Source: https://www.scribd.com/document/108350169/US-v-Mehrdad-Yasrebi-Transcript-of-sentencing-hearing
Timestamp: 2017-12-18 07:33:14
Document Index: 114231196

Matched Legal Cases: ['§ 371', '§ 2', '§ 1702', '§ 3553', '§ 3553', '§ 2', '§ 3553']

US v. Mehrdad Yasrebi: Transcript of sentencing hearing | United States Federal Sentencing Guidelines | Charitable Organization
9 Proceedings - 3/6/12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 THE COURT: Are you ready to make your argument, then? MR. GORDER: Yes, we are. THE COURT: Okay. Let me ask the defense, would you prefer to put on testimony before argument, or do you wish to hear the Government's argument before you put on your testimony and argue, to the extent you're going to argue? MR. ANGELI: Your Honor, we're not going to be putting on testimony. Dr. Yasrebi does want to allocute at the end of the proceedings, but there won't be any testimony. We'll be proceeding directly to argument, too. I've heard what the Court has said on those issues. It is my intent, Your Honor, because I do believe it's an absolutely critical issue for what you have to decide today, to address this question of legality in a little bit more detail. I hope -- I understand where the Court is inclined to go. THE COURT: I'm prepared to listen to it. If you feel it's important to address, I'll listen to it. MR. ANGELI: If Your Honor would like, I can spend some time discussing that right now before we get into talking about what the evidence is in the case. THE COURT: Well, I usually let the Government
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10 Proceedings - 3/6/12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 wish. MR. ANGELI: Your Honor, we do have a PowerPoint presentation. There are two, and I'll direct Your Honor's attention as appropriate to that. THE COURT: Okay. I have it here. MR. ANGELI: Judge, I think this issue of the legality in the underlying transfers is important for a number of reasons in this case. Obviously, as Your Honor has pointed out, it goes to the guidelines issue, which, of course, is the core part of what Your Honor is going to be deciding today, albeit not a dispositive part. In our view, 2C1.1 applies here, and I think the Government has come around to the point where they've even agreed 2C1.1 is the starting point. If you stay in 2C1.1, then you've got a guideline range of six to 12 months. I think it's important here, Your Honor, to recognize Dr. Yasrebi did not plead guilty to a violation of the OFAC regulations. He's pled guilty argue first, unless the parties -- I don't care. What do you think, Mr. Gorder? MR. GORDER: Well, Your Honor, I was going to start off talking about the issue involving the embargo. In light of the Court's preliminary ruling, I'll probably reserve and wait until Mr. Angeli talks about it. THE COURT: Mr. Angeli, you can argue if you
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11 Proceedings - 3/6/12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 to a conspiracy under 18 U.S.C. § 371, which is what is covered by § 2C1.1. And, critically, the cross-references apply. And this is really the issue today, at least in this part of the presentation. The cross-references that the Government applies to get to the higher guideline range apply only if there is some other crime, some other criminal activity that was either facilitated or covered up by the conspiracy. So that question of whether there's an underlying crime is critical to the issue of the guidelines. It's also important, Your Honor, because, as you know, Dr. Yasrebi is a permanent resident in the United States, but he's not a citizen. And what happens here today in this courtroom may very well have important immigration consequences for him. And if Your Honor were to make a finding that he violated a regulation that implicates national security, that could potentially have devastating consequences to him from an immigration perspective, as well. And, finally, Your Honor, I think this issue of the legality of the underlying transactions just affects the overall feel of this case. In our view, Dr. Yasrebi is a man who tried his best for a period of ten years to guide this charity in a way
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12 Proceedings - 3/6/12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 that he thought was legal. He wasn't perfect, but he did his best. In late 2006 and early 2007 there's an aberrational period of conduct, and that's what he pled guilty to. The Government's view is that there was a decade-long period of illegality here that was capped off in late 2006 and early 2007. I think, Your Honor, that that question of the legality of the underlying transfers just changes the feel of the case. Those are two very different world views about what happened here. So I think digging into this question is important. There is, Your Honor, a very specific way and logical way to go about answering this question of legality. And as the slide shows here, Judge, the very first question that somebody needs to ask: The ITRs do not prohibit all transactions between the United States and Iran. So the first question you have to ask, Judge, is, "Are these transactions covered by the regulations at all? Are they presumptively prohibited?" If the answer to that question is no, that the regulations don't cover the transactions, that's the end of the analysis. We don't have to talk about whether an exemption applies or whether OFAC issued a license. You don't even have to get there. The transaction is not
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13 Proceedings - 3/6/12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 presumptively prohibited. If it is presumptively prohibited, the next question is, "Does an exemption, nevertheless, apply?" If this transaction is part of a larger class of transactions that are prohibited, does it, nevertheless, fall within a specific exception provided by the regulations? And if the answer to that question is yes, again, the transaction is legal. Finally, if the transaction is presumptively prohibited and if it doesn't fall under an exemption, then it's illegal, unless OFAC has issued a license. Now, in its papers, Your Honor, the Government spent all of its time on questions 2 and 3. Mostly they talk about question 3. They say over and over again, "Child Foundation transferred money without a license," and we obviously concede that. They did. And they spent a little bit of time on question 2, and they point to the fact -- and they're right -- that the regulations contain a specific exemption saying that you can donate articles intended to relieve human suffering. They say funds are not articles, and, therefore, that exemption doesn't apply. I think that point is at least arguable. But where we spent all of our time and where I think the real question is in this case is up on question one,
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14 Proceedings - 3/6/12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 and they don't answer that question at all. And that question is, "Are charitable transactions, charitable remissions, presumptively prohibited by the ITRs at all?" Because if the answer to that question is no, we don't have to talk about exemptions, and we don't have to talk about licenses. And the answer is charitable transactions are not presumptively prohibited by the ITRs. How do we get to that answer? Your Honor knows we relied on the Banki case, which the Second Circuit decided earlier this year. And Banki involved millions of dollars worth of transactions in the United States and Iran relating to Mr. Banki's family. In that case the Second Circuit was presented with the question that we have here today: Were those transfers presumptively covered by the ITRs? As Your Honor will see on the screen, in responding to that question, the Second Circuit told us a number of things. They started out by saying: While there are provisions prohibiting the remitting of funds for certain purposes, there is no general bar to the remission of funds. And let's stop right there for a moment. What the Second Circuit is recognizing, Your Honor, is that the regulations prohibit transactions involving
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15 Proceedings - 3/6/12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 the exportation or supply of three things: Goods, technology, and services. Funds are not among the things that are specifically prohibited by the regs. As the Second Circuit recognized in Banki, when the Government wants to do an overall bar on the transfer of funds, it knows how to do that. The 1979 embargo says you can't transfer funds, goods, technology, or services. But in the current regime there is no general bar to the remission of funds, and that's what the Banki court was recognizing. Even more importantly, Judge, is the last part about what the Second Circuit said there. 560.516(a)(2) expressly provides that noncommercial remissions are not prohibited. Now, of course, to some extent, that begs the question in this case: What is a noncommercial remittance? And in Banki the Court reversed Mr. Banki's conviction, finding that the millions of dollars worth of transactions in that case were not commercial remissions. So the question that we have to answer here today, Your Honor, is "What other types of remittances fall within that general category of noncommercial remittances," and, specifically, "Do charitable donations
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16 Proceedings - 3/6/12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 fall within that overall category?" And the answer is yes. And how do we get there? In our letter to Mr. Eisenbrandt, the presentence report writer, we cited several cases that help us get to the answer to that question. But before we go there, look at the regulation itself, Your Honor. We've quoted it here. The regulation says that they do not prohibit noncommercial remittances to or from Iran; for example, a family remittence not related to a family-owned enterprise. So the regulation tells us two things: One, it tells us there is this large class of transactions called noncommercial remittances; and, two, that a subset of that larger class are family remittances. And I think the question for the Court is, "Do charitable remittances also fall within that larger circle?" And the answer is yes. And, to my knowledge, this issue has not specifically been T'd up in the context with the ITRs with the Court. But in the other contexts the Courts have answered this question in the affirmative. And, specifically, in the Drake case that we cite -- it was a Sherman Act case -- relating to the donation of public service advertisement time. And the quote, Your Honor, from the Drake case is, Provision of free air time for
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17 Proceedings - 3/6/12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 public service announcements is not commercial activity and, thus, not the sort of activity which the Sherman Act was intended to address. It is charitable activity. And the Drake court calls that, quote, the polar opposite of commerce, and, hence, not within the scope of the Sherman Act. So the Drake court says not only is charitable activity not commercial activity, it's the polar opposite of it. Similarly, Judge, in the Second Circuit case that we cited, arising out of 9/11, some plaintiffs sued Saudi Arabia. And the question the Court was faced with in that case was whether the Foreign Sovereign Immunities Act applied. And the law says you don't get immunity, if you're a foreign country, if you were engaged in commercial activity in the United States. And, Your Honor, similarly, the Court said donations to charities from Saudi Arabia, even though the donors knew that that money was ultimately going to be used to pay for goods and services, is not commercial activity, because the Court said giving away money is not a commercial activity. Really, Judge, the thread that runs through both of those cases, the distinguishing factor about what makes something a commercial transaction is a mutual exchange
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18 Proceedings - 3/6/12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 of consideration. That's what the courts are saying. I give you something. You give me something in return. If I give you something and get nothing in return, it is not a commercial transaction. And, Judge, that -- that distinction is consistent with the way the term is used in other contexts. For example, the Uniform Commercial Code itself, which we've put up on the screen, recognizes that a commercial transaction is a single subject. Every phase of commerce involved is part of one transaction; namely the sale of and payment for goods. So, again, it's a two-way transaction; not a donation. We've cited other authority, Your Honor. The Encyclopedia Britannica tells us all commercial transactions have one thing in common, and that is this mutual exchange. We cited Black's Law Dictionary on and on. The core point, Judge, is that a commercial transaction, which are the only type -- commercial remittances of money are the only type covered by the regulations have to involve a mutual exchange of consideration. And that is not what happened here. So we think, Your Honor, that charitable remittances fall neatly within that larger class. And, critically, Your Honor, you don't even have to make that finding,
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19 Proceedings - 3/6/12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 because this is a criminal case. And if there's even any ambiguity on that question, that ambiguity has to be resolved in Dr. Yasrebi's favor. The rule of lenity, which the Supreme Court has told us over and over again applies in criminal cases, requires ambiguous criminal laws to be resolved in the defendant's favor. And in light of all this, Judge, the way the courts have defined what commercial activity is, the way the Uniform Commercial Code defines what it is, the Government cannot stand up here with a straight face and say the statutes and the rules unambiguously prohibit the transfer of charitable donations. They don't. And I think that that is particularly true in light of this letter that's up on the screen now, Judge. You know, we've spent a lot of time talking about this letter in our papers. And this is the letter that the then director of OFAC sent to the Kahrizak Foundation in 1997. And the Kahrizak Foundation was asking OFAC about the very same thing that's at issue here: Do the regulations apply to the transfer of funds to Iran? The Government complains about our use of this letter, and they say, "That's a different charity. That's not the Child Foundation, and, therefore, it's irrelevant."
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20 Proceedings - 3/6/12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 But, Judge, to our knowledge, this letter is the only time, outside of these proceedings, that this specific issue of whether charitable remissions fall within the scope of the ITRs was presented for a decision by any forum. And the Government has never explained what the legally relevant distinctions are between the Child Foundation situation and the situation this charity was facing in 1997; a U.S. charity sending money to its Iranian affiliate for charitable purposes. And I challenge them, if there is a legally relevant distinction between the two situations, to tell the Court today what that distinction is. We've asked. We've sent multiple FOIA requests to OFAC. We've sent multiple discovery letters to the Government, seeking documents that might tell us whether there is a distinction between the two situations, seeking documents that might tell us whether any other charity has ever asked OFAC whether the regulations prohibited charitable transactions and been told they do prohibit it, and we haven't gotten anything. So, to our knowledge, no such document exists. The Government, Judge, also says -- they've referred to this letter as a license. And they've said, well, this is like the Government giving a driver's license to one party and then another party saying, "I get to drive,
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21 Proceedings - 3/6/12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 too." This is not a license. And, Your Honor, we've blown up the relevant parts of this letter. And in the letter OFAC recognizes that what Kahrizak Foundation was asking was that first layer of our analysis. Not for a license. They were asking, "Do the regulations apply at all to our transfer of funds to our sister charity in Iran?" And the director of OFAC, in the next part that we've called out, echoes the Court's language in Banki and says, "The regulations do not prohibit transfers that are noncommercial in nature." And goes on to say, "Yes, the regulations permit you to send money for charitable purposes to Iran." In light of all that, Judge -- in light of the Drake opinion, the Second Circuit's case in the 9/11 case, the UCC definition, all of the common use definitions, and the ruling of OFAC itself in this matter, the agency responsible for interpreting these regulations, I can't imagine how we can conclude here today that the regulations unambiguously prohibit the transfer of charitable funds. And if there's any ambiguity in that, those issues -- and they are important issues, both from a guidelines perspective and an immigration perspective, for Dr. Yasrebi -- I can't imagine that we can conclude
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22 Proceedings - 3/6/12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 there's no ambiguity there. And that ambiguity has to be resolved in his favor, Your Honor. So, for that reason, I hope the Court will reconsider its conclusion about the legality of these underlying transactions, or, at the very least, recognize that the rule of lenity compels that those issues be resolved in Dr. Yasrebi's favor. THE COURT: Let me ask you about the plea, the plea petition that was made to the Court regarding the charges. The statement made by Defendant Yasrebi is as follows: From the middle of 2006 to early 2007, as the president of the Child Foundation, I was aware that Child Foundation funds were being used to facilitate cash transfers to Iran for charitable purposes; but, nevertheless, in violation of an embargo ordered by President Clinton. MR. ANGELI: Yes. THE COURT: Now, isn't that an admission on his part of the violation for the purpose of this case? MR. ANGELI: Absolutely not, Your Honor. What Dr. Yasrebi pled to is a conspiracy to impede the lawful functions of OFAC and the IRS. And, specifically, the conduct that he engaged in at that period of time -- and we admit to this -- was creating
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23 Proceedings - 3/6/12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 documents to cover up certain transactions that had happened. And the reason he did that, and that's what this factual assertion is talking about, is, "Why did I do that?" And the answer is that people brought to his attention in late 2006 -- there was a guy gamed David Kirkwood at the Child Foundation, and we submitted a memorandum that Mr. Kirkwood wrote. He made Dr. Yasrebi aware of that. And it was that awareness that caused him to engage in actual conduct underlying the plea. That doesn't mean Dr. Yasrebi agrees today that, in fact, the conduct was illegal. That's what was brought to his attention at the time, and it's what, unfortunately, motivated him to engage in the conduct for which he pled guilty. But I don't think there's anything there, Your Honor, that's any admission of the illegality of the underlying transactions. And perhaps more importantly, the transactions are either legal or they're not, Judge. And I think for the reasons we just talked about, we've got the better of the argument, and, in a criminal case, that's all that matters. To my knowledge, there is no authority, zero, out there for the proposition that an entity sending charitable remissions to Iran has violated the law. I'm
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24 Proceedings - 3/6/12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 not aware of any entity who's ever had even a civil enforcement action brought against it for that, much less a criminal prosecution. This is a unique case. This theory that the Government is presenting in this case has never been presented before, and it's contrary to the guidance that OFAC itself was issuing at the time. And, you know, when I first looked at this case, Your Honor -- and I said this to the Government -- "How is it that you can give one charity permission to do this and prosecute, criminally, another entity and its director?" I mean, there's a fundamental unfairness there. And to stand here in a criminal case and say unambiguously the statute prohibits that conduct, it's unfair, Judge. There's nothing out there to support that notion, civilly, much less criminally. THE COURT: All right. I'll hear from Mr. Gorder. MR. GORDER: Your Honor, with your permission, I'd like to stand over by the podium, too. THE COURT: Okay. MR. GORDER: Your Honor, today I'm going to address the issue of the scope of the embargo and also the defendant's knowledge about the violations of the
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25 Proceedings - 3/6/12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 embargo that were going on at the Child Foundation under his direction. And I also want to address briefly the national security implications of the case. Mr. Atkinson is going to talk further on the question of the continued illegality that was going on over a long period of time, which I think impacts on what the appropriate sentence -THE COURT: Well, be sure to respond to the arguments that were just made. MR. GORDER: I will. THE COURT: Particularly, the questions that Mr. Angeli asked of you generally at this point. MR. GORDER: Your Honor, the Foundation clearly violated the sanctions in a number of ways. You have to just look at the text of the regulations in three different respects. 31 CFR 560.206 prohibits the purchase of goods and services of Iranian origin. And that would include food, clothing, medicine, or anything else that you bought in Iran or paying for the salaries of the services of Iranian employees. And when you look at the actual text of the statute in 560.206, note what is prohibited. Engaging in any transaction, which is defined as purchasing, selling, transporting, swapping, brokering, approving, financing, facilitating or guaranteeing. That's in 560.206(b). 560.207 prohibits any new investment in Iran.
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26 Proceedings - 3/6/12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Defined as a commitment or contribution of funds or other assets or a loan. And that would certainly include establishing of a bank account, earning interest, like a certificate of deposit, which the Child Foundation did for the Lahiji couple; buying rental real estate, buying other properties like that. And, finally, 560.204 prohibits -- excuse me, I've been fighting a cold for two weeks, Your Honor. THE COURT: As you go through these, are these transactions that occurred during the middle of 2006 through early 2007, which was the period set forth in the charge? MR. GORDER: Some are and some aren't, Your Honor. And we'll go through some of those facts a little bit. THE COURT: Shouldn't you be talking about the ones that occurred during this period of time if that's the charge? MR. GORDER: Well, Your Honor, the charge covers a longer period of time. We know the defendant in his guilty plea tried to limit the time frame. But, I think in terms of relevant conduct in the case, you've got to look at what happened over the period of ten years. Now, to get into the specifics of cash transfers by
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27 Proceedings - 3/6/12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 charities, the Iranian sanctions or the embargo track exactly the statute, the International Emergency Economic Powers Act, which is 50 -- 50 U.S.C. § 1702(b)(2), and they contain a limited exemption from the sanctions for donations of articles, such as food, clothing, and medicine, intended to relieve human suffering. Now, the donated articles themselves, they've got to cross the border; in other words, they've got to come from outside Iran in this particular case. You can't send cash in to purchase them. And the case law interpreting the International Emergency Economic Powers Act has been clear on that. There is case law interpreting that particular part of the statute. The Veterans Peace Convoy case from the 1980s, the Holy Land case in 2001, and there's a recent unpublished opinion involving another charity in 2009, Islamic American Relief. If you accept the argument that Mr. Angeli is proposing, that there was an exemption or the -- you know, for the transfer of cash or anything else to Iran, if you had a charitable intent, there would be no reason to put into the regulations a specific exemption for donated articles. It would be simply surplusage. So what is a charity to do in this situation, Your Honor? Get a license. It's not impossible to do.
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28 Proceedings - 3/6/12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 In fact, the Child Foundation got one once, for a very limited purpose, that was good for three months. And we've cited some examples in our brief of other Iranian-type charities that have received licenses from OFAC, too. Now, we're all aware that in any complex regulatory scheme, you know, good lawyers can find ways to argue that the words aren't clear. That's why the International Emergency Economic Powers Act requires that someone act willfully in order to be charged with a crime. I think that's what deals with the rule of lenity in this case, is that the evidence is clear that Mr. Yasrebi and the Child Foundation, through him, were acting willfully. They knew what they were doing was illegal. The Banki case, I think, supports the Government's position here. Note 7 said, in the case, that in determining whether or not transfer of funds to Iran is prohibited by the sanctions, you've got to look at the underlying purpose of the transfer, which fits just perfectly into prohibiting any transaction with an underlying purpose of buying and selling, and that sort of thing, in Iran. I just don't accept the proposition that whatever a charity does is noncommercial. Charities engage in
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29 Proceedings - 3/6/12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 commercial transactions all the time. If the Red Cross goes out and buys a van to haul blood supplies around, that's a commercial transaction. And, even further, in the Banki case, even if you accept the premise that, well, if somebody is donating something they have a charitable intent and that's a noncommercial transaction, the Banki case clearly says that what the Child Foundation did, which was providing a service for its donors of taking their donation and getting it to a particular person in Iran, was the processing of a noncommercial remittance, and that would be barred, according to the Banki case, at page 9 in the West Law version, under the more general ban about exporting a service. Now, counsel talks about this letter involving the Kahrizak Foundation in 1997. First of all, there is no evidence, that I'm aware of, in the record, or anywhere else, that the defendant ever saw that letter. It wasn't found. And I checked in the evidence seized pursuant to the search warrant executed in this case. It comes in May of 1997, early on in the sanctions regime, and before, actually, the final executive order finalizing the sanctions came out in 1997. It involves, Your Honor, a discreet sanitarium in Tehran that had been operating for 25 years with 1,500
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30 Proceedings - 3/6/12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 elderly and handicap patients. As Mr. Angeli knows, because we got him the file from OFAC pursuant to his discovery request, there's correspondence going back and forth between OFAC and the Kahrizak Foundation. They asked for the identities of the directors of the Foundation; minutes of the board meetings of the Foundation. Now, if any transfer of funds by a charity was legal under the sanctions, why would they be asking for that kind of information? I mean, in effect, what this letter is, is a de facto license to the Kahrizak Foundation. And if this was the United States v. Kahrizak, counsel would have a point. Of course we wouldn't be here if this was United States v. Kahrizak, because of that letter. But as applied to what the Child Foundation did and as applied to what Defendant Yasrebi knew about this case, the regulations were absolutely clear. I want to go through a little bit of the evidence to make that point. And it stretches over this entire period, Your Honor. THE COURT: I think I've heard -- seen all of the arguments you're going to make. You can have a few minutes on this, but -MR. GORDER: Okay. Well, to speed things up,
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31 Proceedings - 3/6/12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 ball. THE COURT: The Government referred the matter for investigation? MR. GORDER: Right. What they did, and this is actually in some of the exhibits that the defense provided you, is referred it to their enforcement section, because it appeared to be a violation of the sanction. But what I want to point out, Your Honor, is what was not in that letter. What was not in that letter was: In the next three weeks we're going to transfer $400,000 to Iran to buy real estate for the Lahijis and rent it rent free for ten let me just remind the Court that in the year 2000, September 2000, the Child Foundation applied for a license. THE COURT: What response did they get? MR. GORDER: They got a response that said, "We got your application." THE COURT: "We got your application." Did they get any advice? MR. GORDER: They didn't get any advice. THE COURT: The Government didn't give them any advise, as requested? MR. GORDER: No. The Government dropped the
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32 Proceedings - 3/6/12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 years. THE COURT: What was in the letter that was sent in 2001 that the Government lost? MR. GORDER: I don't know. I've never seen it. THE COURT: But they received it? MR. GORDER: They have a -THE COURT: They were asking the same questions? MR. GORDER: They have some kind of computer entry that it was received. We've never seen it, and we didn't find it. So unless defense counsel has it, I don't know what was in it. THE COURT: Okay. So they were asking questions about what they could or couldn't do; is that correct? MR. GORDER: They were asking for a license. Permission to -- you know, to send the license. But what they did immediately -- I mean, they turned around, before you could expect the Government to get back to them anyway, and sent $400,000 to buy real estate in Tehran. A couple of months later they tried to transfer $30,000 through the Bank of America to a bank in Dubai, and it was stopped and rejected. And three days later they sent it through a hawala system to Iran. They
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33 Proceedings - 3/6/12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 purchased formica. They sent money to Italy in February of -THE COURT: That charge has been -- will be dismissed, isn't it? MR. GORDER: Yes. But I think it's important to note that while this license application was pending, they were continuing to send funds to Iran. THE COURT: Their purpose was to continue their humanitarian work with children. Do you agree with that? MR. GORDER: In part, yes. THE COURT: In part. MR. GORDER: In part, yes. THE COURT: Okay. MR. GORDER: Your Honor, now even the defense concedes that after September 11th it was reasonable for people to interpret the regulations as controlling the transfer of funds to the Middle East. And we know that that's what the defendant felt, because we have his notes dated November 3rd of 2001. That's in tab 16 of our exhibits. And maybe we can have that on the board. You can see the translation is on the left. Permission to send the Child Foundation's exchanged money, the possibility of obtaining such permission, very low. So there's no question at that point that they were
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34 Proceedings - 3/6/12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 aware of the effect of the law. Then, Your Honor, I want to direct your attention to, again, some exhibits of the defense, because I think they're important. And this would be Mr. Angeli's second declaration. His Exhibit 13. There was a terrible earthquake in Bam, Iran, in the latter part of 2003. And because of that -and this is his Exhibit 13, page 1 -- OFAC, issued a general license saying for a 90-day period U.S. persons are allowed to make funds to nongovernmental organizations to be used in support of humanitarian relief in response to the earthquake in Bam. That period of time expired. And on the next page, page 2, you can see that OFAC issued another license for another 90 days, saying if you want to send money to Iran for the Bam earthquake, you can do it through -- and they gave a list of about ten charities. Now, there's no reason -- if the position of Mr. Newcomb, who signed these licenses, was that you can send funds to Iran any time you were a charity, there was no reason to issue these licenses. It's clear the Child Foundation was aware of it, because a couple months later, in May of 2004 -- and this is tab 18, page 1 -and, again, the first paragraph, they made an application for a license to send $250,000 to Iran for the Bam
Page ID#: 1660
35 Proceedings - 3/6/12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 earthquake relief. Because they weren't on the list of approved charities, that application was denied by OFAC, in writing. They got an answer that time. So it's certainly clear that by 2004 there's just no question in their minds. Now, in the papers that have been filed before you and kind of fitting in with this limited scope of time during the plea, they claim that somehow there was an epiphany at the Child Foundation in the fall of 2006, and that's when they discovered that there was a question about sending cash to Iran. I'd like to point out for you tab 58. Now, this is an email, and we'll be looking at page 4, where Mr. Yasrebi was responding to an inquiry from a potential donor, and the date on this email is February of 2006. So it's six or seven or eight months before this limited time in the plea, but it's interesting to see what he says. As I stated, in an email: Child Foundation USA only sends food, clothing, and medicine to Iran. No cash transfer is ever made by the Child Foundation except when specifically permitted by the Office of Foreign Affairs. Now, that was just false. I want to briefly talk a little bit about the reliance on professional advice defense that has been
Page ID#: 1661
36 Proceedings - 3/6/12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 suggested in the papers. There's a suggestion that what the Child Foundation did was approved by their lawyers and by their accountants. Well, to claim, you know, reliance on advice of counsel, you've got to waive the attorney-client privilege, which they've refused to do in their papers, so we don't know what the advice was. But I just want to show you what -- so these billing records that they submitted are really worthless. If we can take just a brief look at Mr. Angeli's second declaration, Exhibit 12, we have this bill from Shawn Khastoo. Review of -- redacted. Legal research regarding -- redacted. Review of draft -- redacted. We don't know what the advice was, so I think that you have to discount the information suggested by these billing records. And to have a legitimate advice of counsel or professional defense, you've got to tell your lawyers and your accountant what's really going on. You've got -the facts have got to be clear. And if we can take a brief look at tab 28, this was -- this was the only legal advice that we know about that was provided, because it was put up on the Child Foundation's website.
Page ID#: 1662
37 Proceedings - 3/6/12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 And if you read through this exhibit, Your Honor, you'll see that the factual premise here is that there's no cash going to Iran; that the donations are only used to purchase food, clothing, informational materials, and medicine, outside Iran. Then on page 2, there's information in the lower paragraph here that they've entered into memoranda of understanding with other Iranian charities where they all exchange food and other items and not cash. That was clearly false. THE COURT: Can I ask you to wrap up in about five minutes, Mr. Gorder? MR. GORDER: Sure. Okay. Your Honor, there's a lot of exhibits in the record. THE COURT: That's what I'm -- I don't think we need to go through all of them. MR. GORDER: Okay. I want to just show one, if I may, and then I'll conclude on this -- on this area. And this would be tab 60, pages -- we'll start out with 7 or 8. Now, you'll recall that there was -- you know, there's a discussion of these memorandas of understanding. Well, here's a draft that was sent by -from Iran to Mr. Yasrebi, and you can see that he crossed out certain articles. Well, if we go to the translation,
Page ID#: 1663
38 Proceedings - 3/6/12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 which is on pages 2 and 3 -- and the previous page, please -- in particular, article 3 was crossed out. Receiving food aid sent from the Child Foundation, distributing them amongst the needy families, payment of financial aid to the families under the Child Foundation coverage according to their needs. So this was what he crossed out in this memoranda of understanding that was being concocted to show to the lawyers. I think that is probably the best way of -- of discussing the reliance on counsel advice. Your Honor, you say I've only got five more minutes, so let me talk briefly about two other issues. One, there was a suggestion in the defendant's reply memo that we had misled the Court about the 2007 tax return that was filed. I just want to clear that up. Child Foundation was on an unusual fiscal year. It ran from June 1st to May 31st. So any particular year would encompass two calendar years. The document that's in our reply brief, where they talk about doing things in Afghanistan and other countries, but never mention Iran, is the return that covered June 2006 to May 2007. We referred to that as the 2007, 05 return. The return that is in the defendant's reply brief is
Page ID#: 1664
39 Proceedings - 3/6/12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 actually -- covers the next year. It wasn't prepared until November of 2008, after the search warrant was executed in this case, and, as I understand it, it was never filed with the IRS. Finally, Your Honor, turning to national security, just briefly. Counsel tries to diminish the effect, the impact, of the money that was sent to Grand Ayatollah Makarem Shirazi. That's why I'm saying that some of it is not humanitarian, Your Honor; nor is the money going to the Lahiji's bank accounts and their real estate investments and that sort of thing. They try to diminish that by saying, "Well, it's only $100,000." Let's take a quick look at tab 36, page 3. This was a fax that was sent by the Lahijis to the Child Foundation at one point in 2006, trying to come up with some kind of accounting of the money that had been sent. And you'll notice that there's -- under paragraph 1(a)(3), there's $250,000 in khoms. And then down in paragraph 4 there's $200,000 in khoms where they're pending receipt. Khoms are -- I'm not quite sure exactly how to translate it. It's kind of like a tithing. And based on the conversations that were intercepted, it's clear that those khoms of Mr. Lahiji's was going to
Page ID#: 1665
40 Proceedings - 3/6/12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Makarem Shirazi. I'm not sure how much more, because there's some talk about -THE COURT: Well, let's not speculate, then. MR. GORDER: -- but certainly more -- and there's information that they obtained specific permission from him to raise khoms from other people in the United States. Now, this is a man who was a prime supporter of Hezbollah, has bragged about that he and other clerics allocated a portion of their monies to Hezbollah in Lebanon, gave out condolences for the death of the person who was responsible for the killing of the U.S. Marines in Beirut in 1983. And certainly a national security matter, beyond just the pumping up of the Iranian economy that sending $10 million over a ten-year period would do. We saw in the letters that Mr. Yasrebi wrote to Iran that the purpose of the Child Foundation was to educate and prepare children for the Islamic Republic of Iran. Now, Your Honor, there's a lot of debate today about what U.S. policy should be with regard to Iran; sanctions versus military actions. Well, if sanctions are to work, they have to be enforced. And they have to, you know, be enforced across the board. And to diminish the national security
Page ID#: 1666
41 Proceedings - 3/6/12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 clear. THE COURT: I'm meeting with the judges of the court of appeals at a certain time here today, at 12:00, so I'm -- we need to move on, so -MR. ATKNSON: Okay. I'm getting that message loud and clear. Judge King, good morning, and my remarks were intended to take about a half hour or so, and I'm -- I'm going to -THE COURT: Well, I've read everything you submitted. There's not much more that could be submitted, that I'm aware of, at this point, but go interests in this case, I think would be -- would be inappropriate. One thing on the potential immigration consequences -- I don't claim to be an immigration attorney, but I can say that in my experience with other Iranian nationals who have been convicted of charges like this, they have not been deported because of it. So, you know, beyond that, I can't really -- I can't really speak. THE COURT: All right. Thank you, Mr. Gorder, your co-counsel wanted a short period of time. I do want to limit this. MR. ATKNSON: I'm getting that message loud and
Page ID#: 1667
42 Proceedings - 3/6/12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 ahead. MR. ATKNSON: Well, what I'd like to focus on this morning, then, in light of those limitations, is one point that is relevant both to the correct sentence under 3553(a) and under the guidelines, and it's responsive to my friend Mr. Angeli's claim that all of Mr. Yasrebi's misconduct, all of his criminal activity, was backward looking; that is, that it was designed to cover up criminal behavior in which he previously engaged, and none of it was designed to cover up ongoing or future criminal activity. That makes a difference both in the guideline analysis and, more importantly, how you view these crimes. Was he simply looking back at something that he committed and trying to cover it up, or was he enabling and facilitating ongoing criminal behavior? And there's a couple of examples from the evidence that I'd like to point out, about which you may not be fully aware, that should be of help to you in determining where Mr. Yasrebi should be sentenced. The first example has to do with this tuition program that the Child Foundation was running. If we could have tab 39 up, please, and let's just go straight to page 1. I initially had intended to show you both the Farsi and the English here, because it does make a bit of a
Page ID#: 1668
43 Proceedings - 3/6/12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 difference, but this is a -- an email in which Mr. Yasrebi tells his counterpart in Iran, "I made the request that you not discuss these topics" -- meaning, this tuition program by which the Child Foundation would pay the tuition of Iranian students in London, that would discharge their tuition obligations in Iran at an institution known as the Azad University. "I made the request for you not to discuss these topics with everyone. Announcing of these topics openly could place all of us in jail in America." From this, you can conclude as follows, I'd submit, Judge -- and I'd be stunned if my friends at the other side of the table would argue to the contrary -- you can conclude that the defendant, by this point in time, had gathered that the provision of services in Iran was prohibited, and there can be no dispute but that tuition for educational services is a service under the holding in Banki, which is essentially providing something of value to someone else, and, I might point out, whether or not there's any consideration for it, contrary to what counsel argues -- argued earlier. Number 2, on October 8th he knows that the provision of tuition in Iran is against the law and that he shouldn't do it. Counsel argues that he did the right thing after
Page ID#: 1669
44 Proceedings - 3/6/12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 that and he stopped this tuition program. What I want to show you is evidence to the contrary. Can we have tab 61, please? Just three weeks later, on Halloween of that same year, here's Dr. Yasrebi soliciting future tuition donations. In the second paragraph: He needs to double this amount if he wishes to pay for her tuition in the next semester, as well. Kindly contact Mr. Nagahvi and let me know. Can we have tab 62, please? We have the translation first. And here's an indication that in December, two months after he's made this statement that he knows that this tuition program can land him in jail in the United States, he's talking about -- he's being made aware of a donor who has just donated to sponsor a loan program for 20 college students in Iran to the tune of $14,000. And there's talk about him being willing to sponsor some more. So his very conduct that he knows is criminal is occurring two months later. If we could go to page 3, please. As evidence of that in November, five or six weeks after he makes this statement that he knows that this tuition program can provide him in jail, we have a receipt for the donation of 13- or $14,000 to the Jamshid
Page ID#: 1670
45 Proceedings - 3/6/12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Foundation. And if you look down at the bottom of the box, you can see it's for student loans. So if we can skip ahead to tab 63 -- I'm sorry. Yes, tab 63. Here we have an email in which -- a translated email in 2008. Judge, two years later. Two years after the defendant indicates he realizes that this is unlawful. And it makes it very clear that they're still continuing to use U.S. funds. And let me quote, "Please see the attached detail list of the expenses paid out of the monies received from the Child Foundation USA." And going down to the table, one can see a reference to payments made to assistance seekers, payments made to college students. 95 million rials, or a significant sum of money translated into U.S. dollars. One example of his facilitation of ongoing and future criminal conduct, even after he knows that it's against the law. Example number two: There's reference in the papers to this what my co-counsel, Mr. Gorder, characterized as an epiphany, but let's call it a bellwether event, that Mr. Angeli hangs his hat on as being the point in time at which there's a memo written by a Child Foundation employee by the name of Kirkwood, who, according to their theory of the case, makes the defendant aware that what
Page ID#: 1671
46 Proceedings - 3/6/12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 he's doing is illegal. At that point in time they're running a charity in Canada, as well. The regulations make it very clear that a U.S. citizen can't, in Canada or in another foreign country, do what he's prohibited from doing when in the United States. Counsel's memo says that far from doing the wrong thing here, Mr. Yasrebi did exactly the right thing. He stopped any backroom support of this Child Foundation, Canada, just as he had been advised by his employee who had written a white paper, essentially, telling him that any continued support to Canada would be unlawful. Publicly, and to his employees, he's stating, "We're out of Canada. We're finished. We're not going to support them anymore." The facts prove differently, Judge. Could we have tab 77? That is a conversation right during the relevant time period of October 23rd, 2006. On page 1, the communicants are the defendant and his subordinate at the Child Foundation, Mr. Sherafi, on page 2. This is going to take just a moment, Judge. The upshot of it is, as you can see, the defendant points out to Mr. Sherafi that our office in Canada is closed. It's closed, because it's crystal-clear that
Page ID#: 1672
47 Proceedings - 3/6/12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 it's illegal and one of my employees, Mr. Kirkwood, is about ready to blow the whistle on us, and we're about to be arrested for this. He's afraid of going to jail. He says: Essentially, then, with regards to Canada, although it's discontinued, but I'll continue. We worked too hard for it, and I just can't discontinue it. On the next page, please, page 4, he clarifies that he had an employee doing exactly what counsel said that he put a stop to; that is, backroom support for Canada. She's continuing the work. And about midway through the page, I'll pick up and quote -- this is Dr. Yasrebi speaking -- We have to continue. If you like, with regards to your salary, it's Canada. It won't be paid from our office, but you'll be paid directly from Canada. But he essentially solicits his subordinate, Mr. Sherafi, to continue to provide backroom secret support to Canada, even though he's represented to his employees and others that they've stopped doing that. Judge, I can't emphasize enough how significant the Lahiji evidence is in this case. I intended to go through it for you again and to cover it in some detail, but I think you get it. And I just want to make one point about it, because it shows ongoing criminal conduct even more clearly than
Page ID#: 1673
48 Proceedings - 3/6/12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 the scheme itself, which sort of speaks for itself, the provision of the secret accounts in Iran that weren't really charitable donations at all enabling the Lahijis to take deductions from their income tax and to essentially set up a retirement fund in Iran and to purchase real estate in Iran, among other things. But tab 59 -- please, Ms. Rallis -- is worth looking at. And this is one in which I think we need to look at the Farsi first. So if you can go to page 3 first, you see this letter in the Farsi with a different style of handwriting below it -- that Ms. Rallis has just highlighted for you. I'd like to point to the translation on page 1. Essentially, what we have here is a letter written by Mr. Iranshahi to the defendant for his approval making more widely known -- proposing to make more widely known the fact that the Lahiji couple had this -- these two certificates of deposit, as it turns out, for $700,000, that the Child Foundation was prohibited from touching until some point in time way off into the future, when the principal was going to be used to engage in another embargo violation. That is a construction project and the interest would come back to the Lahijis. There's a proposed letter that Mr. Iranshahi is going to disseminate more widely. And the part of the
Page ID#: 1674
49 Proceedings - 3/6/12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 letter in the Farsi that was handwritten down below, that was different, appears on the next page. What does the defendant say? Does he say, "We need to pull this investment back. We need to stop this. We need to comply with the law here"? He says, "Why have you correlated these monies to us? You were not supposed to say that the Lahiji money was being held in the trust in the bank." Your Honor, he's facilitating ongoing criminal conduct. Rather than pulling it back, he's making it easier and facilitating it. With regard to the Madhi transactions, the defendants both say that it's unfair for us to characterize these transactions as trade-based money laundering, because simply -- that's an overstatement, as I understand their position. But the defendant and Mr. Iranshahi engaged in genuinely complicated transactions that took us a significant period of time to unravel. If we could have 29-I, please. The gist of the conspiracy is made clear here, essentially, in May of 2006. Now, Judge, this is four months before -- or three-and-a-half months before this supposed epiphany from the Kirkwood white paper that he wrote complaining about all the illegal conduct that he was observing
Page ID#: 1675
50 Proceedings - 3/6/12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 occurring around him. We have a situation where Mr. Iranshahi reveals the essence of the commodity scheme. Essentially, the funds that came from the United States, half of them were passed through to Iran without any purchase of food, which was what the defendant in Child Foundation claimed that they were doing. The other half would be used for the purchase of food, Judge; but it would be sold commercially. I don't think there's any dispute from anybody that a regulation within the Iranian sanctions regime makes it very clear that commercial food transactions are prohibited absent the license. And there's a specific provision describing a one-year license that someone who wants to engage in those sorts of transactions can obtain. So, essentially, the public stance was, "We're only distributing food," and, in reality, there wasn't any food that they were distributing. Half of the money coming from the United States was being funneled through an Iranian trading company that was generating false receipts for Child Foundation's books and records. And the other half was being siphoned off and reconsigned to a commercial food vendor in Iran, but disguised as transactions in which Child Foundation was the recipient
Page ID#: 1676
51 Proceedings - 3/6/12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 of the food in Iran. Fairly clever. Clever enough to warrant the characterization of their conduct as being trade-based money laundering. They tried to make it look like these were exempt transactions, when, in reality, the false documents, generated months before this supposed epiphany, covered them to make it look as if they were lawful. This is a concealing of ongoing criminal activity. The defendant claims that this was conduct stopped in early 2007 -- this is the last point I want to make, Judge, and then I'll sit down -- after the legal memo to which my co-counsel, Mr. Gorder, referred a few minutes ago, appeared on the Child Foundation website, this February 2007 memo, where they claim that Child Foundation is only sending food into Iran and they may exchange a little bit with other charities. But counsel has drawn a bright line there and said, "It really did stop. Trade-based money laundering really did stop at some point in early 2007." Now, I'm not so sure that that's true. Can we have tab 61, please? The following were all -- sorry. It's tab 69. Okay, yes, tab 69. These are a series of invoices, Judge, that suggest very strongly that the misconduct that I described a few
Page ID#: 1677
52 Proceedings - 3/6/12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 minutes ago continued long after February of 2007 when they received, by all accounts, legal guidance to stop what they were doing, which they chose to ignore. And this is after they misrepresented what they were doing to their counsel in the first place. Note at the top that we have an invoice number involving a particular quantity of food that they purchased for $172,000 in U.S. currency. The invoice number is DEX 715. It's dated August of 2007. Next exhibit, please. Next consecutive exhibit. I believe it's 70. Here's its sister exhibit, Judge. And we see this time and time again in the evidence. This one is numbered the same, DEX 715, except it has the appendage C added. So this is the second set of books, if you will, that Child Foundation continued to keep. Down at the bottom we have the price, not in U.S. dollars this time. It involves the same amount of food and is exactly the same order. It's 1.3 million UAE dirhams. The going exchange rate at the time would make that north of $350,000. So they actually paid 170-plus thousand dollars, yet got a phoney receipt showing that they paid $350,000. If I could have the next exhibit, page 71. THE COURT: How many more exhibits do you
Page ID#: 1678
53 Proceedings - 3/6/12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Judge. THE COURT: All right. MR. ATKNSON: This is a document associated with the same transaction. And what I'd like to point out is the name of the consignee. In the middle of the document -- Ms. Rallis is going to highlight this for you -- this isn't Child Foundation. This is a person by the name of -- if I'm not doing an injustice to the pronunciation -- Mohammadian. I can tell you that in all of the investigation work we've done in this case, the thousands and thousands of pages of evidence that we've uncovered, this is the first time we've seen this name. It appears to us to be a reconsignment to a third party. But even if it isn't -- can we have 74, please. This is the document that came back to Child Foundation to be on its books and records about a year after they claim that they had the epiphany. And if you could highlight the first line. This is the transaction about which we're speaking. If you'll recall the very first exhibit, Judge King, show that they bought this stuff for something slightly north of $170,000. intend to cover, because I may have to make some changes on my schedule here. MR. ATKNSON: Two more, and I'll sit down,
Page ID#: 1679
54 Proceedings - 3/6/12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 About midway through this column you'll see an amount in U.S. It's been ballooned up to $334,000. So what happened here is that they continue to take about half the money as a pass-through, even after they've been told by counsel to cut this stuff off -- out, as if it wasn't obvious from the generation of the false documents that they had been doing all along. And it looks to us as if any food that was generated by this order was siphoned off to a third-party consignee, just like they were doing earlier. But, in any event, it's clear that at least they're keeping a double set of books in order to make it look like they're paying just slightly less than twice as much for the food than they're paying in reality. This is the sort of conduct, ongoing criminal activity, that warrants the sentences that we recommend in this case. Thank you. THE COURT: All right. Counsel? MR. ANGELI: Your Honor, I promise to keep my remarks relatively brief and to keep it to the issues that counsel has raised, and I won't respond to all of them. For example, I think the issue with the Lahijis is covered adequately in our briefs. THE COURT: It is.
Page ID#: 1680
55 Proceedings - 3/6/12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 MR. ANGELI: Thank you, Your Honor. I respectively suggest that the Government has been involved in this case for so long that they've lost sight of the forest through the trees. And we're focusing here on issues that don't go to the heart of what this case really is about. First, I want to just say, Your Honor, at the risk of beating a dead horse, on the underlying legal issue, Mr. Gorder still has not answered the underlying question. He's referred to two cases -- the Holy Land case and the Veterans Peace case -- that had nothing to do with the ITRs. There weren't transactions or transfers of money to Iran. And those cases talk specifically about the humanitarian aid exemption. Mr. Gorder still doesn't deal with the fact that the ITR regulations have a specific carve-out that says noncommercial remittances are permitted. And he still hasn't told us what he thinks the words "noncommercial remittance" means. In our view, Judge, charitable remittances are clearly permitted. He's right. Charities can engage in commercial transactions. He talked about the Red Cross buying an ambulance. That's a commercial transaction. But when a charity gives something away and gets nothing in return -- they don't get an ambulance back -- that's
Page ID#: 1681
56 Proceedings - 3/6/12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 not a commercial remittance. And that's what happened here. Child Foundation gave money away and got nothing in return. I want to talk, Your Honor -- briefly respond to the issues that Mr. Gorder and Mr. Atkinson raised. I want to start out, Judge, by pointing out that this case started -- this whole legal case started 12 years ago when Child Foundation, on its own initiative and at Dr. Yasrebi's direction, wrote this letter to OFAC in September of 2000. And, Judge, Mr. Gorder has referred to this letter as an application for a license. I want to point Your Honor straight to the first paragraph of this letter, which makes absolutely clear that what Child Foundation was seeking when it wrote to OFAC in 2000 was a, quote, determination with respect to the applicability of the regulations. They weren't asking for a license. They were going to OFAC and they were asking for help. "Are you going to take the position, OFAC, that what we are doing is illegal?" And in that letter, as Your Honor pointed out, which I think was a fair request to a government agency who should be in the business of helping people like Dr. Yasrebi and Child Foundation when they ask for
Page ID#: 1682
57 Proceedings - 3/6/12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 help -- and in that letter, Judge, Dr. Yasrebi openly disclosed basically everything that Mr. Atkinson and Mr. Gorder have talked about today. They disclosed that the major part of its efforts and capital were being spent in Iran. They disclosed that they used the sister charity, Refah Kudak. They disclosed they had already provided aid to a thousand kids. And they disclosed that they were paying for tuition, as Mr. Atkinson was talking about today, and clothing and food for all these kids. And they even, Judge, included a pie chart that showed that 95 percent of all the money that Child Foundation spent went to Iran. It was absolutely clear right from that moment forward exactly what they were doing, but they didn't get an answer from OFAC. And Dr. Yasrebi didn't just sit on his hands when he didn't get an answer from OFAC. He sent another letter in 2001. And OFAC never responded to those letters. To this day, Judge, OFAC has never responded to either one of those two requests for help. And why not? In its papers, the Government says that OFAC's response to the Child Foundation, quote, slipped through a bureaucrat crack. Slipped through a crack. It was an oversight, they say to the Court. And, Judge, that is
Page ID#: 1683
58 Proceedings - 3/6/12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 just flat-out false. And how do we know that? We know it because we have this internal memorandum from OFAC that was written shortly after September 11th, which is displayed up on the screen. And it's critical to note, Judge, that this memo was never shared with Dr. Yasrebi. It was never sent to Child Foundation. It was never sent to Child Foundation's lawyers. I want to point out a couple things about this letter. First of all, it recognizes Child Foundation's request for what it really was. Child Foundation wrote, seeking a determination as to the applicability of the regs. Again, the first layer in our analysis. Not a license. "Do you think, OFAC, that the regulations apply?" OFAC went on to recognize the next logical step in this process. The next logical step would have been to respond to Child Foundation by asking for more information. But they didn't take that logical step. And why not? Because the U.S. Attorney's Office had decided to launch a criminal investigation here. An investigation into what? At this point OFAC could have written back to Dr. Yasrebi and said, "You know, the regulations don't allow you to do what you're doing. Please stop." But they didn't do that.
Page ID#: 1684
59 Proceedings - 3/6/12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 So what is it that they investigated? Whether or not Child Foundation was actually sending money to Iran without a license? Of course not. Dr. Yasrebi had told them that, in an 86-page submission, in great detail. What they investigated and what consumed them for the next eight years -- the international travel, the search warrants, the FISA warrants, the secret middle-of-the-night searches -- all of that was done because the Government thought it had a terrorism case on its hands. And in their papers they say we criticized them for investigating the way that they did it and using these tools. And that's not true, Judge. In fact, in our papers we expressly recognized that there were good reasons for them to investigate the way they did. Our criticism relates to what they did at the end of that investigation, when they realized that this case was not about terrorism and when they realized that, in fact, Child Foundation was doing exactly what Dr. Yasrebi had told them they were doing eight years before. And instead of at the conclusion of that investigation finally responding to Dr. Yasrebi for help, they filed criminal indictments. They came to this Court and said, "Look what we found. Child Foundation has been sending money to Iran for years without a license, and they've
Page ID#: 1685
60 Proceedings - 3/6/12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 been hiding it for a decade." And to spice it up, Your Honor, they cited some language that Dr. Yasrebi used in a scholarship application 30 years ago, and they threw in words like "Hezbollah" and "Grand Ayatollah" in an attempt to frighten this Court. And adopting a classic kitchen sink approach to prosecution, they try to tar Dr. Yasrebi with the decision that some private donors made about how to reflect their donations on their tax returns. It's that approach, Judge, that we criticize, because it isn't fair. It isn't right. The truth is that the Government knew from the beginning that Child Foundation was sending money to Iran. They knew it because Dr. Yasrebi told the IRS that in his 501(c)(3) application in 1994. They knew it because he submitted an 86-page submission to OFAC in 2000 and a letter in 2001 and another letter in 2004 and another one in 2007. They knew it because Dr. Yasrebi and Child Foundation literally advertised in the newspaper and talked to members of the United States Congress about it and to CNN. And all the while the Government sat idly by, for eight years, watching it all happen, deciding secretly not to respond to Dr. Yasrebi's request for help and, instead, coming into this court
Page ID#: 1686
61 Proceedings - 3/6/12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 with a criminal indictment asking you to put him in jail for two-and-a-half years. That's what we criticize, Your Honor. And we believe that that context is critically important when Your Honor is weighing the different views that the parties have presented to you about what this case is actually about. I also want to just spend a few minutes, Your Honor, talking about these issues that Mr. Gorder raised about concerns that were brought to Dr. Yasrebi's attention and how he responded to them at various points in time. The first one that he raised up on the screen here is a note that was seized from Dr. Yasrebi's office. And the Government believes that this is Dr. Yasrebi's notes, probably after talking to counsel, and they directed the Court's attention to this specific passage: Permission to send the Child Foundation exchanged money. The possibility of obtaining it, very low. Now, if Dr. Yasrebi did get that advice from counsel at this point in time, it's not particularly surprising that he did. His letter to OFAC had been sitting unanswered for over a year. 9/11 had just happened two months before. It probably wasn't particularly likely that OFAC was going to write to him and say, "Go ahead and send the money."
Page ID#: 1687
62 Proceedings - 3/6/12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 The Government doesn't point, Your Honor, to the very next entry of this note. "Tell us what to do. Tell us what to do." He was asking the people who were consulting with him at the time. And, Your Honor, we've provided billing records showing you that at the time Dr. Yasrebi was consulting with a lawyer, Mr. Khastoo. He was consulting with Mr. Panetta at KPMG. The Government criticizes us for not waiving the privilege. To that, Your Honor, I'll only say this: The privilege is not Dr. Yasrebi's to waive. It belongs to the Child Foundation. And most of the billing records that we've submitted to the Court are from the firm of Berliner Corcoran and Rowe, who have an ongoing relationship with Child Foundation. And obviously a waiver of the privilege with respect to BCR's advice could have implications well beyond this case. But the important point here, Your Honor, is Dr. Yasrebi asked for help, and this is what the lawyers gave him. They said to him -- or what's reflected on here, with the notations of Khastoo and Panetta, is this notion of sending money to Switzerland and then to Iran. And as Your Honor knows, Switzerland does not have an embargo against Iran. So what this looks like is that Dr. Yasrebi is being told, "This system you have now,
Page ID#: 1688
63 Proceedings - 3/6/12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 this hawala system, don't do it; but if you send money to Switzerland, they can send it to Iran." Now, is this the advice that I would have given to Dr. Yasrebi if I wanted to give him conservative advice about how to comply with the regulations? No, it's not. And, frankly, I don't think Mr. Khastoo was a very good lawyer. But what these documents show is when an issue was raised with Dr. Yasrebi, he consulted with professionals and he changed the way Child Foundation operated. And, Judge, the Government's own documents that show money going through these money exchangers show that those exchanges stopped right at this same period of time when he was consulting with the professionals about this Swiss operation. He heard a concern, he consulted with professionals, a solution was proposed, and he stopped what they were doing. There's one more example that Mr. Gorder raised. And that is the letter that Dr. Yasrebi got from OFAC in 2004 that may have raised additional concerns about this -- the way the Child Foundation was doing business. First of all, I'll note that OFAC said, "You can't send this $250,000 for the Bam earthquake," and Dr. Yasrebi responded by not sending the $250,000 for the
Page ID#: 1689
64 Proceedings - 3/6/12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Bam earthquake. But perhaps even more important than that, at that time when Dr. Yasrebi received that letter from OFAC, he started to lose faith in Mr. Khastoo, and maybe this advice about Switzerland is bad advice. And we've given Your Honor a note that Dr. Yasrebi sent to his board at that point in time, saying, "You know, Khastoo has put us in a tight spot here." And the very day he sent that email to his board Dr. Yasrebi picked up the phone and he hired new lawyers; the Berliner Corcoran and Rowe firm. Just one of the leading law firms in the country in this area of the law. And the bills we submitted to the Court show that in late 2004 and early 2005 the Berliner Corcoran and Rowe firm was providing advice intensely to Child Foundation. And in late April 2005 they talked specifically about this Swiss arrangement and about compliance efforts. And the last entry, Your Honor, on this bill, discussing that issue, is April 25th. And, again, the Government's own documents, which summarize the transfers to Switzerland -- this is page 3 of the three-page document -- show that on the very next day, after he talked to his lawyers about this, that was the last time they ever sent money through Switzerland. So, once again, an issue is raised. He goes out and
Page ID#: 1690
65 Proceedings - 3/6/12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 he hires new lawyers. He talks about this program, and he stops immediately and transitions to this new program whereby they are buying food in Dubai and transmitting it to Refah Kudak in Iran. That was clearly the safest way to proceed, because, even as the Government concedes, sending food is clearly permitted by the regulations. Now, sometimes Refah Kudak sold that food before it reached Iran; sometimes after it reached Iran. But all of the money that Child Foundation donated and got nothing in return went to help the children that Dr. Yasrebi has spent the last 15 years of his life trying to help. As time went on, discussions continued at Child Foundation. Mr. Atkinson has gone through some great detail showing what those discussions were. And were people raising concerns? Yes, they were. And what was Dr. Yasrebi's response to that? He ordered a comprehensive -- in 2006, a comprehensive audit and legal review of everything going on at Child Foundation. And, ironically, it's that audit that he ordered that ultimately led him to commit the conduct for which he pled guilty here. Because it was in the course of that audit that Mr. Kirkwood raised his concerns. And when he did, Dr. Yasrebi frankly panicked. They were in
Page ID#: 1691
66 Proceedings - 3/6/12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 the middle of this comprehensive audit, these issues came up, and for a period of a few months -- and we don't limit it to just October of 2006, Your Honor -- for a period of a few months Dr. Yasrebi and Mr. Iranshahi admittedly engaged in the conduct that he pled guilty to here, trying to phoney up documents. And we don't hide from that. He's admitted it, and he's pled guilty to it, and he's here today to be sentenced for that conduct. I think, Your Honor, at the end of the day what does this all add up to? And how do you judge a man and the things he did? Dr. Yasrebi committed a crime. That's true. But Dr. Yasrebi also had the courage, the energy, and the commitment to do something that few of us will never do. He recognized inequality and suffering in the world and he did something about it. He really did something about it. And if a man is judged by the totality of his actions, Your Honor, Mehrdad Yasrebi should be favorably judged. Sending him to prison, taking him away from his family and his community would serve no useful purpose in this case, Judge, and that's why we respectfully request that the Court impose a sentence of probation with whatever conditions you deem appropriate. THE COURT: All right. I've cancelled my appointment at noon, and we're going to go through and
Page ID#: 1692
67 Proceedings - 3/6/12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 of. THE LAW CLERK: The Child Foundation? THE COURT: Oh, I'm sorry. I kind of missed you over here. You've been quiet. MR. CALO: We've been very quiet, Your Honor. We have, in the time that has passed, scaled down our arguments and we do want to say a few brief comments. THE COURT: You'll make it short, I hope. MR. CALO: I've got that hint, Your Honor. THE COURT: Okay. Thank you. (Recess taken.) THE CLERK: All rise. THE COURT: I apologize for keeping you complete the sentencings today. I want to take about a ten-minute recess at this point and come back at ten minutes of, and we'll continue -- now, do you have any further presentation you wish to make other than Dr. Yasrebi? MR. ANGELI: Only to answer any questions that Your Honor has. THE COURT: Okay. Government? I don't want additional argument. I just want to know if you have anything else you want to present. MR. GORDER: No, Your Honor. THE COURT: We'll be in recess, then, until ten
Page ID#: 1693
68 Proceedings - 3/6/12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 waiting. At this point we'll hear from Mr. Calo. MR. CALO: Thank you, Your Honor. Again, following the Court's dictates, I'll try to be very, very brief. I know the Court has read all our papers and have studied the exhibits. I just have one point to make on each separate area we're contesting here. The fine and the probation for the Foundation. My first point relates to what the Court said at the commencement of the hearing. The Court had indicated that it was going to go with the guideline of 2M5.1, which, of course, would carry over from the individual to the Foundation itself. And then the Court indicated, correctly that probation is recommending a $60,000 fine and the Government is recommending a $125,000 fine. But the Court went on to say, as I recall, that those are both departures from the guideline. When, in fact, as probation, in the presentence report, makes clear, and as our papers make clear, once you go to the 2M5.1, it's not listed under chapter 8 of the guidelines. So the Court is right back into 3553 and 3572, which means that it's a clean slate. There is no guideline number that begins the analysis. And maybe perhaps the Court meant that. I just wanted to clarify that one point. THE COURT: I agree with you. At this point
Page ID#: 1694
69 Proceedings - 3/6/12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 say. The second point I wanted to make, Your Honor, is just on the probation. It's a point we didn't make in our papers, but I will be very brief about it. I wanted the Court to realize that there's a very different feeling for probation between a charity and a corporation. I'm sure corporations have appeared for sentencing in front of this Court. I've represented corporations from environmental crimes, financial fraud committed by executives of the corporation, and what is important is even when those corporations are placed on probation, their customers do not flee; their suppliers do not flee. They may have a momentary dip in their stock price, but it doesn't affect them. Citicorp, Goldman Sachs has had misconduct. There's been no run on those banks. They continue as always. But charities are a much different animal, the Court has discretion to order a fine within the statutory amount. MR. CALO: Right. From zero right up to the statutory maximum. THE COURT: That's my understanding. MR. CALO: There's no guideline recommending -THE COURT: That's my understanding. MR. CALO: Okay. And that's all I wanted to
Page ID#: 1695
70 Proceedings - 3/6/12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Your Honor. Charities -- the goodwill is very, very fragile. Donor dollars are very scarce. People can go elsewhere. And so what it is is can be more of a death-knell to a charity than it can be for a private corporation. And so for this -- for this organization, to put it on probation is sending a message to the general public that something is still amiss, something needs to be guided by the Court and by the probation office, when, in fact, this foundation has policed itself, rehabilitated itself, set up internal and external procedures to keep it in line, and it has OFAC and IRS oversight continuously. So if you weigh the -- the benefit of probation is very, very marginal. It's not necessary. Every condition that the probation office has, every suggested condition that the guidelines has, we have satisfied. So I just wanted the Court to be aware that it's much different to place a charity on probation. It has major consequences that a corporation will not suffer. And, on that, I'll submit it, unless the Court has any questions. THE COURT: Thank you. Mr. Angeli, your client wishes to be heard, I understand. MR. ANGELI: He does, Your Honor.
Page ID#: 1696
71 Proceedings - 3/6/12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 THE COURT: Thank you. I'll get your name right. Yasrebi? THE DEFENDANT: Yes. THE COURT: Have you had an opportunity to review the presentence reports that were prepared by probation for both the Child Foundation and for yourself? THE DEFENDANT: Yes, Your Honor. THE COURT: All right. Do you wish to make any statement to the Court at this time regarding the charges against you and your sentence? THE DEFENDANT: Yes, Your Honor. THE COURT: All right. If you would, please. THE DEFENDANT: Thank you for giving me the time to speak. Your Honor, I have broken the law. I accept complete responsibility for what I did. I stand here ready to accept whatever sentence you decide is appropriate. I'd like to take this time to tell you how I feel about what I have done. Child Foundation was my passion for many years. My work with Child Foundation was always for the purpose of helping the struggling children in Iran. I've never used any of the Foundation's money to enrich myself. I'm deeply hurt by any accusation that I did so. For most of my time with Child Foundation we
Page ID#: 1697
72 Proceedings - 3/6/12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 honestly tried to do things in what we thought was the right way. As you know, however, during one period of time I did not do what I thought was right; but, instead, obstruct people about how Child Foundation was operating. I have no excuse for that. I did what I did because I was trying to help Child Foundation, but that does not make it right. By doing what I did, I not only broke the law, but I jeopardized the Foundation and its mission and caused a lot of pain and difficulty for many innocent people. Your Honor, I am proud of what I did for Child Foundation and its children over the years. I certainly am not proud of the conduct that I admitted to this Court. By doing what I did, I brought shame on myself. I can't change what I have done, but I can do my best to live the remainder of my life with honor, and I intend to do so. Your Honor, I thank you for taking the time to listen to me. THE COURT: All right. You may be seated. This will probably take a little while. I want to go through the factors that the Court has considered in writing a sentence. MR. CALO: Your Honor, I didn't realize we were moving into this part. The president of the Foundation
Page ID#: 1698
73 Proceedings - 3/6/12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 would like to make a statement as part of the allocution if it's okay. Thank you very much. THE COURT: Would you introduce him? MR. CALO: This is Mr. Navid Seyedali. All right. MR. SEYEDALI: Your Honor, my name is Navid Seyedali. I'm president and a board member of Child Foundation, a nonpolitical and nonreligious and nonprofit organization. At the outset, I want the Court to know that we accept responsibility for the misconduct to which our former president pled guilty and fully accept to be penalized in some way. I'm here to give the Court additional information to show that a minimal fine and no probation is a fair sentence for CF. Your Honor, Dr. Mehrdad Yasrebi founded Child Foundation over 17 years ago, which, up to date, has successfully graduated over 500 young men and women from universities and over 11,000 teenagers from high school. We considered this a worthwhile achievement and increasing these numbers is our goal. We understand that mistakes have been made in the past. We have taken responsibility for that. As any
Page ID#: 1699
74 Proceedings - 3/6/12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 responsible entity, we have made genuine effort and implemented processes to safeguard and circumvent future mistakes. We detailed those processes in my briefing to this Court. We ask the Court to take the full view into account as it considers the fair and just sentence for this charity. Child Foundation has made genuine effort to identify and correct areas that have brought us here and designed and initiated processes of procedures that will protect us from experiencing what we've gone through for the past three years. Child Foundation has already suffered tremendously as a result of the conviction. We've lost some of our donors, we've lost the accreditations of rating agencies, financial institutions have closed the doors to us, and our morale has been hampered, but we're -- we're resolved to carry out our mission. We respectfully request what this Court considers trusting the reputable members of the present board of directors to continue running this organization without hinderance of any probationary mechanism or any significant fine. These individuals have done nothing to warrant mistrust and are worthy of being trusted. A harsh sentence, Your Honor, with the burdens of
Page ID#: 1700
75 Proceedings - 3/6/12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 hefty fines and/or the terms of probation, will undermine our creditability within our donor base and, consequently, it will adversely affect our abilities to serve children who are underprivileged. We respectfully submit that we do not see any added value in a position of any terms of probation. We believe probationary terms would be a waste of government resources and impose undue hinderance on our humanitarian work. Therefore, we respectfully request this Court consider allowing us to operate without probation. We recognize that the Court must see that some punishment is necessary, but we respectfully request that the Court take into consideration the harm the Foundation has already suffered. For this reason we ask the Court to order a minimal fine. The fine will be a severe financial hardship, since the source of funds is publicly donated money, which would be better used supporting children in need. At the end, Your Honor, please consider the fate of the 3,000 voiceless children that we support. And this a harsh sentence for Dr. Yasrebi and the organization will have the same negative effect for the organization. On behalf of Child Foundation, we appreciate the time you've provided to hear this statement. Thank you.
Page ID#: 1701
76 Proceedings - 3/6/12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 THE COURT: You're welcome. You may take your seat. MR. SEYEDALI: Thank you. THE COURT: We heard a great deal about Child Foundation and the activities of Defendant Yasrebi. Probation has interviewed Defendant Yasrebi. Probation has received the information regarding this case. I'm going to quote from the presentence report prepared by probation regarding the activities generally of the Child Foundation. They report, quote, the Child Foundation was established in 1994 by co-defendant Mehrdad Yasrebi. He served as CEO until his resignation in 2010. The Child Foundation was established to provide basic necessities to children living in poverty through sponsorships. Sponsors pay a minimum of $20 per month. Children receive aid for their entire academic career and, for some, through their college years. Children may have more than one sponsor. The sponsor's donations provide relief to the children in the form of food, clothing, medical assistance, and educational needs, and, outside Iran, shelter and emergency funding. The Child Foundation is currently providing aid to approximately 3,000 children worldwide. In recent years, the Child Foundation conducted
Page ID#: 1702
77 Proceedings - 3/6/12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 fundraisers for earthquake victims in Haiti, Japan, and Turkey and has raised funds for Pakistan flood victims. Outside of Iran, the Child Foundation collaborates with numerous universities to provide funds for economically disadvantaged students and also collaborates with Habitat for Humanity, the American Cancer Society, and Boys and Girls Aid Club. Now, the background of Mr. Yasrebi is set forth at page 10 and 11 of the presentence report. I'll summarize that. He is 54, was born and raised in Iran. He entered the United States in 1976, at age 19, for education purposes. Since 1992, he's had permanent residence alien status. He obtained a master's degree from UCLA and a Ph.D in ceramic engineering from the University of Washington. From August of 1991 until September of 2011, he worked for Precision Castparts as an engineer working in research. He has a wife and two children. The children are attending college. Both have plans to attend medical school. He's been described as a devoted husband and father. He took a major role in raising the children. He has been dedicated to his humanitarian activities. With regard to the charge in the case, the original indictment was filed in October of 2005. It alleges that the Child Foundation was required to file a tax return
Page ID#: 1703
78 Proceedings - 3/6/12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 identifying its substantial contributors and compensation information, but failed to do so. A superseding indictment was filed by the Government on February 2nd, 2006, adding further failures to identify and alleging a violation of the Iranian transaction regulations in connection with an Italian company. Those counts will be dismissed by reason of the charge in the superseding information which was filed in January of 2011. Just over a year ago. That charge alleges improper transfer of funds, in violation of the Iranian embargo. The charge is basically that cash transfers were made which were illegal under the embargo. Defendant Yasrebi pled guilty in January of 2011, stating as follows -- and I read this statement, because it is a factor in some of the decisions that the Court has made. With respect to the charge to which I am pleading guilty, I represent that I did the following acts and that the following facts are true: From the middle of 2006 through early 2007, as president of the Child Foundation, I was aware that Child Foundation funds were being used to violate cash transfers to Iran for charitable purposes, but, nevertheless, in violation of an embargo ordered by President Clinton. The term "in violation of an embargo" is the defendant's term that's used in the petition and in the
Page ID#: 1704
79 Proceedings - 3/6/12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 colloquy with the Court at the time of the guilty plea. He says: It was within my power to stop those transfers, but I failed to do so. Furthermore, I did not disclose those transfers to the IRS, OFAC, or Child Foundation's auditors, and encouraged several individuals to refrain from volunteering any information suggesting the cash transfers had ever been made. Now, at the same time Child Foundation pled guilty, acknowledging that Mr. Yasrebi was president of the Foundation, acknowledging that the facts to which he admitted to in his plea petition were done on behalf of Child Foundation, with the intent to benefit Child Foundation and for which Child Foundation is vicariously liable. The Foundation admitted that Child Foundation funds were being used to facilitate cash transfers to Iran in violation of the embargo. The charge to which the defendants pled guilty is basically the defendants participated in a cover-up of the fact that cash transfers were made to entities in Iran in furtherance of their humanitarian activities, which they understood violated the embargo. Now, the defendants argue that, in fact, the embargo does not prohibit the transfer of cash for humanitarian purposes. Both parties had submitted lengthy briefs on
Page ID#: 1705
80 Proceedings - 3/6/12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 the subject, and there have been, and still are, differing opinions on the subject. For example, a letter written by Richard Newcomb, who was the director of the Office of Foreign Assets Control, to a lawyer inquiring for the -- for a company engaged in similar humanitarian activities in May 1997, advice that the Foundation could transfer donated cash funds to the Foundation in Iran for humanitarian purposes. Mr. Newcomb testified in a later case in New York, at length, supporting this proposition. That's set forth in the transcript, I believe, of his testimony -- is set forth in Exhibit 11 of the declaration of David Angeli. In the year 2000, Child Foundation's attorneys sent a letter to the Office of Foreign Asset Control raising the issue and asking for advice. They submitted roughly 86 pages of background information, including a report of the Foundation's activities in Iran. The Government acknowledged receipt of the letter but did not respond to the questions posed by Child. Instead, the correspondence was reassigned internally to the enforcement division for review and possible investigation. Receiving no response, Child Foundation wrote again in August of 2001, posing the same questions and giving
Page ID#: 1706
81 Proceedings - 3/6/12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 information. The Government records -- at least that's my understanding. The Government records indicate the letter was received, but the Government could not locate the letter within OFAC. Apparently -- and it's clear -the Government investigation continued from that point forward. Now, both parties cite legal authority for their positions. The Court has looked at this. The issue is a close call, even considering the possibility of Mr. Yasrebi's good faith efforts to comply with the law, his potential reliance on professional advice, and the fact that at least some individuals within OFAC read the regulation differently. But there is sufficient support in the record where a conclusion that Yasrebi's activities regarding transfers were in violation of the embargo. And I note in his plea, to the charge set forth in the plea petition, he states: I was aware that Child Foundation's funds were being used to facilitate cash transfers to Iran for charitable purposes, but, nevertheless, in violation of an embargo ordered by President Clinton. The language there does indicate to the Court that, at the least, Mr. Yasrebi had the understanding that the embargo prohibited the use of cash transfers to Iran.
Page ID#: 1707
82 Proceedings - 3/6/12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Now, the Court finds that the cash transfers were made for humanitarian purposes. The cash transfers made in 2006 through early 2007 did violate the embargo in effect at that time. I believe that defendant is bound by his admission in the plea colloquy. My finding in this case is for the purposes of this case. I do find that the cash transfers at issue were prohibited by the embargo. Now, the Court is required to find the advisory guideline applies to the case. Again, there's substantial dispute and extensive briefing on the guidelines to be applied. Each party has argued for a different offense level which has a substantial effect -the offense level has a substantial effect on the advisory guideline range. The parties read the same language but come to different conclusions. This is a substantial issue. This is an issue that the Court could go either way. I note while the Government and probation argue for the highest possible offense level, both recommend the sentence below the resulting guideline range. The Court feels that the advisory guidelines argued by the Government are very high for this case and that there are many factors to consider in arriving at a just, reasonable, and necessary sentence; a sentence which I
Page ID#: 1708
83 Proceedings - 3/6/12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 will discuss. However, the Court finds that the base offense level is 26 and the guideline 2M5.1(a)(1), which covers evasion of expert controls, the Court is going to adopt the guideline findings of probation and those argued by the Government. As I say, I have some serious reservations about it, but I think, on balance, that guideline range is the guideline range that the Court will accept. Now, based on the adoption of the offense level of 26 and the probation recommendation on the guidelines, I find that the appropriate offense level, before adjustment, is 26, which results in an advisory guideline range of 46 to 57 months. As I've indicated, there are many mitigating factors under § 3553, which I will consider in determining the sentence in this case. Now, the Court is charged with imposing a sentence which is sufficient, but not greater than necessary, to comply with the purpose as set forth in 18 U.S.C. § 3553. Sentencing courts are to treat the guidelines only as one factor among the 3553(a) factors that are to be taken into account in arriving at the sentence. As I've indicated, I have found that an advisory guideline range of 46 to 57 months is appropriate; but,
Page ID#: 1709
84 Proceedings - 3/6/12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 given the nature of the charge and the many mitigating factors, frankly, the guideline range is not particularly helpful in arriving at a just and reasonable sentence in this case. Now, the Court has considered a number of factors. I'm going to go through these. Participating in or covering up activities that violate an embargo is a serious charge. While the record is clear that the activities and motivation on the part of defendants were fairness and humanitarian assistance to children, including Iranian children, the evidence is that defendants knew at some point in time, or believed, or supposed, that there was an issue as to whether cash transactions could be made without violating the embargo. As I've indicated, I find that -- I've already found that cash transactions violate the embargo. The record reflects that Defendant Yasrebi, rather than resolving the issue within the terms of the embargo, embarked on several methods of hiding and failing to disclose these cash transfers. This was, at the least, very poor judgment, and, in fact, constitutes and was a felony offense. He continued to seek methods of continuing to include cash transfers in support of the children even after he arrived at the understanding or belief that it was prohibited.
Page ID#: 1710
85 Proceedings - 3/6/12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Now, balanced against those facts are the following factors: Neither defendant has ever been involved in any criminal activity other than these charges relating to the transfer of cash to Iran to pursue their humanitarian project. Defendant Yasrebi's history indicates that he has many accomplishments. He's a good family man, a hard worker, and has been involved in humanitarian work for over 15 years. He has substantial support from the community. Now, both defendants are not likely to reoffend. There's no question in the Court's mind about that. There is no substantive evidence of -- that defendants were in any way assisting the Government of Iran or any terrorist organization. There are activities and suppositions which the Government has reported, but the Court notes that after, roughly, over eight years of investigation, no substantive evidence was developed. Other than that, Mr. Yasrebi and Child Foundation were engaged in furnishing humanitarian assistance to children and were not supporting any regime or terrorist activity. The Court finds there is nothing to support any such charge, and, in fact, no such charge has been formally made by the Government. The defendant has been substantially punished at this point by reason of the charges and his conviction of
Page ID#: 1711
86 Proceedings - 3/6/12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 those charges. For a number of years this litigation has been a cloud over the heads of the defendant and his family. In addition, there have been large financial costs to him because of the charges and the defense. He is a permanent resident alien, and his long-pending citizen application has recently been denied. Undoubtedly, this litigation was a factor. He will face immigration issues by reason of this conviction. Now, his intentions were entirely charitable. There's no evidence, that the Court can see, of any specific harm to national security. With regard to the request for a fine, Dr. Yasrebi is unemployed at the present time, has substantial family obligations, and is not wealthy. The Court intends to impose a fine, but it will be less than that recommended by the Government. As I previously discussed, there are substantial issues both as to the offense level that's appropriate in this case, which substantially raises the advisory guidelines, and there are also legal issues regarding the Iranian transfer regulations which the Court has resolved in favor of the Government. These are factors that the Court is also considering under 3553.
Page ID#: 1712
87 Proceedings - 3/6/12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Now, the defendant, as I've indicated, attempted to obtain information on this subject in 2000 and 2001, but the Government did not respond to them and, instead, opened an investigation file. As counsel has argued, and it can be argued, that if the Government had responded on the merits of the question, we might not be here today. Dr. Yasrebi will have the stigma and the limitations that come with a felony conviction. I note that there is substantial disparity between the sentences imposed for this type of conduct and the sentence requested by the Government. At page 21 and 22 of the Child Foundation reply memorandum, there are a number of cases listed by the defendant. These are cases involving the same type of conduct. They may not be exactly the same, but the same type of conduct. In all but one case the defendant was given a noncustodial sentence, often with the consent of the Government. I would note specifically the case of USA v. Groos. That's discussed at page 22 of the Child's reply memorandum. In that case, the defendant was sentenced based upon his attempt to distribute fire suppression equipment to Iran without a license. The company was not charged criminally and the individual defendant's guideline range was 24 to 30 months. The Court departed
Page ID#: 1713
88 Proceedings - 3/6/12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 downward to 60 days imprisonment. And, in pronouncing the sentence, the district court judge noted the amendment history of § 2M1.5 lends evidence to the defendant's argument that the harshest punishment should be reserved for cases where weapons or military technologies are at issue and where the threat to national security is apparent. As I indicate, the defendant has cited cases on the issue of disparity, which indicate there is a disparity between the request of the Government and sentences in this type of case. The probation department in the presentence report states, quote, The threat to national security was less than average. In fact, the Court feels it was basically nonexistent. With regard to the request for a fine against Child's, consideration should be given to the fact that the source of the funds, which are mostly donations received from innocent donors, reducing the funds would adversely affect the children for whom the funds were raised. Motive is a major factor in these cases, and in this case the motive was solely humanitarianism -humanitarianism. There's lack of financial consideration to the defendants. The entry of a guilty plea will save
Page ID#: 1714
89 Proceedings - 3/6/12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 a tremendous amount of money in prosecuting this case. Defendant's conduct caused little, if any, harm to U.S. sanctions. We're not really aware of any harm to the sanctions, other the fact that there is a violation here as discussed. It has conferred no benefit, in the Court's view, on the government of Iran. The overriding fact is that the Government investigated and surveyed and obtained warrants to search his facilities and looked at computers for about ten years and found no evidence that he's in any way supporting terrorist activities or is a supporter of the Iran regime. In fact, the evidence is to the contrary. It seems, to the Court, with the extensive investigation made by the Government, if there was something there, it would have been found and it would have been in this record and in the record at this point. Now, I will note that regarding the Child Foundation they've completely revamped their operation, they've met all of the conditions required by the Government as part of the plea agreement. The list was substantial. They have a negative net worth, according to the presentence of this report. They undoubtedly lost donations as a result. I mention that he has support in the community.
Page ID#: 1715
90 Proceedings - 3/6/12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 There were numerous letters from the Iranian children who were part of the program over the years. Pretrial Services reports that he has met all of the conditions of release. On the record before this Court, there's no evidence that defendant committed this crime through any violent or threatening behavior. There's no evidence that defendant's conduct facilitated or encouraged any violence in Iran. The Government's evidence does not support any conclusion that defendant's conduct posed a national security threat to the United States, nor is there evidence suggesting that any such threat, in fact, was created. After reviewing all of the material and hearing the arguments, it's the Court's feeling that while this is a serious crime, after reviewing all of the factors, which I am required to consider under § 3553, the positive factors in favor of the defendants outweighed the negative aspects of the case. With regard to the Child Foundation, would you stand, please, Mr. Calo. Would you like to present any further information at this time before the Court passes sentence? MR. CALO: No, Your Honor. We'll submit it. THE COURT: Okay. Well, I've considered the
Page ID#: 1716
91 Proceedings - 3/6/12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 advisory sentencing guideline range. I've considered all the factors that I've set forth here. I'm going to impose sentence of what I feel reflects the seriousness of the offense, that will provide just punishment for the offense, that will afford adequate deterrence to criminal conduct. It will be the judgment of the Court that the defendant, Child Foundation, pay a fine in the amount of $50,000, due immediately in full. Interest will be waived. Now, if the defendant has not paid that fine within a reasonable period of time, they shall commence payments of not less than $2,000 per month. Now, the defendant argues against probation. I don't know that they need probation, but there are a number of conditions they have to fulfill. I'm going to place the defendant on probation for a period of two years or until the fine has been paid, but no less than two years. I feel that the probation is appropriate in this case because of the numerous conditions of supervision that have -- well, numerous conditions that have been made a part of the plea agreement. During the period of probation, the probation officer can make certain that these conditions are being obeyed. The Court does receive requests to terminate probation when there's no -- showing that there's no need
Page ID#: 1717
92 Proceedings - 3/6/12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 for probation. That will be the judgment of the Court. The period of probation is two years. They'll pay the fine of $50,000 during that time. All transactions conducted with Iran by the Foundation shall receive approval from the Department of Treasury, Office of Foreign Assets Control. Now, there's to be notice to the donors and contributors for the past five years in writing of the behavior in a form to be approved by the Government. The Government and the defendant have not been able to agree on the form. It's been submitted to the Court. I'll furnish you with a formal notice when I've completed this sentence. Now, the further condition is that the defendant develop and submit a compliance program to be approved by the Government and the probation office. They shall authorize release of the probation office of any and all financial information by execution and release of the financial information form. Prior to sentencing, the defendant agrees to terminate the employment of its current office manager. Have these conditions all been met, Mr. Gorder? MR. GORDER: It's my understanding they have, Your Honor, with the exception of the donor letter.
Page ID#: 1718
93 Proceedings - 3/6/12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 THE COURT: Okay. All right. Prior to -excuse me, the defendant shall pay a fee assessment in the amount of $400, due immediately in full. Is there a waiver of appeal rights as part of the agreement? MR. GORDER: Yes, Your Honor. THE COURT: Okay. You have waived some or all of your appeal rights as part of the plea agreement. These waivers are generally enforceable. If you believe the plea agreement allows you to appeal, you must file an appeal within 14 days of the entry of judgment. If you are unable to pay the cost of an appeal, you may apply for leave to appeal in forma pauperis. And if you request, the clerk of the court will prepare and file a notice of appeal on your behalf. Do you have charges to dismiss, Mr. Gorder? MR. GORDER: Yes, Your Honor. We move to dismiss the underlying indictment and superseding indictment. THE COURT: There's two underlying indictments. The one in 2005 and the one in 2006, they both will be dismissed? MR. GORDER: That's correct. THE COURT: All right. Any questions, Counsel, about the judgment?
Page ID#: 1719
94 Proceedings - 3/6/12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 MR. CALO: No, Your Honor. THE COURT: Any questions from the Government with regard to the Child Foundation? MR. GORDER: No, Your Honor. MR. ATKNSON: No, sir. THE COURT: All right. That completes the sentencing process for Child Foundation. Mr. Yasrebi, would you stand, please. All right. I've considered all the factors that I've discussed with you, the advisory sentencing guideline range, the factors required under 3553, and I've selected a sentence that I believe appropriately addresses the nature and circumstances of the offense, the history and characteristics of this defendant, that will reflect, also, the seriousness of the offense and promote respect for the law and provide just punishment. It will be the judgment of the Court that the defendant shall pay a fine in the amount of $50,000, due immediately in full. Interest will be waived. The defendant shall be placed on probation for a period of five years, subject to the standard conditions of supervision adopted by this Court and the following special conditions: He shall cooperate in the collection of DNA, as directed by the probation officer, if required by law. His employment shall be subject to approval by
Page ID#: 1720
95 Proceedings - 3/6/12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 the probation officer. The defendant shall authorize release to the probation officer of any and all financial information by execution of a release of financial information form or by any other appropriate means as directed by the probation officer. He shall pay this fine in the amount of $50,000. If there's any unpaid balance or inability to pay the full balance, it shall be paid at the maximum installment possible, and not less than $1,500 per month. I believe this is an appropriate case for a noncustodial sentence for an alternative sentence to a prison sentence. Accordingly, I'll require that he adhere to a home detention schedule, as prescribed by the probation officer, for a period of 12 months, which may include radio frequency, global positioning surveillance, or other means of location monitoring as directed by the probation officer. The defendant's employer or other third parties may be contacted, at the probation officer's discretion, to confirm the defendant's compliance with the home detention program. He shall pay all or part of the cost of home detention, as determined by the probation officer, and may be held responsible for any damage to the monitoring equipment. The drug testing condition is suspended based on the
Page ID#: 1721
96 Proceedings - 3/6/12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Court's determination that the defendant poses a low risk of future substance abuse. He shall pay a fee assessment in the amount of $100. That's due immediately. Now, you have waived some or all of your appeal rights as part of the appeal agreement. These waivers are generally enforceable. If you believe the plea agreement allows you to appeal, you must file a notice of appeal within 14 days of the entry of judgment. If you can't pay the cost of an appeal, you may apply to appeal in forma pauperis. If you so request, the clerk of the court will prepare it and file a notice of appeal on your behalf. Now, are there pending charges -- I guess there are, as well, Mr. Gorder, as to Mr. Yasrebi? MR. GORDER: Yes, Your Honor. The same two indictments should be dismissed. THE COURT: Any issues regarding the form of judgment that we need to discuss? MR. GORDER: No, Your Honor. THE COURT: Do you have any issues regarding the form of judgment, Mr. Angeli? MR. ANGELI: No, Your Honor. THE COURT: We're going to have a long period of home confinement here. I talked to the probation officer. I've conveyed to him the fact that this will
Page ID#: 1722
97 Proceedings - 3/6/12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 allow Mr. Yasrebi to be -- the home confinement conditions will allow him to work and go to places approved by the probation officer. I believe that that alternative to imprisonment is very appropriate and very fair and reasonable in this case. Anything further we need to discuss? MR. ANGELI: Nothing from us, Your Honor. MR. GORDER: No, Your Honor. Thank you. THE COURT: Good luck to everyone connected with the case. Thank you. MR. ANGELI: Thank you, Judge. THE CLERK: Court is adjourned. (Hearing concluded .)
Page ID#: 1723
98 Proceedings - 3/6/12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 /s/Jill L. Erwin ________________________ Jill L. Erwin Official Court Reporter C E R T I F I C A T E I certify, by signing below, that the foregoing is a true and correct transcript of the record of proceedings in the above-entitled cause. A transcript without an original signature, conformed signature, or digitally signed signature is not certified.
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