U.S. 1089 (2002); United States v. Fitzgerald, 232 F.3d 315, 319

(2d Cir. 2000).
The investment fraud that Loutos participated in is
relevant conduct for the bank fraud. Cf. Brierton, 165 F.3d at

1137; United States v. Polichemi, 201 F.3d 858, 866 (7th Cir.

2000), cert. denied, 531 U.S. 993, 1168 (2000, 2001). Therefore
the losses related to the investment fraud are considered in
determining the loss amount for Loutos's offense level. Loutos
is responsible for more than $10,000,000 in losses to investors.
Alternatively, even if the investment fraud did not
constitute relevant conduct, it would be found that the bank
fraud was a cause of the loss to investors. Guideline 2F1.1 did
not contain a definition of causation. The Guideline that would
currently be applicable to bank fraud defines loss as follows:
(i) Actual Loss.-~-"Actual loss" means the

reasonably foreseeable pecuniary harm that

resulted from the offense.
eke

(iv) Reasonably Foreseeable Pecuniary
Harm.--~For purposes of this guideline,
"reasonably foreseeable pecuniary harm" means
pecuniary harm that the defendant knew or, under
the circumstances, reasonably should have known,
was a potential result of the offense.

U.S.S.G. § 2B1.1 comment. (n.2(A) (i), (iv)) (2002).

Although this language was not in § 2F1.1 during the
relevant time, § 2F1.1 contained other references to a reasonable
foreseeability standard. ee U.S.S.G. § 2F1.1 comment.,

(nn.7(c), 10(a), 10(c)). See also id. § 1B1.3(a)(1)(B). Case

- 19 -


time, Peitz had shown a total inability to complete any of the
funding projects on which he had worked with Benson. Loutos was
aware that Pietz had taken money from Jery Sedy, Suresh Thadhani,
Richard Marcus, and defendant Paladino's father without ever
obtaining project funding and that he had failed to fund the
Westmar University project. Loutos provided false
representations in aid of the scheme to defraud. Loutos's
contention that it was simply an error of judgment or a stupid
act to provide the letter as drafted and requested by Peitz is
inconsistent with Loutos being an experienced attorney and is not
persuasive in light of his other acts in aid of the investment
fraud scheme.

Early in August 1996, Loutos learned that the FBI and SEC
were investigating transactions in which Benson and Peitz were
involved. Loutos telephoned Joanne Fried in New York and told
her not to speak to the FBI and told the FBI he was representing
her. Fried testified that Loutos was not her attorney. Any
legal work he had previously done for Fried regarded terminating
a lease for an unrelated business and apparently was done at the
request of Peitz without Fried's knowledge that Loutos was
representing her. Contacting Fried and talking to the FBI was
not conduct of a person unaware that any wrongdoing may have been
occurring.

After learning of the investigations, Loutos sent Peitz

an August 8 letter stating that he would no longer be


otherwise applying the 1995 Guidelines Manual. See U.S.S.G.

§ 3E1.1(b) (April 30, 2003); Prosecutorial Remedies and Tools

Against the Exploitation of Children Today Act of 2003 (PROTECT

Act), Pub. L. No. 108-21 § 401(g) (2), 117 Stat. 650, 671-72.
The investment fraud has been found to be relevant

conduct. Therefore, applying U.S.S.G. § 2F1l.1 (1995), Loutos's

Total Offense Level is calculated as follows:

2F1.i(a) Base offense level

2F1.1(b) (1) (P) over $10,000,000

2F1.1(b) (2) more than minimal planning/one victim

2F1.1(b) (5) use of foreign accounts®

2F1.1(b) (6) (B) more than $1,000,000 in personal receipts
affecting financial institution’

3B1.1 aggravating role (leader/supervisor)

3B1.2 (b) mitigating role (minor participant)®

3B1.3 abusing position of private trust (lawyer)®

3C1.1 obstruction of justice

3E1.1 acceptance of responsibility

Total Offense Level

A Total Offense Level of 21 and a Criminal History
Category of I provides for a sentencing range of 37 to 46
months. The fine range if $7,500 to $1,000,000. ee U.S.S.G.

S$ 5E1.2(C) (2)-(4); 18 U.S.C. § 1014. These guideline ranges

°This adjustment is inapplicable when the offense level
is otherwise 12 or above.

"Loutos personally received less than $1,000,000.
®*See Loutos I, 2003 WL 168627 at *9.

‘See id.

~ 23 -

be

NONNGOD ONUD

i)
rag


range. In the meantime, Loutos had moved to withdraw his plea of

guilty, but that motion was denied. See Loutos II, supra. The

probation officer thereafter issued a supplemental PSR. She
again applied current Guideline 2B1.1 and found a sentencing
range of zero to six months, though this time based on a total
offense level of 6 instead of 4. The probation officer no
longer recommended a two-level reduction for acceptance of
responsibility based on Loutos asserting legal innocence as one
ground for withdrawing his guilty plea.

The court then provided the parties with the opportunity
to present whatever additional evidence that they desired to
present for purposes of sentencing. The parties submitted a
limited written stipulation. Loutos was provided the opportunity
to call witnesses, but instead chose to submit certain
depositions (of himself‘ and others) that were taken in related
civil proceedings, transcripts of certain recorded telephone
conversations, and some documentary evidence.* The government

presented the testimony of its case agent, a United States Postal

‘Two depositions of Loutos have been provided. One is a
deposition of Loutos in a proceeding initiated by the SEC against
Lennox, taken on May 24 and 25, 1999 (the "SEC Deposition"). The
second is a February 21, 2001 deposition taken in a proceeding
initiated by the SEC receiver (the "Quilling Deposition").

5SLoutos represented at the June 11, 2003 hearing that he
would provide a purported Defendant's Exhibit 8, his legal file
relating to Joanne Fried. That exhibit was never found and
defendant instead provided two documents from the file of the
opposing counsel in that case.


law has applied such a standard. See, e.g., United States v.

Sarno, 73 F.3d 1470, 1501 (9th Cir. 1995), cert. denied, 518 U.S.

1020, 519 U.S. 859 (1996). Also, it is not necessary that a
defendant be a direct or even proximate cause of the loss; it is
sufficient that the defendant's conduct was a factual
prerequisite for the loss. United States v. Morris, 80 F.3d
1151, 1171-74 (7th Cir.), cert. denied, 519 U.S. 868 (1996);

United States v. Ware, 282 F.3d 902, 907 (6th Cir. 2002).

Opening the Lennox Account was a prerequisite to completing the
Lennox portion of the investment fraud and the losses that
thereafter occurred were reasonably foreseeable. If the
investment fraud did not constitute relevant conduct, the
$11,000,000 in investor losses would still be found to have been
caused by Loutos's bank fraud.

Because the investor fraud losses are being taken into
consideration in determining defendant's sentencing range, it is
unnecessary to consider an upward departure which would otherwise
be appropriate because the false statements made for purposes of
opening the bank account in violation of § 1014 were also made to
facilitate the investment fraud that violated the wire fraud
statute. See U.S.S.G. § 2F1.1 comment. (n.10(b)). See also
U.S.8.G. §§ 5K2.9; 2B1.1 comment. (n.15(A) (iv)) (2002).

An issue exists as to whether or not Loutos should be

entitled to any reduction for acceptance of responsibility. See

- 20 -


go no lower than 33 months with a three-level reduction for
acceptance of responsibility (20 total offense level) and as high
as 57 months with no acceptance of responsibility (23 total
offense level). Given the circumstances of this case, it is
understandable that Loutos would argue that the investment fraud
should not be considered and that he did not engage in such
conduct. However, he has not provided current testimony in which
he denies such involvement. It is also understandable that
Loutos would attempt to withdraw his plea upon recognizing that
the court may have a different view of the appropriate sentencing
range than the preliminary calculation contained in the Plea
Agreement. While the issue is close, the court finds that, under
the special circumstance of defendant's plea resulting in a
substantially greater sentencing range than originally
anticipated by the parties, Loutos has made a sufficient showing
of acceptance of responsibility and it is appropriate to apply a
two-level reduction under § 3E1.1(a). The additional one-level
reduction under § 3E1.1(b) is inapplicable because Loutos did not
provide complete information that assisted the government in its
investigation and he did not plead guilty sufficiently in advance
of the trial date to avoid preparation for trial.

Since the one-additional one-level reduction is otherwise
found to be inapplicable, it is unnecessary to determine whether
a recent procedural amendment to § 3E1.1(b) requiring a motion by

the government would be applicable to this case which is

-~- 22 -


that occurred during the commission of the

offense of conviction, in preparation for that

offense, or in the course of attempting to avoid

detection or responsibility for that offense;

(2) solely with respect to offenses of a

character for which § 3D1.2(d) would require

grouping of multiple counts, all acts and

omissions described in subdivisions (1) (A) and

(1) (B) above that were part of the same course of

conduct or common scheme or plan as the offense

ef conviction;

U.S.S.G. § 1B1.3(a) (1)-(2).

There is no dispute that the bank fraud and investment
fraud would be grouped together under § 3D1.2(d). It is also
clear that the bank fraud was part of the same common scheme as
the investment fraud. There was one common scheme to defraud
investors. Both the false statements in opening the Lennox
account and the acts of wire fraud were part of that common
scheme. In order for both to be part of a common scheme, they
must be substantially connected by at least one common factor.
U.S.S.G. § 1B1.3, comment. (n.9(A)). Here, there are common
accomplices and, with the bank account viewed as part of the acts
needed to deceive the investors and obtain funds, common victims
and a common purpose. The bank fraud and investment fraud are
part of a common scheme. Therefore, under § 1B1.3(a) (2), the
investment fraud constitutes relevant conduct.

It is argued that the "during the commission of the

offense" limitation of § 1B1.3(a) (1) also limits § 1B1.3(a) (2)

and therefore the investment fraud cannot be relevant conduct

-i7-


Loutos repeatedly denies any significant knowledge of the
practices and business dealings in which his client, Benson, was
engaged. He also denies knowledge as to the practices and
business dealings of Peitz, whom Loutos sometimes characterized
as being his client for a period of time. Loutos contends he was
unaware that any of the deposits in the Lennox Account were from
investors. He contends he was unaware of who actually owned
Lennox and in what type of business it was engaged. Loutos
testified that he did not inquire about the conduct or dealings
of Benson and Peitz. He even testified that, when negotiating
settlements of judgments taken against Benson and Peitz for money
taken as advance fees in failed funding projects, he never
learned of the disputes that were being settled. Based on the
evidence before the court as herein related, Loutos's testimony
professing virtual ignorance of Benson's and Peitz's business
conduct, transactions, and fraud is not credible. Even if
Loutos's protestations of lack of knowledge were to be accepted,
at best, they would show that he intentionally tried to remain
ignorant of the crimes he was aiding, which would not relieve him
of criminal liability. See United States v. Wallace, 212 F.3d
1000, 1004-05 (7th Cir. 2000).

Loutos has been a practicing attorney since 1964. His
practice has been exclusively civil and he is an experienced
attorney. He has generally been a partner in a small law firm or

a sole practitioner. Financial information included in the PSR


well as by repaying earlier, disgruntled

investors with funds from new investors.
Indictment 1 3.

All six defendants were charged with eight substantive
counts of wire fraud in violation of 18 U.S.C. §§ 1343 and 2.
The alleged wire communications underlying these counts occurred
from October 10, 1996 through May 22, 1997. Defendants Peitz,
Benson, Loutos, and Paladino were also charged with a money
laundering conspiracy in violation of 18 U.S.C. § 1956(h) under
which they agreed to (1) conduct financial transactions involving
the proceeds of the wire fraud scheme in order to promote the
scheme in violation of 18 U.S.C. § 1956(a) (1) (A) (i); (2) engage
in wire fraud violations that were designed to conceal the source
and ownership of unlawful proceeds in violation of 18 U.S.C.
§ 1956(a) (1) (B) (i); and (3) engage in monetary transactions in
criminally derived property with a value greater than $10,000 in
violation of 18 U.S.C. § 1957(a). The conspiracy allegedly began
no later than October 1994 and continued until at least June
1998. The four alleged conspirators were also charged with five
substantive counts of violating 18 U.S.C. §§ 1957 and 2 and two
substantive counts of violating 18 U.S.C. §§ 1956(a) (1) (B) (4)
and 2.

In pleading guilty to the bank fraud charge, Loutos
admitted that, in June 1996, he aided Benson in opening a bank
account for Lennox Investment Group Ltd. (the "Lennox Account")

at First of America Bank and making false representations as to


Inspector, who testified as to investigatory interviews of two
persons. The government aiso submitted documents.

As was previously held, "[f]lindings for purposes of
sentencing may be based on any reliable evidence, including
hearsay or other evidence that would not ordinarily be admissible
at trial." Loutos I, 2003 WL 168627 at *3. As the parties have
been informed and are aware, this includes evidence that was
before the court in the trial of the codefendants between
November 4 and December 9, 2002. Id. Facts to be found for
purposes of sentencing must be found by a preponderance of the
evidence. Id.

The original indictment in this case alleged:

defendants FRANK PEITZ, DANIEL BENSON, PETER
LOUTOS, ROBERT PALADINO, RANDALL LAW, MONICA ILES
and others, through FLP Capital, Active
International[{, Inc.] and Lennox [Investment
Group, Ltd.], sought to and did obtain and retain
funds from prospective investors and investors by
offering and selling investments purportedly in
the international trading of bank financial
instruments. In offering and selling these
investments, the defendants made and caused to be
made material misrepresentations and omissions
about, among other things: the risk involved

in the investment; the expected return on

the investment; the use of money raised from
investors; and the previous investment experience
and the criminal and regulatory background of
those offering and selling the investment. As a
part of the scheme, the defendants raised over
$11,000,000 from at least 30 investors and then
misappropriated almost all of the funds for their
own benefit. In order to retain the use of
investors' funds and obtain additional funds from
new investors and to conceal various parts of

the scheme from victim investors and others,
defendants continued to lull investors through a
series of misrepresentations and omissions about
the nature and status of their investments as


because it did not occur as part of or during the bank fraud.
However, the case law is to the contrary. Relevant conduct can
occur "before, during and after the offense" of conviction.

United States v. Matthews, 116 F.3d 305, 307-08 (7th Cir. 1997).

See also United States v. Bjorkman, 270 F.3d 482, 496-97 (7th

Cir. 2001), cert. denied, 535 U.S. 1095 (2002) (favorably citing
cases that base relevant conduct on offenses that occurred after
the offense of conviction). The relevant conduct may be part of
the same course of conduct by being part of an “ongoing series of
offenses." U.S.S.G. § 1B1.3 comment. (n.9(B)); Matthews, 116
F.3d at 307. The Seventh Circuit has expressly held that

§ 1B1.3(a) (1) does not limit § 1B1.3(a) (2) in the manner
suggested by the government.

Under the provisions that relate to money
laundering, relevant conduct includes all acts or
omissions, including jointly undertaken criminal
endeavors, "that were part of the same course of
conduct or common scheme or plan as the offense
of conviction." U.S.S.G. § 1B1.3(a) (2).

(Olson is incorrect when he asserts that

§ 1B1.3(a) (1) (B) governs here, under which we

would restrict our consideration to activities

that occurred "during the commission of the

offense of conviction," or in preparation for

that offense or to avoid detection or

responsibility for that offense.)
United States v. Polichemi, 219 F.3d 698, 713 (7th Cir. 2000),
cert. denied, 531 U.S. 993, 1168 (2000, 2001). See also United
States v. Schaefer, 291 F.3d 932, 939 n.5 (7th Cir. 2002); United
States v. Brierton, 165 F.3d 1133, 1137 (7th Cir. 1999); United

States v. Boone, 279 F.3d 163, 178 (3d Cir.), cert. denied, 535

- 18 -


Account that is the subject of Loutos's bank fraud charge. Also,
more than $1,000,000 in investor funds were transferred to the
trust account of Loutos's law firm. Although in fact a demand
checking account, the Lennox Account was titled as being an
escrow account. lLoutos was aware that an escrow title was placed
on the account and was also aware no escrow agreement was set up
nor were any other formalities of an escrow account ever
established. Special deposit confirmation statements addressed
to Randall Law, Peter Loutos, Loutos & Leventis, Ltd., at the
address of the Loutos law firm and referring to an "escrow
account," were requested by Benson and issued by the bank. The
confirmations were sent to Loutos with a copy to Daniel Benson.
Copies of the deposit confirmations were made and sent to the
investors whose monies were wired and deposited in the account.
The confirmation statements were intended to give investors the
false impression that their money was protected in an escrow
account and an attorney exercised some control over the account.
Use of this account was a significant aspect of the investment
fraud scheme. Having funds pass through the law firm trust
account also gave some of the transactions an additional
appearance of legitimacy.

Loutos does not dispute the facts set forth in the
preceding paragraph. He contends, however, that his
participation was completely innocent and that he was totally
unaware of the investment fraud in which the others participated.

Throughout his deposition testimony that has been provided,


will be employed when Loutos is sentenced on July 23, 2003 at
11:30 a.m.

For purposes of restitution, any loss must be caused
directly by the bank fraud to which Loutos pleaded guilty. See
United States v. Behrman, 235 F.3d 1049, 1052-53 (7th Cir. 2000).
In accordance with 7 17 of the Plea Agreement, it is found that
Loutos is not responsible for any restitution.

IT IS THEREFORE ORDERED that it is found that defendant
Peter Loutos's sentencing guideline range is 37 to 46 months.

Defendant Loutos will be sentenced on July 23, 2003 at 11:30 a.m.
ENTER:

Witharver T.

UNITED STATES DISTRICT JUDGE

DATED: guLy ~~ , 2003

- 24 -


Mire Order Form (06497)

United States District Court, Northern District of Illinois

Name of Assigned Jud; SITTING JUDGE IF
aor Magistrate Suage WILLIAM T. HART OTHER THAN
ASSIGNED JUDGE
CASE NUMBER 01 CR 852 -3 DATE JULY 2, 2003
CASE UNITED STATES OF AMERICA vy. PETER A. LOUTOS
TITLE

[In the following box (a) indicate the party filing the motion, e.g., plaintiff, defendant, 3rd party plaintiff, and (b) state briefly the nature
MOTION: of the motion being presented.]

DOCKET ENTRY:

(0) Oo Filed motion of [ use listing in “Motion” box above.]

Q) im Brief in support of motion due

(3) o Answer brief to motion due___. Reply to answer brief due___.

4 oO Ruling/Hearingon___set for___at

(5) a Status hearing[held/continued to] [set for/re-set for]on___——ssetfor_ at.
(6) Oo Pretrial conference[held/continued to] [set for/re-set for] on__——setfor___—_att

(©) oO Trial{set for/re-set for]on at

(8) ia [Bench/Jury trial] [Hearing] held/continued to —_at

(9) oO This case is dismissed [with/without] prejudice and without costs[by/agreement/pursuant to]

COFRCP4(m) OlLocal Rule 41.1 COFRCP4I(a\(1) OOFRCP41(a)(2).

ao) mf [Other docket entry] Defendant Peter Loutos's sentencing guideline range is 37 to 46
months. Defendant Loutos will be sentenced on July 23, 2003 at 11:30 a.m.

\

(11) @ [For further detail see attached Memorandum Opinion and Order.]

No notices required, advised in open court.

No notices required. .
number of notices

iL 93 2003

date

lotices mailed by judge's staff.

r
Notified counsel by telephone. J

Docketing to mail notices.

Mail AO 450 form. Leno

Copy to judge/magistrate judge.

courtroom fach Hq é-
ow deputy’s
initials awa ty
bitehtimé récbived it~
central Clerk’s Office mailing initials



Loutos was aware that account was still open in June 1996.
Nevertheless, Loutos contends he did not question assisting
Benson in opening the Lennox Account under false pretenses and
that he made no inquiries when millions of dollars began being
deposited into the account. Loutos's position is that he
remained totally ignorant of the sources and uses of the funds.

As initially established and for a few months thereafter,
Loutos had signatory powers for the Lennox Account. Even after
he was removed as a signatory for the account, the confirmation
statements continued to be sent to Loutos's law office. The fact
that Benson and Peitz were willing to give Loutos control over
and access to the Lennox Account through which $11,000,000 in
unlawful proceeds was passed is evidence from which it can be
inferred that Loutos was not an ignorant participant.

On July 2, 1996, the bank forwarded to Loutos the July 2,
1996 letter of Harold Miller, an attorney for Lennox investors,
in which Miller stated that $600,000 being wire deposited in the
Lennox Account was to be held in escrow. Even if he did not know
already of an investor program, that letter would have given
Loutos notice that funds being deposited into the Lennox Account
were not limited to earnings or commissions of Benson. Gov. Exh.
68 is a one page letter and attachment from a Lennox investment
agreement stating that investment funds would be held in the
"escrow account." The exhibit shows that both pages were "faxed"

to Loutos on July 2. The exhibit clearly discloses the existence

-i1l-


indicates he lives comfortably, but not that he is particularly
wealthy. There is no evidence that Loutos participated directly
in receiving a share of the unlawful proceeds, although over
$1,000,000 of investor money passed through his attorney trust
account. There is also evidence that Benson provided, from
investor money, a $150,000 loan for Loutos's nephew that was
repaid. Loutos personally borrowed $35,000 from Benson which
came from investor money and which Loutos then lent to his son.
The $35,000 loan was repaid to the receiver only after the SEC
initiated an investigation.

The parties have stipulated that Loutos received $200,000
for legal work he did for Benson and Peitz over a period of two
years or less. That would represent a substantial portion of
Loutos's income during that time period. At $150 per hour, that
represents 1,333 hours of work. Even if some of the charges were
for expenses so that the actual hours were less, it represents a
substantial portion of Loutos's work during that time period.

Loutos testified that he was aware that, prior to June
1996, Benson had no car or place to live and was getting by on
money borrowed from Paladino. SEC Dep. at 274-83. During the
preceding 18 months, none of the deals in which Loutos had
represented Benson actually closed and Loutos was aware of no
other source of income for Benson. Loutos was also aware that,
shortly after they first met, Benson had set up another account

at the same bank on which Loutos had also had signatory power and

- 10-


Benson's sole ownership of Lennox, a corporation, in order to
influence the bank to open the account with Benson and Loutos as
signatories on the account. Benson, however, was not ever an
owner, or officer, of Lennox.

Because he did not plead guilty until just before the
trial of the codefendants began, Loutos had access to all the
pretrial discovery that was provided to the other defendants. He
has also had the opportunity to read the transcript of the
codefendants' trial. Following a jury trial, the codefendants
were found guilty as to all counts except for one count
(Count 13) of violating § 1957. In sentencing each of the
codefendants, the loss amount under U.S.S.G. § 2F1.1(b) (1) (1997)
and, for whom applicable, U.S.S.G. § 2S1.1(b) (2) (1997), was

found to be over $10,000,000. See United States v. Peitz, 2003

WL 1964241 (N.D. Ill. April 25, 2003). The total offense levels
and sentencing ranges for each codefendant were determined to be
as follows: Peitz: 35/168-210 months; Benson: 34/151-188
months; Paladino: 27/70-87 months; Law: 27/78-97 months; and
Iles: 27/78-97 months. Id. Each codefendant was sentenced to
the following number of months of incarceration: Peitz: 188;
Benson: 188; Paladino: 72; Law: 84; and Iles: 78. Each was
also ordered to pay in excess of $11,000,000 in restitution.
Based on the evidence presented at the trial of the
codefendants, it is found that the scheme to defraud charged
in the indictment occurred and that it involved more than

$11,000,000 of investor funds funneled through the Lennox


U.S.S.G. § 3E1.1. As to the two-level reduction under
§ 3E1.1(a), the Commentary provides:

1. In determining whether a defendant
qualifies under subsection (a), appropriate
considerations include, but are not limited to,
the following:

(a) truthfully admitting the conduct
comprising the offense(s) of conviction,
and truthfully admitting or not falsely denying
any additional relevant conduct for which the
defendant is accountable under § 1B1.3 (Relevant
Conduct). Note that a defendant is not required
to volunteer, or affirmatively admit, relevant
conduct beyond the offense of conviction in
order to obtain a reduction under subsection
(a). A defendant may remain silent in respect
to relevant conduct beyond the offense of
conviction without affecting his ability to
ebtain a reduction under this subsection.
However, a defendant who falsely denies, or
frivolously contests, relevant conduct that the
court determines to be true has acted in a manner
inconsistent with acceptance of responsibility;

U.S.S.G. § 3E1.1 comment. (n.1l(a)).

Here, Loutos has argued that he did not commit the
investment fraud that has been found to be relevant conduct.
However, the present case involves an unusual circumstance.
Loutos entered into a Plea Agreement which contained a
preliminary Guideline calculation which assumed that the
investment fraud did not constitute relevant conduct. Loutos
continues to contend that the investment fraud does not
constitute relevant conduct. Under this view, the investment
fraud would not be considered. Moreover, Loutos was expecting a

sentencing range of zero to six months. Instead, the range can

-~21-


WL 168627 at *4-5. It was also made clear that additional facts
would have to be considered before a determination was made as to
the appropriate sentencing range. See id. at *3-10. Most
importantly, it would be determined whether Loutos participated
in the investment fraud charged in the original indictment and,
if so, whether the investment fraud was relevant conduct or
should otherwise be considered in sentencing Loutos on the bank
fraud charge. It was recognized that Loutos was entitled to an
opportunity to be heard as to the additional facts and issues and
would be provided with such an opportunity. See id. at *2-3.
Additionally, Loutos I, submissions of the government and
probation officer, and statements in court have provided Loutos
with sufficient notice of the additional facts and issues that
were to be considered in determining an appropriate sentencing
range and sentence.

In accordance with Loutos I, the government provided a
supplemental version of the offense. Thereafter, the parties
each filed a sentencing memorandum addressing the issues raised
by Loutos I and the supplemental version of the offense. The
government took the position that evidence would prove that
Loutos participated in the investment fraud and money laundering,
but that it was not relevant conduct and therefore did not affect
his total offense levei. Loutos contended the evidence would not
show he participated in the investment fraud. Alternatively, he
contended the investment fraud would not constitute relevant

conduct or otherwise affect his total offense level or sentencing


representing Peitz or his corporation. Loutos, however,
continued to represent Benson.

In April 1997, the bank having the Lennox Account froze
that account and Benson's FLP account to which Lennox investor
funds had been transferred and initiated an interpleader action.
An investor group was seeking access to funds that had been
deposited in the Lennox Account. Loutos represented Benson and
one of Benson's companies in this action. There was an express
allegation in the interpleader action that funds from investors
were deposited. Also, Loutos's participation in the lawsuit
provided him with additional information about sources of funds.
Loutos further aided the investment fraud scheme by making false
representations in order to induce the complaining investors to
settle for substantially less than their investment. Loutos told
Harold Miller, the attorney representing investors of $600,000,
that money in the FLP account belonged to Benson and that Randall
Law stole the money that had been in the Lennox Account. Miller
settled for $100,000. lLoutos assisted Benson in obtaining
$300,000 of investor funds that were in the FLP account at the
time.

The evidence shows that all of the investor funds in the
Lennox Account were taken by Benson, Peitz, and Paladino. Some
of it was put in the FLP account. None of that money belonged to

Benson.


diverted to his codefendants' personal use. It is found that
Loutos aided and abetted the investment fraud and that he was a
knowing participant. For the reasons stated below, it is held
that the investment fraud is relevant conduct for the bank fraud
to which defendant pleaded guilty.

Although Benson was not an owner of Lennox, Loutos
committed the bank fraud by aiding and abetting false statements
to that effect so that Benson could open an “escrowTM account in
Lennox's name. That account was then used to funnel more than
$11,000,000 in unlawful proceeds from the investment fraud and
also aided that fraud by providing an appearance that the money
was safe because in an escrow account over which an attorney had
some control. It is contended that the investment fraud is not
relevant conduct for the bank fraud. Since the bank fraud was
completed in June 1996, the 1995 Guidelines Manual will be used.
See Loutos I, 2003 WL 168627 at *8. Unless indicated otherwise,
that is the version of the Guidelines Manual that is cited below.

The relevant conduct guideline provides in part:

(1) (A) all acts and omissions committed, aided,

abetted, counseled, commanded, induced,
procured, or willfully caused by the
defendant; and

(B) in the case of a jointly undertaken
criminal activity (a criminal plan, scheme,
endeavor, or enterprise undertaken by the
defendant in concert with others, whether or
not charged as a conspiracy), all reasonably
foreseeable acts and omissions of others in

furtherance of the jointly undertaken
criminal activity,

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criminal history category of I for a sentencing range of zero to
six months. At the time of the plea colloquy, the court accepted
Loutos's plea of guilty, but deferred ruling on acceptance of the
Plea Agreement until after consideration of the Presentence
Report ("PSR"), which was also expected to be after the trial

of the codefendants had been completed. ee Fed. R. Crim. P.

il(e) (2) (2001); U.S.S.G. § 6B1.1(c); United States v. Loutos,

2003 WL 1845308 *3-6 (N.D. Ill. April 4, 2003) ("Loutos Ti").

The initial PSR that was submitted to the court by the
probation officer also concluded that the applicable sentencing
range was zero to six months. Unlike the calculations contained
in the Plea Agreement, the probation officer applied § 2B1.1 of
the 2002 Guidelines Manual. A minute order was thereafter issued
directing that the parties address certain issues pertaining to
sentencing. Thereafter, having heard the evidence that was
presented at the trial of Loutos's codefendants and having
considered the initial PSR, the parties' supplemental
submissions, and possible Guidelines applications, on January 23,
2003, the court accepted Loutos's Plea Agreement. See United
States v. Loutos, 2003 WL 168627 (N.D. Ill. Jan. 24, 2003)
("Loutos I"). See also Loutos IIT, 2003 WL 1845308 at *5-6 & n.9.
The question of the appropriate sentencing range, however, was
left open to be determined in further proceedings.

In Loutos I, the court made clear that it was not bound
by the preliminary Guidelines calculations contained in the Plea

Agreement nor the stipulations contained therein. Loutos I, 2003


IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

UNITED STATES OF AMERICA,

)
Plaintiff,
v. No. 01 CR 852-3
PETER A. LOUTOS, SR., leer
Defendant. ) 4UL 3 200,

MEMORANDUM OPINION AND ORDER

In 2001, an indictment was returned charging defendant
Peter Loutos and five codefendants with one count of a money
laundering conspiracy, eight substantive counts of wire fraud,*
and seven substantive counts of money laundering. Loutos was
named in all 16 counts. On October 30, 2002, however, Loutos
pleaded guilty to one count of a superseding indictment charging
him with making a false statement on an application for the
purpose of influencing a federally insured bank in violation of
18 U.S.C. §§ 1014 and 2.? The preliminary Sentencing Guideline
calculation contained in the Plea Agreement applied U.S.S.G.

§ 2F1.13 and determined a total offense level of four and a

‘The wire fraud scheme will be referred to as “investment
fraud."

?This charge and conduct will be referred to as “bank
fraud."

3Guideline 2F1.1 is not contained in the 2001 or 2002
Guidelines Manual. The Plea Agreement does not specify which ¢
year's Guidelines Manual was relied upon.


of investors and investor money even though Miller was induced by
Iles to withdraw his July 2 letter by virtue of another provision
in the investor agreements prohibiting investors from contacting
the bank for any reason under pain of penalty. The fact that
Miller withdrew the letter does not eliminate the fact that
Loutos had to know no later than July 2, 1996 that investor money
was coming into the Lennox account.

In late July 1996, Pietz directed Loutos to withdraw
$250,000 from the Lennox account and wire it to C. Hoare & Co.,
which he did. That money was part of the investor funds obtained
by the investor fraud and laundered by transfers. It is not
reasonable to assume that Loutos would transfer such a sum out of
a Lennox Account controlled by Benson at the direction of Pietz
without knowing that Benson and Pietz were both obtaining and
distributing investor money.

On August 2, 1996, Loutos wrote a letter to Randall W.
Law, President, CitiCapital Corporation on Loutos's letterhead
which states:

This letter is to confirm that my client, Mr.

Frank L. Peitz of Active International, Inc., has

the ability to provide a Safe-Keeping Receipt on

a One-year Bank Guarantee Instrument (text

attached) with a face value of One Hundred and

Eight Percent (108%) of your company's investment

amount, provided the investment amount is for a

minimum sum of Ten Million United States Dollars

($10,000,000.00 US).

Loutos concedes that he had no basis for the representations

contained in the letter. To the contrary, up to that point in

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Questions as to Loutos's credibility are also raised by
discrepancies between his SEC Deposition testimony and his
Quilling Deposition testimony, as well as a statement to the
postal inspector. In an August 16, 2001 interview, Loutos
attempted to portray his innocent involvement by stating that he
was unaware there were investor funds in the Lennox Account until
the SEC filed suit in 1998. However, this is clearly
contradicted by the fact that the interpleader complaint had
contrary allegations in 1997 and the knowledge Loutos otherwise
learned during the pendency of that action. Additionally,
Miller's July 1996 letter would have put Loutos on notice as
well. In May 1999, Loutos testified Benson said nothing about
the sources of the monies to be deposited into the Lennox
Account. SEC Dep. at 72-73. In February 2001, he testified that
Benson told him the funds were earnings and commissions he had
earned or funds provided to him by Peitz. Quilling Dep. at 26-
31. In 1999, Loutos testified as to ignorance of the Lennox
Account being set up and titled as an escrow account, SEC Dep. at
81-82, but in 2001 he recalled Benson requesting it be called an
escrow so he could use it for mortgages, Quilling Dep. at 104-05.
Loutos did not remain consistent when proclaiming ignorance.

On the evidence before the court, it is found by a
preponderance of the evidence that Loutos was aware that investor
funds were deposited into the Lennox Account, that they were

obtained based on false representations, and that they were being

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