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# United States Court of Appeals For the Seventh Circuit

No. 12-2630

U NI T E D S TAT E SOF A M E RI C A , Plaintiff-Appellee ,

v.

J AM E S K E N N E DY

, Defen dant-Appellant.

Appe al f ro m the Uni ted S tates Distri ct Co urt fo r the Nor thern Distri ct o f Il l i noi s, Eastern Di v i sio n. No. 08 CR 00 9 — Joan B. Gottsc hal l , Judg e.

A RGU E D F E B R

UAR Y 25, 2013

— D E C I D E D A UGUS T 9, 2013

Before B AU E R

, P O S N E R , and S YKE S

, Circ uit Judges.

B AU E R , Cir cui t Judge. James Kennedy pleaded gui lty to mai l fraud, 18 U.S.C. § 1341, wi re fraud, 18 U.S

. C

. § 1343, and threat ening an informant, 18 U.S .C. § 1513(b), for hi s r ole in a sch eme to sell counterfeit art

. The di stric t court sentenced hi m2 No. 12-2630

to 96 months’ i mpri sonment and or dered him t o pay restitution in the amount of $316,42 5

. 65. On appeal, Kennedy

ch a l l e n ge s the d i s tr i c t c ou rt’s Se n te n c in g Gui delines calc u l a ti on
as to loss amount and numb er of vic tim s as w ell as the restitution amoun t. W

e affi rm. I. BACKGRO UND
Fr om 2000 to 2008, Kennedy w as invol v ed in a sch eme to sell counterfeit fine art prin ts of w ell-known art i sts, inclu ding Alexander Calder

, Salv ador Dali, Mar c Chagall, Roy Li chens tein, Joan Miro, and P ablo Pi cass o. The prin ts Kennedy sold bore forg ed si gn a tures or false markings that made the prin ts appear as i f they w ere part of an or i gin al li mi ted edi tion

or prepar ed for t he art i st’s own use. Kennedy obtain ed many prin ts knowi ng they had forg ed si gnature s and markings, and someti mes Kennedy hi mself forg ed the si gn a tu res of the art i sts

on the prints or added other markings indi cati v e of an or i gin al li mi ted edi tion prin t. Kennedy then sold the p rints on eBay and at art s h ow s thro u gh out the country , repr esenting to cus tomer s that the prints w ere genuine li mi ted edi tion prin ts si gned and authorized by the art i sts. On Mar ch 18, 200 8 , a gr and jury ret urned a superseding indi ctment chargin g Kennedy wi th three counts of mai l fraud, in v i olation o f 18 U.S.C. § 1341, three counts o f wire fr a ud , in violati on of 18 U.S.C. § 1343, and one count o f t hr eatenin g bodily harm to a wi tness, in violati on of 18 U.S.C. § 1513(b)

. Kennedy pleaded guilty to all counts on Se ptember 23, 2010. Kennedy’s sentencing w as or i gin ally set for August 3, 2011. At the sentencing, the parties di sagreed on the numb er of vic tim s and the loss amount for the fraud, so the di stric t courtNo. 12-2630 3

set a hearin g to permi t the parties to present evidenc e reg arding the numb er of vic tim s, loss amount, and restituti on. The di stric t court held hearin gs on Sept ember 16, 2011, October 21, 2011, June 20, 2012, and June 29, 2012, to re solv e these i ssu es. At the hearin gs on Se p t e mb er 16 and October 21, the government arg ued that the loss amount in thi s case exceeded

a mi lli on dollars, and w as li kely far gr eater , and presented testim ony from tw o wi tnesses in supp or t. FB I S p eci al Agent Brian Brusokas, a case agent who w as inv olv ed in inv esti gating Kennedy and the fraudu l e nt art sch eme, testifi ed reg ardin g interv i ews wi th Kenned y in J a nuary and Februar y 2007. At one interv i ew

, on Janu ary 17, 2007, after ini tiall y denyi ng that he knowi ngly sold fraudulent art w or k, Kennedy a dmi tte d to engaging in such conduc t and told Agent Brusokas that he had fo r g e d v arious art i sts’ si gnature s “hundreds of tim es.” In an interv i ew the following month, Kennedy sai d that he had three prim a r y so urces of fraudulent art w or k: Leon Ami el, Jr ., Michael Zabrin, and Giuseppe Concepci on. Kennedy sai d that he had pai d C on c e p c i on a p p ro xim a te l y $ 500,000 for fraudulent art w or k. Agent Brusokas also testifi ed reg ardin g an interv i ew wi th Zabrin, who sai d t ha t he and Kennedy had tr aded fake art w or k back and forth o v er the y ears. The M i lw aukee Polic e Department, whi ch had inv esti gate d K ennedy for selling fraudulent art in 2004, prov i ded Agent Brusokas an inv oic e for

a single tr ansac tion of fraudulent art betw een Kennedy and Zabrin that had an esti mated v alue of $129,600. Agent Brusokas also testifi ed that Zabrin sa id he marked the pric e of counterfeit ar t up for resale by appro xim ately t hree t i mes the wholesale pri ce he pai d.4 No. 12-2630

U.S. P ostal Inspector John Donnelly also testifi ed reg ardin g hi s inv esti gation of the fr a ud ulent art sch eme. He sai d that

ov er the course of hi s multi -y ear inv esti gation, he co ns ult ed wi th art exper ts and partici pants in the counterfeit art sch eme to i denti fy the counterfeit prin ts. He then i denti fi ed sales of prin ts he beli ev ed were fake using Kennedy’s bus iness recor ds from Nov ember 2005 to January 2007, inclu ding sales inv oic es, copi es of chec ks and credi t card receip ts, and bank statements, and esti mated that there w ere at least $744,108 of sales attr ibutable to fraudulent artfor t hi s fi fteen-month period. Inspector Donne l l y a l s o re vi e we d re c or d s fro m the accoun ting fi rm that prepar ed tax ret urns for Kennedy’s bus iness since at least 2000, from whi ch he obtained t he tot al sales amounts Kennedy repo rt ed for 2000 thro ugh 2005: $721,019 in 20 0 0; $389,862 in 2001; $398,920 in 2002; $369,191 in 2003; $453,126 in 2004; $ 6 3 0,124 in 2005. For the y ears 2000 thro ugh 2002, Inspector Donnelly obtained detailed sch edules of inv oic es for the sales of some of the art w or k sold by Kennedy , and based

on hi s knowledge from the inv esti gation, i denti fi ed the sales of counterfeit art

. He esti mated that betw een 2000 and 2002, at least $255,550 of sales w ere relat ed to counterfeit art w or k. 1 Inspector Donnelly also e st i mated $285,000 in counterfeit art sales in 2 0 0 4 , and i denti fi ed $35,407 in counterfeit art sales based on e B ay recor ds from 2005 and 2006. Addi tionally ,

Because the do cuments were i ncompl ete, the i nfor mati on pe rtained to 1 onl y a por tio n of the total sales fo r the year. For exa mple , i n 20 02 , the do cuments i ndic ated $3 98 ,00 0 i n total sales, b ut there were onl y detail ed i nv oi c e s fo r ab out $1 25 ,00 0 of the sales, and of tha t $1 25 ,00 0, Inspector Donnel l y i denti fi ed $9 0,2 75 i n sales of counter fei t art. There were no i nv oi ces fo r the pe ri od o f 2 00 3 to 20 05

.No. 12-2630 5 Inspector Donnelly testifi ed that he had i dentifie d $73,375 in counterfeit art sales based on information from vic tim s whose purchas es w ere not evident in the av ai lable recor ds, but who contacted the g ov ernment during the inv esti gation. Kennedy co nt ended that the loss amount w as less than $1,000,000. He arg ued that many of the documents and recor ds upon whi ch Inspector Donnelly relied for hi s calc ulati ons w ere not reli able and that a much small er percentage of Kennedy’s sales were o f counterfei t ar t than the g ov ernment estim ated.
At the end of the second hearin g, the di stric t co ur t fo und that the loss amount e xceeded $1,000,000 and appli ed an enhanc ement under § 2B1.1(b) (1)( I). I n su p port of thi s loss amount, whi ch the di stric t co urt noted w as i mpreci se, the di stric t co ur t relied upon Kennedy’s admi ssi on that he pai d

one of hi s three supp li ers $500,000 for fraudulent art, and that he then marked up the pric e of the art by at least twi ce what he pai d, and someti mes ev e n t e n t imes as much as he pai d. The di stric t court also consi dered the calc ulati ons o f I ns pector Donnelly , whose esti mates of Kennedy’s sales of fraudulent art from 2000 to 2007 exceeded $1,000,000 and di d not inclu de the sales of fraudulent art from peri ods from whi ch records w ere not av ai lable and any sales Kennedy conduc ted incash

. When the di stric t court a sk ed whether there w ere any
rem a inin g objections to the PSR, Kennedy’s atto rney mentioned that the PSR calc ulated 312 vic t i ms, but that only 130 vic tim s had responded to the government during i ts inv esti gation, and that many of those vic tim s had only lost aro und $300. The di stric t c ourt agr eed that the vic tim s in thi s case were not harmed as seri ously as i s common in cases where the numb er
-6 No. 12-2630
of-vic tim s enhanc ement i s appli ed and sta ted that i t w ould take that into account under the 18 U.S.C. § 3553(a) factors. The di stric t court indi cat e d , though, that i t sus pected that “there probably ar e 250 vic tim s.” Kennedy’s atto rney t hen sai d, “I’ll back off on tha t

. ” The di stric t court accordingly adopted the PSR’s calculatio n that the numb er of vic tim s w as at least 250 and appli ed a si x-lev el enhanc ement under U.S.S .G. § 2B1.1(b) (2)( c). After the loss amount and numb e r -of-vi cti m enhanc ements, the resulti ng Gui delines range w as 108 months to 135 months. The di stric t court consi dered the § 3553(a) factors and ulti mately i mposed a sentence of 96 months’ i mpri sonment. At the end of the hearin g, when the di stric t court turned to the i ssu e of restituti on, the parties agr e e d t o sub mi t further bri efing on the i ssu e becau se the governme nt had not y et completed a li st speci fyi ng each vic tim and the corr esponding loss. The government sub mi tte d addi tional bri efs on October 28, 2011, and Nov ember 18, 2011. In the s ubm i ssi ons, the government prov i ded a li st of 135 vic tim s’ names, add r e sses, and loss amounts, and requested restituti on tot aling $821,714.65. The government relied upon the ev ide nce i t prov i ded at sentencing to pr ov e loss amount for purposes of the Sente ncing Gui delines but di d not sub mi t any addi tional evidenc e supp or tin g the loss amount clai med for each named vic tim for purposes of rest i tution. The di stric t court accordingly i ssu ed an or d er on June 8, 2012, indi cating that the government had fai led to establi sh by the prepon d e ran c e of the evidenc e actual losses by speci fi c vic tim s as required by 18 U.S.C. § 3664(e), wi th the exception of tw o vic tim s. The di stric t court gav e the government an oppor t un ity to sub mi t addi

-No. 12-2630 7
tional evidenc e as to the other vic tim s i t i dent ified, such as proo f that the tr ansac tions li sted on invo ices in the government’s possess i on occurred, that the vic t im had not ret urned the art w or k, and that any money obtained thr o ugh a restitution or der could be ret urned to the vic tim

. The government then produced a r e d uc e d li st of 41 vic tim s’ names and requested a rev i sed tot al restituti on amo un t o f $469,131.65. In suppor t of the requested amount, the government sub mi tt e d

sev eral fi les of documents on the ev e of the restituti on hearin g, whi ch w as held on June 20 and June 29, 2012. The di stric t court si fted thro ugh the documents, whi ch inclu ded ban k r ecords, vic tim questi onnai res, copi es of canc elled che ck s, and other financi al r ecords, and ulti mately found that the government had met i ts burden as to 21 vic tim s and or d e r e d Kennedy to pay $316,425. 6 5

. The di stric t court rej ected the government’s request as to tw enty vic tim s for a v ariety of reasons, inclu ding a complete lack of evidenc e to supp or t the restituti on request in si x cases, insu ffi ci ent evidenc e to supp or t the requested loss

a mo un t in thi rt een cases, and in one case, a lack of evidenc e that t he ide nti fi ed party had purchas ed fraudulent art from Kennedy

. II. DISCUSSION Kennedy appeals the restituti on aw ard a n d the l oss amount and numb er of v icti ms the di stric t court used to enhanc e hi s sentence. W

e address each in turn. A. Rest itut ion The Man d a tor y Vi cti ms Restituti on Act of 1996 requires that a court sentencing a defendant for certain cri mes in whi ch “an i denti fi able vic tim

... has suffered a

... pecun i ar y l o ss”8 No. 12-2630

mus t or der that the defendant make restituti on to the vic tim of the offense. 18 U.S.C. §§ 3663A(a)(1), (b )(1) , (c) (1). The amount of restituti on i s li mi ted to the a ct ua l losses

caus ed by the speci fi c conduc t underlyin g the offense, see 18 U.S.C. § 3663A(a); United States v

. Dokich , 614 F .3d 314, 319 (7th Ci r

. 2010), and the government mus t establi sh the loss amount by the preponder ance of the e videnc e. 18 U.S.C. § 3664(e); United States v

. Hosking , 567 F .3d 329, 333 (7th Ci r

. 2 0 0 9 ). W e
rev i ew a d ist ric t court’s calc ulati on of restituti on for abus e of di screti on, view ing the evidenc e in the li ght most fav or able to the government. Uni te d States v

. Hassebrock , 663 F .3d 906, 925 (7th Ci r . 2011) (c i tations omi tte d). Kennedy contends that the di stric t court’s restituti on calculati on lacked suffi ci ent evidentia r y supp or t, poin tin g to the dwindling nature of the go v ernment’s request for restitution ov er the course of the sentencing and restituti on proceedings. A s w e hav e noted, t he government’s r equest for restitution fell from $821,714.65 for 135 v i cti ms to $468,131.65 for 41 vic tim s, and the di stric t co urt ulti mately or dered $316,425.65 pai d to 21 vic tim s. Addi tion a l l y , the government fai led to prov i de any speci fi c supp or t for i ts ini tial requested restituti on amount for e ach vic tim, and when giv en a chanc e by the di stric t court to supp or t i ts request, prov i ded the evidenc e to the di stric t courtin a haphazard mann er

. 2

Even in i ts fi nal sub missi on, the di stric t court w as unab l e to lo cate any 2

reco rds tha t suppor ted the government’s request as to six of the v i cti ms on the government’s li st.No. 12-2630 9

W e agr ee w i th Kennedy that the government’s handling of i ts restituti on request in thi s case w as di ffi cult to follow

. The restituti on amount sought in a case may ev olv e as the government obtains more information duri ng i ts inv esti gation. E.g. D ok ich , 614 F .3d at 316–17. Here, though, the government

rev i sed i ts request no t becau se of addi tional evidenc e, but becau se the di stric t court remin ded the g o v ernment of i ts b u rd e n of p ro of

. N one the l e s s, the government’s less- than-i d e a l handling of i ts restituti on request does not mean that the final amount deter mined by the di stric t co ur t lacked evidenti ary supp or t. For tunately for the go v e rnm e n t, the d i stric t court here

w ent to gr eat lengths to sort thro ugh the di sorg ani zed recor d to ensure that i ts calculati on of restituti on w as prec ise and vic tim -spec i fi c, rely ing upon swor n complaints sub mi tte d to the gove r nment, copi es of inv oic es indi cating that payment

w as ma d e , vic tim interv i ews by postal inspec tor s, copi es of bank recor ds, and c opies of canc elled chec ks. Kennedy’s only speci fi c ch allenge to the calcu lation of the restituti on a mo unt pert ains to the $247,000 aw arded to one vic tim, Linden N. The di stric t co ur t found that Linden N. 3 suffered an actual loss of t his amount based on Inspector Donnelly’s t esti mony that Linden N. told Inspector Donnelly that “he w as out” $240,000; a copy of a fax sent from Kennedy to Linden N . that stat es “Y ou gav e me 75,000 money[,] 60,000

Kennedy rai se s speci fi c argumen ts regardi ng the resti tutio n amounts 3

awa rded to el even of the v i ct i ms i n hi s repl y b ri ef, taking i ssue with the evidence the di stric t c our t rel i ed upon to deter mine the l oss amount fo r each v i cti m. Arguments raised fo r the fi rst time i n a repl y brief, ho wev er, are waived. Broadd us v. Sh ields , 6 65 F.3 d 8 46 , 8 54 (7 th Ci r. 2 01 1)

.10 No. 12-2630

w atch[,] 22,000 auto[,] 90,000 w atch[e]s ”; and that the government sei zed 23 pi eces of art from Linden N. that w ere deemed to be fa k e s. The government also sub mi tte d three sets of inv oic es for sales of art by Kennedy t o L inden N. tot aling $375,960. 4 Kennedy cont e nd s that thi s evidenc e w as unreli able and arg ues that the amount aw arded to Linden N. reflects only an “approx i mati on” for hi s loss as opposed to hi s actual loss. W e di sa g r e e

. Whi le Linden N. offered “approx i mati ons” o f what he pai d Kennedy to the FBI inv esti gato rs duri ng hi s interv i ews (acc or ding to Inspector Donnell y , Kennedy sai d he “w as out”

aro und $240,000; the recor ds from hi s FBI int e r v iew sai d he had lost about $250,000), the final amount reached by the di stric t court w as supp or ted by the fax Kennedy sent Linden N., whi ch l ist e d $247,000 w or th of money and goo ds Linden N. pai d Kennedy

. Whi le thi s w as clearly no t an
or thodo x tr ansac tion or typical inv oic e, Kennedy fai ls to

co nv ince us that the di stric t court err ed in rely ing upon i t in deter mining th a t L in d e n N

. p a i d Ke nn e dy $247,000 for art w or k that turned out to be fraudu l ent. W e there fore conclu de that the di stric t co ur t di d not abus e i ts di screti on in or dering Kennedy t o pay $316,425.65 in resti tution to hi s vi cti ms.

Li nden N. to l d the go v ernment tha t he was not owed tha t ful l amount 4 b ecause he had no t paid Kennedy fo r some of the art and had returned

some o f the p i eces.No. 12-2630 11

B. Loss Calc ulati on and Number of Vict ims
Ke nn e d y n e xt ch a l l e n ge s the di stric t court’s factual findin gs
re g a r d ing the loss amount and numb er of vic tim s used for sentencing. W

e rev i ew a di stric t court’s factual deter minati ons at sentencing for clear err or

. United States v

. McKinn ey, 686 F .3d 432, 434 (7th Ci r

. 2012). T o establi sh clear err or

, Kennedy mus t show that the di stric t court ’ s deter minati on “w as inaccurate and outsi de the realm of permi ssi ble computati on s. ” United States v

. Borrasi, 639 F .3d 774, 783 (7th Ci r

. 2011) (ci tatio n omi tte d).
On appeal, Kennedy rehashes many of t he arg uments he made reg ardin g l os s a m oun t b e for e the di stric t court, inclu ding that the documents and recor ds that Inspector Donnelly used for hi s calculati ons w ere not reliab le. Speci fically , Kennedy contends that Inspector Donnelly’s use of invo i ces w as problema t ic because the inv oic es may document sales that

w ere nev er consu mmated or sales in wh i ch the art w or k w as ret urned to Kennedy

, as in the case of Linden N. The di stric t court recog ni zed thi s possi bi li ty , how ev er

, but noted that ev en i f the inv oic es mi ght ov erstat e the actual loss, the inv oic es w ere evidenc e of Kennedy’s intent to sell the fake pi eces of art w or k li sted on the inv oic e , and t he inv oic e amounts w ere there fore

accu rat e indi cator s of intended los s. See Dokich , 614 F .3d at 318–19 (notin g that unli ke wi th restituti on, “loss” for purposes of calculating the offense lev el for someone convic ted of mai l fraud under the Sente ncing Gui delines i s defined as “the gr eater of actual or intended l o ss” under § 2B1.1(b) (1))

. Addi tionally

, in ar riving at the loss amou nt , the di stric t court gav e only li mi ted wei ght to Ins pector Donnelly’s calculati ons and prim arily relied upon Kennedy’s own admi ssi ons reg ard-12 No. 12-2630

ing the amount he had spent purchas ing counterfeit art from just one dealer—$500,000—and then marked up before selling to hi s cus to me r s. Kennedy i denti fi es no problems wi th the di stric t court’s relianc e on these admi ssi ons, and w e there fore find no error in the di stric t c ourt ’s deter minati on that the loss amount exceeded $1,000,000.
W e li ke wi se rej ect Kennedy’s contention that the di stric t court er red in finding that K ennedy’s offense inv olv ed 250 or

more vic tim s becau se he w ai v ed any objection to the finding at sentencing. W

ai v er is t he intentional relinqu i shm ent or abandonment of a known right, and forfeiture i s the fai lure to make a tim ely asserti on of a right. United States v

. Irby, 558 F .3d 651, 655 (7th Ci r

. 2009 ) (c it ing United States v

. Olano , 507 U.S. 725, 733 (1993))

. The w a iv er of a right precludes appellate

rev i ew , but when the right i s merely forfeited, w e may rev i ew the d ist ric t court ruli ng for plain err or

. Id. Whi le “[w] ai v er prin ci ples mus t be construed libe r a l l y in fav or of the defendant,” United States v

. And e r s on , 604 F .3d 997, 1002 (7th Ci r

. 2010) (ci tation omi tte d), w e find w ai v er “when there are sound

s tr ateg i c reasons explain ing why couns el w ould e l e c t to p u rs u e
a ro ute as a matter of strat egy .” Sw anson v

. United States , 692 F .3d 708, 716 (7th Ci r

. 2012) (interna l q uo tation marks and ci tations omi tte d).
As w e noted abov e, Kennedy’s atto rney expr essed concern that only 130 vic tim s had come forw ard during the government’s inv esti gation, but he “back[ed] off” thi s arg ument after the di stric t court indica t e d that i t w ould be receptiv e to an arg ument from Kennedy under the § 3553(a) factors that whi le the fraud in thi s case inv olv ed a si gni fi cant numb er of vic tim s, they had been defrauded only a rela t ivel y small amount. ByNo. 12-2630 13
maki ng thi s str ateg i c deci si on to abandon his o bjection t o the calculati on of the numb er of vic tim s and instead fo cus on arg uments in mi tigati on under the § 3553(a) factors, Kennedy

w aived hi s objection to the finding that the offense inv olv ed

more than 250 vic tim s. See U n i te d States v

. Jaimes-Ja imes , 406 F .3d 845, 848 (7th Ci r

. 2005) (“There may be sound strat egic

reasons why a cri minal defendant wi ll e l ect to pursue one sentencing arg ument whi le also choosing to forg o anothe r , and when the defendant selects as a matter of strat egy , he also

w ai v es those arg uments he deci ded not to present.”). W e accordingly decline to rev i ew Kennedy’s a rguments reg ardin g t h e n u m b e r
- o f

- v i c t i m s e n h a n c e m e n t u n d e r U

. S

. S

. G

. § 2B1.1(b) (2)( C).
III. CONCLUSION
For the foreg oin g reasons, w e AFF IRM the judgment of the di stric t court

.