UNITED STATES DISTRICT COURT 

NORTHERN DISTRICT OF INDIANA 

SOUTH BEND DIVISION 

UNITED STATES OF AMERICA ) 

 ) 

 v. ) Case No. 3:14-CR-094 JD 

 ) 

DERRY GADSON ) 

OPINION AND ORDER

 Defendant Derry Gadson is charged in a fourteen count indictment with participating in a 

tax fraud scheme involving Banks A and B, and an investment account wire fraud scheme 

involving Bank C and Brokerages A, B, and C. Specifically, the indictment charged Gadson 

with one count of mail fraud (involving a mailed tax refund check deposited on November 27, 

2012 into the Basic Funding, LLC account Gadson created at Bank A, with the refund check 

being in the name of MP and in the amount of $189,599.00), in violation of 18 U.S.C. § 1341 

[Count 1]; one count of aggravated identity theft involving Bank A (wherein without 

authorization Gadson allegedly used MP’s name, signature, and social security number to make 

MP an authorized signer of Gadson’s Basic Funding, LLC account on November 12, 2012), in 

violation of 18 U.S.C. § 1028A [Count 2]; six counts of wire fraud (involving over $46,000.00 in 

direct deposits (and attempted direct deposits) of fraudulent income tax refunds to Gadson’s 

account at Bank B by use of individual victims’ social security numbers in February through July 

2013), in violation of 18 U.S.C. § 1343 [Counts 3–8]; one count of aggravated identity theft 

involving Brokerage A (wherein on October 17, 2012, Gadson listed MP as a co-holder of an 

account and submitted MP’s name, signature and passport without authorization to do so), in 

violation of 18 U.S.C. § 1028A [Count 9]; and five counts of wire fraud involving Bank C and 

Brokerages A, B, and C (wherein Gadson set up online investment accounts at Brokerages A, B, 
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and C, and then attempted to wire unauthorized funds to the tune of $1.25 million from Bank C 

to the brokerage accounts from May to July 2013), in violation of 18 U.S.C. § 1343 [Counts 10–

14]. 

 Now before the Court is Gadson’s motion for review of pretrial detention [DE 15]. An 

evidentiary hearing was held on January 7, 2015. Prior to that hearing, the Court reviewed the 

transcript of the detention proceedings before the Magistrate Judge [DE 19], which was also 

offered into evidence at the January 7 hearing, during which IRS Special Agent Tonya Johnson 

testified. At the January 7 hearing, the government offered the supplemental testimony of 

Special Agent Kathryn O’Connor from the IRS, as well as several exhibits [DE 22]. Counsel 

also provided their respective arguments during the January 7 hearing and the Court took the 

motion under advisement for a written ruling. For the reasons stated below, the Court DENIES 

the motion to revoke detention. 

DISCUSSION 

18 U.S.C. § 3145(b) permits a defendant to file a motion seeking review or revocation of 

a detention order when the defendant has been ordered detained by a magistrate judge. The 

standard of review for this Court’s review of a magistrate judge's detention order is de novo. 

United States v. Portes, 786 F.2d 758 (7th Cir. 1985) (affirming the district court judge’s de novo 

review of the magistrate judge’s detention determination); United States v. Levine, 770 F. Supp. 

460, 465 (N.D. Ind. 1991). 

 The Bail Reform Act limits the circumstances under which a district court may order 

pretrial detention. As an initial matter, the Court must determine whether release of a defendant 

on personal recognizance or an unsecured bond would either not reasonably assure the 

appearance of the person as required or endanger the safety of any other person or the 
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community. 18 U.S.C. § 3142(b). If such a release would not reasonably assure the Defendant’s 

appearance or the safety of the community, then the Court must consider whether there is some 

condition or combination of conditions that would so assure the Court. 18 U.S.C. § 3142(c). 

“Pretrial detention is allowed only after the court holds a hearing and finds that ‘no condition or 

combination of conditions will reasonably assure the appearance of the person as required and 

the safety of any other person and the community.’” Miller v. Hastings, 87 F. App’x 585, 586 

(7th Cir. 2004) (citing 18 U.S.C. § 3142(e)). 

The government bears the burden of proving that the defendant is either a flight risk or a 

danger to the community. United States v. Daniels, 772 F.2d 382, 383 (7th Cir. 1985). With 

respect to risk of flight, the United States bears the burden of proof by a preponderance of the 

evidence. United States v. Portes, 786 F.2d 758, 765 (7th Cir. 1985). With respect to risk of 

safety, the United States must prove its allegations by clear and convincing evidence. 18 U.S.C. 

§ 3142(f); United States v. Salerno, 481 U.S. 739 (1987). Detention may be based on a showing 

of either dangerousness or risk of flight; proof of both is not required. Portes, 786 F.2d at 765. 

 The factors to be considered by the Court in determining whether there are conditions 

that will reasonably assure the appearance of Gadson and the safety of any other person and the 

community include: (1) the nature and circumstances of the offense charged, including whether 

the offense is a crime of violence or involves a minor victim, controlled substance, or firearm; 

(2) the weight of the evidence against Gadson; (3) Gadson’s history and characteristics, 

including (A) his character, physical and mental condition, family ties, employment, financial 

resources, length of residence in the community, community ties, past conduct, history relating 

to drug or alcohol abuse, criminal history, and record concerning appearance at court 

proceedings; and (B) whether, at the time of the current offense of arrest, Gadson was on 
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probation, on parole, or on other release pending trial, sentencing, appeal, or completion of 

sentence for another offense; and (4) the nature and seriousness of the danger to any person or 

the community that would be posed by Gadson’s release. 18 U.S.C. § 3142(g). 

In this case, the government argues both that Gadson is a flight risk and that he is a 

danger to the community, although the Magistrate Judge detained him only as a flight risk. The 

danger that the government argues Gadson poses is economic, rather than physical.1 With 

respect to risk of flight, the government argues that Gadson faces likely conviction and a lengthy 

sentence; that he is a savvy international traveler and had booked two international flights in 

December 2014 after learning of the IRS’ attempt to locate him; that despite his limited income 

he had a means by which to purchase expensive flights and hire defense counsel; and, that he has 

little by way of assets and no steady employment (and that his business, Basic Funding LLC, was 

the vehicle through which many of his fraudulent transactions were committed). The 

government also argues that Gadson lied to his defense counsel who represented that Gadson 

only booked both international flights before learning of his active warrant, when in fact Gadson 

booked his flight to Nigeria after having been informed by his girlfriend that the IRS was looking 

for him and after having been informed by the IRS itself that a warrant for his arrest had been 

 

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 The Court doubts that Gadson may be detained on the grounds that he constitutes a danger to the community under 

these circumstances. Several circuits have held that a defendant may only be detained as a danger to the community 

in cases where the crime satisfies one of the predicates under 18 U.S.C. § 3142(f)(1). United States v. Himler, 797 

F.2d 156, 160–61 (3d Cir. 1986); United States v. Ploof, 851 F.2d 7, 10–12 (1st Cir. 1988); see also United States v. 

Byrd, 969 F.2d 106, 109–110 (5th Cir. 1992); United States v. Twine, 344 F.3d 987, 987–88 (9th Cir. 2003). The 

Seventh Circuit has never addressed this question, but other districts courts within the Seventh Circuit have agreed. 

United States v. Chavez-Rivas, 536 F. Supp. 2d 962, 966–68 (E.D. Wis. 2008); United States v. Morgan, No. 

14cr10043, 2014 WL 3359430, at *4 (C.D. Ill. July 9, 2014). Although the government mentioned that Gadson’s 

prior felony convictions for dealing in cocaine and escape may meet the criteria under section 3142(f)(1)(D), its 

argument for detention rests primarily on Gadson’s being a flight risk. Moreover, the only details the Court has 

been provided concerning Gadson’s conviction for escape is Gadson’s own contention that he walked away from a 

work release program, and thus, the Court is unwilling to conclude that this conviction constitutes a crime of 

violence under section 3142(f)(1)(D), as defined by 18 U.S.C. § 3156(a)(4). See, e.g., Chambers v. United States, 

555 U.S. 122, 127–30 (2009) (an “escape” that takes the form of a failure to report is not a “violent felony” within 

the meaning of the Armed Career Criminal Act); United States v. Templeton, 543 F.3d 378, 383 (7th Cir. 2008) (“A 

walkaway is not a crime of violence under Begay.”). However, given the Court’s ultimate holding on risk of flight, 

the Court need not consider whether Gadson may be detained as a danger to the community. 
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issued. Additionally, the government has provided convincing evidence demonstrating that 

Gadson is a clever man who is capable of committing identity theft for the purpose of securing 

financial accounts and the unauthorized transfer of funds to himself, and that he has been doing 

so continuously since 2008. Thus, the government argues that Gadson cannot be trusted and is 

not likely to abide by any conditions of release that could be imposed. 

Gadson, on the other hand, argues that detention is not required to reasonably assure his 

appearance. Through counsel, he argues that he does have substantial ties to the community, 

including his adult daughter and girlfriend of 22 years, and that he is a lifelong member of the 

community, even receiving recognition from the Mayor of Elkhart for his work with at-risk 

youths. The defense points out that Gadson has always returned from his travels, and even had 

return flights booked for his two December 2014 trips abroad. Additionally, the defense argues 

that Gadson could have fled the district on December 14, after being apprised of his arrest 

warrant; instead, Gadson voluntarily surrendered his passport on December 15 and selfsurrendered on December 16. Plus, there is no evidence that Gadson ever used an alternative 

means of identification for himself for the purpose of travel. Finally, Gadson has no physical or 

mental health issues, and no problems with drug or alcohol abuse. 

 Based on the evidence presented, the Court makes an initial determination under section 

3142(b) that releasing Gadson on personal recognizance or an unsecured bond would not 

adequately assure his appearance as required. Gadson likely faces a substantial sentence of 

incarceration if convicted (the government represents that an advisory guideline range of 156–

183 months is realistic, which includes a mandatory sentence of four years on the charges for 

aggravated identity theft). Gadson has shown an ability to quickly (and recently) access 

significant funds for himself, even if by way of credit, which could be utilized to abscond, and 
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has shown his adeptness at international travel and ability to book last minute flights to locations 

not only outside of this district, but outside of the country. The Court is most troubled by 

Gadson’s booking of a trip on December 14 to Nigeria, apparently after learning of his active 

arrest warrant on December 12—facts which Gadson still hasn’t denied. The fact that Gadson 

also booked a return flight means little, given the suspicious timing of his travel plans and the 

fact that there’s no way of knowing whether Gadson would have returned. And although Gadson 

surrendered his passport and then self-surrendered to authorities, the government proffers strong 

evidence of Gadson’s sophistication in using the identification means of others, including the use 

of social security numbers and another’s passport, to secure and personally withdraw 

unauthorized funds. And, there’s no reason to believe he wouldn’t do the same to assist his 

ability to flee even without his own passport. While Gadson does have substantial historical ties 

to this community and family members living here, the Court believes these ties are offset by the 

fact that he has no incentive to stay for employment or established assets, including equity in a 

residence. These factors convince the Court that personal recognizance or an unsecured bond 

would not reasonably assure Gadson’s continuing presence. 

Having found that release on personal recognizance or an unsecured bond is insufficient, 

the Court considers whether there is a condition or combination of conditions that would 

reasonably assure Gadson’s presence as required. Considering the factors under section 3142(g), 

the Court notes that the charged offenses do not concern a crime of violence, nor do they involve 

any minor victims, an act of terrorism, controlled substances, or firearms. The weight of the 

evidence against Gadson appears to be significant—the government proffers a strong case of 

direct evidence against Gadson involving the testimony of various victims of the charged 

offenses, a large paper trail of Gadson’s fraudulent transactions and attempted transactions 
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involving at least four million dollars, actual video recordings of Gadson’s personally making 

unauthorized transactions, and various recorded conversations between customer service 

representatives and Gadson (personally and by way of his IP address) involving Gadson’s 

attempt to secure online funds illegally. In addition, government’s exhibit 1 evidences that about 

two dozen financial institutions have reported that Gadson’s fortyish fraudulent transactions date 

back to July 2008 and continued through 2014, even after Gadson was interviewed by IRS agents 

in October 2013 about his suspected illegal activity. 

Gadson is 48 years old. He was born in Elkhart, Indiana, and has lived in Elkhart for his 

entire life, although he has no steady employment or equity in a home. He appears to be in good 

physical health and reports no history of any mental or emotional health issues. He lives with his 

girlfriend of 22 years and her son, and his adult daughter and his three siblings all live in this 

area. His last criminal conviction dates back to 2006, but he has a conviction for escape, which 

at a minimum means Gadson has previously failed to comply with a court order imposing release 

conditions. 

On the face of the pretrial services report, it appears Gadson’s income is limited, yet 

Gadson has a means to financial resources as evidenced by his ability to book two international 

flights and hire experienced and respected counsel all within a few days in December 2014. 

Further, Gadson’s business, Basic Funding, LLC, was the means by which his fraud was 

conducted. And given Gadson’s history and alleged ability to generate funds by using the 

personal identifiers of others, there is a strong suggestion that he has the financial ability and 

wherewithal to escape and secrete himself if released. The Court is not aware of any history of 

drug or alcohol abuse by Gadson, although he does have a conviction for dealing in cocaine from 
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1995. The Court believes that these factors weigh heavily in support of the conclusion that 

Gadson is a substantial risk of flight. 

Gadson has proposed that he is willing to be subject to any conditions that the Court 

would feel are appropriate to reasonably assure his appearance. Defense counsel has specifically 

suggested that Gadson could be released on home detention with electronic location monitoring, 

to reside at his residence in Elkhart. Aside from the fact that the home currently has no landline 

telephone, the Court does not believe that Gadson’s proposal would reasonably assure his 

appearance. The Court regards location monitoring as merely a deterrence to escape—and an 

insufficient one for Gadson given his strong risk of flight and resources/know-how to do so 

quickly, before his escape could be detected and Gadson located. After learning that federal 

authorities were looking to arrest Gadson in December 2014, he booked an international flight, 

despite not having taken other international flights in two and a half years. He may have recently 

turned in his passport, but as the government’s proffer strongly suggests, he has had no hesitancy 

in the past to repeatedly use other’s identities, including their social security numbers and 

passports, to obtain the means necessary to flee. Given that he allegedly continued to engage in 

financial fraud even after the IRS contacted him in 2013, it is questionable that Gadson is a man 

who is easily deterred from lawlessness, and given his prior violation of court ordered release (as 

well as the rest of the discussion contained herein), it does not appear he can be expected to be 

present in the courtroom when required to answer to these serious felony charges. As a result, 

the Court finds that there is currently no condition or combination of conditions that will 

reasonably assure Gadson’s appearance as required. 
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CONCLUSION 

For the reasons stated above, after a de novo review and based on the factors listed in 18 

U.S.C. § 3142(g), the Court finds by a preponderance of the evidence that no condition or 

combination of conditions will reasonably assure the presence of Gadson. Accordingly, the 

Court DENIES the request to revoke detention [DE 15]. Based on the current record, Gadson 

shall remain detained pending trial. 

 SO ORDERED. 

ENTERED: January 12, 2015 

 /s/ JON E. DEGUILIO 

 Judge 

 United States District Court