Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_19-cv-00264/USCOURTS-azd-2_19-cv-00264-0/pdf.json

Nature of Suit Code: 510
Nature of Suit: Prisoner Petitions - Vacate Sentence
Cause of Action: 28:2255 Motion to Vacate / Correct Illegal Sentence

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IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

United States of America, 

Plaintiff,

v.

Joel Stephen Cutulle, 

Defendant/Movant.

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CV 19-00264-PHX-NVW (MHB)

CR 12-01927-PHX-NVW

REPORT AND RECOMMENDATION

TO THE HONORABLE NEIL V. WAKE, UNITED STATES DISTRICT JUDGE:

Defendant/Movant Joel Stephen Cutulle, who is confined in the Federal Correctional

Institution in Berlin, New Hampshire, filed a pro se Amended Motion Under 28 U.S.C. §

2255 to Vacate, Set Aside, or Correct Sentence by a Person in Federal Custody. (CV 19-

00264 (“CV”) Docs. 6, 7.) Plaintiff United States of America (the “government”) filed a

Response to the Motion, and Movant filed a Reply. (CV Docs. 14, 19, 20.)

BACKGROUND

Movant was convicted by jury trial of one count of Conspiracy, six counts of Wire

Fraud, and twenty-one counts of Money Laundering, in violation of 18 U.S.C. §§ 371, 1343,

and 1957(a)-(b)(1), respectively. On March 30, 2015, the Court sentenced Movant to

concurrent terms of imprisonment, the longest of which was 108 months, followed by 3 years

on supervised release. (CV Doc. 9; CR 12-01927 (“CR”) Doc. 814.)

Movant and his co-defendants appealed their convictions, arguing that the District

Court: (1) erred when it denied the defendants’ motions for acquittal; (2) abused its discretion

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 Movant originally alleged four grounds for relief. In Ground Four, Movant argued

that his sentence was imposed in violation of the Constitution, stating that he is entitled to

a 3 or 4-level reduction pursuant to Amendment 794 based on his role as a minimal

participant. (CV Doc. 7 at 12-14.) In its screening Order, however, the District Court

dismissed the claim declining to apply Amendment 794 retroactively in the context of a

collateral attack. (CV Doc. 9.)

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when conducting voir dire; (3) abused its discretion by allowing the prosecution to impeach

one of Movant’s co-defendants with his prior conviction; (4) abused its discretion by

admitting summary charts detailing the disposition of the victim’s money; (5) erred when

questioning witnesses; (6) erred when instructing the jury on Pinkerton (Pinkerton v. United

States, 328 U.S. 640 (1946)) liability using Ninth Circuit Model Criminal Jury Instruction

8.25; (7) erred in giving a money laundering jury instruction; and (8) abused its discretion

in denying one of Movant’s co-defendant’s motion to sever. See United States v. Kirby, 692

Fed.Appx. 334, 336-38 (9th Cir. 2017). On May 15, 2017, the Ninth Circuit affirmed

Movant’s convictions and sentences. Thereafter, Movant filed a petition for writ of certiorari,

which the United States Supreme Court denied on January 8, 2018. See Cutulle v. United

States, 138 S.Ct. 688 (2018).

In his Amended § 2255 Motion and memorandum, Movant alleges three grounds for

relief.1

 (CV Docs. 9, 6, 7.) In Ground One, Movant argues that he received ineffective

assistance of counsel at trial when his attorney failed to challenge “Movant’s Applicable

Guidelines Calculation” before the Court and failed to raise the issue on appeal. In Grounds

Two and Three, Movant argues that he received ineffective assistance of counsel at trial

when his attorney failed to challenge the Court’s miscalculation of the Guidelines’ range.

DISCUSSION

In its Response, the government contends that Movant’s claims are meritless. Thus,

the government argues that Movant’s Amended Motion to Vacate, Set Aside, or Correct

Sentence be denied and dismissed with prejudice.

A claim of ineffective assistance of counsel is cognizable as a claim for denial of the

Sixth Amendment right to counsel, which guarantees not only assistance, but effective

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assistance of counsel. See Strickland v. Washington, 466 U.S. 668, 686 (1984). The

benchmark for judging any claim of ineffectiveness is whether counsel’s conduct so

undermined the proper functioning of the adversarial process that the proceeding cannot be

relied upon as having produced a just result. See id.

To prevail on a claim of ineffective assistance of counsel, Movant must satisfy a two

prong test, demonstrating: (1) deficient performance, such that counsel’s actions were outside

the wide range of professionally competent assistance, and (2) that Movant was prejudiced

by reason of counsel’s actions. See id. at 686-90. “Failure to satisfy either prong of the

Strickland test obviates the need to consider the other.” Rios v. Rocha, 299 F.3d 796, 805

(9th Cir. 2002). Indeed, it is unnecessary for a federal court considering a habeas ineffective

assistance claim to address the prejudice prong of the Strickland test if the petitioner cannot

establish incompetence under the first prong. See Siripongs v. Calderon, 133 F.3d 732, 737

(9th Cir. 1998). Similarly, a court need not determine whether counsel’s performance was

deficient before examining the prejudice suffered by the defendant as the result of the alleged

deficiencies. See Strickland, 466 U.S. at 697; Williams v. Calderon, 52 F.3d 1465, 1470 &

n.3 (9th Cir. 1995) (approving district court’s refusal to consider whether counsel’s conduct

was deficient after determining that petitioner could not establish prejudice).

There is a strong presumption that counsel’s conduct falls within the wide range of

reasonable assistance. See Strickland at 689-90. “A fair assessment of attorney performance

requires that every effort be made to eliminate the distorting effects of hindsight, to

reconstruct the circumstances of counsel’s challenged conduct, and to evaluate the conduct

from counsel’s perspective at the time.” Id. at 689. Review of counsel’s performance is

extremely limited. Acts or omissions that “might be considered sound trial strategy” do not

constitute ineffective assistance of counsel. Id. The prejudice component “focuses on the

question whether counsel’s deficient performance renders the result of the trial unreliable or

the proceeding fundamentally unfair.” Lockhart v. Fretwell, 506 U.S. 364, 372 (1993).

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In Ground One, Movant argues that he received ineffective assistance of counsel at

trial when his attorney failed to challenge “Movant’s Applicable Guidelines Calculation”

before the Court. Movant also alleges that counsel failed to raise the issue on appeal. (CV

Doc. 7 at 2-7.) Specifically, Movant claims that the Presentence Investigation Report (“PSR”

or “presentence report”) erroneously “attributed a twenty-two level enhancement based on

an intended loss calculation between $20,000,000 and $50,000,000.” Movant contends that

the “4-level swing” where “$20 million represents a 22-level enhancement and $7 million

represents an 18-level enhancement ... should have been obvious to counsel.” Movant states

that counsel “dropped the ball,” claiming that counsel “was responsible for ensuring that [his]

Guidelines range was properly calculated.”

Movant is correct – under the Offense Level Computation, the presentence report

stated, “[t]he laundered funds were derived from wire fraud; thus, the applicable guideline

is USSG §2B1.1(a)(1) which establishes a base offense level of 7. Twenty-two levels are

added, pursuant to USSG §2B1.1(b)(1)(L), as the intended loss ($23,450,000) was more than

$20,000,000 but less than $50,000,000.” (CR Doc. 682.)

The record reflects, however, that on March 17, 2015, counsel filed his Objections to

the PSR specifically objecting to the “twenty-two level enhancement based on an intended

loss calculation between $20,000,000 and $50,000,000.” (CR Doc. 672.) Counsel argued that

the enhancement was largely attributed to the “Bear Mountain” loan deal, in which the

government argued that an $18.125 million cash equity fee was requested. Counsel stated

that since there were no Bear Mountain representatives who came to testify to any fraudulent

representations, the intended loss calculations should not include losses attributed to the Bear

Mountain loan deal. Counsel argued that only 10 of the victim borrowers testified to the

actual loss calculation, which total losses amounted to $6,627,116.56. Counsel stated that

based on that figure, the intended loss calculation amounted to an 18-level enhancement.

Counsel again discussed his objection to the 22-level enhancement based on the Bear

Mountain loan deal at the status hearing held on March 18, 2015, (CR Doc. 853), and the

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sentencing hearing held on March 30, 2015, (CR Doc. 844). The Court ultimately agreed,

finding, in pertinent part:

On this one, having studied this, I’m not persuaded by a preponderance of the

evidence to include that one. And a lot of that is because of just the complexity

of it, the fact that it never came to fruition. It raises a question about how far

down the road one must get in order to have a mere intended loss count. And

the most important thing is that in a close question, it goes to the defendant in

a criminal case. So I will sustain the objection for exceeding $20 million for

the loss amount, but I find, without difficulty, that the government has carried

its burden however you measure it for proof of more than $7 million for

defendants Brewer, Cutulle, and Nickolas. We’ll address later what the

amounts are for Mr. Kirby and Mr. Rachel when we get to their particular

sentencings.

(CR Doc. 844.) The Court then subtracted two levels based on its finding that the Bear

Mountain intended loss should not apply resulting in an advisory sentencing range of 135-

168 months of imprisonment. The Court ultimately sentenced Movant to 108 months.

Thus, finding that Movant’s counsel specifically challenged the 22-level enhancement

based on the intended loss calculation set forth in the presentence report, and finding that the

Court agreed and omitted the alleged losses attributed to the Bear Mountain loan deal, the

Court finds that Movant has failed to demonstrate ineffective assistance of counsel at trial

or on appeal. The Court will recommend that Movant’s ineffective assistance of counsel

claim alleged in Ground One be denied.

In Ground Two, Movant argues that counsel was ineffective for failing to challenge

the Court’s calculation of “Movant’s Guidelines Range” based on 10 or more victims, when

“nowhere close to ten (10) victims showed up to testify either at trial or during sentencing.”

(CV Doc. 7 at 7-9.) Movant contends that the PSR erroneously determined that a total of 16

victims were involved in the charged offense, leading the Court to impose a two-level

enhancement.

The presentence report identified “[a]t least 16 borrowers [who] sent their refundable

cash equity fees totaling approximately $11,750,809.93 to the third party escrow agents in

order to obtain financing for their projects,” plus another eight potential borrowers. (CR Doc.

682.) Counsel objected to the number of borrowers identified in the PSR stating that “[m]ore

globally, [Movant] also objects to including any non-testifying victim borrowers in the actual

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loss calculation.” (CR Doc. 672.) Counsel argued that “[o]nly representatives of Hawk,

Sundance, Prichard Petroleum, Entrenched, Worsley, Itoys, MB Vision, Red Duck Hill,

Caitlin Energy, and Ocean Embassy testified. Their total losses amount to $6,627,116.56.

Based on that calculation, the loss calculation becomes an eighteen-level enhancement.”

Counsel again notified the Court of his objection to the government’s victim count and

projected loss amount in a status conference held on March 18, 2015. (CR Doc. 853.)

Counsel stated, in pertinent part:

MR. FOX: I’m sorry. I said nothing but this has been a point made by Mr.

Knapp several times. I was going to wait to address it at sentencing but I want

to make this Court aware of it now. The government keeps talking about all

these non-testifying victim loan deals, evidence was presented to establish they

were part of the conspiracy. And they are relying on essentially bank records

and the summary exhibits which are rooted in those bank records. We had

objected to the use of those specific non-testifying deals for substantive

purposes. And as I recall, and I can get the transcript, this Court agreed that

absent foundational testimony establishing that they were fraudulently

induced, the government couldn’t use it for that purpose.

(CR Doc. 853.) Counsel also reiterated his objections regarding the non-testifying borrowers

at sentencing. (CR Doc. 844.) Ultimately, the Court found “that the government has carried

its burden of persuasion” with respect to the 10 victims. The Court overruled the objections

as to the enhancement for 10 or more victims.

Finding that Movant’s counsel specifically challenged the 16 victims plus eight

potential victims identified in the presentence report, and the Court ultimately found that the

that the government carried its burden with respect to the 10 victims, the Court finds that

Movant has failed to demonstrate ineffective assistance of counsel. The Court will

recommend that Movant’s ineffective assistance of counsel claim alleged in Ground Two be

denied.

In Ground Three, Movant argues that he received ineffective assistance when counsel

failed to object to the Court’s calculation of “Movant’s Guidelines Range” based on use of

sophisticated means. (CV Doc. 7 at 9-12.) Movant states that the Court erroneously applied

the “‘sophisticated means’ enhancement based on the overall scheme rather than on whether

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Movant’s own conduct was sophisticated.” Movant contends that he was just “following

instructions by those who were controlling the operation.”

The presentence report stated, in pertinent part:

The defendants traveled around the world to identify to potential borrowers

who were attempting to obtain loans for business projects. They presented

fraudulent documents allegedly issued by foreign banks as proof of funds to

potential investors: a JP Morgan Chase proof of funds letter; an altered

Bloomberg screenshot from Japanese Bank; a bank statement from the Central

Bank of Venezuela; a Japanese government bond; and, a Bank of Fiji proof of

funds letter. They used a fake company, HS&H Holdings, and they tried to set

up their own bank in Fiji to facilitate the execution of the offense. They also

transferred a significant amount of the victims’ refundable escrow deposits to

foreign bank accounts. As a substantial part of the fraudulent scheme was

committed outside of the United States and the offense involved sophisticated

means, the offense is increased by two levels.

(CR Doc. 682.)

Counsel objected both in his Objections to presentence report (CR Doc. 672) and

during the sentencing hearing stating, as follows:

THE COURT: ... Now, the other ones that are shared by more than one person,

this issue of the two-level enhancement for the substantial part of the crime

having been done in foreign territory or use of sophisticated means, who is

raising that one again? ...

THE COURT: All right. This one is easier to deal with. I will hear very briefly

if you want to be heard on it. My -- when it says a substantial amount has to

have been on foreign territory, substantial is a legal word that means

something that’s more than insignificant. And it doesn’t have to be the

majority. So does any defendants want to be heard briefly on that?

MR. FOX: Yes, Judge, on behalf of Mr. Cutulle. The tenor of the comments

to that particular subsection of the sentencing guidelines seems to indicate at

least by my reading, that that enhancement is there for the purpose of ensuring

that there’s additional punishment when part of the fraud scheme is to use

overseas operations or accounts or entities for the purpose of concealment.

Certainly with respect to Mr. Cutulle, Your Honor, there wasn’t any

concealment in terms of the transactions involving his banking records. The

government has taken, submitted document after document, in painstaking

fashion, showing all the bank records, went through Mr. Cutulle’s accounts in

Mr. Cutulle’s name, doing business as Global Financial Holdings and Elite. So

given that, although there were transactions involving businessmen and victim

borrowers from different countries, there wasn’t concealment. That wasn’t

done for the purposes of concealment. There’s certainly no indication that was

done for that purpose. So I think that the real spirit of that enhancement would

be misplaced in this particular context certainly with respect to Mr. Cutulle.

(CR Doc. 844.)

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The Court, however, overruled counsel’s objections stating, “I’m satisfied this

guideline is satisfied both for substantial involvement in foreign territory and for use of

sophisticated means. So those objections are overruled.” (CR Doc. 844.)

Despite the Court’s ruling on counsel’s objection, the record reflects that counsel did,

in fact, object to the enhancement based on a substantial part of the crime having been done

in foreign territory or use of sophisticated means. Therefore, the Court finds that Movant has

failed to demonstrate ineffective assistance of counsel. The Court will recommend that

Movant’s ineffective assistance of counsel claim alleged in Ground Three be denied.

CONCLUSION

Based on the foregoing, the Court will recommend that Movant’s Amended Motion

to Vacate, Set Aside, or Correct Sentence be denied and dismissed as set forth in this

Recommendation.

IT IS THEREFORE RECOMMENDED that Movant’s Amended Motion Under

28 U.S.C. § 2255 to Vacate, Set Aside, or Correct Sentence by a Person in Federal Custody

(CV Docs. 6, 7) be DENIED and DISMISSED WITH PREJUDICE;

IT IS FURTHER RECOMMENDED that a Certificate of Appealability and leave

to proceed in forma pauperis on appeal be DENIED because Petitioner has not made a

substantial showing of the denial of a constitutional right.

This recommendation is not an order that is immediately appealable to the Ninth

Circuit Court of Appeals. Any notice of appeal pursuant to Rule 4(a)(1), Federal Rules of

Appellate Procedure, should not be filed until entry of the district court’s judgment. The

parties shall have fourteen days from the date of service of a copy of this recommendation

within which to file specific written objections with the Court. See 28 U.S.C. § 636(b)(1);

Rules 72, 6(a), 6(b), Federal Rules of Civil Procedure. Thereafter, the parties have fourteen

days within which to file a response to the objections. Pursuant to Rule 7.2, Local Rules of

Civil Procedure for the United States District Court for the District of Arizona, objections

to the Report and Recommendation may not exceed seventeen (17) pages in length. Failure

timely to file objections to the Magistrate Judge’s Report and Recommendation may result

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in the acceptance of the Report and Recommendation by the district court without further

review. See United States v. Reyna-Tapia, 328 F.3d 1114, 1121 (9th Cir. 2003). Failure

timely to file objections to any factual determinations of the Magistrate Judge will be

considered a waiver of a party’s right to appellate review of the findings of fact in an order

or judgment entered pursuant to the Magistrate Judge’s recommendation. See Rule 72,

Federal Rules of Civil Procedure.

DATED this 13th day of March, 2020.

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