U.S. Department of Justice

United States Attorney

Eastern District of Pennsylvania

Robert A. Zauzmer

615 Chestnut Street

Direct Dial: (215) 861-8568 Suite 1250

Facsimile: (215) 861-8497 Philadelphia, Pennsylvania 19106-4476

E-mail Address: bob.zauzmer@usdoj.gov (215) 861-8200

August 2, 2006

The Honorable Legrome D. Davis

United States District Judge 

6614 United States Courthouse

601 Market Street

Philadelphia, PA 19106-1747

Re: United States v. Denis I. Shusterman

Criminal No. 04-00364 

Dear Judge Davis:

Please find enclosed a courtesy copy of the

Government’s Sentencing Memorandum. A copy has been served

on counsel for the defendant, and the original has been

filed electronically with the Clerk of Court.

Respectfully yours,

PATRICK L. MEEHAN

United States Attorney

 

ROBERT A. ZAUZMER

Assistant United States Attorney

cc: Ari R. Karpf, Esq.
IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF PENNSYLVANIA

UNITED STATES OF AMERICA :

v. : CRIMINAL NO. 04-00364

DENIS I. SHUSTERMAN :

GOVERNMENT’S SENTENCING MEMORANDUM
TABLE OF CONTENTS

I. Facts ....................... 2

A. Shusterman’s Commitment to Crime Even

After Being Aware of the Authorities’

Knowledge of His Conduct . . . . . . . . . . . 3

B. The Coventry Market Episode Illustrates

Shusterman’s Character . . . . . . . . . . . . 8

II. The Applicable Procedure and Guideline Range . . . . 15

A. The Significance of the Guideline Range . . . . 18

B. The Guideline Calculation . . . . . . . . . . . 24

C. There is No Ex Post Facto Issue. . . . . . . . 29

III. Consideration of the Section 3553(a) Factors . . . . 57

IV. Financial Penalties . . . . . . . . . . . . . . . . 61

V. Conclusion ..................... 63
Defendant Denis Shusterman stands convicted of 51

counts of wire fraud, bankruptcy fraud, perjury, bank fraud,

and tax evasion. During the period from September 1996

through March 2003, he stole over $10.8 million from his

employer, Kimber Mfg., Inc., and evaded the payment of over

$2 million in taxes on both legitimate and illegitimate

income. He also filed a fraudulent bankruptcy in order to

escape a substantial part of a payroll tax debt claimed by

the IRS, and presented false information to a federally

insured bank in order to secure a $1.7 mortgage.

The Court is very familiar with this sordid tale

of persistent greed and deception, having sat through more

than two weeks of trial. During that period, the Court

heard the same avalanche of evidence which persuaded

Shusterman to change his plea to guilty. Thus, the

government will not burden the Court with a repetition of

the evidence, which is summarized at length in the

government’s trial memorandum and the presentence report. 

Rather, we present this sentencing memorandum to discuss two

salient points which were not addressed at the trial, and to

address the Sentencing Guidelines calculation and proper

sentence.
- 2 -

The government believes that Shusterman should

receive a substantial term of imprisonment, within the range

of 135 to 168 months. He engaged in wanton criminality for

a period of years, persisting even after he was explicitly

warned that the government was aware of and endeavoring to

stop his illegal conduct. This brazenness comes as no

surprise when his personal history of fraudulent conduct is

considered. The substantial harm caused by Shusterman’s

conduct fully warrants a sentence within the recommended

range.

I. Facts.

The facts of this case are set forth at length in

the government’s trial memorandum and the presentence

report. There are two additional matters, however, which

the government wishes to bring to the Court’s attention,

which are vitally pertinent to sentencing. The first

involves the fact that Shusterman persisted in his multimillion dollar thefts during a time that he knew he was

under investigation; and the second relates to an earlier

episode of fraud which starkly illuminates Shusterman’s

character.
- 3 -

A. Shusterman’s Commitment to Crime Even After Being

Aware of the Authorities’ Knowledge of His

Conduct. 

At trial, the Court did not hear of the remarkable

fact that Shusterman continued to steal $4 million from

Kimber and Leslie Edelman even after Shusterman was

explicitly told by the government of its suspicions

regarding his conduct. This information would have emerged

in detail during cross-examination of the defendant, and if

necessary, during the government’s rebuttal case. It

starkly demonstrates the quality of the intent and

seriousness of Shusterman’s crimes.

The facts are as follows. On July 11, 2001, AUSA

Zauzmer, along with Agents Manning and Tengood of the IRS,

and Montgomery County Assistant District Attorney Laurel

Grass, met with Shusterman, who was represented at the

meeting by attorney John Rogers Carroll. The government

requested this meeting.

As of this time, the federal and county

authorities had been conducting a joint investigation for 16

months into the embezzlement which occurred at Temple Sinai. 

The focus on Denis Shusterman’s mother, Betty, and the

suspicions voiced by some Temple Sinai congregants regarding
- 4 -

Denis, had led the authorities to investigate his finances

as well. What they had determined by this stage was that

Denis Shusterman was not responsible for any misconduct at

the synagogue, but that there were grossly suspicious

matters in his own affairs.

The government, appreciating that there was clear

evidence of wrongdoing by Shusterman but that a full

accounting would require years of investigation, asked to

meet with Shusterman to see whether he was willing to admit

his conduct and resolve any criminal charges. At the

meeting, AUSA Zauzmer stated that it would be in

Shusterman’s interest to admit any misconduct at an early

stage, as he would receive consideration for such an

admission in a plea. At the same time, AUSA Zauzmer stated,

if Shusterman had an innocent explanation for his conduct,

the government wanted to hear it; AUSA Zauzmer stated that

the assigned agents had plenty of other matters to work on

and had no interest in pursuing an innocent man.

Over the course of 90 minutes, Zauzmer described

what the government had learned about Shusterman’s affairs. 

As it turned out, this represented a fraction of the

evidence which would ultimately be found, but nonetheless
- 5 -

revealed a good deal of criminal conduct. Zauzmer explained

that the government was aware that millions of dollars had

been transferred from Kimber to Shusterman’s accounts, and

that Shusterman had not paid income tax on much of it (and

indeed had not filed returns for many years). The

government was further aware that Shusterman had filed for

bankruptcy in March 1999, and testified at a deposition in

February 2000, and made statements which were sharply

inconsistent with his apparent means.

While the evidence of tax evasion and bankruptcy

fraud seemed clear, the major open question, Zauzmer

explained, was whether Shusterman was entitled to the

millions of dollars he was receiving from Kimber. Without

access to Kimber’s personnel and records, Zauzmer said, the

government had not yet been able to determine whether the

transfers represented compensation, a loan, or theft. While

promising that the government would persist in its

investigation, Zauzmer invited Shusterman to help resolve

this issue, saying that the government would drop the issue

if Shusterman were entitled to the money, but that otherwise

it was in Shusterman’s interests to own up to any

illegality.
- 6 -

Upon hearing all of this information, Shusterman

made no statement. Several months later, attorney Carroll

contacted Zauzmer and stated that Shusterman had no interest

in talking further to the government. The government had no

further direct contact with Shusterman.

What Shusterman did do was persist in his criminal

conduct. He soon moved to California (perhaps to put

distance between himself and the Philadelphia-based

investigators), engaging in the bank fraud for which he was

convicted. He returned to Kimber and persuaded Edelman not

to cooperate with the government. He told Edelman (and a

number of others) that the government was solely pursuing a

vendetta regarding Temple Sinai, and that Kimber should stay

clear of it. In fact, Zauzmer had explicitly told

Shusterman and his attorney that the government had

concluded by July 2001 that Shusterman was not responsible

for any conduct at the synagogue, and that the government’s

investigation of Shusterman himself concerned only his

relationship with Kimber and related matters.

Based on his lie to Edelman, Shusterman was able

to continue in his employment, prevent Edelman’s contact

with the government (Edelman was advised by an attorney
- 7 -

located by Shusterman to assert his Fifth Amendment

privilege), and continue to steal. Of the $10.8 million

which Shusterman stole, approximately $4 million was taken

after the July 11, 2001 meeting. It is difficult to imagine

a clearer depiction of an individual’s commitment to illegal

conduct. Shusterman also persisted in his fraudulent

conduct with respect to his tax obligations. He did not

file his 1997 and 1998 M&D returns, nor his 1998 and 1999

personal returns, until early 2003, when he learned that the

government planned to charge him with tax evasion for these

years. At that time, he recruited an attorney to falsely

tell the IRS that these returns had been filed earlier. He

never filed a personal return for 2001 at all, and made many

false statements in all of the returns he filed, both before

and after the meeting with the government. 

This narrative establishes beyond doubt that

Shusterman was a man passionately committed to stealing from

others, and nothing but a massive government investigation,

which spanned more than four years, was going to bring him

down. He never relented in his criminal conduct at Kimber

until Kimber’s owner finally wised up and fired him;

Shusterman stole money on a grand scale until his very last
- 8 -

day of employment in March 2003. Then, he never admitted

his wrongdoing until the very end of the trial, after the

government had presented the overwhelming evidence it had

marshaled, and was in the process in cross-examination of a

defense expert witness of demonstrating the frivolity of

Shusterman’s defense to the tax charges. And then, after

the jury was dismissed and the government’s march toward a

jury conviction halted, Shusterman once again remarkably

proclaimed his innocence and asked for a new trial.

Such a brazen commitment to wanton illegality may

only be addressed with a sentence of incarceration to the

full extent suggested by law.

B. The Coventry Market Episode Illustrates

Shusterman’s Character. 

The other matter uniquely pertinent to sentencing,

which was not fully examined at trial, concerns the 1992-93

Coventry Market venture which produced the payroll tax debt

leading to Shusterman’s bankruptcy fraud. This episode as

well casts a bold light on Shusterman’s character,

establishing (if there were any doubt after the evidence

regarding the later Kimber years) that he is a man committed
- 9 -

to deceiving and cheating others, and warrants

incapacitation.

As the Court will recall, the evidence at trial

established that the failure of the Coventry delicatessen

venture created a large payroll tax debt. The IRS was of

the view that Shusterman, as a partner in the enterprise,

was a responsible party, and it obtained a lien against

Shusterman of approximately $250,000 plus interest. In

March 1999, to resolve this dispute, Shusterman filed for

bankruptcy, ultimately settling with the IRS for

approximately $127,000.

At trial, the government stated that it was not

necessary for purposes of this case to resolve the dispute

between Shusterman and the IRS. The government believed

that such evidence was collateral and potentially

prejudicial to Shusterman, as resolution of the dispute was

not necessary to determine the criminal charges. In this

case, the government stated that one may assume that there

was a legitimate dispute between Shusterman and the IRS, but

that it was unlawful for Shusterman to use the bankruptcy

process, and make false statements during the bankruptcy, to
 There were many examples offered at trial. 1

Shusterman tried to be a movie producer, but lost over $5

million; he and his partner blamed a disreputable

distributor. Shusterman invested over $1.2 million in the

Orion Financial enterprise, which ultimately closed; he

blamed his long-time partner, Ronald Davis, for misfeasance. 

Shusterman gave $725,000 to Norman Myers, a custodial worker

at a Norristown hospital, and wrote it off as a real estate

investment; Shusterman’s attorney suggested at trial this

was some type of theft by Myers. The list goes on and on. 

All depict ambitious and sometimes flighty schemes which

Shusterman was able to undertake because he was not spending

his own money.

- 10 -

deceive the IRS regarding his means and thereby obtain a

favorable settlement of the matter.

Nevertheless, during his brief direct testimony at

trial, before he changed his plea, Shusterman undertook to

attempt to put an innocent spin on his conduct at Coventry. 

In his telling, he and his family were the victims of

mismanagement by their partners in the Coventry enterprise. 

This was something of a theme in Shusterman’s history -- he

embarks on a grandiose plan, it ends in failure and

financial loss, and he blames someone else for misconduct.1

In the Coventry instance, his claims are demonstrably false;

what the episode really reveals is the long history of

Shusterman’s mendacity.
- 11 -

Shusterman entered the Coventry venture along with

his parents, Jack and Betty, and Temple Sinai executive

director Barry Wilf. (At the time, Betty Shusterman and

Barry Wilf were already well underway in their huge thefts

from Temple Sinai; the government established in the WilfShusterman case that the two used money stolen from the

synagogue to pay off debts related to the Coventry

delicatessen.) As a group, they entered a complicated

arrangement to take majority control of Coventry Market, a

long-established Jewish market and caterer in Melrose Park,

Pennsylvania. The agreement called for the continued

participation and minority interest of the Rovner family,

which had long operated the market.

With the Court’s permission, Marsha Rovner will

testify at the sentencing hearing. Before meeting the

Shustermans, she and her husband, Daniel, were pillars of

the local Jewish community, and had run their successful

business for two decades. Incidentally, before the

Shusterman years, they never wavered in faithfully paying

payroll taxes as required for their employees. They had no

difficulty in operating their business, but wanted to

expand, and needed financing to do that. They met the
- 12 -

Shustermans, who offered to provide the necessary financing

in exchange for a majority share in the business.

What ensued was a disaster. At trial, Denis

Shusterman (during his direct testimony before he entered

his plea) falsely testified that the Rovners maintained

control of the finances of the business, and routinely

failed to pay expenses of the business. He said that when

he learned that payroll taxes were not being paid, he called

a meeting with Marsha Rovner and demanded that this be

corrected. The truth, unsurprisingly, is exactly the

opposite.

In truth, it was Denis Shusterman who took over

the financial affairs of Coventry, along with his accounting

partner, Ronald Davis. The arrangement was that the Rovners

would handle the food operations, based on their expertise,

and Shusterman would attend to the finances, based on his

expertise as a CPA. It was Shusterman who had the

responsibility to and failed to pay the IRS the money which

had been withheld from employees. While the Rovners had

long used the respected ADP payroll service, and thus

continually complied with their tax obligations, Shusterman

insisted that he and Davis alone would handle the payroll. 
- 13 -

Moreover, Shusterman paid himself over $20,000 in

unwarranted payments, which the Rovners did not find out

about until after the market closed and their attorney was

able to wrest access to the books.

The Coventry venture failed because, in expanding

to locations outside the Melrose Park market (including a

restaurant in Chalfont and a bakery facility in Pennsauken),

the new enterprise undertook substantial new obligations,

but at the same time, the Shusterman group never delivered

the large financing it promised. Soon swimming in debt, the

Rovners lost not only the expanded venture, but their

original market as well. This devastating setback took a

significant toll on their lives and health.

The Coventry episode is nothing but a retelling of

the Kimber affair, writ small. In the Coventry matter, as

would later occur with Leslie Edelman, the Rovners put their

faith in Shusterman, to their enduring detriment. At the

outset, in 1992, the Rovners were respected proprietors of a

decades-old business serving the Jewish community of eastern

Montgomery County; by the end of 1993, their market was out

of business and they were engaged in litigation with their

erstwhile benefactors, Denis Shusterman and his cohorts. 
 Of course, the misconduct proven in this case is not 2

just a single episode called “Kimber,” but a seven-year

course involving an endless series of lies on every

pertinent issue, from false statements to Edelman and

Edelman’s attorneys regarding expenditures, wire transfers,

the Heidenreich loan, and the Camden Ordnance episode;

numerous false statements to the IRS in multiple tax returns

and letters; false statements under oath in the bankruptcy

- 14 -

Shusterman’s conduct in the Coventry matter is

consistent with the course of his affairs at Kimber. It

should be recalled that his thefts at Kimber began small,

when he could not yet be certain of the extent to which he

could embezzle. In his first full year of employment, 1997,

he stole approximately $150,000, mostly through transfers to

his personal credit cards. Then, in 1998, Shusterman saw

the opportunity to fraudulently gain control of the Camden

Ordnance company, and steal another couple hundred thousand

dollars. In later years, he would discover (by virtue of

his receipt of a $3 million bonus in 1999), that he could

transfer far larger sums, and no one would notice. But his

conduct in 1997 and 1998 confirmed what his actions at

Coventry had shown four years earlier, that he would take

whatever opportunity he had to steal from others, whether on

a small scale or a large scale, and that he would then lie

to others to cover his tracks.2
filing and deposition; misstatements to Millennium Bank

regarding Shusterman’s assets; lies to his business

associates and acquaintances, and on and on.

- 15 -

What all of this evidence confirms is that Denis

Shusterman is a person committed to fraudulent conduct,

whose only motivation is his own gain. When he could steal

a lot, he stole a lot, and persisted in that conduct even

when he knew the government was on his tail; when he could

steal only a little, he stole only a little. Proof of this

abiding character makes clear that Shusterman is fully

deserving of the substantial sentence of incarceration he

faces, both to punish Shusterman and to protect the public

from his misdeeds.

II. The Applicable Procedure and Guideline Range.

Pursuant to United States v. Cooper, 437 F.3d 324,

330 (3d Cir. 2006), this Court must calculate the advisory

guideline range, and then consider that range along with all

the pertinent considerations of sentencing outlined in 18

U.S.C. § 3553(a) in determining the final sentence. “The

record must demonstrate the trial court gave meaningful

consideration to the § 3553(a) factors. . . . [A] rote
 In United States v. Grier, 449 F.3d 558, 574-75 (3d 3

Cir. 2006), the panel held that the solitary statement, “The

Court believes that 100 months is reasonable in view of the

considerations of section 3553(a),” was insufficient to

explain the district court’s reasoning, and remanded for

resentencing. This opinion was subsequently vacated and

rescheduled for hearing en banc, likely on a separate issue

in the case not relevant here, regarding whether the

preponderance standard applies at sentencing to proof of

additional uncharged crimes. The holding with respect to

- 16 -

statement of the § 3553(a) factors should not suffice if at

sentencing either the defendant or the prosecution properly

raises ‘a ground of recognized legal merit (provided it has

a factual basis)’ and the court fails to address it.” Id.

at 329. See also United States v. Schweitzer, 2006 WL

1889986, at *8 (3d Cir. July 11, 2006) (directing district

courts to explain all guideline determinations and final

sentences, stating, “There is simply no substitute for

on-the-record discussion and deliberation. It ensures that

the parties are fully informed of their rights and

obligations and that the appellate court will be able to

assess the merits of the final judgment.”); United States v.

King, 2006 WL 1889976, at *8 (3d Cir. July 11, 2006)

(district courts “should observe the requirement to state

adequate reasons for a sentence on the record so that this

court can engage in meaningful appellate review.”).3
the sufficiency of the sentencing explanation appears to

represent the view of the Third Circuit, as made clear in

the other cases cited above.

- 17 -

In addressing the considerations of sentencing set

forth in 18 U.S.C. § 3553(a), the Court should begin by

determining the sentencing range established in the

Sentencing Guidelines. The Third Circuit has confirmed: 

“In consideration of the § 3553(a) factors, a trial court

must calculate the correct guidelines range applicable to a

defendant’s particular circumstances.” Cooper, 437 F.3d at

330. See also United States v. King, 2006 WL 1889976, at *8

(3d Cir. July 11, 2006) (explaining requirement of guideline

determination). This Court must make findings pertinent to

the guideline calculation by applying the preponderance of

the evidence standard, in the same fashion as was employed

prior to the Booker decision. Id.; see also United States

v. Giaquinto, 441 F.3d 195, 196 (3d Cir. 2006) (court may

continue to determine by a preponderance of the evidence and

consider the defendant’s relevant conduct in determining the

guideline range). In short, the guideline range should be

calculated in the same manner as it was prior to Booker. 

[W]e emphasize that the sentencing courts in this

Circuit should continue to follow the requirement to
- 18 -

“consider” the Guidelines by calculating a Guidelines

sentence as they would have before Booker, including

formally ruling on the motions of both parties and

stating on the record whether they are granting a

departure and how that departure affects the Guidelines

calculation, and taking into account this Circuit’s

pre-Booker caselaw, which continues to have advisory

force.

United States v. King, 2006 WL 1889976, at *8 (3d Cir.

July 11, 2006).

A. The Significance of the Guideline Range.

The advisory guideline range carries considerable

weight even after Booker. As the Third Circuit stated, “a

within-guidelines range sentence is more likely to be

reasonable than one that lies outside the advisory

guidelines range . . . .” Cooper, 437 F.3d at 331. The

Court later noted: “The farther a sentence varies from the

advisory guidelines range, the more compelling the judge's

reasons must be.” United States v. King, 2006 WL 1889976,

at *7 (3d Cir. July 11, 2006), quoting United States v.

Jordan, 435 F.3d 693, 696-97 (7th Cir. 2006).

The importance of the final guideline range has

nothing to do with the guidelines’ former mandatory status,

which was eliminated in Booker. Rather, the final guideline

range is the starting point for determining reasonableness
- 19 -

for three reasons: (1) only the guidelines comprehensively

examine the full panoply of sentencing considerations;

(2) the guidelines represent decades of nationwide

experience and study; and (3) they are the only measure for

avoiding unwarranted sentencing disparities. Congress

explicitly created the Sentencing Commission and the

guideline system to achieve these ends. 

First, the guidelines are much more comprehensive

than any other Section 3553(a) factor. Each of the other

3553(a) factors addresses only a single facet of the many

issues posed by sentencing. “[T]he factors the sentencing

commission was required to use in developing the Guidelines

are a virtual mirror image of the factors sentencing courts

are required to consider under Booker and § 3553(a).” 

United States v. Shelton, 400 F.3d 1325, 1332 n.9 (11th Cir.

2005); Statement of Judge Ricardo H. Hinojosa, Chair of the

United States Sentencing Commission, quoted in United States

v. Peach, 356 F. Supp. 2d 1018, 1020-22 (D.N.D. 2005). In

formulating the guidelines, the Commission was required to

and has considered all of the Section 3553(a) factors. See

28 U.S.C. §§ 991(b)(1), 994(b)(1), (c), (f), (g), (m);

U.S.S.G. § 1A1.1 Editorial Note.
- 20 -

Second, the guidelines are the product of years of

nationwide experience and sustained study. In drafting the

original guidelines (which became effective with respect to

offenses committed on or after November 1, 1987), the

Sentencing Commission canvassed prior sentencing practice,

identifying aggravating and mitigating factors. 28 U.S.C.

§ 994(m); U.S. Sentencing Commission, Supplementary Report

on the Initial Sentencing Guidelines and Policy Statements

16-17 (1987). Since then, the Commission has continued to

study district court and appellate sentencing decisions, and

has fine-tuned the guidelines to take them into account. 

U.S.S.G. App. C. Indeed, the Booker Court specifically

affirmed that the Commission will continue to study

appellate and district court sentencing decisions, and “will

continue to modify its Guidelines in light of what it

learns, thereby encouraging what it finds to be better

sentencing practices.” Booker, 543 U.S. at 263 (Breyer,

J.). 

The Sentencing Commission’s incomparable flow of

nationwide information, and its years of concentrated study

on this topic, merit strong consideration by judges who are

assigned the task of determining appropriate sentences for
 Every opinion in Booker acknowledged the express 4

national policy, as articulated by Congress, that sentences

be uniform across the country to the extent possible. See,

e.g., Booker, 543 U.S. at 253 (majority opinion of Breyer,

J.) (“Congress’ basic goal in passing the Sentencing Act was

to move the sentencing system in the direction of increased

uniformity.”); id. at 744 (same) (“Congress’ basic statutory

goal of diminishing sentencing disparity depends for its

success upon judicial efforts to determine, and to base

punishment upon, the real conduct that underlies the crime

of conviction.”); id. at 292 (dissenting opinion of Stevens,

J.) (“The elimination of sentencing disparity, which

Congress determined was chiefly the result of a

discretionary sentencing regime, was unquestionably

Congress’ principal aim.”); id. at 303-04 (dissenting

opinion of Scalia, J.) (“the primary objective of the Act

was to reduce sentencing disparity.”).

- 21 -

criminal conduct. United States v. Wilson, 350 F. Supp. 2d

910, 914-25, reaffirmed on denial of reconsideration, 355 F.

Supp. 2d 1269, 1271-88 (D. Utah 2005); United States v.

Wanning, 354 F. Supp. 2d 1056, 1060-62 (D. Neb. 2005);

Peach, 356 F. Supp. 2d at 1020-22. 

Third, the correctly calculated guideline range is

the only means to evaluate the statutory sentencing goal on

which Booker placed so much emphasis: “the need to avoid

unwarranted sentence disparities,” 18 U.S.C. § 3553(a)(6).4

Congress, the Court, and the guidelines all seek to minimize

such disparity compared to “all other similar sentences

imposed nationwide.” United States v. White, 406 F.3d 827,
- 22 -

837 (7th Cir. 2005). The Sentencing Guidelines provide the

comprehensive information and guidance about sentencing

around the nation that is essential to accomplishing

Congress’ goal of uniform federal sentencing. “The only way

of avoiding gross disparities in sentencing from judge-tojudge and district-to-district is for sentencing courts to

apply some uniform measure in all cases. The only standard

currently available is the Sentencing Guidelines.” Wilson,

350 F. Supp. 2d at 924; Wanning, 354 F. Supp. 2d at 1061-62

(“we have no meaningful substitute for the neutrality,

coherence, and equality” that the guidelines provide). 

Thus, measuring reasonableness in relation to the guideline

range serves “to minimize the wide disparity in sentencing

across the country for similarly situated defendants that

led to the enactment of the Guidelines in the first place.” 

United States v. Paulus, 331 F. Supp. 2d 727, 733 (E.D. Wis.

2005).

Thus, the Third Circuit in Cooper stated that

“‘[t]he Guidelines remain an essential tool in creating a

fair and uniform sentencing regime across the country,’ and

provide a natural starting point for the determination of

the appropriate level of punishment for criminal conduct.” 
 In aiming for uniform sentencing, the appropriate 5

focus is on sentences imposed in federal court for like

offenses. A panel of the Third Circuit correctly found “no

merit in [the] argument that the District Court should have

considered what [the defendant]’s sentence would have been

had he been convicted of a similar state-law offense. 

Booker directs our reasonableness review to the factors set

forth under federal law for federal criminal offenses. That

a separate sovereign chooses to implement its criminal

sentencing scheme in a different manner does not impact our

analysis under § 3553(a)(6), which focuses on the need to

avoid unwarranted disparities among sentences issued by

federal courts for violations of federal law.” United

States v. Cropper, 2006 WL 372338, at *4 n.7 (3d Cir. Feb.

17, 2006) (not precedential).

 See, e..g, United States v. Zapete-Garcia, 447 F.3d 6

57 (1st Cir. 2006); United States v. Smith, 445 F.3d 1 (1st

Cir. 2006); United States v. Davenport, 445 F.3d 366 (4th

Cir. 2006); United States v. Hampton, 441 F.3d 284 (4th Cir.

2006); United States v. Moreland, 437 F.3d 424, 434-37 (4th

Cir. 2006); United States v. Duhon, 440 F.3d 711 (5th Cir.

2006); United States v. Goody, 442 F.3d 1132 (8th Cir.

2006); United States v. Lazenby, 439 F.3d 928, 933 (8th Cir.

2006); United States v. McVay, 447 F.3d 1348, 1357 (11th

Cir. 2006).

- 23 -

Cooper, 437 F.3d at 331, quoting United States v. Mykytiuk,

415 F.3d 606, 608 (7th Cir. 2005).5

Accordingly, while many appellate courts have

reversed as unreasonable sentences imposed outside the

applicable guideline ranges, reversals of sentences imposed 6

within the guideline range have been extraordinarily rare,

and have occurred only where the appellate court found that

the district court did not adequately explain the sentence. 
 “[T]he farther the judge’s sentence departs from the 7

guidelines sentence . . . the more compelling the

justification based on factors in section 3553(a) that the

judge must offer in order to enable the court of appeals to

assess the reasonableness of the sentence imposed.” United

States v. Dean, 414 F.3d 725, 729 (7th Cir. 2005). The

Third Circuit cited this view with approval in King. Accord

United States v. Smith, 445 F.3d 1, 4 (1st Cir. 2006);

United States v. Gatewood, 438 F.3d 894, 896 (8th Cir.

2006); United States v. Moreland, 437 F.3d 424, 434 (4th

Cir. 2006).

- 24 -

See, e.g., United States v. Carty, 2006 WL 1975895, at *4-6

(9th Cir. July 17, 2006). Moreover, the Courts of Appeals

have emphasized that the further outside the range, either

above or below, a sentence falls, the stronger must be the

justification for such disparate sentencing.7

B. The Guideline Calculation.

In this case, there appears to be no dispute with

respect to the guideline range of 135-168 months calculated

in the presentence report. The defendant has stated no

objections to the report. The case conceivably raises an ex

post facto issue, due to a change in the guidelines during

the long duration of Shusterman’s criminal conduct, but

Shusterman does not dispute the government’s view. 

Nevertheless, for the benefit of the Court, we set forth our

analysis below.
- 25 -

The guideline calculation set forth in the

presentence report is accurate, and is as follows. Fraud

offenses should group together, as all involve an aggregate

loss. U.S.S.G. § 3D1.2(d). There are three types of fraud

charged -- wire fraud on Kimber and Edelman, bankruptcy

fraud, and bank fraud. The fraud on Kimber and Edelman

caused a loss of $10,864,437.59. The bankruptcy fraud

caused a loss to the IRS of $149,122.43. The bank fraud

caused no loss. The total fraud loss was $11,013,560.02.

(The bankruptcy fraud statute, 18 U.S.C. § 157, is

not listed in the Statutory Appendix of the guidelines which

directs the choice of the applicable guideline. In this

situation, the court is required to apply “the most

analogous guideline.” § 1B1.2. That is plainly the fraud

guideline which now appears at Section 2B1.1. The gravamen

of the charged Section 157 offense is that Shusterman

conceived a scheme to defraud another entity (the IRS), and

to execute that scheme made false statements in a bankruptcy

proceeding. Thus, the charged offense is a standard fraud

to which Section 2B1.1 applies. See, e.g., United States v.

McBride, 362 F.3d 360, 373 (6th Cir. 2004) (§ 2B1.1

establishes the sentencing range for bankruptcy fraud).)
- 26 -

The guideline manual in effect at the time that

Shusterman’s crimes ended, on March 6, 2003 with respect to

fraud offenses and on October 20, 2004 with respect to tax

offenses, is that dated November 1, 2002, as amended on

January 25, 2003. Under that manual, the offense level for

a fraud loss of $11,013,560.02 is 26, increased by 2 because

the crimes included misrepresentations made in a bankruptcy

proceeding. § 2B1.1(b)(7)(B).

Shusterman is subject to a two-level increase,

under Section 3B1.1(c), because he acted as the leader of

criminal conduct. Specifically, Shusterman employed the

assistance of his wife, Mindy Shusterman, in committing bank

fraud, enlisting her to sign blatantly false documents

misrepresenting her employment and income, in order to

secure the Millennium Bank loan. More generally, Mindy

Shusterman played a role in all of Denis Shusterman’s

misconduct, by furthering the fiction that she was the sole

owner of M&D Consulting, Inc. The creation of this entity

was essential to Shusterman’s tax evasion, as explained at

trial, and Mindy Shusterman abetted this effort, even though

in truth, as every witness at trial testified, Mindy

Shusterman had no role whatsoever in any of her husband’s
- 27 -

business affairs, and Denis Shusterman treated the M&D

accounts as his own personal funds.

Finally, because Shusterman was clearly in a

position of trust as Edelman’s chief financial officer, and

could not have committed the crimes except by abusing this

position of trust, the 2-level increase stated in Section

3B1.3 also applies. This brings the total offense level for

the fraud offenses to 32.

The tax offenses do not group with the fraud

offenses. United States v. Vitale, 159 F.3d 810, 813-15 (3d

Cir. 1998). The tax loss, as stated in the presentence

report, is $2,087,279.34. (The applicable provisions,

§§ 2T1.1 and 2T4.1, state that the court may use as an

estimate of tax loss the sum of 28% of the amount of

unreported income, unless a more accurate estimation may be

made. Here, the government undertook to make a quite

precise calculation.) Under the 2002 manual, the offense

level for this tax loss is 22, plus 2 for failing to report

more than $10,000 in criminal proceeds, § 2T1.1(b)(1), for a

total of 24.

Under the grouping rule, § 3D1.4, one level is

added to the higher level (for fraud), creating a total
 Shusterman properly has not sought a reduction for 8

acceptance of responsibility, under Section 3E1.1. He

entered a guilty plea only after compelling the government

to conduct an exhaustive investigation, and present an

exhaustive case. Shusterman had numerous opportunities to

accept responsibility and relieve the government’s burden,

beginning with a meeting which the United States Attorney’s

Office requested on July 11, 2001 at which he was encouraged

to admit what the government then knew. He did not do so,

and instead returned to Kimber, persuaded Edelman not to

talk to the government, and proceeded to steal another $4

million. He entered a guilty plea only after the government

rested and had presented a case so overwhelming that anyone

within earshot of the courtroom knew exactly what the jury’s

verdict would be. Then, after the jury was discharged, he

again proclaimed his innocence and sought to withdraw his

plea. In these circumstances, giving credit for acceptance

of responsibility is inconceivable.

- 28 -

offense level of 33. At criminal history category I, that

produces an advisory sentencing range of 135-168 months.8

This sentencing calculation is conservative. A

very good argument may be made that the fraud level should

be increased by 2 for perjury; the fact that he made false

representations in bankruptcy, which warrants a 2-level

increase under Section 2B1.1(b)(7)(B), does not fully

capture the independent harm of Shusterman’s false testimony

at a deposition under oath, which normally produces an

additional 2-level enhancement.

It may also be argued that Shusterman’s tax

offense level should be increased by 2 pursuant to Section
- 29 -

2T1.1 for use of sophisticated means, given the fact that

his tax evasion involved use of a fictitious corporate

entity, and the extensive diversion of income through

payments to third-party creditors; and by another 2 levels,

under Section 3B1.3, for use of a special skill as a tax

accountant in crafting the fraudulent returns.

If all of these enhancements applied, the fraud

offense level would be 34, the tax offense level would be

28, and the grouped offense level would be 35, producing a

sentencing range of 168-210 months. The government does not

seek these enhancements, however, viewing the calculation

stated earlier as sufficient and accurate.

C. There is No Ex Post Facto Issue.

This guideline calculation is accurate despite the

fact that the fraud and tax guidelines were substantially

increased on November 1, 2001. To be sure,

[t]he ex post facto clause is violated when a court

applies a change in the law which is adverse to the

interests of a defendant where that change occurred

after the commission of the crime. See U.S. Const.,

art. I, §§ 9, cl. 3. Accordingly, when the court in a

criminal case is confronted with post-offense

amendments which call for a more severe sentence than

that prescribed by the Guidelines in effect at the time

of the offense, the court must apply the Guidelines as

they existed at the time of the crime. 
- 30 -

United States v. Brennan, 326 F.3d 176, 197 (3d Cir. 2003). 

However, as the Third Circuit further held, the ex post

facto clause does not bar application of new penalty

provisions where the crime was a continuing offense, and the

criminal conduct continued after the effective date of the

amendment. Id. at 198. See also United States v. Moscony,

927 F.2d 742, 754 (3d Cir. 1991) (RICO offense which began

before and continued after enactment of guidelines was

continuing offense to which guidelines may constitutionally

apply); United States v. Audinot, 901 F.2d 1201, 1202-03 (3d

Cir. 1990) (same ruling with respect to escape charge);

United States v. Rosa, 891 F.2d 1063, 1068-69 (3d Cir. 1989)

(same ruling with respect to conspiracy charge). The theory

of these rulings is that a defendant who continues a

criminal scheme after the law has been amended acts with

full knowledge of the consequences of his conduct,

satisfying the concern of the ex post facto principle. This

rationale rejects any ex post facto challenge to application

of the 2002 guidelines in this case to the conduct which

contributes to the guideline calculation -- bankruptcy

fraud, tax fraud, and wire fraud.
 The amendment applied to Section 2F1.1 of the 9

guidelines; the new provision was carried over into what now

- 31 -

Bankruptcy fraud. In Brennan itself, the Third

Circuit specifically rejected an ex post facto claim with

regard to a bankruptcy fraud charge, on the grounds that it

is a continuing offense. That ruling applies directly to

the bankruptcy fraud charge in this case which comprises

part of the fraud group. That charge, Count 36, involved

Shusterman’s false bankruptcy filing on March 16, 1999, and

perjury on February 9, 2000. The loss of $149,122.43 caused

in the bankruptcy fraud scheme is part of the total fraud

loss, and Shusterman also merits a two-level increase to the

fraud guideline for making a false statement in connection

with a bankruptcy proceeding.

The amount of loss caused in the bankruptcy fraud

is immaterial in the ultimate calculation, given that the

wire fraud loss was so much larger. What is pertinent about

the bankruptcy fraud is that it causes a two-level increase

to the fraud level for making a false statement in a

bankruptcy proceeding. To be sure, that enhancement

provision was not added to the guidelines until November 1,

2000, and the Third Circuit has held that that amendment 9
appears as Section 2B1.1, when the two sections were

combined effective November 1, 2001.

- 32 -

cannot be applied retroactively to conduct which occurred

prior to that date. Brennan, 326 F.3d at 198.

However, in Brennan, the Court further held that

bankruptcy fraud is a continuing offense, which ends not

when it is discovered by federal prosecutors, but when the

debtor reveals the fraud to the Bankruptcy Court or to the

United States Trustee. Id. at 199. The Brennan Court

therefore held that application of the November 1, 2000

amendment in that case was appropriate, even though

prosecutors learned of and actually brought an indictment

regarding the fraud before that date, given that the

defendant never accounted to the Bankruptcy Court for the

concealed assets. Id. (“the concealment was ongoing as long

as Brennan did not reveal the existence of his assets to the

United States Trustee. The date the prosecutors discovered

the crime does not affect whether the crime was still being

perpetrated.”).

This ruling compels the conclusion in this case

that Shusterman, who never informed his victim (the IRS),

the United States Trustee, or the Bankruptcy Court of the
- 33 -

assets he misrepresented, committed an offense which

actually continued until his conviction in this case. 

Application of the two-level enhancement to the fraud

guideline therefore does not violate the ex post facto

clause, pursuant to Brennan.

Further, even if the two-level increase presently

stated in Section 2B1.1(b)(7)(B) for making a

misrepresentation in a bankruptcy proceeding should not

apply, because it did not exist while Shusterman’s

bankruptcy fraud was pending, Shusterman would still receive

a two-level increase because his bankruptcy crime involved

perjury in a deposition. Under the guidelines in effect

both in February 2000 (i.e., the 1998 manual) and now, where

a defendant is convicted both of a fraud and of perjury in

relation to that fraud, the appropriate course is to add two

levels to the fraud offense level. See 1998 manual at

§ 2J1.3 app. note 3; § 3C1.1 app. note 8; § 3D1.2 app.

note 5. Thus, Shusterman would receive the same two-level

increase related to the bankruptcy case under either the
 As stated earlier, an argument can be made under the 10

post-November 2000 manuals that Shusterman should receive

two-level increases for both the bankruptcy

misrepresentations and for perjury, but the government does

not propose that here.

- 34 -

1998 or 2002 book, and there is no ex post facto violation

for this reason as well.10

Tax fraud. The tax fraud charged in this case was

also a continuing offense, which encompassed the tax years

from 1997 through 2003. The indictment charged in Count 39

that there was a single course of tax evasion for these

years, in which Shusterman employed a common set of

stratagems to attempt to evade federal income taxes for all

years. The Third Circuit has upheld proof of the type of

tax evasion scheme charged here, in which the government

establishes that the defendant engaged “in a continuous

scheme and course of conduct to conceal assets from the IRS”

over a multi-year period. United States v. Pollen, 978 F.2d

78, 82 (3d Cir. 1992). Accordingly, pursuant to Brennan,

the final guideline book within this period plainly applies

to the total of the evasion.

Wire fraud. The question of which book applies to

the wire fraud on Kimber and Edelman presents the most
- 35 -

involved ex post facto question. In contrast to bankruptcy

fraud and tax evasion, the Third Circuit has held that mail

or wire fraud is not a continuing offense, but rather is

complete upon the execution of each mailing or wiring. 

United States v. Seligsohn, 981 F.2d 1418, 1425 (3d Cir.

1992).

The fraud guidelines were restated in Section

2B1.1, and increased significantly, effective November 1,

2001. Shusterman’s fraud on Kimber and Edelman straddled

that date. The formula which the government used to

precisely calculate the theft was:

-- Shusterman’s receipts from Kimber,

-- PLUS Shusterman’s expenses paid by Kimber to third

parties,

-- MINUS Kimber/Edelman’s expenses paid by

Shusterman,

-- MINUS Edelman and Ronald Cohen’s salary and taxes

paid by Shusterman,

-- MINUS Shusterman’s legitimate entitlement (i.e.,

$125,000 per year plus a one-time $3 million

bonus).

This assessment resulted in a finding of a total theft of

$10,864,437.59 during the entire period of Shusterman’s

employment by Kimber, from September 1996 to early March
- 36 -

2003. When these calculations are divided into the period

before and after November 1, 2001, one finds that two-thirds

of the theft occurred before that date and one-third

occurred afterwards. Specifically, the theft before

November 1, 2001 was $7,249,299.83, and the theft afterwards

was $3,615,137.76.

As for the tax loss, of the total tax loss of

$2,087,279.34, the sum which applies to the 2001-2003 tax

obligations (which became due after November 1, 2001) is

$874,997.41.

If a pre-2001 book applied exclusively to this

case, under the prior guideline applicable to fraud, Section

2F1.1, the offense level for a loss of more than $10 million

was 21, increased by 2 for more than minimal planning, by 2

for a misrepresentation in the course of a bankruptcy

proceeding (or perjury), by 2 for Shusterman’s leadership

role, and by 2 for abuse of trust. Under Section 2T4.1, the

base offense level for a tax loss of between $1.5 million

and $2.5 million was 20, increased by 2 for failure to

report criminal proceeds. Grouping of these offense levels

(29 for fraud and 22 for tax) would produce a final offense

level of 30, and a range of 97-121 months.
- 37 -

The pre-2001 book should not apply, however, as

Shusterman appears to acknowledge. Many courts have

addressed the situation found here, in which part of an

ongoing fraud occurred before and part occurred after a

guideline change applicable to that fraud. With one

exception, all have held that it is appropriate to apply the

guideline manual in effect at the time that the fraud ended,

on the theory that the defendant was fully on notice as he

continued his conduct of the enhanced penalty. As will be

seen below, even the one dissenting opinion would not

preclude application of the later manual to the entire

course of the fraudulent conduct, albeit by an unusual

route.

The Sentencing Commission itself has weighed in on

this issue, stating in Section 1B1.11(b)(3): “If the

defendant is convicted of two offenses, the first committed

before, and the second after, a revised edition of the

Guidelines Manual became effective, the revised edition of

the Guidelines Manual is to be applied to both offenses.” 

In a background statement, the Commission explained:

Because the defendant completed the second offense

after the amendment to the guidelines took effect, the

ex post facto clause does not prevent determining the
- 38 -

sentence for that count based on the amended

guidelines. For example, if a defendant pleads guilty

to a single count of embezzlement that occurred after

the most recent edition of the Guidelines Manual became

effective, the guideline range applicable in sentencing

will encompass any relevant conduct (e.g., related

embezzlement offenses that may have occurred prior to

the effective date of the guideline amendments) for the

offense of conviction. The same would be true for a

defendant convicted of two counts of embezzlement, one

committed before the amendments were enacted, and the

second after. In this example, the ex post facto

clause would not bar application of the amended

guideline to the first conviction; a contrary

conclusion would mean that such defendant was subject

to a lower guideline range than if convicted only of

the second offense. Decisions from several appellate

courts addressing the analogous situation of the

constitutionality of counting pre-guidelines criminal

activity as relevant conduct for a guidelines sentence

support this approach.

U.S.S.G. § 1B1.11 background.

In United States v. Vivit, 214 F.3d 908 (7th Cir.

2000), the Court of Appeals agreed. In that fraud case, the

question involved the application of an amendment which

added a two-level enhancement for use of a minor. While the

execution of the scheme at one point involved use of a

minor, the only post-amendment count did not involve use of

a minor. The Court held that it was appropriate to apply

the amended guidelines, given that the calculation of the

fraud guideline involves a single offense level for an

entire course of conduct. The Court stated that while mail
- 39 -

fraud may not be a continuing offense, it is grouped

together for sentencing purposes.

[T]he relevant inquiry becomes whether the grouping

rules give the defendant fair notice at the time a

crime is consummated that the commission of further

crimes subject to grouping would subject the defendant

to sentencing under revised Guidelines. The grouping

rules, enacted in 1987, provide warning to criminals

that completing another criminal offense similar to one

committed previously places them in peril of sentencing

under a revised version of the Guidelines. The

introductory commentary to the grouping rules explains

that because the offense guideline for fraud, § 2F1.1,

“deal[s] with repetitive or ongoing behavior,” multiple

fraud convictions are appropriately grouped when the

convictions involve substantially the same harm. See

U.S.S.G. § 3D introductory commentary. We believe that

this conclusion reflects the intent of the Sentencing

Commission to provide notice to criminals that engaging

in ongoing fraudulent behavior involving the same type

of harm risks grouping of convictions, which because of

the one-book rule, will all be sentenced according to

the Guidelines in effect when the latest conduct

occurred.

Id. at 919. The Seventh Circuit agreed with the statement

of the Eighth Circuit that “it was not the amendments to the

Sentencing Guidelines that disadvantaged [the defendant], it

was his election to continue his criminal activity.” Id.,

quoting United States v. Cooper, 35 F.3d 1248, 1250 (8th

Cir.), vacated, 514 U.S. 1094 (1995), reinstated, 63 F.3d

761 (8th Cir. 1995).
 In an earlier opinion in this case, reported at 242 11

F.3d 1248, the court reached the opposite conclusion. Then,

on a motion for reconsideration, two of the three judges

reversed their positions.

- 40 -

Vivit thus stands for the proposition that where,

pursuant to Section 3D1.2(d), an entire course of criminal

conduct is aggregated in a single group for purposes of

guideline sentencing, it is appropriate to apply the final

applicable manual to the entire sum of the wrongdoing. Many

other courts have applied the same analysis and reached the

same result. See, e.g., United States v. Sullivan, 255 F.3d

1256, 1260-63 (10th Cir. 2001) (where the defendant was

convicted of tax offenses in three counts covering three

separate years, and a guideline amendment went into effect

before the last year, the later guideline applied to the sum

of the tax fraud, as that fraud is aggregated for guideline

purposes); United States v. Lewis, 235 F.3d 215, 217-18 11

(4th Cir. 2000) (same as Sullivan -- later guidelines

applied to multiple years of tax fraud which straddled

amendment); United States v. Kimler, 167 F.3d 889, 893-95

(5th Cir. 1999) (mail fraud was committed before amendment,

and counterfeiting offense was committed afterwards, but all

were grouped into a single group based on the aggregate
- 41 -

harm, and therefore there was no ex post facto violation in

use of the later volume); United States v. Bailey, 123 F.3d

1381, 1404-05 (11th Cir. 1997) (continuing series of mail

fraud and related offenses); Cooper, 35 F.3d at 1250-52

(Eighth Circuit holds that the amended guidelines apply to a

series of firearms offenses which are grouped together into

a single group); United States v. Regan, 989 F.2d 44, 48

(1st Cir. 1993) (multiple counts of embezzlement).

The only dissenter is the Ninth Circuit, in United

States v. Ortland, 109 F.3d 539, 545-47 (9th Cir. 1997). 

There, the defendant was convicted of five counts of mail

fraud, four of which involved conduct occurring before an

amendment changed the way loss is calculated in a fraud

case. The court held that application of Section

1B1.11(b)(3) to sentence the defendant on all five counts

under the amended guideline violated the ex post facto

clause. As a remedy, the court held that the district court

must impose two sentences, applying the pre-amendment

guidelines to the counts involving conduct occurring prior

to the amendment, and the post-amendment guidelines to

conduct occurring after the amendment. The court

acknowledged that, as the Sentencing Commission stated in
 The court did not explain why, if the later count 12

fell and the defendant had received only a single sentence,

the defendant could not simply be resentenced, as often

occurs when a conviction is partially overturned.

- 42 -

its commentary, the sentence for the last count would also

encompass the entire scheme, under the relevant conduct

rule; “[t]he harm caused by the earlier offenses can be

counted in sentencing the later one.” Id. at 547 (emphasis

in original). The court suggested that the two sentences --

one for the pre-amendment offenses and the other for the

last offense -- would “run concurrently to the extent that

they overlap.” Id.

Thus, under the Ninth Circuit’s approach, the

defendant, as in all other circuits, will receive a sentence

for the later offense which encompasses all relevant loss

and is calculated under the latest guideline manual. Though

the exercise it directs may therefore seem unnecessary, the

court stated that it was warranted because otherwise “were

the later count to fall at some time after sentencing, all

that would remain would be the earlier sentences, which

would be too long.” Id.12

The Third Circuit addressed this issue in United

States v. Bertoli, 40 F.3d 1384, 1401-07 (3d Cir. 1994). 
- 43 -

While some courts have facilely described Bertoli as

comporting with the Ninth Circuit’s view regarding the ex

post facto issue, see, e.g., United States v. Sullivan, 255

F.3d 1256, 1262 (10th Cir. 2001) (proceeding to disagree

with the Ninth Circuit view), that is only based on a

cursory reading of this complex decision. A careful

examination reveals that Bertoli does not control the

situation presented here, and that the Third Circuit has not

taken sides against the vast weight of authority applicable

to a continuing fraud scheme.

Bertoli and his co-conspirators were charged with

unlawfully manipulating the prices of certain stocks. 

Bertoli was convicted of two counts -- conspiracy to

obstruct justice (Count Three), and obstruction of justice

(Count Six). He was acquitted of the substantive fraud

charges.

The conduct at issue in Count Six took place in

1990, when Bertoli and others transferred certain proceeds

of racketeering activity with the intent to hide their

criminal activity and unlawful gains from the United States

government. The conspiracy at issue in Count Three occurred

from 1983 to 1992, and encompassed efforts to obstruct a
- 44 -

variety of government proceedings. At sentencing, the court

divided the offenses into three groups: “Group [One] would

consist of the three conspiracies to obstruct [F]ederal

court proceedings as well as Count [Six]. Group [Two] would

consist of the conspiracy to obstruct the [G]rand [J]ury

[I]nvestigation. Group Three would consist of the

conspiracy to obstruct the SEC Investigation.” Bertoli, 40

F.3d at 1401.

Because each group involved obstruction of

justice, the district court applied Section 2J1.2 to each. 

That guideline, however, contains a cross-reference, calling

for application of the accessory-after-the-fact guideline if

the obstruction aimed to interfere with the investigation or

prosecution of a criminal offense, and use of the referenced

guideline would result in a higher offense level. Applying

these provisions to each group, the court applied the fraud

guidelines to each group, and assessed an offense level of

25 for Group One, 22 for Group Two, and 22 for Group Three. 

Upon applying the grouping rules, it found a total offense

level of 28. Id. at 1401-02.

The ex post facto challenge arose because there

was a critical amendment to the commentary regarding the
- 45 -

2J1.2 cross-reference, which came into effect after Count

Six (the 1990 offense) was completed. Prior to the

amendment, the cross-reference did not apply if the

defendant aimed to obstruct an investigation of his own

conduct, only someone else’s. Without that amendment, the

cross-reference would not apply to Bertoli’s 1990 offense.

The Court of Appeals stated: “Apparently, the

district court believed that if the conduct is grouped

together, there is no need to assess the counts

independently to determine whether ex post facto clause

considerations arise. Thus, although finding that the

conduct of Count Six occurred in 1990, the court

nevertheless held that the crimes were completed in 1992,

when the conspiracy’s last overt act occurred.” Id. at

1403. The Third Circuit disagreed:

The fact that various counts of an indictment are

grouped cannot override ex post facto concerns. Id. 

Therefore, the trial court erred by failing

independently to analyze which Guidelines Manual should

have applied to the conduct charged in Count Three. 

Our independent analysis of the question leads us to

conclude that the 1989 guidelines apply to Bertoli’s

sentence. 

Id. at 1404.
 The opinion in Bertoli does not state the provision 13

on which the grouping of Count Six with other acts of

obstruction was premised. Logically, it must have been

§ 3D1.2(b), which calls for grouping of “counts” which

“involve the same victim and two or more acts or

transactions connected by a common criminal objective or

constituting part of a common scheme or plan.” In contrast,

§ 3D1.2(d), which applies in this case, groups offenses

“[w]hen the offense level is determined largely on the basis

of the total amount of harm or loss, the quantity of a

substance involved, or some other measure of aggregate harm,

of if the offense behavior is ongoing or continuous in

nature and the offense guideline is written to cover such

behavior.” (These provisions appeared in the 1992 manual

initially applied in Bertoli and remain unchanged today.)

- 46 -

The Court then spent the remainer of its analysis

on the question whether the amended commentary amounted to a

substantive change in the law. Finding that it did, the

Court held that it could not apply to the conviction for

Count Six, the subject of which predated the amendment.

The Court never addressed the matter at issue in

this case -- whether a later book may apply to a continuing

course of conduct which is assessed in the aggregate in the

application of the pertinent guideline. The grouping in

Bertoli of Count Six with other offenses was not based on

Section 3D1.2(d), which addresses offenses whose harm is

considered in the aggregate (like fraud loss and drug

quantity). The only pertinent sentence in Bertoli was 13
- 47 -

this: “The fact that various counts of an indictment are

grouped cannot override ex post facto concerns.” While that

rule may apply to the situation in Bertoli, where discrete

acts of obstruction were grouped for sentencing purposes, it

is a different situation, as regarding fraud and tax

offenses, where the guidelines direct in Section 3D1.2(d)

that all harm caused in a continuing course of conduct be

assessed in the aggregate.

The Court did not have the benefit of any of the

competing case law, or the Sentencing Commission’s views on

this point. Moreover, the Court noted that it was only

called upon in Bertoli to determine the guideline applicable

to Count Six, noting that “in this case the government does

not argue that we should apply a Guideline Manual later than

the 1989 Guidelines Manual to either Group 2 or Group 3 if

we apply the 1989 Manual to Group one.” Id. at 1404 n.17. 

The Court repeated this observation in denying the

government’s motion for rehearing by the panel on this

issue: “In denying the motion the court observes that, as

set forth in footnote 17, page 35 of the slip opinion, the

government did not argue that we should apply a Guideline

Manual later than the 1989 Guideline Manual to either Group
 The Third Circuit’s earlier decision in Seligsohn 14

likewise did not resolve the issue presented by this case. 

In that case, which involved a variety of offenses, the

Court held that the district court would be required on

remand to determine when each offense was completed, in

order to determine the applicable manual consistent with ex

- 48 -

2 or Group 3 if we apply the 1989 Manual to Group one.” Id.

at 1415.

In other words, the Court did not address the

relevance of the situation presented here, in which the

guideline calculation includes not only aggregated conduct,

but also grouped offenses (bankruptcy fraud and tax fraud,

and part of the wire fraud) which plainly continued after

the pertinent guideline amendment.

Bertoli may therefore be read to hold that, where

a discrete count of conviction concerns events which

occurred before a guideline change, the guideline manual in

effect at that time must apply to that count. The Court did

not address the type of counts at issue here, which involved

ongoing fraudulent conduct which is totaled cumulatively for

offense level purposes. The Court further did not address,

because the government did not present, the situation in

which other offenses occurred after the guideline amendment

to which the new guideline book should apply.14
post facto principles. Seligsohn, 981 F.2d at 1424. The

Court did not, however, address any particular offense,

stating that “[r]ather than make the detailed calculations

at this juncture as to the appropriate total scores for each

defendant, we prefer to leave the assessment to the district

court in the first instance.” Id. at 1425.

- 49 -

This case presents these issues, and as explained

above, the great weight of authority holds that application

of the manual in effect at the time the fraudulent course of

conduct ended does not violate the ex post facto clause. In

this instance, the correct rule was stated by, among many

others, the Tenth Circuit: the “‘same course of conduct’ is

analogous to a continuing offense like conspiracy, the

ending date of which determines the applicable sentencing

guidelines.” Sullivan, 255 F.3d at 1263. Because the

defendant was clearly on notice at the time of the guideline

change that this would occur, and continued his criminal

conduct with that understanding, there is no violation of

the constitutional principle.

As explained above, even the single Ninth Circuit

decision which takes a divergent approach would not result

in a different outcome. The Ortland court faced the

question which the government did not present in Bertoli,

i.e., how to proceed where one manual is found to apply to
 The Ortland court stated that it required a separate 15

guideline sentence for the pre-amendment offenses only for

the event that the later conviction might fall. Ortland,

109 F.3d at 547.

- 50 -

earlier conduct and another applies to later conduct. 

Ortland decided that the correct method is to calculate two

guidelines sentences -- one for the pre-amendment conduct,

and the other for the post-amendment conduct, and run them

concurrently to the extent they overlap. The court

acknowledged that such an overlap is likely, in that in

calculating a sentence for the later count under the later

book, the court must take into account all relevant conduct,

including that which occurred earlier. In other words, the

post-amendment guideline sentence will still encompass the

entire course of relevant conduct; in this case, that leads

to an advisory guideline range of 135-168 months.15

The result turns out the same because of the

relevant conduct principle. Pursuant to Section

1B1.3(a)(2), in the case of conduct such as fraud which is

aggregated for sentencing purposes under Section 3D1.2(d),

“relevant conduct” includes all of the defendant’s acts

“that were part of the same course of conduct or common

scheme or plan as the offense of conviction . . . .” Such
- 51 -

relevant conduct may long predate the offense of conviction,

and even the statute of limitations. See United States v.

Stephens, 198 F.3d 389 (3d Cir. 1999) (district court

properly considered all related fraud as relevant conduct,

even though the fraudulent acts continued for 21 years,

beginning at a time long before the applicable statute of

limitations). This matter was not at issue in sentencing of

the obstruction offenses in Bertoli, because, as explained

above, the aggregate sentencing rules of Section 3D1.2(d)

did not apply in that case.

Thus, in Shusterman’s case, a guideline sentence

for post-November 1, 2001 offenses alone must include the

entire course of the related fraud on Kimber and Edelman,

leading to the same guideline range calculated earlier. 

Such a calculation itself does not violate the ex post facto

clause, as the Third Circuit and every other court have

held. A guideline that takes prior conduct into account in

determining the sentence for conduct occurring within the

guideline period does not violate the ex post facto clause. 

That is because the actual punishment is for the current

offense only, and the defendant was on notice at the time he

committed it that earlier conduct could figure into his
- 52 -

sentence. United States v. Bucaro, 898 F.2d 368, 371 (3d

Cir. 1990), citing McDonald v. Massachusetts, 180 U.S. 311,

312 (1901) (which held that an increase in punishment for a

felony based on prior convictions does not violate the ex

post facto clause because the punishment is for the new

crime only). See also United States v. Pierce, 17 F.3d 146,

150 (6th Cir. 1994) (“where a conviction is predicated upon

acts occurring after the Guidelines’ effective date,

enhancing a base offense level based upon relevant conduct

that occurred before the Guidelines were enacted does not

violate the ex post facto clause.”).

In sum, there is no court that has ever held that,

in a situation like this, the sentencing court is compelled

to apply only the earlier book to the entire course of

criminal conduct. “To hold otherwise could lead to the

anomalous result that a particular defendant could be

subject to a lower sentence if convicted of multiple

offenses spanning a revision of the Sentencing Guidelines,

than if convicted of the singular last offense after the

revision of the Sentencing Guidelines.” Cooper, 35 F.3d at

1252.
- 53 -

Holding Shusterman responsible under the more

serious guidelines which became effective on November 1,

2001, is particularly appropriate. In situations where a

penalty is increased during the course of a continuing

crime, a defendant is often heard to complain that even

though he is held as a matter of law to have been aware of

the applicable law, he was actually unaware of the

development. Shusterman’s, however, is an unusual case in

which the defendant had explicit notice of both the

illegality of his conduct and the penalties he faced.

As explained above, government officials met with

Shusterman on July 11, 2001, and, in a 90-minute

presentation, outlined their knowledge as of that time

regarding Shusterman’s bankruptcy fraud, tax evasion, and

unusual transfers to his own accounts from Kimber. 

Shusterman’s response to that meeting was to remain silent,

decline to address the government’s concerns, and return to

Kimber to steal another $4 million during the ensuing 19

months.

At the same time, there was persistent and

prominent national coverage regarding a recent rash of

corporate fraud, including the debacle at Enron Corp. which
 Part of what resulted was the Sarbanes-Oxley Act, 16

Pub. L. No. 107-204, which became effective on July 30,

2002.

- 54 -

first emerged in the fall of 2001, and the occurrences at

MCI and Adelphia which were exposed soon thereafter. During

this period, there was extensive coverage of the determined

efforts of federal legislators to adopt new laws and

penalties to punish such conduct (including in part the

guideline changes which took effect on November 1, 2001). 

Federal officials including the President of the United

States publicly called for harsher treatment of corporate

fraud, a fact which was known to any informed citizen. See,

e.g., “Bush, on Wall Street, Offers Tough Stance,” N.Y.

Times, July 10, 2002, sect. A, page 1 (recounting

administration proposals for increased penalties, and

opposition by Senate Democrats, who proposed even stiffer

penalties). Shusterman thus knew both that his conduct 16

was illegal and that legislation was afoot to increase the

penalties for the very type of fraud in which he was

engaged. Accordingly, it would be entirely inappropriate to

spare Shusterman punishment under the provisions which

directly applied to his criminal conduct at the time it
- 55 -

occurred. The revised guidelines directly apply in this

case because Shusterman engaged in continuing crimes which

persisted after the amendments.

The inequity of applying the pre-November 2001

manual in any manner is also evident when one examines the

advisory range that would be produced. As explained above,

if only that manual were used, the advisory guideline range

for the entire set of frauds would be 97-121 months. 

Interestingly, that is similar to the range which would

apply if one pretended that Shusterman’s crimes before

November 1, 2001 never took place. In that scenario, there

is no doubt that the post-November 2001 guidelines would

apply to his conduct.

As stated earlier, the fraud which post-dated

November 1, 2001 was approximately $3.6 million. Using the

new manual, the fraud offense level for a $3.6 million fraud

is 24, plus 2 for abuse of trust. The tax offense level for

the $874,997.41 in tax loss which occurred after November

2001 is 20, plus 2 for failure to report criminal proceeds. 

Grouping of these offense levels under Section 3D1.4 (26 for

fraud and 22 for tax) leads to an offense level of 28, and a

range of 78-97 months.
 If the Court disagrees, the government submits that 17

a sentence in the higher range is warranted under the

authority granted in Booker. Any other result would give

Shusterman a free pass for much of his criminal conduct, and

would ignore the harsher penalties which should apply based

on the law in effect when he continued his crimes.

- 56 -

In other words, using the pre-November 2001 manual

in this case not only is unwarranted based on consideration

of the ex post facto clause, but would result in a striking

windfall for Shusterman, who would largely escape punishment

for more than $7 million in theft, for bank fraud, for

bankruptcy fraud, and for over $1 million in tax evasion. 

Plainly, that result would be inconsistent with principles

of justice.

The bottom line is that Shusterman committed

continuing fraud and tax crimes, with full knowledge of his

illegal conduct and of the penalties he faced. No court has

ever held that only a pre-amendment manual may be applied to

continuing conduct, and the clear weight of authority,

unrebutted by the Third Circuit, is that there should be a

single guideline sentence in this case based on the latest

manual. The applicable manual calls for a sentence within

the range of 135 to 168 months. There is no ex post facto

infirmity in application of that range.17
- 57 -

III. Consideration of the Section 3553(a) Factors.

A full review of all pertinent factors suggests

that a sentence within the guideline range of 135-168 months

is appropriate. Those factors are:

(1) the nature and circumstances of the offense and the

history and characteristics of the defendant;

 (2) the need for the sentence imposed-- 

 (A) to reflect the seriousness of the offense, to

promote respect for the law, and to provide just

punishment for the offense; 

(B) to afford adequate deterrence to criminal

conduct; 

(C) to protect the public from further crimes of

the defendant; and 

 (D) to provide the defendant with needed

educational or vocational training, medical care,

or other correctional treatment in the most

effective manner; 

(3) the kinds of sentences available;

(4) the kinds of sentence and the sentencing range

established for-- 

(A) the applicable category of offense committed

by the applicable category of defendant as set

forth in the guidelines . . . issued by the

Sentencing Commission . . . that . . . is in

effect on the date the defendant is sentenced;

. . . 

(5) any pertinent policy statement . . . issued by the

Sentencing Commission . . . that . . . is in effect on

the date the defendant is sentenced. 
- 58 -

(6) the need to avoid unwarranted sentence disparities

among defendants with similar records who have been

found guilty of similar conduct; and 

(7) the need to provide restitution to any victims of

the offense.

18 U.S.C. § 3553(a).

As explained earlier, the applicable guideline

range (the § 3553(a)(4) factor) deserves strong

consideration as the considered judgment of the expert

Sentencing Commission, and to avoid disparity with

defendants nationwide who have committed similar offenses

(§ 3553(a)(6)). At the same time, Shusterman has not and

cannot set forth any persuasive basis for leniency.

The offenses were quite serious (§ 3553(a)(1)),

involving the persistent looting of a significant

manufacturing company. The central fraud continued for more

than six years, as Shusterman wrung every dollar he could

out of the company he served as chief financial officer. At

the same time, Shusterman defrauded the IRS of over $2

million, a crime which harms every taxpayer and undercuts

our essential system of voluntary tax compliance (a fact

Shusterman, a tax accountant, well knew). Further, the
- 59 -

crimes were particularly complex, and required a substantial

government effort to terminate and prosecute.

While Shusterman has not previously been convicted

of another offense (a fact accounted for in his criminal

history category of I), that plainly results only from the

fact that he was not caught during daily crimes which

spanned a period of many years. Thus, as argued above, the

history and characteristics of the defendant (§ 3553(a)(1))

support the substantial sentence of incarceration

recommended by the guidelines. Shusterman committed the

same crimes for years, in increasing severity as he had the

opportunity. He is intelligent, well-educated, and capable

of lucrative, honest pursuits, making his devotion to

criminality all the more serious.

A significant sentence is also necessary to

promote respect for the law, provide just punishment, and

deter the defendant and others from committing similar

crimes (§ 3553(a)(2)). Shusterman has failed to show any

remorse whatsoever, and has never accepted responsibility

for his conduct. He committed the crimes in a blatant

fashion, continuing to steal even as he knew that he was

under investigation. A sentence of imprisonment is
- 60 -

therefore necessary to punish his misconduct, and to stop

future crimes he may commit if given the opportunity. In

addition, this case received significant public attention,

because of the substantial amount of Shusterman’s theft and

his previous prominence in the local community, and a

substantial sentence is warranted to deter others who will

learn of this Court’s action.

The other 3553(a) factors are not pertinent in

this case, such as any need to provide the defendant with

educational or vocational training, medical care, or other

correctional treatment (§ 3553(a)(2)(D)). While there is a

need to provide restitution to the victims of the offense

(§ 3553(a)(7)), the fact is that Shusterman has made no

effort whatsoever to pay any restitution to his victims, and

likely would not make significant headway in the upcoming

years. It is far more important to punish his offenses

through incarceration, for all of the reasons set forth

above.

This case, in short, involves persistent and

serious criminality. Any relevant consideration of

sentencing supports the conclusion advocated by the
- 61 -

Sentencing Commission, that Shusterman should receive a

substantial term of incarceration within the advisory range.

IV. Financial Penalties.

At sentencing, this Court should enter the

preliminary order of forfeiture as part of the judgment,

pursuant to Federal Rule of Criminal Procedure 32.2. The

Court should also order restitution to the victims, as set

forth in paragraphs 121 and 122 of the presentence report.

In determining the financial penalties and payment

schedules, the Court should keep in mind that much of the

present assets Shusterman reports were illicitly obtained

and represent the proceeds of theft.

As his substantial assets, Shusterman lists

$30,000 in securities of Public Media Works, a 2002 Saab

valued at $11,000, and a note worth $90,000.

Public Media Works is a California entity related

to Shusterman’s film ventures, which Shusterman financed

with stolen funds. The 2002 Saab was purchased on March 23,

2002, for $42,161.48, which Shusterman took from Kimber. 

The promissory note represents funds owed to Shusterman by

accountants in California, to dissolve a partnership they
- 62 -

briefly formed. After sentencing, the government will seek

to forfeit this note as a substitute asset, pursuant to the

forfeiture judgment in this case.

We also observe in the presentence report that

Shusterman received $28,000 in June 2006 from the sale of

rights to the film “Heart of Stone.” PSR ¶ 172. His

disposition of these funds is not apparent in the PSR, as

Shusterman represented to the Probation Office that he only

has $1,300 in cash. PSR ¶ 169. Further, the Court should

be aware that Shusterman’s ownership of movie rights to

“Heart of Stone” is entirely the result of illegal conduct.

As reported in evidence submitted at trial, the

production of “Heart of Stone” was accomplished using a bank

account in the name of “D&S Screen Fund III” at Bank of

America. In that account, Shusterman deposited $80,000

which came from investors; $110,000 which Shusterman

fraudulently transferred directly from Kimber; and $335,000

which came from M&D Consulting, Inc., Shusterman’s company,

and which itself was stolen from Kimber. Arguably, under

the terms of the limited partnership agreement pertinent to

the film, Shusterman was entitled to the film’s first

receipts, to reimburse him for his expenditures to make the
- 63 -

movie. But those expenditures were made entirely with money

stolen from Kimber. Thus, Shusterman’s recent $28,000

windfall represents nothing other than proceeds of fraud. 

This should be considered as well in imposing sentence.

V. Conclusion.

For all of these reasons, the government

respectfully recommends that Shusterman be sentenced within

the range of 135-168 months, and be subjected to the other

penalties required by law.

Respectfully submitted,

PATRICK L. MEEHAN

United States Attorney

 

ROBERT A. ZAUZMER

Assistant United States Attorney
CERTIFICATE OF SERVICE

I hereby certify that I have caused to be served a

true and correct copy of the attached Government’s Trial

Memorandum by electronic filing and by first-class mail,

postage prepaid, upon:

Ari R. Karpf, Esq.

Karpf, Karpf & Virant

3070 Bristol Pike

Building 1, Suite 302

Bensalem, PA 19020

 

ROBERT A. ZAUZMER

Assistant United States Attorney

Date: August 2, 2006.