[s\]**\' agreements to enter pleas of guilty **\[well in
advance of trial\]**, and from the indication of acceptance provided by
cooperation given to the government by discussing criminal activity in
this case and related odometer fraud investigations. The government
expects to move pursuant to U.S.S.G. 3E1.1(b) for the third level
provided by that guideline section.

F. [Restitution]{.underline}

**\[The \"mandatory restitution\" provisions of 18 U.S.C. § 3663A-3664
have applied to Title 18 fraud offenses since 1996. Title 49 odometer
offenses themselves are not subject to mandatory restitution.
[See]{.underline} 18 U.S.C. § 3663A(c)(1). However, U.S.S.G. §
5E1.1(a)(2) directs that a court impose a restitution order as a term of
supervised release for offenses \[such as odometer tampering\] that are
not restitution-authorized under 18 U.S.C. § 3663(a)(1). Under U.S.S.G.
§ 5E1.1(b)(2)(B), that provision does not apply where \"determining
complex issues of fact related to the cause or amount of the victim\'s
losses would complicate or prolong the sentencing process to a degree
that the need to provide restitution to any victim is outweighed by the
burden on the sentencing process.\"**

**For mandatory restitution offenses, section 3664(f)(1)(A) states that
the defendant\'s economic circumstances may not be considered in
determining the amount of restitution, though they can be considered in
ordering nominal periodic payments in lieu of full restitution at once.
18 U.S.C. § 3664(f)(3)(B). Nevertheless, section 3663A(c)(3) provides
that restitution need not be ordered if (A) \"the number of identifiable
victims is so large as to make restitution impracticable\" or (B) if
\"determining complex issues of fact related to the cause or amount of
the victim\'s losses would complicate or prolong the sentencing process
to a degree that the need to provide restitution to any victim is
outweighed by the burden on the sentencing process.\"**

**The victims are generally the first consumer purchaser of the
vehicles. However, if that information is unavailable and current owners
are known, the current owners can properly be viewed as victims, as they
cannot readily resell the vehicles once notified of the rollback.**

**With large numbers of vehicles and the vagaries of consumer car repair
bills, determining restitution amounts consumer by consumer is virtually
impossible, suggesting that the average loss per vehicle amount used to
calculate loss under § 2B1.1 should be used as the restitution amount
where restitution is practicable. In those cases, probation should be
provided as complete a list of victims as possible, and urged to grant
as restitution the figure that is used to calculate \"loss\" under
2B1.1.**

**Some jurisdictions view use of an \"average\" loss figure as
inappropriate. In those jurisdictions, the Probation Office contacts
victims seeking individualized loss information. If OCL or the USAO is
sending victim notification letters (informing consumers that they are
victims of the offense) in the period of time before sentencing, it is
frequently efficient to send in the same mailing to victims the notice
that the Probation Office provides to victims, in which the Probation
Office solicits information about consumer losses.**

**In cases where restitution is not practicable, the following,
reflecting the language of the statute, may apply:\]**

It is difficult to identify all the victims of the fraud scheme. Not
only did the wholesale and retail car dealers, to whom the clocked cars
were sold, suffer a monetary loss, but each dealer who thereafter bought
and sold the vehicle, as well as the consumers who purchased the
vehicles for their own use, was defrauded. By this point in time, some
of the consumers may have already resold the clocked cars to second- or
third-generation purchasers without suspecting the fraud. Tracing chains
of ownership for the many vehicles involved here would be
labor-intensive and time-consuming.

Moreover, the number of victims in the case, the difficulty in setting a
fair market value for each vehicle at the time of its fraudulent sale,
and the difficulty of calculating the value of extra charges and
expenses (such as the increased finance charges, insurance costs, and
repairs) makes it almost impossible to set an exact restitution amount
that would be appropriate for each consumer who owned one of
defendant\'s rollbacks for a period of time.

The government will provide victim information related to the specific
vehicles identified as having been rolled back in the Indictment to
which defendant pled guilty. However, the number of victims is so large
that fashioning a broader restitution order is impracticable. The
difficulty of identifying victims, and other considerations discussed
above, leads the government to believe that determining complex factual
issues related to the cause and amount of victim losses would complicate
and prolong the sentencing process to a degree that the need to provide
restitution on a broader scale (related to all the vehicles involved in
this case) is outweighed by the burden on the sentencing process.
Accordingly, a broader restitution order is not appropriate. 18 U.S.C. §
3663A(c)(3); U.S.S.G. § 5E1.1(b).

G. [Special Condition of Supervised Release]{.underline}

Finally, the United States urges that an occupational restriction be
placed on the defendant as a condition of supervised release. The
defendant engaged in a massive consumer fraud, causing large economic
harm to numerous consumers. In light of this, a condition of supervised
release prohibiting the defendant both from operating a used car
business and from being employed in automobile sales is necessary to
protect the public.

Imposing this type of employment restriction as a special condition of
supervised release is specifically provided for by U.S.S.G. §§ 5D1.3(b),
and 5F1.5. The sentencing guidelines provide for the imposition of
special conditions of supervised release that are reasonably related to
(1) the nature and circumstances of the offense, (2) the need for
adequate deterrence of further criminal conduct, and (3) the need to
protect the public. U.S.S.G. § 5D1.3(b). Pursuant to U.S.S.G. §
5F1.5(a), an employment restriction is permissible as a condition of
supervised release or probation if:

> \(1\) a reasonably direct relationship existed between the
> defendant\'s occupation, business, or profession and the conduct
> relevant to the offense of conviction; and
>
> \(2\) imposition of such a restriction is reasonably necessary to
> protect the public because there is reason to believe that, absent
> such restriction, the defendant will continue to engage in unlawful
> conduct similar to that for which the defendant was convicted.

Both of these factors exist in this case. The criminal conduct is a
direct result of activities in the used car business. Moreover, in light
of the defendant\'s multi-year involvement in odometer fraud there is
substantial reason to believe that the defendant will continue to engage
in such offenses absent such a court-imposed restriction.

In previous odometer fraud cases, district courts have not hesitated to
impose precisely this restriction. [See]{.underline} [United States v.
Whitlow]{.underline}, 979 F.2d 1008, 1012 (5th Cir. 1992); [United
States v. Mills]{.underline}, 959 F.2d 516, 519 (5th Cir. 1992).

V. [CONCLUSION]{.underline}

The above describes the conspiracy, summarizes the role of each
defendant in the conspiracy, and discusses guidelines applicable to all
defendants. A copy of this letter will be provided to counsel for all
defendants. In the following pages, we discuss how the guidelines apply
to each defendant. A copy of the page(s) pertaining to each defendant
will be provided to that defendant\'s counsel. Should you have any
questions about any of the discussion provided or need any additional
material, please do not hesitate to contact me.

Sincerely,

**\[NAME\]**

**\[ATTORNEY\]**

**\[OFFICE\]**

Enclosures:

1 Guidelines calculation for defendant

2 Declaration from case agent (providing average mileage rollback and
retail price information for the case, as well as information on the
total number of vehicles involved in the offenses.)

3 Pennsylvania Attorney General\'s Study

4 Declaration of Richard Diklich

5 Automotive Fleet, April 1993

6 National Association of Fleet Resale Dealers, February 1993 bulletin

\[Copies of attachments 3 - 6 are available from the Office of Consumer
Litigation.\]

DEFENDANT A (An organizer in a 60 car case at \$4,000 loss/car who
obstructed justice)

[OFFENSE LEVEL CALCULATIONS]{.underline}

2B1.1(a) BASE OFFENSE LEVEL 6

2B1.1(b)(1)(G) INCREASE (\$200,000 - \$399,999 LOSS) 12

2B1.1(b)(2)(B) MORE THAN 50 VICTIMS 4

2B1.1(b)(9) SOPHISTICATED MEANS 2

3B1.1(a) ROLE IN THE OFFENSE 4

3C1.1 OBSTRUCTION 2

\_\_\_

TOTAL OFFENSE LEVEL: 30

-3E1.1 REDUCTION FOR ACCEPTING RESPONSIBILITY -3

\_\_\_

ADJUSTED OFFENSE LEVEL 27

[CRIMINAL HISTORY]{.underline}

**\[Discuss any known criminal convictions and calculate criminal
history.\]**

[APPLICABLE GUIDELINE RANGES]{.underline}

a\. [Imprisonment]{.underline}

An adjusted offense level of 27 combined with a Criminal History
Category of **\[I\]** results in a guideline range of **\[70-87\]**
months imprisonment.

b\. [Supervised Release]{.underline}

The crimes to which the defendant pleaded guilty are **\[Example\] Class
E** felonies. [See]{.underline} **18 U.S.C. § 3559(a)(5)**. Accordingly,
because defendant\'s guideline sentence will be greater than one year's
imprisonment, a term of supervised release of one year is appropriate.
U.S.S.G. §§ 5D1.1(a), 5D1.2(a)(3).

c\. [Fine]{.underline}

The sentencing guidelines require calculation of a minimum and a maximum
amount for a fine. For an offense level of 27, under U.S.S.G. §
5E1.2(c)(3), the fine guideline is \$12,500 - \$125,000.

d\. [Special Assessment]{.underline}

Pursuant to 18 U.S.C. § 3013, the defendant must pay a special
assessment of \$100 for each count of conviction. The assessments here
is **\[\$xxx\]**.

**\[Similar pages of analyses for each defendant in multiple defendant
cases should be added.\]**

[^1]: / Application Note 18 provides: \"The cumulative loss produced by
    a common scheme or course of conduct should be used in determining
    the offense level, regardless of the number of counts of
    conviction.\" Application Note 3(A) provides: \"Subject to
    \[exclusions for certain interest and governmental costs\] loss is
    the greater of actual loss or intended loss.\"

[^2]: The federal regulations implementing 49 U.S.C. § 32705 require
    that the odometer disclosure statement for a vehicle whose odometer
    does not display the vehicle\'s true mileage must state \"that the
    odometer reading does not reflect the actual mileage, and should not
    be relied upon. This statement shall also include a warning notice
    to alert the transferee that a discrepancy exists between the
    odometer reading and the actual mileage.\" 49 C.F.R. § 580.5(e)(3).
    \"True Mileage Unknown,\" or \"TMU,\" is an industry colloquialism
    that refers to vehicles that must be sold with this disclosure.

[^3]: U.S.S.G. 2B1.1, Application Note 3(D)(i) states that interest of
    any kind should be excluded from loss. Accordingly, the \$797 of the
    loss in the Pennsylvania Attorney General\'s study that is
    attributed to excess finance charges (study at page 17) would not be
    considered under § 2B1.1. Subtracting this \$797 from the \$6,653
    loss found in the study leaves a \$5,858 loss per vehicle.

[^4]: The six cents per mile figure was from Automotive Market Report
    (AMR), while the ten cents/mile estimate comes from Galves Auto
    Price List (Pennsylvania Attorney General study, p. 14). Both are
    among the more reliable mileage deduction indicators in the
    industry, according to an industry publication. \"According to
    resale dealers, . . . \[t\]he used-car guides that did the best job
    of adding/subtracting for high miles, in order, were AMR, NADA,
    Galves, Kelley Blue Book, Black Book, and Gold Book.\" Automotive
    Fleet, April 1993, p. 68 (copy attached). Note that the graphic on
    page 1 of this article lists the \"Top Factors in Determining Resale
    Price,\" and the first factor is \"Mileage.\"