Source: https://ja.scribd.com/document/30649242/Prosecution-SentencingMemorandum
Timestamp: 2019-06-27 10:51:04
Document Index: 391192941

Matched Legal Cases: ['§ 3553', '§2', '§3', '§1', '§2', '§2', '§2', '§2', 'art, 415', '§2', '§2', '§ 2', '§2', '§2', '§2', '§2', '§2', '§ 2', '§ 2', '§ 2', '§ 2', '§1', '§ 2', '§ 2', '§2', '§ 2', '§2', '§2', '§2', '§2', '§2', '§ 2', '§ 2', '§ 2', '§2', '§2', '§2', '§ 2', '§1', '§2', '§3', '§ 1', '§ 1', '§3', '§ 2', '§2', '§2', '§3', '§3', '§2', '§3', '§3', '§ 3', '§3', '§ 3', '§3', 'art, 415', '§ 3', '§3', '§ 3', '§3', '§ 3', '§3', '§ 3', '§ 3', '§ 2', '§ 2', '§ 2', '§ 2', '§ 1956', '§ 1956', '§ 2', '§2', '§ 2', '§ 2', '§2', '§2', '§2', '§2', '§3', '§3', '§3', '§2', '§2', '§ 1956', '§2', '§3', '§3', '§3', '§ 3553', '§2', '§2', '§2', '§2', '§2', '§2', '§2', '§5', '§5', '§5', '§ 2', '§5', '§5', '§ 3664', '§ 3663', '§ 3663']

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Steve Bright_Lawyer_Never Had Any Interest in Makin Lot of Money
Geneva County Board of Education v. Cna Insurance Company and Continental Casualty Company, Alexander & Alexander of Texas, Inc., 874 F.2d 1491, 11th Cir. (1989)
Dennis R. Morley and Marion Schaffer v. Stephen Branca v. Dennis R. Morley, in No. 71-1222. Appeal of Marion Schaffer, in No. 71-1223, 456 F.2d 1252, 3rd Cir. (1972)
United States v. Morton Brilliant, 274 F.2d 618, 2d Cir. (1960)
DEFENDANT’S MOTION TO EXCLUDE IMPROPER TERMINOLOGY
Jury Evaluation 2
Lucie Dolores Hart, as Administratrix of the Goods, Chattels and Credits of Timothy J. Hart, Deceased, Plaintiff-Ap-Appellee v. Vincent Forchelli and Charles N. Forchelli, 445 F.2d 1018, 2d Cir. (1971)
Heir hunter fraud trial
Henry B. Rebmann, Jr., Administrator D.B.N.C.T.A. Of the Estate of R. Harland Horton, Deceased v. Albert A. Canning, 390 F.2d 71, 3rd Cir. (1968)
UNITED STATES v. VENANCIO SANTOS G.R. No. 1530 April 4, 1905.pdf
Miscarriages of Justice in Principle
Annabel Melongo Computer Tampering Trial Transcript
United States v. Fernando Carmona, Jose Omar Sanchez, Carlos Escobar, Faoud Hassan, Angelica Carvajal, Luz Marina Carvajal, Sophie Meja Carvajal, Luis Garcia, Jesus Zambrano, Vicky Quinjano, Gonzalo Gaviria, Robert Pietri, Jose Santa Cruz-Londono, Carlos Escobar, A/K/A "Jairo Escobar", A/K/A "Javier Torres", A/K/A "Florecita", 858 F.2d 66, 2d Cir. (1988)
United States v. Roger Swift, 732 F.2d 878, 11th Cir. (1984)
United States v. Louis Cramer and Minnie K. Cramer, 447 F.2d 210, 2d Cir. (1971)
Case2:08-cr-01324-LRR
2:08-cr-01324-LRR Document
Document876-1
883 Filed
Filed04/12/10
04/09/10 Page
Page11ofof74
Plaintiff, ) No. CR 08-1324 LRR
SHOLOM RUBASHKIN, )
The United States provides this Memorandum regarding sentencing. The
sentencing hearing is scheduled for Wednesday, April 28, 2010, at 8:00 a.m.
I. INTRODUCTION AND OFFENSE SUMMARY. . . . . . . . . . . . . . . . . . . . . . . . . . 3
II. FACTUAL RECORD. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
A. Defendant’s Introductory Objections Should be Overruled. . . . . . . . . . . . 7
B. Government’s Proposed Sentencing Exhibit 5500. . . . . . . . . . . . . . . . . . 8
C. Defendant’s Enumerated Factual Objections. . . . . . . . . . . . . . . . . . . . . 10
III. LOSS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
A. Legal Standards. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
B. Loss to the Banks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
C. Loss to the Cattle Suppliers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
D. Defendant’s Objections. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
IV. NUMBER OF VICTIMS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Page22ofof74
V. SOPHISTICATED MEANS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
VI. AGGRAVATING ROLE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
A. Defendant’s Section 2B1.1 Offenses. . . . . . . . . . . . . . . . . . . . . . . . . . . 37
1. Inflation of Accounts Receivable Collateral. . . . . . . . . . . . . . . . . 37
2. Alien Harboring and Document Fraud. . . . . . . . . . . . . . . . . . . . . 38
3. Packer’s Act Offenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
B. Defendant’s Money Laundering Offenses.. . . . . . . . . . . . . . . . . . . . . . . 41
VII. ABUSE OF POSITION OF TRUST. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
A. Defendant Abused His Position as a Corporate Officer to
Facilitate His Offenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
B. Defendant Abused His Positions as a Corporate Officer of Kosher
Community Grocery and a Corporate Officer of Torah Education. . . . . 49
C. The Assessment of Two Levels for Abuse of a Position of
Trust Does not Constitute Impermissible Double Counting.. . . . . . . . . . 49
VIII. OBSTRUCTION OF JUSTICE.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
A. Defendant Committed Perjury.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
B. Defendant Concealed and Destroyed Evidence. . . . . . . . . . . . . . . . . . . 53
C. Defendant Interfered with Material Witnesses. . . . . . . . . . . . . . . . . . . . 55
D. Obstruction of Justice Regarding Money Laundering. . . . . . . . . . . . . . . 57
IX. MONEY LAUNDERING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
X. SOPHISTICATED LAUNDERING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
XI. SUMMARY OF ADVISORY GUIDELINE RANGE.. . . . . . . . . . . . . . . . . . . . . . 62
XII. A GUIDELINE SENTENCE IS WARRANTED.. . . . . . . . . . . . . . . . . . . . . . . . . 63
Page33ofof74
A. The Court Should Reject Defendant’s Kimbrough Challenge
to the Loss Table.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
B. Grounds for an Upward Departure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
1. Extraordinary Obstruction of Justice.. . . . . . . . . . . . . . . . . . . . . . 69
2. Other Criminal Conduct. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
XIII. FINE.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
XIV. RESTITUTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
XV. CONCLUSION.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
I. INTRODUCTION AND OFFENSE SUMMARY
This case is ordinary in that it involves a common criminal. This case is
extraordinary in that uncommon means were used to cheat a bank and others out of a
staggering amount of money – more than $26 million – and to commit a host of other
Defendant’s charges followed a May 12, 2008, immigration raid that was in
response to defendant’s persistent and pervasive use of underpaid, illegal labor.
Defendant was made personally aware three years before the raid – through letters
from the Social Security Administration – that he was employing hundreds of
undocumented workers at Agriprocessors. Rather than compromise his unlawful
business plan, defendant made every effort to maintain his illegal underpaid workforce.
An ICE Agent visited the plant in the Fall of 2007 and urged defendant’s human
resources manager to stop hiring workers with bad documents. She did so, but
Page44ofof74
defendant went behind her back to have the illegal workers placed on a separate
payroll. Further, while defendant’s attorneys were urging the government to hold off on
its planned May 12th enforcement action, defendant was secretly funding the purchase
of new, fake resident alien cards for dozens of his undocumented workers – personally
inspecting the fake documents the day before the raid.
The charges against defendant were brought in several superseding indictments
as a result of a criminal investigation that kept revealing more unlawful schemes. The
more rocks overturned, the more crimes uncovered. When defendant was first charged
with bank fraud in November 2008, his fraudulent scheme to hide millions of dollars in
customer payments had just come to light. However, it was not until early 2009 – when
a trustee was appointed to run Agriprocessors and after its creditors had injected new
money into the business to try to salvage the value of their collateral – that defendant’s
creation of tens of millions of dollars in fake sales was first revealed. The creditors then
too were victimized by defendant’s unlawful actions. When creditors were forced to
liquidate, no one wanted to buy Agriprocessors’ accounts receivable – at least
$10,000,000 of the amount shown on paper did not exist.
Defendant also defrauded the bank by falsely assuring the bank Agriprocessors
was operating legally. In fact, this was far from the truth. At trial, the government
introduced evidence of defendant’s maintenance of an illegal workforce and his practice
of illegally using his livestock suppliers as unwilling banks. Defendant’s lies to his bank
about these unlawful practices were proven beyond a reasonable doubt at trial because
Page55ofof74
they went to the heart of the bank’s victimization. When the truth behind defendant’s
lies was finally made known, Agriprocessors was revealed to be all but worthless to the
bank and others as a going concern. This was due, in part, to the fact defendant had
been running the business with illegal workers earning below-market wages. It was
also due, in part, to the fact defendant had, in essence, been unlawfully extracting
credit from Agriprocessors’ captive cattle and poultry suppliers.
Defendant’s violations of the Packer’s Act were a particularly significant part of
the case against defendant because of the substantial financial harm the violations
ultimately caused. Approximately $5,000,000 was taken out of the bank’s recovery in
the bankruptcy because defendant had not paid his cattle and poultry suppliers as
required by law. This figure added to the already tremendous bank loss caused by
defendant’s creation of false invoices and diversion of income.
The government’s investigation did not slow defendant’s criminal conduct. In
November 2009, the government sought defendant’s detention because, in addition to
making apparent plans to flee, defendant had been covering his tracks by destroying
evidence of his guilt. While the extent of defendant’s obstruction of justice would not be
known until much later, just before Agriprocessors was to be turned over to a receiver,
defendant managed to destroy or hide copies of diverted checks, computer records of
diverted payments, hard copies of fake invoices, and customer statements that were
inconsistent with what the bank had been told. He had previously destroyed or hidden
Page66ofof74
copies of I-9s for the illegal workers he had placed on a separate payroll and assisted
two witnesses to his crimes in leaving the country.1
Now, at sentencing, defendant raises 134 objections to the presentence
investigation report and contests all but a handful of the U.S. Probation Office’s
sentencing guideline calculations. By this sentencing memorandum, the government
shows the U.S. Probation Office’s recommendations are well-founded and defendant’s
numerous challenges should be overruled.
The government asks that defendant be treated the same as any other
defendant brought before the Court for sentencing. After calculating defendant’s proper
guideline range, the Court will consider all relevant factors under 18 U.S.C. § 3553(a),
and impose sentence. Defense counsel has notified the government defendant will
seek a variance from the advisory guidelines range established by Congress and the
United States Sentencing Commission. The government will respond to that request2
when it receives defendant’s filing.
The Court had previously determined defendant to be a flight risk but found there
were conditions of release that would adequately assure his appearance for trial. Once
defendant was convicted by an unbiased jury aware of all the facts, his likelihood of flight
increased substantially because of the potential penalties he faced for his crimes proven
beyond a reasonable doubt. Defendant’s detention was more than justified by his proven
disregard for the law, and should be continued after sentencing if defendant is sentenced
to a term of incarceration.
The government addresses herein one purported ground for variance which
defendant identified in his objection. That is, the government addresses defendant’s
Kimbrough challenge to the loss table in USSG §2B1.1.
Page77ofof74
II. FACTUAL RECORD
A. Defendant’s Introductory Objections Should be Overruled
In his objections to the PSR3, defendant begins by purporting to object “to the
entirety of the statement of the offense conduct contained in the presentence report.“
(Defendant’s Objections p. 1). In conclusory terms, defendant claims the PSR
“contains so many material inaccuracies that it does not present a reasonable basis for
sentencing.” (Id.) Defendant also objects to the PSR on, what appears to be, hearsay
grounds. (Id.) Defendant’s generalized objection to the PSR should be overruled.
"[U]nless a defendant objects to a specific factual allegation contained in the
PSR, the court may accept that fact as true for sentencing purposes." United States v.
Razo-Guerra, 534 F.3d 970, 975 (8th Cir. 2008).
We have never recognized implied objections to factual statements contained in
a PSR. Rather, we require that objections to the PSR be made with specificity
and clarity before a district court is precluded from relying on the factual
"PSR" refers to the draft Presentence Investigation Report disclosed on February
22, 2101 (document #845). “Defendant’s Objection” refers to defendant’s March 8, 2010,
Objections to the draft PSR (document #860). "[Last Name] TT" refers to witness trial
testimony and is followed by the applicable transcript date and page reference, where
available. “[Last Name] DHT” refers to testimony from the November 18, 2009, detention
hearing and is followed by the applicable page reference. "Gov. T Exb." refers to
government exhibits received at trial and is followed by the exhibit number assigned at
trial. "Gov. S Exb." refers to the government’s proposed sentencing exhibits and is
followed by the proposed exhibit number.
Certain proposed sentencing exhibits were received into the record during hearings
other than trial. Such exhibits have been renumbered for sentencing purposes. Courtesy
copies of government trial exhibits specifically cited herein (which have not been
renumbered) are being provided to the Court and counsel along with the government’s
proposed sentencing exhibits.
Page88ofof74
statements contained in the PSR. The purpose of the objection is to put the
Government on notice of the challenged facts . . .
Id. at 976 (citations and internal quotation marks omitted).
Defendant’s generalized claims regarding the accuracy of the statement of
offense conduct as a whole provide no assistance to the Court with regard to
sentencing and are insufficient as a matter of law to call any specific factual matters into
question. Accordingly, the Court should overrule defendant’s generalized objection and
rely upon the PSR’s statement of offense conduct except where defendant has
otherwise lodged a factual objection with “specificity and clarity.” Id.
As to defendant’s hearsay objection, the Federal Rules of Evidence do not apply
at a sentencing hearing. Nor does a criminal defendant have a Sixth Amendment right
of confrontation at a sentencing hearing. See United States v. Brown, 430 F.3d 942,
943-44 (8th Cir. 2005). The Court may rely upon hearsay in making factual
determinations at sentencing, including with regard to the application of the advisory
sentencing guidelines. See id. at 944.
Accordingly, the Court should overrule defendant’s introductory objections the
offense conduct portion of the PSR.
B. Government’s Proposed Sentencing Exhibit 5500
There has been a month-long jury trial in this case and an extensive factual
record has been developed. Mindful that a sentencing hearing is not an opportunity for
the parties to retry the case, the government believes that the Court may rely almost
entirely upon the trial record in resolving the factual disputes attendant to the
Page99ofof74
calculation of the advisory guidelines and other issues for determination by the Court at
sentencing. Despite defendant purporting to object to all of his offense conduct, and
despite defendant’s objections to all but a handful of the advisory calculations made by
the U.S. Probation Office, the government intends to make a very limited factual
presentation at sentencing. However, in order to establish some additional record with
regard to many of the details set forth in the statement of the offense conduct portion of
the PSR, the government has compiled an indexed compendium of witness statements
and reports of interviews as Gov. S Exb. 5500.4 It remains the government’s intention
that the Court rely primarily upon the trial record in resolving issue-specific factual
disputes. However, particularly in view of defendant’s generalized introductory
objection (discussed above), the government intends to offer proposed exhibit 5500,
under seal5, in support of the more subordinate details in the PSR.
The compendium is indexed according to PSR paragraph number, and portions of
the included statements and interview reports have been highlighted in correspondence
with the index. While government’s Gov. S Exb. 5500 is not intended to support every
detail of the offense conduct portion of the PSR, it is the government’s hope that it will be
useful to the Court for the purposes of sentencing and considered for whatever weight the
The exhibit contains grand jury testimony. In addition, given the fact certain
defendants have yet to be apprehended, the government believes sealing is appropriate.
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C. Defendant’s Enumerated Factual Objections
Regarding defendant’s enumerated objections to the factual matters in the PSR,
the government relies primarily upon the established trial record.6 The government
directs the Court’s attention as follows:
Defendant’s Objection 1 (PSR ¶ 57) - The government directs the Court’s
attention to trial evidence regarding the false nature of the purported accounts
Defendant’s Objection 3 (PSR ¶ 106) - The government directs the Court’s
attention to trial evidence showing defendant did conspire with others to harbor illegal
aliens and defraud MBFB. (See e.g. Lykens TT 10/20/09 p. 54 (representative from
MBFB was present at the meeting shortly after the raid when defendant made the false
statements forming the basis for his conviction on Count 101)).
Defendant’s Objections 4-6 (PSR ¶¶ 107-110) - The government directs the
Court’s attention to trial evidence regarding defendant’s role at Agriprocessors. The
government did not concede at trial “that operations were not subject to [defendant’s]
Many of defendant’s assertions and purported clarifications set forth in his
objections are inconsequential, lack foundation, and do not otherwise warrant specific
discussion here. The government’s failure to address each factual assertion made by
defendant in his objections should not be deemed an acknowledgment that such factual
assertions are accurate. Rather, the government leaves to the defendant whether or not
to produce evidence in support of such assertions.
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Defendant’s Objections 7 and 8 (PSR ¶¶ 111 and 112) - The government directs
the Court’s attention to trial evidence, including the testimony of Bensasson, regarding
defendant’s exercise of authority over Bensasson and others.7
Defendant’s Objection 9 (PSR ¶¶ 114 and 115) - The government directs the
Court’s attention to trial evidence regarding defendant’s harboring of undocumented
aliens and the jury’s findings that he made false statements to the bank regarding his
knowledge of harboring at Agriprocessors. Regarding payments to Garnavillo Gospel
so that undocumented workers could be paid in cash, although the Court need not
reach the issue, the government has included grand jury testimony of Ron Wahls and a
report of Bensasson’s April 1, 2010, interview in Gov. S Exb. 5500 at p. 65.
Defendant’s Objections 10-12 (PSR ¶¶ 116 and 165-179) - The government
directs the Court’s attention to trial evidence regarding defendant’s misuse of the Hunt
payroll to harbor illegal workers. Such evidence included the testimony of Billmeyer,
Althouse and Judy Hunt and Billmeyer’s “confused and befuddled” e-mail (Gov. T Exb.
Defendant’s Objections 13-17 (PSR ¶¶ 118-124) - Regarding working conditions
at Agriprocessors, the government has included the search warrant application and
affidavit in support in Gov. S Exb. 5500 at p. 459. In addition, regarding information
from the CI, the government directs the Court’s attention to trial testimony from SA
The government has included an FBI 302 regarding an April 1, 2010, interview of
Bensasson in Gov. S Exb. 5500 at p. 65. In the interview, Bensasson addresses some of
the factual assertions made in defendant’s objections.
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Fischels in this regard. (See Fischels TT (after defendant started putting
undocumented workers on the Hunt payroll after hours, the CI could not gain
employment with fake documents by applying during regular business hours)).
Defendant’s Objection 18 (PSR ¶ 128) - The government directs the Court’s
attention to Billmeyer’s trial testimony regarding her understanding of defendant’s role
at Agriprocessors.
Defendant’s Objections 19-21 (PSR ¶¶ 133-134, 139-140) - The government
directs the Court’s attention to Billmeyer and Althouse’s trial testimony and Gov. T Exb.
1108 (the “confused and befuddled” e-mail) regarding SA Spaulding’s visit and
defendant’s actions with regard to the hiring process and I-9s. The government also
directs the Court’s attention to SA Spaulding’s trial testimony regarding his visit.
Defendant’s Objections 23-29, 31-33 (PSR ¶ 142-148, 152-154) - The
government directs the Court’s attention to Billmeyer’s trial testimony regarding
Agriprocessors’ receipt of no-match letters, her creation of the no-match spreadsheet at
defendant’s direction, and defendant’s acts and omissions in relation thereto. The
government also directs the Court’s attention to the no-match letters entered into
evidence. The government notes there was no evidence at trial or anywhere in the
record that defendant’s unlawful efforts to maintain an undocumented workforce were
done at the direction of counsel.
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Defendant’s Objection 30 (PSR ¶ 150) - The government directs the Court’s
attention to Billmeyer’s trial testimony regarding the meeting between defendant and
Brent Beebe in the parking lot.
Defendant’s Objections 34-40 (PSR ¶¶ 158-164) - The government directs the
Court’s attention to Billmeyer’s trial testimony regarding the circumstances surrounding
the May 2007 walkout. Although not presented at trial, additional information regarding
the walkout is included in statements and reports of interviews of Luis Eduardo
Ixen-Tzuquen, Althouse, Billmeyer, Karina Freund, Nichole Caguach Hernandez,
Shawn Meyer, Martin De La Rosa, and Carlos Guerrero-Espinoza (included as part of
Gov. S Exb. 5500).
Defendant’s Objections 41-52 (PSR ¶¶ 165-179) - The government directs the
Court’s attention to Billmeyer, Althouse and Judy Hunt’s trial testimony regarding the
Hunt payroll scheme, as well as Billmeyer’s “confused and befuddled” e-mail (Gov. T
Exb. 1108). Although not presented at trial, additional information regarding the
scheme is included in statements and reports of interviews of Althouse, Billmeyer,
Karina Freund, Nichole Caguach Hernandez, and Shawn Meyer (included as part of
Defendant’s Objections 53-66 (PSR ¶¶ 180-200) - The government directs the
Court’s attention to Billmeyer’s trial testimony (and e-mails and other documents
entered into evidence) regarding the poultry re-identification scheme and defendant’s
involvement therewith. Other information related to the scheme that was not introduced
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at trial is included in statements and reports of interviews of Alisha Arias, Martin De La
Rosa, and Billmeyer (included as part of Gov. S Exb. 5500).
Defendant’s Objections 67-76 (PSR ¶¶ 201-226) - Regarding the beef
re-identification scheme and defendant’s involvement, the government directs the
Court’s attention to the trial testimony of Billmeyer, Althouse and Guerrero-Espinoza
(and e-mails and other documents entered into evidence), as well as fake resident alien
cards and application paperwork seized on May 12, 2008 (also entered into evidence).
Other information related to the scheme is included in statements and reports of
interviews of Guerrero-Espinoza, Billmeyer, Althouse and Shawn Meyer (included as
part of Gov. S Exb. 5500).
Defendant’s Objection 77 (PSR ¶ 230) - Regarding defendant’s laptop computer,
the government directs the Court’s attention to trial evidence that defendant maintained
detailed financial records on his laptop computer. Although the Court need not address
the issue, the government reserves the option of presenting evidence at sentencing
regarding the location of the laptop during the May 12, 2008, search.
Defendant’s Objection 78 (PSR ¶ 231) - The government directs the Court’s
attention to Guerrero-Espinoza’s trial testimony regarding defendant sending him to St.
Bridget’s church to try to get workers to return to work (and Hosam Amara’s actions and
statements regarding the same).
Defendant’s Objections 80-81 (PSR ¶¶ 233-234) - Regarding defendant causing
the unavailability of Amara and Ben Chaim, the government directs the Court’s
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attention to evidence presented at the November 18, 2009, detention hearing (and
government exhibits entered into the record).8
Defendant’s Objection 82 (PSR ¶ 235) - The government directs the Court’s
attention to the trial testimony of Laura Althouse regarding defendant’s promise to pay
Althouse, Billmeyer and Beebe during any time they spent in prison. The government
also relies upon the Employee Status Forms themselves. (See Gov. T Exbs. 1314,
1315 and 1316).
Defendant’s Objection 84 (PSR ¶ 240) - Regarding defendant’s false assertion
that “trial testimony indicated or suggested” that FBBC was “aware of the money
deposited by AGRI from its customers,” the government directs the Court’s attention to
the trial record as a whole, including the testimony of Phil Lykens, Shane May and Gary
Pratt. There was no evidence at trial to suggest the bank was aware defendant was
diverting customer payments until the returned checks in October 2008.
Defendant’s Objection 85 (PSR ¶ 241) - The government directs the Court’s
attention to the trial testimony of Phil Lykens, Shane May and Gary Pratt regarding the
bank’s knowledge with regard to Agriprocessors’ capitalization. In this regard, the
government also directs the Court’s attention to the testimony of Bensasson and
The government has re-marked the following items, received into the record at the
November 18, 2009, hearing, as sentencing exhibits: Gov. S Exbs. 5504 (detention hearing
exhibit 1319); Gov. S Exb. 5505 (detention hearing exhibit 1300); Gov. S Exbs. 5506
(detention hearing exhibit 6); Gov. S Exbs. 5507 (detention hearing exhibit 7); and Gov. S
Exbs. 5508 (detention hearing exhibit 1301).
16ofof74
Meltzer that defendant consistently manipulated monthly financial statements sent to
the bank to falsely state what defendant wanted them to say.
Defendant’s Objection 86 (PSR ¶ 243) - The government directs the Court’s
attention to the jury’s guilty verdict on Count 101 of the Indictment establishing, beyond
a reasonable doubt, that defendant falsely stated to bank representatives that, “during
the time period leading up to the arrests of approximately 389 undocumented alien
workers at Agriprocessors, Inc. on May 12, 2008, the defendant had been unaware that
such alien workers were undocumented.” (See Final Jury Instruction 14 and Verdict
Form (renumbered Count 29)). As noted above, according to the trial testimony of Phil
Lykens, representatives of MBFB were present during the meeting where the statement
Defendant’s Objection 87 (PSR ¶ 244) - The government directs the Court’s
attention to the trial evidence and the jury’s guilty verdicts and findings demonstrating
defendant caused false statements to be made to the bank regarding Agriprocessors’
compliance with the law, including the Packer’s Act.
Defendant’s Objection 88 (PSR ¶ 247) - The government directs the Court’s
attention to the trial testimony of April Hamilton regarding defendant’s directions to
separately maintain records of diverted customer payments.
Defendant’s Objections 89-90 (PSR ¶¶ 244 and 245) - The government directs
the Court’s attention to the trial testimony of April Hamilton that defendant directed her
to cut Kosher Community Grocery (KCG) and Torah Education of Northeast Iowa (TE)
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Chax checks in seemingly random amounts, as well as the trial testimony of Kerry Bolt
and checks and check summaries entered into evidence. (See Gov. T Exb. 2021
(summary of Agriprocessors money flowing through KCG and into the depository
account in the form of Chax checks); Gov. Exb. 2027 (summary of Agriprocessors
money flowing through TE and into the depository account in the form of Chax checks).
The government also directs the Court’s attention to the jury’s guilty verdicts on the
money laundering counts establishing, beyond a reasonable doubt, defendant did use
Chax checks for concealment.
Defendant’s Objection 91 (PSR ¶ 252) - Defendant’s claim that he lacked the
intent to deceive is inconsistent with the jury’s verdicts on each and every fraud count.
The government directs the Court’s attention to the trial record in this regard as well.
Defendant’s Objection 92 (PSR ¶ 254) - The government directs the Court’s
attention to the trial testimony of Darlis Hendry that defendant acknowledged taking the
fake invoices. (Hendry TT 10/15/09 pp. 44-45).
Defendant’s Objection 93 (PSR ¶ 256) - The government directs the Court’s
attention to all of the trial evidence and the jury’s verdicts determining, beyond a
reasonable doubt, that defendant committed fraud by means of the advance requests.
Defendant’s Objection 99 (PSR ¶ 265) - The government directs the Court’s
attention to the trial testimony of Darlis Hendry and April Hamilton (among other
evidence) that defendant directed both of them to take actions which fraudulently
manipulated APGEN data.
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Defendant’s Objection 102 (PSR ¶ 271) - The government directs the Court’s
attention to the trial testimony of Bensasson and Hendry, as well as Judy Meyer’s “blue
folder” (Gov. T Exb. 2096). There was no trial evidence to support defendant’s claim
that “Bensasson and Meyer engaged in this conduct for years before defendant was
involved.” Both Bensasson9 and Hendry testified that Bensasson never asked Hendry
to create a fake invoice.
Defendant’s Objection 103 (PSR ¶ 272) - The government directs the Court’s
attention to the trial testimony of Darlis Hendry and Bensasson regarding defendant’s
responsibility for the fake invoices.
Defendant’s Objection 104 (PSR ¶ 273) - The government directs the Court’s
attention to the trial testimony of Darlis Hendry and Bensasson that Bensasson never
asked Hendry to create a fake invoice.
Defendant’s Objection 109 (PSR ¶ 282) - As with Defendant’s Objection 102
(regarding PSR ¶ 271), the government directs the Court’s attention to the trial
testimony of Bensasson and Hendry and Judy Meyer’s “blue folder” (Gov. T Exb. 2096).
There was no trial evidence to support defendant’s claim that he “was not involved for
many years.” Both Bensasson and Hendry testified that Bensasson never asked
Hendry to create a fake invoice.
Many details from PSR ¶¶ 258-302 are taken from reports of Bensasson’s
interviews included as part of Gov. S Exb. 5500 at pp. 65-139. The most pertinent
portions are supported by the trial testimony of Bensasson and others.
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Defendant’s Objection 110 (PSR ¶ 291) - As with Defendant’s Objections 89 and
90 (regarding ¶¶ 244 and 245), the government directs the Court’s attention to the trial
evidence regarding defendant’s fraudulent manipulation of check amounts going to and
from KCG and TE and the jury’s guilty verdicts on the money laundering counts.
Defendant’s Objection 114 (PSR ¶ 297) - The government directs the Court’s
attention to the trial testimony of Phil Lykens that the checks were returned for
insufficient funds (as wells as the returned checks themselves, Gov. T Exb. 123).
Defendant’s Objection 116 and 118 (PSR ¶¶ 299 and 306) - The government
directs the Court’s attention to the trial testimony of Bensasson and Kerry Bolt regarding
over $1.5 million in Agriprocessors money that was used to cover defendant’s personal
bank accounts. See also Gov. T. Exb. 114 (excessive compensation summary)).
Defendant’s Objection 117 (PSR ¶ 305) - The government directs the Court’s
attention to the trial testimony of Bensasson and Meltzer that the fraudulent
manipulation of monthly financial statements was done at defendant’s direction.
Defendant’s Objection 124 (PSR ¶ 323) - The government directs the Court’s
attention to the trial testimony of Laura Althouse that defendant gathered copies of the
Hunt I-9s from her either right before or right after the raid. (Althouse TT 10/29/09 p.
Defendant’s Objection 126 (PSR ¶ 325) - The government directs the Court’s
attention to the trial testimony of April Hamilton, Darlis Hendry, and Wendy Torson
regarding defendant’s destruction and concealment of evidence of defendant’s fraud.
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Defendant’s Objection 127 and 128 (PSR ¶¶ 307-315 and 316) - Although
defendant refers to PSR ¶¶ 307-316 in Defendant’s Objections 127 and 128, the body
of the objections refer only to a $1.2 million account at Luana Bank as security for cattle
suppliers and an unspecified reference to other objections. Defendant does not make
any specific objection to the factual matters set forth in paragraphs 314, 315 and 316
regarding the loss figures reported by MBFB and FBBC representatives. Because
defendant has not made a specific objections to these loss figures, the Court may rely
upon the figures for sentencing purposes.10 The government understands defendant is
pursuing a legal objection to the foreseeability of the actual loss represented by those
Defendant’s Objection 133 (PSR ¶¶ 361-364) - Regarding information that
defendant provided approximately $15,000 to $20,000 in illicit cash payments to the
former mayor of Postville during the time the mayor was in office, this information was
not received at trial. The government has included reports of interviews of the former
mayor in Gov. S Exb. at pp. 411-429 which detail the circumstances of the payments.11
"[U]nless a defendant objects to a specific factual allegation contained in the PSR,
the court may accept that fact as true for sentencing purposes." United States v. Moser,
168 F.3d 1130, 1132 (8th Cir.1999).
This information should be considered by the Court generally at sentencing and,
as discussed below, would provide a potential basis for an upward departure. However,
given the U.S. Probation Office’s recommendation regarding the calculation of the advisory
guideline range, and depending upon the Court’s ultimate calculation of the guidelines, a
departure may well be unnecessary to achieve an adequate sentence in this matter.
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III. LOSS
The burden is on the government to prove by the preponderance of the evidence
the amount of loss. See United States v. Staples, 410 F.3d 484, 490 (8th Cir. 2005).
“Loss is a proxy for the seriousness of the offense.” United States v. Parsons,
141 F.3d 386, 392-93 (1st Cir. 1998). In determining loss amount, the Court should
consider relevant conduct that was part of the scheme to defraud. Relevant conduct is
comprised of (1) “all acts and omissions committed, aided, abetted, counseled
commanded, induced, procured, or willfully caused by the defendant,” (2) “all acts and
omissions that were part of the same course of conduct or common scheme or plan as
the offense of conviction” if “the offenses are of a character for which §3D1.2(d) would
require grouping,” and (3) “all harm that resulted from acts and omission specified in
subdivisions (a)(1) and (a)(2) above,” and “all harm that was the object of such acts and
omissions.” USSG §1B1.3(a).12
Loss is the greater of either actual loss or intended loss. USSG §2B1.1,
comment (n. 3(A)). Actual loss “means the reasonably foreseeable pecuniary harm that
resulted from the offense.” USSG §2B1.1, comment (n.3(A)(I)). “Intended loss”
includes “the pecuniary harm that was intended to result from the offense.” USSG
§2B1.1, comment (n.3(A)(ii)).
In determining the loss amount for the purposes of the advisory guidelines, the
Court should consider as part of relevant conduct the losses caused to both FBBC and
MBFB.
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“The court only needs to make a reasonable estimate of the loss.” USSG
§2B1.1, comment (n.3(c)). See also United States v. Waldner, 580 F.3d 699, 705 (8th
Cir. 2009) (“Because the loss caused by fraud is often difficult to determine precisely, ‘a
district court is charged only with making a reasonable estimate of the loss.’”), quoting
United States v. Parrish, 565 F.3d 528, 534 (8th Cir. 2009); United States v. Boesen,
541 F.3d 838, 850 (8th Cir. 2008) (the court need only make a reasonable estimate of
the loss and can base it on reasonable extrapolation from known facts); United States
v. Erhart, 415 F.3d 965, 971 (8th Cir. 2005) (court’s determination of loss need not be
precise, although it must reflect a reasonable estimate of the loss); United States v.
Agboola, 41 F.3d 860, 863 (8th Cir. 2005) (applying loss provision in §2F1.1, and finding
loss amount need not be determined precisely)13; United States v. Wells, 127 F.3d 739,
748 (8th Cir. 1997) (“The court need not determine the value of the loss with any degree
of precision; a reasonable estimate of the loss based on available evidence will
suffice”).
The commentary to USSG §2B1.1 provides special instructions regarding how
loss is to be calculated in cases involving pledged collateral. Application note 3(E)(ii)
(E) Credits Against Loss. – Loss shall be reduced by the following:
USSG § 2F1.1 has been consolidated into 2B1.1. See United States v.
Edelmann, 485 F.3d 791, 814 (n.5) (8th Cir. 2006).
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(ii) In a case involving collateral pledged or otherwise provided by the
defendant, the amount the victim has recovered at the time of sentencing
from disposition of the collateral, or if the collateral has not been disposed
of by that time, the fair market value of the collateral at the time of
USSG §2B1.1, comment (n.3(E)(ii)). Thus, in the case of a fraudulent loan, available
collateral and proceeds from the sale of collateral are accounted for by offsetting the
principal balance on the loan. See Parish, 565 F.3d at 535 (“the equation used to
calculate actual loss to the lenders is the amount of the fraudulently obtained mortgage
loans minus any payments made on the loan principal and the value of the collateral at
the time of sentencing”); United States v. Erpenbeck, 532 F.3d 423, 431 (6th Cir. 2008)
(actual loss is to be reduced by “the amount of collateral that has been collected at the
time of sentencing” (emphasis in original)); United States v. James, 592 F.3d 1109,
1114 (10th Cir. 2010) (In cases of pledged collateral, “loss is calculated by subtracting
the value of the collateral – or, if the lender has foreclosed on and sold the collateral,
the amount of the sales price – from the amount of the outstanding balance on the
loan”).
B. Loss to the Banks
For the purposes of USSG §2B1.1(b)(2), the Court should find the actual loss in
this case to be between $20,000,000 and $50,000,000 in accordance with the
recommendation of the United States Probation Office. While loss under the advisory
guidelines is sometimes difficult to calculate, this is not such a case. Rather, where
funds have been loaned on the basis of fraudulently inflated collateral, Application Note
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3(E) to USSG §2B1.1 provides a relatively simple roadmap. The outstanding principal
on the loan is reduced by any recoveries from the sale of collateral and the value of any
unsold collateral. The resulting figure is the actual loss amount for the purposes of
USSG §2B1.1(b)(2).
Here, based upon most recent information14 from FBBC and MBFB, the
outstanding principal balance on the loan is $29,944,981. This figure accounts for the
proceeds from the sale of collateral. (PSR ¶ 315). When the principal balance is further
reduced by the fair market value of remaining unsold collateral and other unapplied
credits (see PSR ¶ 315)15, the total becomes $26,944,981 – still well above the
$20,000,000 threshold.
C. Loss to the Cattle Suppliers
In addition, although it does not change the enhancement level16, all of the
victims of the Packer’s Act violations committed by defendant suffered actual loss which
would qualify for inclusion in the USSG §2B1.1(b)(2) analysis. (See PSR ¶¶ 319 and
See PSR ¶¶ 314-316.
As indicated in PSR ¶ 315, these amounts are $254,888 (to account for unapplied
cash which has been collected from the sale of pledged collateral had not yet been applied
to the principal balance stated above); $186,674 (to account for the maximum amount of
anticipated recovery on remaining accounts receivable collateral); $200,000 (to account
for the estimated fair market value of certain collateral equipment obtained from a facility
in Gordon, Nebraska); $1,984,000 (to account for tax refunds which the Trustee filed for
and the bank hopes to obtain, in the event such refunds are allowed by the IRS and State
of Iowa); and $400,000 (to account for the amount of proceeds reasonably attributable to
the sale of the banks’ interest in Agriprocessors’ trademarks to SHF).
The next threshold for an enhancement under USSG § 2B1.1(b)(2) is
$50,000,000. (USSG § 2B1.1(b)(2)(M) (calling for a 24 level enhancement)).
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320 (listing 31 victims of defendant’s Packer’s Act violations)). These include victims of
relevant and acquitted conduct. (See PSR ¶ 320).17 The actual loss to each Packer’s
Act victim is attributable to the fact that they all lost the time value of their money while
they were waiting for payment. Waverly Sales, Inc. has quantified the amount of their
actual loss to be $3,800.51. This is based upon the amount of interest Waverly paid on
a mortgage loan it took out on its property in order to cover the cost of the cattle sold to
Agriprocessors while it was waiting for payment through the Packer’s trust.
D. Defendant’s Objections
Defendant does not lodge any specific objections to the factual matters
underlying the PSR’s loss calculation for the purposes of USSG § 2B1.1(b)(2). (See
PSR ¶¶ 314-318). Rather, defendant appears to claim the banks’ loss amount should
be less than $7,000,00018 because any additional loss was not reasonably foreseeable.
Defendant’s arguments should be rejected. Because defendant caused the bank to
loan against approximately $10 million in fake invoices and diverted millions of dollars in
All victims of relevant conduct, including acquitted conduct, are to be considered
for the purposes of specific offense characteristics under USSG § 2B1.1. See USSG
§1B1.3(a); United States v. Watts, 519 U.S. 148, 157 (1997).
Defendant’s objections in this regard are internally inconsistent. At pages 30-31
of Defendant’s Objections, defendant proposes a flawed calculation which would result in
a loss total of $4.5 million. At page 33, defendant proposes a 20 level enhancement and,
again, states the loss should be less than $7,000,000. USSG § 2B1.1(b)(2)(K) calls for a
20 level enhancement where the loss is more than $7,000,000. In any event, for the
reasons discussed below, defendant’s objections to the loss calculation should be
overruled, and the Court should determine a 22 level enhancement applies pursuant to
USSG § 2B1.1(b)(2) as recommended by the U.S. Probation Office.
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bank collateral which further undermined the value of the banks collateral, a loss of
more than $20,000,000 was reasonably foreseeable.
Defendant first claims the victim bank’s own conduct caused the actual loss to
exceed a reasonably foreseeable amount. Specifically, defendant suggests the bank
should have accepted a purported offer from Mordechai Korf. As a factual matter, the
government understands the purported offer to have been a verbal offer to buy out the
bank’s position with regard to Agriprocessors, at a significant discount, and on the
express condition that a trustee not maintain control of the company.19 Not knowing
anything about fake invoices and the true scope of the fraud in this case, the bank did
not pursue the offer - electing instead to proceed with a trustee.20 Defendant’s
argument is flawed in that it fails to account for the fact that the bulk of the fraud had yet
to be discovered. The evidence at trial established that, in November 2008, the bank
was aware of a diversion of approximately $1.4 million. (Lykens TT 10/21/09 pp. 38-
39). Defendant’s fake invoice scheme was not discovered until Marc Ross and Alan
See April 7, 2010, interview of Phil Lykens (included as part of Gov. S Exb. 5500
at 346).
Tellingly, in his objections to the PSR, defendant states, “[a]t the time, the
generally accepted value of Agriprocessors was approximately $40,000,000.” (Defendant’s
Objections p. 28). Assuming this was the generally accepted view, it would have only been
due to the fact that defendant’s fraudulent inflation of Agriprocessors’ sales was not yet
known. If the company was thought to be worth so much - it would have been foolish for
the bank to sell its position at a loss rather than to support Agriprocessors’ sale as a going
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Rice started having trouble collecting accounts receivable in approximately January
2009. (See Ross TT 10/14/09 p. 21, and Rice TT 10/14/09 137).
Moreover, even assuming defendant could prove (he cannot) the bank acted
unreasonably with regard to mitigation of its loss, defendant’s argument still fails. “A
victim’s failure to mitigate or the negligence of intervening actors does not prevent
attributing to the defendant[] the full amount of loss.” United States v. Miller, 962 F.2d
739, 744 (7th Cir. 1992); accord United States v. Kopp, 951 F.2d 521, 531 (3d Cir. 1991)
(Guidelines “definitely reject[] adjusting the ‘loss’ itself downward to reflect other causes
beyond the defendant’s control”; rather “actual loss was how much better the victim
would have been but for the defendant’s fraud”).
Defendant also claims the government caused the actual loss to exceed a
reasonably foreseeable amount by pursuing potential criminal forfeiture of assets which
were used to facilitate wholesale alien harboring at Agriprocessors. This argument fails
as well. Defendant was convicted beyond a reasonable doubt at trial of defrauding
FBBC by lying to it about alien harboring Agriprocessors. In addition, the trial evidence
firmly established that it was defendant who was primarily responsible for the harboring
that took place. That the bank’s collateral might be substantially compromised by the
company’s criminal conduct is precisely why it was criminal for defendant to lie to the
bank about it. Thus, any actual loss attributable to the criminal alien harboring at
Agriprocessors was a direct and foreseeable loss resulting from defendant’s criminal
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Insisting that the actual loss in this case was not reasonably foreseeable,
defendant suggests the loss be calculated on the basis of the principal attributed to the
fake collateral supporting the loan. That is, defendant argues, “a reasonable estimate
of the loss stemming from the defendant’s conduct is 85% of the fraudulent invoices or
approximately $8.5 million.” (Defendant’s Objections pp. 30-31)).21 In essence,
defendant appears to want full credit for the face value of all actual accounts receivable
which supported the loan – regardless of their actual value to the victims banks upon
liquidation. Defendant’s argument misapplies the law with regard to the calculation of
As noted above, the proper method for taking into account actual pledged
collateral is set forth in Application Note 3(E)(ii) to USSG §2B1.1. That is, the actual
value of the collateral to the bank is deducted from the total principal owing on the loan.
The result of the calculation is reflective of the actual loss because it takes into account
the actual position of the victim (at least with regard to principal). In contrast,
defendant’s proposal ignores the actual position of the victim. Rather, defendant’s
Incredibly, defendant suggests the $8.5 million figure should be further reduced
by $4 million - purporting to be the amount of interest the bank earned due to the
fraudulent invoices. (Id.). This suggested reduction should be rejected out of hand. First,
there is no legal basis for reducing a § 2B2.1(b)(2) loss amount on the basis of revenue
earned by the victim bank pursuant to its loan agreement. Interest is earned in nearly
every case involving fraudulent conduct with regard to a loan, and the amount of interest
earned has no bearing upon the seriousness of the defendant’s conduct. Cf. Parsons, 141
F.3d at 392-93 (“Loss is a proxy for the seriousness of the offense”). The guidelines simply
do not call for a corresponding reduction. In addition, as Gary Pratte testified at trial - the
bank does not get its money for free – it has to pay interest on the money it loans. (Pratt
TT 10/20/09 p. 92).
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proposal employs a false presumption – contrary to the facts – that, in the wake of the
failure of a loan due to a massive fraud, every nickle of every real account receivable
will be recovered.22 Although defendant’s proposal would still result in a loss figure of in
excess of $7,000,000, it does not even approximate the actual loss to the victim banks.
Therefore, it does not adequately reflect the seriousness of the offense.
In cases involving misrepresentations in connection with loans, there are cases
which support the calculation of intended loss in accordance with the additional amount
of money lent due to the fraud. See United States v. Miller, 588 F.3d 560 (8th Cir. 2009)
(“Here, the amount of intended loss attributable to Miller is the amount by which the
fraudulent loans purchased by the financial institutions exceeded the amount that those
institutions would have paid had they known the truth”); United States v. Carter, 412
F.3d 864, 869 (8th Cir. 2005) (“even though Carter testified that he thought the loans
would be repaid, Carter intended to leave the lenders with loans that were riskier and
less valuable than the lenders thought”); Kok v. United States, 17 F.3d 247, 250 (8th Cir.
1994) (“the measure of loss that Kok intended to inflict is the difference between the
amount of credit the bank extended based upon the false representations and the
amount of credit the bank would have extended had it known the company’s true
In a related sense, defendant’s argument employs a false presumption that the
victim banks would lend on actual collateral regardless of whether their customer was, at
the same time, lying to them about the value of other collateral. In reality, false statements
on the scale of those made in this case imperil the entire position of the lending institution.
As was demonstrated in this case, where a business engages in wholesale fraud, the
overall value of the entire business (and all of its assets) is compromised.
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financial condition”). However, in this case, the actual loss is far greater. Thus,
defendant’s argument is contrary to the plain directive in the guidelines that “loss is the
greater of actual loss or intended loss.” USSG §2B1.1, comment (n. 3(A)). For the
reasons previously submitted, the actual loss in this case far exceeds $20,000,000.
Any lesser calculation based upon intended loss is trumped by the actual loss.
Because the actual loss in this case is more than $20,000,000, a 22-level
enhancement should apply under USSG §2B1.1(b)(2)(L).
IV. NUMBER OF VICTIMS
The United States Probation Office properly found defendant’s sentence should
be increased two levels, pursuant to USSG §2B1.1(b)(2)(A), because defendant’s
offense involved more than 10 victims. (PSR ¶ 335). The Sentencing Guidelines
provide for a two level increase “[i]f the offense . . . involved 10 or more victims.” USSG
§2B1.1(2)(A). “‘Victim’ means (A) any person who sustained any part of the actual loss
determined under subsection (b)(1).” Id., comment (n.1); accord United States v. Icaza,
492 F.3d 967, 969 (8th Cir. 2007). “‘Person’ includes individuals, corporations,
companies, associations, firms, partnerships, societies, and joint stock companies.”
USSG §2B1.1, comment (n.1). To summarize, a victim must be an individual,
corporation or company of some type that sustained part of the actual loss determined
by the district court.” Icaza, 492 F.3d at 969.
Here, as discussed above with regard to loss, each and every victim of a
Packer’s Act violation by Agriprocessors suffered an actual pecuniary loss with regard
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to the time value of their money. Waverly Sales, Inc. has quantified the amount of their
actual loss to be $3,800.51 based upon the amount of interest Waverly paid on a
mortgage loan it took out on its property in order to cover the cost of the cattle sold to
Agriprocessors while it was waiting for payment through the Packer’s trust. While other
Packer’s Act victims may or may not be able to similarly quantify their loss, there is no
doubt that each and every such victim suffered an actual loss. Regarding the number
of victims, the U.S. Probation Office has identified 31 victims of Pacer’s Act violations
committed as part of the same course of conduct or common scheme or plan as
defendant’s offenses of conviction. (PSR ¶ 336). When added to the two banks23, the
total number of victims is 33. (Id.).
Defendant inaccurately claims the Packer’s Act victims did not suffer any
pecuniary harm. (Defendant’s Objections p. 25). Of course they did. The fact that they
were ultimately paid is completely beside the point when the essence of the criminal
offense is the failure to timely pay providers of livestock. The 31 victims of defendant’s
Defendant provides no support for his argument that MBFB should not be
considered a victim under USSG § 2B1.1(b)(2)(A) because MBFB “was not in privity of
contract with Agri.” (Defendant’s Objections p. 25). The fact remains that defendant knew
that MBFB was a participant in the revolving loan and defendant’s crimes caused over
$8,000,000 in loss to MBFB. In addition, according to the trial testimony of Phil Lykens,
at least one representative of MBFB was present at the meeting shortly after the raid when
defendant falsely and fraudulently claimed that he was unaware that the workers arrested
during the raid were undocumented. (Lykens TT 10/20/09 p. 54). As with all specific
offense characteristics under USSG § 2B1.1, the number of victims is to be determined on
the basis of defendant’s broader course of conduct and common scheme or plan. The loss
to MBFB certainly falls within this framework.
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Packer’s Act violations take the total number of victims well above the threshold of 10,
and a two-level enhancement was properly applied under USSG § 2B1.1(b)(2)(A).
V. SOPHISTICATED MEANS
The United States Probation Office properly found defendant’s offense conduct
involved sophisticated means, pursuant to USSG §2B1.1(b)(8)(C), resulting in a
two-level increase in defendant’s offense level. (PSR ¶ 337). A sentence should be
enhanced by two levels if “the offense otherwise involved sophisticated means.” USSG
2B1.1(b)(8)(C). The government must show that the offense involved “especially
complex or especially intricate offense conduct pertaining to the execution or
concealment of an offense.” Id., comment (n.8(B)). In other words, the government
must show defendant’s conduct was “notably more intricate than the garden variety”
fraud. United States v. Hance, 501 F.3d 900, 909 (8th Cir. 2007) (“the government
must show that Hance's mail fraud, when viewed as a whole, was notably more intricate
than that of the garden-variety mail fraud scheme”). “Repetitive and coordinated
conduct, though no one step is particularly complicated, can be a sophisticated
scheme.” United States v. Finck, 407 F.3d 908, 915 (8th Cir. 2005); accord, Edelmann,
458 F.3d at 816 (“A district court commits no error in applying the two-point
enhancement for sophisticated means where the defendant's ‘total scheme was
undoubtably sophisticated’”); United States v. Halloran, 415 F.3d 940, 945 (8th Cir.
2005) (same).
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“Conduct such as hiding assets or transactions, or both, through the use of
fictitious entities, corporate shells, or offshore financial accounts also ordinarily
indicates sophisticated means.” USSG §2B1.1, comment (n.8(B)); accord United
States v. Huber, 462 F.3d 945, 951 (8th Cir. 2006) (holding a sophisticated means
increase was not proper when the defendant “did not use shell corporations, offshore
accounts, or ‘layer’ transactions). The use of layer transactions, corporate shells, and
fictitious documents in order to perpetrate a fraud have been found to be sufficient to
justify a sophisticated means enactment under §2B1.1(b)(8)(C). Halloran, 415 F.3d at
945 (“To accomplish his multi-layered plot, Halloran required the use of a corporate
entity, numerous fraudulent documents and forged notary stamps”).
Here, defendant’s fraudulent scheme was notably more sophisticated than the
typical fraud. Defendant did not simply lie to the bank about the value of
Agriprocessors’ accounts receivable collateral. Rather, in order for the fraud to be
effective and sustainable for years, the lies and false documents involved the customer
service, shipping, and accounting departments (both accounts payable and accounts
receivable) and the all-around manipulation of a substantially integrated computer
! To initiate the false sales part of the scheme, defendant caused the customer
service department to create fake invoices in the APGEN system. The
fabricated sales involved not only actual Agriprocessors customers, but they also
involved straw customers such as The Right Place and House of Glatt.
! To back up the fake invoices, defendant directed fake bills of lading (normally
created in the shipping department) to be created. Since bills of lading were
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normally signed by truck drivers, the fakes needed to have forged signatures of
drivers from logical routes on them.
! To initiate the diverted income portion of the scheme, defendant caused
customer payments not to be entered into the APGEN accounting system.
Generally, such payments were accounted for in the “1510 Rubashkin Loan
Payable account.” Because the 1510 account was a liability account, it was not
likely to be reviewed in detail by the bank or its examiners.
! At defendant’s direction, “round-up checks” were added to the diverted income
deposits so that they looked like loans or transfers on Agriprocessors’ bank
statements. Without the round-up checks, bank statements would reflect
deposits in random amounts. This would tip off the bank or investigators that the
deposits consisted of customer checks. (See Bolt TT 10/29/09 pp. 213-214 (the
diversion of customer payments went unnoticed for a substantial period of time
due to the even amounts of the deposits)).
! At defendant’s direction, actual customer payment information was maintained in
a separate set of books - consisting of copies of diverted checks, a thumb drive
containing a spreadsheet of the diverted payments, and APGEN entries that
were mis-dated. Hamilton mis-dated the customer payments to prevent them
from posting to customer accounts and reducing the borrowing base. The
sophistication of this part of the scheme allowed defendant to, effectively,
defraud the bank twice using the same, carefully timed set of transactions.
! In order to accommodate the customers that paid off of statements, defendant
caused completely new customer statements to be generated outside of the
APGEN system. This was part of a separate set of records that had to be
hand-crafted whenever the customer needed a statement.
! As the inflated figures from both parts of the scheme were merged into the
APGEN accounting system – the inflated APGEN numbers became the basis for
false borrowing base certificates which were sent to the bank almost daily by the
accounting department. Because the APGEN system was integrated, and it
would require numerous fake entries from different parts of the business in order
to falsify the information, the bank did not suspect the APGEN numbers were
! In order to back up the false borrowing base certificates, false monthly accounts
receivable aging reports (also generated by APGEN) were sent to the bank.
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! Due, in part, to all of the manipulation of the APGEN system (including the 1510
account), monthly financial figures from APGEN grossly distorted the actual
financial condition of Agriprocessors. At defendant’s direction, Bensasson and
Meltzer fabricated entries into the financial statements to hide the manipulation
that had taken place (and to otherwise make the financial statements look like
defendant wanted them to look).
! In order to pay down the revolving loan in a manner that would not reveal the
diversion of customer payments and creation of fake sales, defendant executed
a complex money-laundering scheme which included the use of straw customers
(including KCG and TE), layered transactions (with money going to and from the
straw customers in differing amounts), and the use of “no-signature” checks.24
! As part of his fraudulent scheme, and in an attempt to conceal his offenses,
defendant gathered up and either hid or destroyed the hard copies of the fake
invoices and fake bills of lading, the copies of the diverted checks, the thumb
drive, and the customer statements. He also directed April Hamilton to destroy
evidence in APGEN of the mis-dated payments.
Thus, defendant’s scheme to defraud involved all of the hallmarks of a
sophisticated scheme – fake transactional records (both computer and hard copies),
fake financial records (both computer and hard copies), the use of straw companies (as
purported customers), and multi-layered transactions (including the manipulation of
dollar amounts to conceal the nature of the transactions).25 Defendant’s objection to
The complexities of defendant’s money laundering scheme are discussed in more
detail below regarding the U.S. Probation Office’s recommended application of a two-level
enhancement under USSG § 2S1.1(b)(3) for sophisticated laundering.
In addition, although the Court need not address the issue, the manner of
defendant’s harboring of undocumented aliens and his Packer’s Act violations were
unusually sophisticated. The underlying crimes are part of defendant’s relevant conduct
in that they were necessary parts of defendant’s fraudulent scheme as found by the jury.
Accordingly, defendant’s conduct in committing the harboring and Packer’s Act offenses
is to be considered in determining the application of specific offense characteristics. See
USSG §1B1.3(a) (here, relevant conduct includes acts committed “during the commission
of the offense of conviction” and “acts that were part of the same course of conduct or
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the scoring of a two-level enhancement for sophisticated means, pursuant to USSG
§2B1.1(b)(8)(C), should be overruled.
VI. AGGRAVATING ROLE
The sentencing guidelines provide for a four-level enhancement where “the
defendant was an organizer or leader of a criminal activity that involved five or more
participants or was otherwise extensive.” USSG §3B1.1(a). Generally26, all of
defendant’s relevant conduct is to be considered in determining defendant’s role.
The determination of a defendant’s role in the offense is to be made on the basis
of all conduct within the scope of § 1B1.3 (Relevant Conduct), i.e., all conduct
included under § 1B1.3(a)(1)-(4), and not solely on the basis of elements and
acts cited in the count of conviction.
USSG §3B1.1, introductory commentary. The terms “organizer” and “leader” are
broadly interpreted. See United States v. Miller, 91 F.3d 1160, 1162 (8th Cir. 1996). A
defendant need not “directly control his intermediaries.” Id. at 1164 (quoting United
States v. Maxwell, 25 F.3d 1389, 1399 (8th Cir. 1994)).
common scheme or plan as the offense of conviction”). Regarding harboring, defendant
used a straw employer (Hunt Enterprises) to employ undocumented workers. Defendant
offense also involved an array of false documents such as Hunt I-9s, Agriprocessors I-9s
and other records, and, of course, the fake resident alien cards financed by defendant.
Similarly, defendant’s Packer’s Act violations consisted of more than simply late payments.
Defendant signed checks that appeared to be timely and then held them. He also had
some payments run through Agriprocessors’ postage meter and then held. Given the
relative simplicity of a run-of-the-mill Packer’s Act violation, these characteristics of
defendant’s Packer’s Act offenses could be readily characterized as unusually
For the purposes of money laundering scored under USSG § 2S1.1, Chapter
Three adjustments are to be determined based upon the covered offense. USSG §2S1.1,
comment. n.2.
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Factors the court should consider in determining whether a defendant was an
“organizer” or “leader” include the defendant's exercise of decision making
authority, the nature of the defendant's participation in the commission of the
offense, the recruitment of accomplices, the claimed right to a larger share of the
fruits of the crime, the degree to which the defendant participated in planning or
organizing the offense, the nature and scope of the illegal activity, and the
degree of control and authority the defendant exercised over others.
United States v. Mickle, 464 F.3d 804, 807 (8th Cir. 2006) (citations omitted). More than
one participant in criminal activity can qualify as an “organizer” or “leader.” Id.
A. Defendant’s Section 2B1.1 Offenses
For all of the reasons set forth in PSR paragraphs 339-340, defendant was an
“organizer or leader” of the criminal activity covered by section 2B1.1. Defendant does
not dispute his section 2B1.1 offenses involved five or more participants or were
otherwise extensive.27 Rather, defendant argues a three-level role enhancement
applies, maintaining he was a mere manager or supervisor. To the contrary, regarding
the following portions of defendant’s fraudulent schemes, defendant acted as an
organizer or leader in, at least, the following ways.
1. Inflation of Accounts Receivable Collateral
! Defendant directed Judy Meyer and Darlis Hendry to create fake invoices and
bills of lading. At trial, Hendry testified that only defendant asked her to do so.
(See Hendry TT 10/15/09 pp. 33-36).
! Defendant directed April Hamilton to divert customer payments to different
accounts and to not post the payments to customer accounts. When Hamilton
was gone, defendant asked Wendy Torson to pull the checks. At trial, Hamilton
See Defendant’s Objections p. 26 (“Defendant agrees that he was a manager or
supervisors [sic] involving five or more participants for purposes of the three point
enhacement”); see id. at p. 33 (“ROLE IN THE OFFENSE: +3 (Manager or Supervisor)”).
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testified that only defendant asked her to do so. (Hamilton TT 10/22/09 pp. 33-
36, 58; Torson TT 10/22/09 pp. 12-14).
! Defendant directed Hamilton to maintain a separate set of books in order to keep
track of actual accounts receivable and post customer payments as the accounts
were close to becoming ineligible. (Hamilton TT 10/22/09 pp. 16-17, 66-67).
! Defendant directed Hamilton to add “round-up” checks to the deposits containing
diverted checks in order to conceal the nature of the deposits. (Hamilton TT
10/22/09 pp. 48-49).
! Defendant directed Mitch Meltzer to write a personal check - with the notation
“meat” on the subject line – for use as a “round up” check. (See Hamilton TT
10/22/09 pp. 53-54; Meltzer TT 10/26/09 pp. 37-38).
! Defendant directed Debbie Preusser to cut checks to Kosher Community
Grocery and Torah Education (money that was ultimately used to pay down the
revolving loan), breaking up large amounts into smaller, seemingly random
amounts. At trial, Preusser testified that only defendant asked her to do so.
(Preusser TT 10/26/09 pp. 89-91).
! Defendant directed Hamilton to cut Chax checks from KCG and TE to
Agriprocessors for deposit into the depository account. At trial, Hamilton testified
that it was defendant that asked her to do so. (Hamilton TT 10/22/09 pp. 68-87).
! Defendant directed Toby Bensasson to submit fraudulent advance requests and
borrowing base certificates to the bank. (Bensasson TT 10/21/09 p. 64). Mitch
Meltzer would submit the fraudulent advance requests and borrowing based
certificates to the bank in Bensasson’s absence. (See Meltzer TT 10/26/09 p.
! Defendant directed Bensasson and Meltzer to fraudulently manipulate monthly
financial statements. (Bensasson TT 10/21/09 pp. 119-122; Meltzer TT 10/26/09
pp. 44-45).
! Defendant directed Hamilton and Torson to either turn over or destroy evidence
of the fraud. (Hamilton TT 10/22/09 pp. 88-91; Torson TT 10/22/09 pp. 30-31).
2. Alien Harboring and Document Fraud
! Defendant directed Elizabeth Billmeyer to create a spreadsheet of no-match
employees at Agriprocessors, and then prevented her from taking any effective
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action regarding the listed employees. Penny Hanson assisted Billmeyer in the
creation of the spreadsheet, and Hanson, Karina Freund and others assisted
Billmeyer in the maintenance of the undocumented workforce.
! Defendant directed Laura Althouse, Karina Freund, and Hosam Amara to place
workers with bad identification documents on the Hunt payroll behind Billmeyer’s
back (Nicole Miller Caguach and Shlomo Ben Chaim assisted in the Hunt payroll
scheme). Defendant later directed Althouse to give him the copies of the Hunt
I-9s. (Althouse TT 10/29/09 p. 65).
! Defendant financed a scheme to obtain dozens of new, fake, resident alien cards
for Agriprocessors workers the week before the May 12, 2008, immigration raid.
At least Brent Beebe, Carlos Guererro-Espinoza, Antolin Trinidad, and every
worker who obtained a new, fake resident alien card participated in the
scheme.28 (Guererro-Espinoza TT).
! Days before the raid, defendant directed Althouse to gain access to Billmeyer’s
locked office to obtain a list of remaining no-match employees. He directed her
to put letters in the listed employees’ Friday paychecks and then report to work
on Sunday because there would be a lot of “hiring” to do. Defendant personally
inspected the new fake documents on Sunday as the purported “hiring” was
taking place. Beebe, Guererro-Espinoza and Shawn Meyer participated in the
fraudulent “re-hiring” process. (Althouse TT 10/28/09 pp. 81, 90).
3. Packer’s Act Offenses
! Defendant fraudulently manipulated the timing of cattle payments at
Agriprocessors. In doing so, defendant directed Shella Chiu to mail payments
after they were due, and run payments through a postage meter for defendant to
hold. (Chiu TT 10/22/09 pp. 90-92).
While Application Note 2 to USSG §2L1.1 (the harboring guideline) states “the
aliens smuggled, transported, or harbored are not considered participants unless they
actively assisted in the smuggling, transporting, or harboring of others,” the directive would
seem to have limited application where, as here, the aliens also committed document
fraud. Such a reading is supported by the Introductory Commentary to USSG §3B1.1
which makes clear that an aggravating role enhancement is to be determined by reference
to all relevant conduct, not just the offense of conviction. USSG §3B1.1, introductory
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With regard to all of the above schemes, defendant alone made the initial
decisions to commit the offenses and provided the direction to others to effectuate the
crimes. See United States v. Williams, 97 F.3d 240, 242 (8th Cir. 1996) (finding
defendant was an organizer where the defendant “directed or procured the aid of
underlings,” and was responsible for organizing others for purposes of carrying out
crimes). The above crimes simply would not have been occurred but for defendant
organizing and leading the offenses. See Mickle, 464 F.3d at 807 (“defendant's
exercise of decision making authority” and role in “planning or organizing the offense”
are factors). Defendant used his position of authority at Agriprocessors to direct the
actions of other Agriprocessors personnel, including criminal participants, in aid of the
offenses. Contrary to defendant’s assertions, the trial evidence clearly established
Bensasson acted at defendant’s direction; not the other way around. (See Bensasson
TT 10/21/09 p. 64); see Mickle, 464 F.3d at 807 (“the degree of control and authority
the defendant exercised over others” is a factor). Defendant chose the persons who
would assist him in his crimes. For example, after Judy Meyer died, it was defendant
who recruited Darlis Hendry to create fake invoices going forward. (Hendry TT
10/14/09 p. 222; see Bensasson TT 10/21/09 p. 56); see Mickle, 464 F.3d at 807 (“the
recruitment of accomplices” is a factor). Despite his relatively high level of authority
over others, defendant also participated in the execution of the fraudulent schemes in
an extraordinarily personal way. For example, he personally contacted Darlis Hendry
and told her which customers and amounts to use for fake invoices. (Hendry TT
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10/14/09 p. 226). He personally directed April Hamilton to divert customer payments -
sometimes sorting through customer checks to pick the ones he wanted diverted.
(Hamilton TT 10/22/09 p. 37). He also personally inspected new, fake resident alien
cards the day before the raid. (Lopez-Nunez TT 10/29/09 p. 19); see Mickle, 464 F.3d
at 807 (“the nature of the defendant's participation in the commission of the offense” is
a factor). He also involved several participants in the cover-up – that is, gathering up
incriminating evidence and having others shred and delete other evidence.
Finally, it was the defendant who caused over $1.5 million - money that came
through Agriprocessors but originated, almost daily, from fraudulently obtained
advances – to be transferred to cover his personal bank accounts. (Bolt TT 11/2/09 p.
47; Gov. T Exb. 114). Thus, defendant “claimed right to a larger share of the fruits of
the crime.” Mickle, 464 F.3d at 807.
B. Defendant’s Money Laundering Offenses
Similarly, defendant was an organizer or leader with regard to his money
laundering offenses. As with his section 2B1.1 offenses, defendant does not dispute
his money laundering offenses involved five or more participants or was otherwise
extensive, but maintains he was a mere manager or supervisor.29
For all of the reasons set forth in PSR paragraph 348, defendant was an
organizer or leader with regard to his money laundering offenses scored under USSG
See Defendant’s Objections p. 34 (“ROLE IN THE OFFENSE: +3 (Manager or
Supervisor)”).
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§2S1.1. According to the evidence at trial , defendant initiated the scheme to run
Agriprocessors money through KCG and TE in order to pay down the revolving loan in a
manner that concealed the source of the funds. April Hamilton testified that the
defendant - and the defendant alone - directed her to cut Chax checks from KCG and
TE bank accounts and deposit them in the depository account. Similarly, Wendy
Torson testified defendant would have her cut the checks when Hamilton was gone. In
total, over $10,000,000 was run through KCG (see Gov. Ex. 2021), and over
$9,000,000 was run through TE (see Gov. Ex. 2027). There was no evidence that
Bensasson or anyone else ever directed such checks to be cut.
Similarly, with regard to the replacement checks30 , Debbie Preusser testified
that, in early February 2008 - about the time defendant switched from using KCG to TE
– defendant started having the replacement checks to the straw customers broken up
and cut in seemingly random amounts. Preusser specifically testified that it was the
defendant who had her break up large round checks into seemingly random amounts -
not Bensasson or anyone else. (Preusser TT 10/26/09 pp. 89-91).
Defendant was more than a manager or supervisor with regard to the money
laundering scheme. This was the defendant’s scheme - initiated by him and conducted
at his direction. While others participated in the scheme, they did so only to assist
defendant in a scheme which he devised. Defendant alone directed April Hamilton to
The “replacement checks” were the checks written from Agriprocessors to the
straw customer accounts to cover the Chax checks that defendant had deposited into the
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cut the Chax checks which became the bases for the money laundering counts of
conviction - clearly establishing defendant as the one ultimately responsible for the
For the above reasons, a four-level role enhancement should apply under USSG
§3B1.1(a) with regard to defendant’s section 2B1.1 offenses and his money laundering
offenses scored under section 2S1.1.
VII. ABUSE OF POSITION OF TRUST
The United States Probation Office properly found, pursuant to USSG §3B1.3,
that defendant abused a position of trust, requiring a two level increase in defendant’s
offense level. This is true with regard to both his section 2B1.1 offenses and his money
laundering offenses scored under section 2S1.1. (See PSR ¶¶ 342 and 349).
Section 3B1.3 of the advisory guidelines provides: “[i]f the defendant abused a
position of public or private trust, or used a special skill, in a manner that significantly
facilitated the commission or concealment of the offense,” the defendant’s sentence
should be increased by two levels. “This adjustment applies to persons who abuse
their positions of trust or their special skills to facilitate significantly the commission or
concealment of a crime.... Such persons generally are viewed as more culpable.”
USSG § 3B1.3, comment (background).
“Public or private trust” refers to a position of public or private trust characterized
by professional or managerial discretion (i.e., substantial discretionary judgment
that is ordinarily given considerable deference). Persons holding such positions
ordinarily are subject to significantly less supervision than employees whose
responsibilities are primarily non-discretionary in nature. For this adjustment to
apply, the position of public or private trust must have contributed in some
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significant way to facilitating the commission or concealment of the offense (e.g.,
by making the detection of the offense or the defendant's responsibility for the
offense more difficult). This adjustment, for example, applies in the case of an
embezzlement of a client's funds by an attorney serving as a guardian, a bank
executive's fraudulent loan scheme, or the criminal sexual abuse of a patient by
a physician under the guise of an examination. This adjustment does not apply in
the case of an embezzlement or theft by an ordinary bank teller or hotel clerk
because such positions are not characterized by the above-described factors.
USSG §3B1.3, comment (n.1).
The government must show two elements, by a preponderance of the evidence,
in order for a sentence to be enhanced for abuse of position of trust: “defendant ‘(1)
occupied a position of private [or public] trust and (2) used [the] position in a manner
[that] significantly facilitated the commission or concealment of [the] offense.’” United
States v. Olson, 22 F.3d 783, 786 (8th Cir. 1994) (quoting United States v. Brelsford,
982 F.2d 269, 271 (8th Cir. 1992)).
Regarding whether a person occupies a position of trust, the Third Circuit has
in considering whether a position constitutes a position of trust for purposes of
§ 3B1.3, a court must consider: (1) whether the position allows the defendant to
commit a difficult-to-detect wrong; (2) the degree of authority which the position
vests in defendant vis-a-vis the object of the wrongful act; and (3) whether there
has been reliance on the integrity of the person occupying the position. These
factors should be considered in light of the guiding rationale of the section-to
punish “insiders” who abuse their positions rather than those who take
advantage of an available opportunity.
United States v. Pardo, 25 F.3d 1187, 1192 (3d Cir. 1994).
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A. Defendant Abused His Position as a Corporate Officer to Facilitate His
Here, because of his position as a corporate officer and the day-to-day manager,
defendant occupied a position of trust to the creditors and shareholder of
Agriprocessors. Defendant was not only a vice-president, but he occupied the highest
managerial position at Agriprocessors. He was regarded by others as the “boss of
Agriprocessors” and the “CEO.” For example, Kari Kime testified defendant was in
charge of Agriprocessors and understood his position to be “CEO.” (Kime TT 10/15/09
pp. 300, 315). Bernard Feldman testified that, when he was named as the purported
new CEO of Agriprocessors in late September 2008, he understood he would be
performing most of the functions defendant had performed in the past. (Feldman TT
10/21/09 p. 7). It was also clear from the evidence defendant made the day-to-day
financial decisions of the company. The testimony from several employees from
customer service to accounting was clear in this regard. According to Bensasson and
Meltzer, defendant exercised so much control over Agriprocessors’ finances that he
was able to manipulate monthly financial statements at will (Bensasson TT 10/21/09 pp.
119-122; Meltzer TT 10/26/09 pp. 44-45) and pay himself approximately $1,500,000 in
extra compensation31 over a two year period. In contrast, Agriprocessors’ owner was
an elderly man who did not work or reside in Postville. (A. Rubashkin TT).
See Gov. Ex. 114 (summary of non-payroll transfers to defendant’s personal bank
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Positions of private trust are positions that involve “professional and managerial
discretion” and “are subject to significantly less supervision than employees whose
responsibilities are primarily non-discretionary in nature.” USSG §3B1.3, comment
(n.1); United States v. Erhart, 415 F.3d 965, 972 (8th Cir. 2005). Corporate officers
have been held to be in positions of private trust to persons whom they owe fiduciary
duties to in their corporate capacity. See United States v. Waldner, 580 F.3d 699, 707
(8th Cir. 2009); United States v. Bhagavan, 116 F.3d 189, 193 (7th Cir. 1997).32
In Waldner, the Eighth Circuit affirmed a determination by this Court that the
defendant, as the CEO and owner of a bankrupt corporation, abused a position of
private trust when he made fraudulent statements during a creditor’s meeting.
Waldner, 580 F.3d at 707. Although Waldner was both a corporate officer and the
owner of the business at issue, the Court of Appeals noted that his status as the owner
arguably undermined the significance of his position because “there were no other
shareholders to whom he owed fiduciary duties.” Id. at 707 (n.5). Here, although the
victims of defendant’s offenses were all creditors, defendant nonetheless “occupied a
position of private trust” vis-a-vis Agriprocessors’ shareholder. In addition, as the
person interacting with creditors on behalf of Agriprocessors, defendant owed a private
The Eighth Circuit has found that other similar fiduciary relationships constitute
positions of private trust. See e.g., United States v. Fazio, 487 F.3d 646, 659 (8th Cir.
2007) (realtor-client); United States v. Gjerde, 110 F.3d 595, 605 (8th Cir.1997) (bank vice
president); United States v. Anderson, 349 F.3d 568, 574 (8th Cir. 2003) (investment
advisor-client); United States v. Baker, 200 F.3d 558, 564 (8th Cir. 2000) (licenced
insurance agent-client); United States v. Morris, 18 F.3d 562, 568 (8th Cir. 1994) (chief
officer of a bank).
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duty of trust to those creditors similar to the duty in Waldner. As a corporation
approaches insolvency, the fiduciary duties officers and directors normally owe
shareholders extends to creditors. See Waldner, 580 F.3d at 707 (“Waldner abused
the trust of H & W’s creditors when he committed fraud at the Section 341 creditor’s
meeting”); In re Tri-River Trading, LLC, 329 B.R. 252, (B.A.P. 8th Cir. 2005) (“When a
corporation becomes insolvent, ‘the fiduciary duty of directors shifts from the
stockholders to the creditors’”).
As a corporate officer of Agriprocessors, defendant had the authority and the
ability to act on its behalf to the detriment of others. In this case, Agriprocessors had an
obligation – a trust agreement with the bank – that defendant abused in his capacity as
a corporate officer.
Agriprocessors’ revolving loan agreement with FBBC provided as follows:
(b) The Borrowers agree to deposit in a Collateral Account or, at the Lender's
option, to deliver to the Lender all collections on Accounts, contract rights, chattel
paper and other rights to payment constituting Collateral, and all other proceeds
of Collateral, which the Borrowers receive directly, immediately upon receipt
thereof, in the form received, except for the applicable Borrower's endorsement
when deemed necessary. Until delivered to the Lender or deposited in a
Collateral Account, all proceeds or collections of Collateral shall be held in trust
by the applicable Borrower for and as the property of the Lender and shall not be
commingled with any funds or property of any Borrower.
(Gov. T Exb. 2000 pp. 30-31 (emphasis added)). Phil Lykens testified this was an
important provision of the agreement because payments on accounts receivable were
considered the property of the bank. (Lykens TT 10/20/09 p. 23). Defendant’s
diversion of customer payments was in direct violation of the trust arrangement with
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FBBC. Thus, acting on behalf of Agriprocessors, defendant violated an express
position of trust with the victim bank.
Similarly, as Agriprocessors approached insolvency, and his fiduciary duties
shifted to the bank, he continued to abuse his position by committing fraud. At the
meeting with the bank shortly after the raid, defendant lied about his knowledge of
undocumented workers. As revenue diminished, defendant increased the creation of
fraudulent sales. (Bensasson TT 10/21/09 pp. 131-31). He continued to divert income
— in direct violation of the trust provision of the loan agreement. And, when he was
caught, in October 2008, diverting $1,400,000 in customer payments, he fraudulently
assured the bank that was it. (Lykens TT 10/21/09 pp. 38-39). While the bank refused
to lend him anymore money, it advanced millions more to the trustee not knowing
defendant had grossly minimized the extent of the fraud.
Defendant’s position of trust at Agriprocessors armed defendant with the
authority to commit and conceal an array of offenses, including his offenses of
conviction. Defendant “used that position [of trust] in a manner that significantly
facilitated the commission” of his offenses. Olson, 22 F.3d at 786. Defendant’s abuse
“contributed in some significant way to facilitating the commission or concealment of the
offense (e.g., by making the detection of the offense or the defendant's responsibility for
the offense more difficult).” United States v. Jankowski, 194 F.3d 878, 884 (8th Cir.
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Community Grocery and a Corporate Officer of Torah Education
Defendant also abused his positions as a corporate officer of both KCG33 and
TE,34 in committing his money laundering and other offenses. Thus, defendant caused
approximately $10,000,000 in proceeds of bank fraud to be run through bank accounts
of both entities opened on his authority. In the case of the TE account, defendant
abused his position as a corporate officer of a non-profit educational institution to create
a secret bank account for his illicit use. The TE account used by defendant was
unknown to even TE’s accountant, Christina Drahos. (See Drahos TT 10/26/09 pp.
136-37).
C. The Assessment of Two Levels for Abuse of a Position of Trust Does not
Constitute Impermissible Double Counting
Accessing the defendant two additional levels for abuse of position of trust would
not be double counting because his abuse of trust or skill is not included in the base
offense level or other specific offense characteristics. The abuse of position of trust
adjustment “may not be employed if an abuse of trust or skill is included in the base
offense level or specific offense characteristic.” USSG § 3B1.3. Courts have nearly
universally held that fraud and false statement offenses do not include abuses of trust
See Gov. T Exb. 2085 (KCG account agreement listing defendant as “President,
Signer & Secretary” of KCG).
See Gov. T Exb. 2086 (TE signature card and depositor agreement listing
defendant as an “Authorized Signer”); Gov. S Exb. 5501 (TE Minutes of Special Board
Meeting “ratify[ing] and confirm[ing] defendant as the sole officer of the corporation acting
as President, Secretary and Treasurer”).
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or skill in the base level offense. See e.g., Bhagavan, 116 F.3d at 193; United States v.
Buck, 324 F.3d 786, 793 (5th Cir. 2003); United States v. Liss, 265 F.3d 1220, 1229-30
(11th Cir. 2001); United States v. Hussey, 254 F.3d 428, 431-33 (2nd Cir. 2001); but see,
United States v. Broderson, 67 F.3d 452, 456 (2nd Cir. 1995). While the Eighth Circuit
has not specifically held that fraud or misrepresentation offenses do not include within
their base offense level abuses of trust or skill, it has upheld a number of adjustments
under §3B1.3 for such offenses. See e.g., Morris, 18 F.3d 562, 568 (bank fraud);
Baker, 200 F.3d at 564 (mail fraud and making false statement to the government);
Gjerde, 110 F.3d at 605 (federal agency fraud). An offense incorporates an abuse of
trust within the base offense only when the misrepresentation is not independently
criminal without the abuse of the position of trust. Broderson, 67 F.3d at 456.
Therefore, the U.S. Probation Office properly found defendant abused a position
of trust and a two-level enhancement should be imposed under 3B1.3.
VIII. OBSTRUCTION OF JUSTICE
For all of the reasons set forth in PSR ¶¶ 321-327, defendant obstructed justice
with regard to his section 2B1.1 offenses and his money laundering offenses scored
under section 2S1.1.
When a defendant (1) “willfully obstruct[s] or impede[s] . . . the administration of
justice with respect to the investigation, prosecution, or sentencing of the instant
offense” and (2) “the obstructive conduct is related to the defendant’s offense of
conviction” his offense level should be increased two-levels. USSG § 3C1.1. Under
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this section, “a defendant is accountable for his own conduct and for conduct that he
aided or abetted, counseled, commanded, induced, procured, or wilfully caused.”
USSG §3C1.1, comment (n.9).
A. Defendant Committed Perjury
Application Note 4 to USSG § 3C1.1 sets forth a non-exhaustive list of conduct
which qualifies as obstruction of justice. Included in the list is “committing, suborning,
or attempting to suborn perjury.” “Lying under oath certainly impedes the
administration of justice during the prosecution of a case.” United States v. Has No
Horse, 42 F.3d 1158, 1159 (8th Cir. 1994). A witness commits perjury “if [he] gives
false testimony concerning a material matter with the willful intent to provide false
testimony, rather than as a result of confusion, mistake, or faulty memory.” United
States v. Taylor, 207 F.3d 452, 454-55 (8th Cir. 2000) (quoting United States v.
Dunnigan, 507 U.S. 87, 94 (1993)). Where a defendant falsely denies under oath that
he engaged in criminal conduct, the adjustment is properly imposed. See, e.g., United
States v. Brown, 311 F.3d 886, 889-90 (8th Cir. 2002) (false denials of knowledge and
of material aspects of key prosecution witness testimony); United States v. Titlbach,
300 F.3d 919, 923-24 (8th Cir. 2002) (false denials of “involvement in the
methamphetamine manufacturing activities that other witnesses said she participated
in”); United States v Berndt, 86 F.3d 803, 810 (8th Cir. 1996) (adjustment based upon
defendant's false claim of any knowledge of odometer fraud of which he was
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Defendant’s false testimony at trial included, but was not limited to: (1) claiming
he never asked Darlis Hendry to create bills-of-lading to go with the false invoices
(Defendant TT 11/5/09 p. 120); and (2) claiming he did not ask April Hamilton to add
"round-up" checks to the deposits containing diverted customer checks (Defendant TT
11/5/09 p. 123). Defendant’s testimony regarding bills-of-lading was contradicted by
Hendry’s testimony that defendant asked her to create bills of lading to back up the
invoices. (Hendry TT 10/15/09 pp. 21-23). The fact that there were fake invoices and
bills of lading in Judy Meyer’s “blue folder” (Gov. Ex. 2096) – the folder being labeled
“Sholom” – supports Hendry’s version of the facts.35 Indeed, other than defendant’s
false testimony, there was no evidence at trial that anyone other than defendant was
responsible for the fake bills of lading. Defendant’s claim that he never asked Hamilton
to add round-up checks to deposits of diverted customer payments was contradicted by
Hamilton’s testimony. (Hamilton TT 10/22/09 pp. 48-49). As with bills of lading, other
than defendant’s false testimony, there was no evidence that anyone other than
defendant directed Hamilton to divert customer payments and add round-up checks.
With regard to both the bills of lading and the round-up checks, as implausible as
defendant’s denial appears, defendant had a strong incentive to make the denials
anyway. There is simply no innocent explanation for either the bills of lading or the
round-up checks.
Heather Bissell testified she created fake bills of lading for Judy Meyer and Meyer
would sign a truck driver’s name to the documents. (Bissell TT 10/29/09 pp. 103-105).
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At defendant’s November 18, 2009, detention hearing, defendant’s false
testimony included, but was not limited to, his claim that he had approximately 86
employees placed on the Hunt payroll in the Fall of 2007 for purely religious purposes
and not because he knew they had bad documents. (Defendant’s DHT pp. 37-38).
Defendant’s testimony was contradicted by the trial testimony of Laura Althouse as well
as Billmeyer’s “confused and befuddled” e-mail (Gov. Ex. 1108). The fact that Hunt
payroll was originally established for religious reasons did not support defendant’s
The Court should reject defendant’s baseless claim that his testimony
“constituted a good faith recollection of complicated events, and was neither directed to
a material issue or knowingly false.” (Defendant’s Objections p. 21). These were
bold-faced lies by defendant regarding matters that were simply too incriminating for
him to admit. They were material in that they went to the heart of defendant’s
involvement in the crimes charged. See United States v. Cox, 985 F.2d 427, 432 (8th
Cir. 1993) (“there may be situations in which the materiality of false testimony is virtually
self-evident – for example, when a defendant gives false testimony during his or her
own trial“).
B. Defendant Concealed and Destroyed Evidence
Application Note 4 also lists “destroying or concealing or directing or procuring
another person to destroy or conceal evidence that is material to an official investigation
or judicial proceeding (e.g., shredding a document or destroying ledgers upon learning
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that an official investigation has commenced or is about to commence . . . “ USSG
§3C1.1, comment (n.4(d)). To be subject to an enhancement under USSG § 3C1.1,
“[A] defendant must have “willfully” obstructed justice, which requires that he knew that
he was under investigation or had “‘a correct belief that an investigation [was] probably
underway. ”’ Brown v. United States. 169 F.3d 531, 536 (8th Cir. 1999) (quoting United
States v. Oppedahl, 998 F.2d 584, 586 (8th Cir. 1993)).
Here, defendant was aware he was under investigation at least as early as the
May 12, 2008, immigration raid.36 As established at trial, in an attempt to conceal his
offenses, defendant gathered up and either hid or destroyed (1) the hard copies of the
fake invoices and fake bills of lading created by Darlis Hendry, (2) the hard copies of
customer checks diverted by Hamilton, (3) Hamilton’s thumb drive containing a
spreadsheet of diverted customer payments, and (4) the customer statements which
were inconsistent with the APGEN figures sent to the bank. He also, (5) directed April
Hamilton to destroy evidence in APGEN of the mis-dated payments.37 In addition,
In addition, soon after the raid, defendant received two target letters from the
government and was subpoenaed to the grand jury to submit to a photograph. See Gov.
S Exb. 5502 (May 20, 2008, target letter notifying defendant he was a target of an
investigation involving alien harboring and related offenses including “money laundering”
(previously in the record as November 18, 2009, detention hearing Exhibit 6561 p. 3)) and
Gov. S. Exb. 5503 (May 21, 2008, target letter notifying defendant he was a target of an
investigation involving bank fraud and related offenses including “money laundering”
(previously in the record as November 18, 2009, detention hearing Exhibit 6561 p. 5)).
At trial, Hamilton testified that defendant asked her for the thumb drive and related
documents, and asked her to delete the APGEN evidence, around the time he went to
court. (Hamilton TT 10/22/09 pp. 88-90). Torson testified defendant had her shred the
customer statements the day after a search warrant was executed at Agriprocessors.
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around the time of the raid, defendant gathered from Althouse the immigration forms I-9
for the employees with the obviously fake identification documents whom he had placed
on the Hunt payroll. (Althouse TT 10/28/09 p. 65). Those forms were never seen
All of this conduct was intended to obstruct or impede the government’s
investigation, and falls within the application of section 3C1.1.
C. Defendant Interfered with Material Witnesses
Defendant also “unlawfully influenced . . . co-defendant[s] [and] witness[es] . . .
or attempt[ed] to do so.” USSG § 3C1.1, comment (n.4(a)).
[T]he obstruction of justice enhancement is designed “not just to prevent
miscarriages of justice but also to reduce the burden on the justice system.”
United States v. Buckley, 192 F.3d 708, 710 (7th Cir.1999). The enhancement
thus covers not only threats or intimidation but also “otherwise unlawfully
influencing” a witness. United States v. Johnson, 46 F.3d 636, 638 (7th Cir.1995).
This circuit has previously held that “unlawfully influencing” a witness means
intentionally engaging in conduct “having a natural tendency to suppress or
interfere with the discovery of truth.” [United States v. Wright, 37 F.3d 358, 362
(7th Cir.1994)].
United States v. House, 551 F.3d 694, 699 (7th Cir. 2008).
On approximately May 29, 2008, defendant's company credit card was used to
buy one-way airline tickets to Israel for Shlomo Ben Chaim, the employee who certified
the I-9s for the undocumented aliens placed on the separate payroll. (Gov. S Exb.
(Torson TT 10/22/09 pp. 30-31). In the Court’s January 28, 2009, Order granting
defendant’s appeal of Magistrate Judge Scoles’ order of detention, the Court found “there
is probable cause to believe Defendant committed a federal crime, Bank Fraud, while on
pretrial release.” (Document #199, p. 16).
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5504). The card was used to purchase tickets for seven of Ben Chaims's family
members as well. (Id.). Ben Chaim and his family then fled to Israel, where they
remain. (Gov. S Exb. 5505). Defendant also took over Ben Chaim's real property in
Iowa. (Fischels DHT pp. 105-108).
Also in late May 2008, defendant became aware Agriprocessors manager and
coconspirator Hosam Amara was a target of the government's criminal investigation into
alien harboring. On June 3, 2008, defendant gave Amara $4,000 for airline tickets and
told him it would be better if he just left and forgot about what had happened at
Agriprocessors. (Fischels DHT pp. 96-103; Gov. T Exbs. 1302, 1303 and 1304; Gov. S
Exbs. 5506 (transcript of March 5, 2009, recorded conversation with Amara); Gov. S
Exb. 5507 (transcript of March 10, 2009, recorded conversation with Amara). Amara
then fled to Israel, where he remains pending extradition. (Fischels DHT pp. 103-104;
Gov. S. Exb. 5508).38
As defendant became aware that Agriprocessors employees were identified as
targets and potential cooperators in the government's alien harboring investigation,
defendant promised those targets to continue to pay their salaries during any time they
spent in prison. Defendant directed Agriprocessors human resources assistant and
defendant's coconspirator Laura Althouse to draft "employee status forms" for her,
human resources manager and defendant's coconspirator Elizabeth Billmeyer, and
Gov. S Exbs. 5504-5508 were previously admitted into the record at defendant’s
November 18, 2009, detention hearing as government exhibits 1319, 1300, 6, 7 and 1301,
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operations manager and alleged coconspirator Brent Beebe. The forms each set forth
an annual salary and included a blank space where the years in prison was to be filled
in once it was known. (Althouse TT 10/28/09 pp. 34-38; Gov. T Exbs.1314 (Billmeyer
form); 1315 (Beebe form); 1316 (Althouse form)). Defendant used his brother’s
signature stamp to “sign” the forms in a vain attempt to distance himself from this
obstructive conduct.
All of the above steps were taken by defendant at a time when defendant knew
he was being investigated for a host of criminal activity, and were intended to “interfere
with the discovery of the truth.” Wright, 37 F.3d at 362.
D. Obstruction of Justice Regarding Money Laundering
Defendant’s efforts to obstruct justice included the obstruction (and attempted
obstruction) of the government’s money laundering investigation. As noted above,
shortly before and after a records search at Agriprocessors, defendant gathered up and
either hid or destroyed key financial documents that would have constituted clearly
incriminating evidence of money laundering. These included the hard copies of
diverted customer checks, the thumb drive containing a spreadsheet of diverted
customer payments, and customer statements showing customer payments that had
been omitted from APGEN and the reports to the bank. Had the government obtained
these items, it could have compared the dollar amounts of the diverted payments and,
by comparison to the dollar amounts of the Chax checks to Kosher and Torah, learned
that the amounts of the checks from Kosher and Torah were clearly manipulated with
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intent to deceive. Thus, the missing records would have constituted damaging
evidence that money had been flowing through Kosher Community Grocery and Torah
Education for the purpose of concealing unlawful activity.
In addition, by testifying falsely at trial that he did not direct April Hamilton to add
round-up checks to the deposits containing diverted payments, defendant attempted to
obstruct justice with regard to money laundering. Although the money laundering
counts of conviction were specifically based upon Chax checks from Kosher and Torah,
the round-up checks were nonetheless part of the scheme to conceal the source of the
laundered funds. Thus, the fact that, at the time of the diversion, defendant
manipulated the deposits to conceal the source of the funds, was directly relevant to the
money laundering counts of conviction. Defendant’s false testimony obstructed justice
with regard to the prosecution of those counts.
For the above reasons, the U.S. Probation Office properly scored two-level
enhancements for obstruction of justice regarding defendant’s USSG § 2B1.1 offenses
and his money laundering offenses scored under USSG § 2S1.1.
IX. MONEY LAUNDERING
Defendant’s sole challenge to the application of the money laundering guideline
(USSG § 2S1.1) is premised upon his legal challenges to money laundering counts of
conviction themselves. (See Defendant’s Objections p. 27). For the same reasons
urged by the government in resistance to defendant’s arguments, and for the additional
reasons set forth in the Court’s March 1, 2010, Order regarding defendant’s motions for
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judgment of acquittal and new trial (document #854), the money laundering guideline
properly applies.
X. SOPHISTICATED LAUNDERING
Under USSG § 2S1.1(b)(3), a two level enhancement applies “[i]f (A) subsection
(b)(2)(B) applies; and (B) the offense involved sophisticated laundering . . ..” Because
defendant was “convicted under 18 U.S.C. § 1956," subsection (b)(2)(B) applies.
Because defendant’s offense involved sophisticated laundering, the U.S. Probation
Office properly scored a two level enhancement. (See PSR ¶ 347).
Application Note 5(A) discusses the applicability of the sophisticated laundering
(A) Sophisticated Laundering under Subsection (b)(3). – For purposes of
subsection (b)(3), "sophisticated laundering" means complex or intricate
offense conduct pertaining to the execution or concealment of the 18
U.S.C. § 1956 offense.
Sophisticated laundering typically involves the use of –
(i) fictitious entities;
(ii) shell corporations;
transportation, transfers, or transmissions, involving
criminally derived funds that were intended to appear
legitimate; or
(B) Non-Applicability of Enhancement. – If subsection (b)(3) applies, and the
conduct that forms the basis for an enhancement under the guideline
applicable to the underlying offense is the only conduct that forms the
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basis for application of subsection (b)(3) of this guideline, do not apply
subsection (b)(3) of this guideline.
USSG § 2S1.1, comment (n.5).
Here, defendant’s money laundering offenses were sufficiently sophisticated to
warrant an enhancement. The goal of the money laundering offenses was to pay down
the revolving loan in a manner that made the funds look like they were coming directly
from customers. Defendant could have committed money laundering by simply writing
checks from Agriprocessors’ accounts in random amounts and depositing them into the
depository account. He did more than that. In his offenses of conviction, defendant ran
the money through the accounts of straw customers – KCG and TE. Thus, while the
entities were not “fictitious,” they functioned as “shell corporations” for the purpose of
defendant’s money laundering scheme. Particularly with regard to Torah Education,
defendant managed to run the money through a bank account that TE’s accountant did
not even know existed. (See Gov. T Exbs. 2101 and 2102; Drahos TT 10/26/09 pp.
136-37). Defendant’s use of a dedicated, secret bank account in the name of TE was
sophisticated to a comparable degree as the use of shell or fictitious entities.
Defendant’s use of actual business entities as straw customers was actually
more sophisticated than if he had used truly fictitious or shell corporations. Defendant’s
use of actual businesses allowed defendant to better hide his money laundering
offenses and conceal the proceeds of his crimes. The actual business conducted KCG
and TE provided additional cover for defendant’s money laundering.
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Similarly, the deposits of the Chax checks from KCG and TE were accompanied
by other transactions designed to do nothing more than aid in the laundering of the
funds. Thus, defendant’s money laundering offenses “two or more levels (i.e., layering)
of transactions, transportation, transfers, or transmissions, involving criminally derived
funds that were intended to appear legitimate.” USSG §2S1.1, comment (n.5(A)(iii)).
First, defendant added round-up checks to each batch of deposited diverted customer
checks in order to make the deposits “look legitimate.” (See Gov. T Exb. 2011). At
times, these additions to the deposits were only a few dollars and cents - “intricate”
transactions when compared to the tens of millions of dollars that defendant laundered.
Second, when accounts were about to go ineligible and needed to be paid down,
defendant caused Chax checks to be deposited into the depository account – cut in
random amounts to make the deposits “look legitimate.” Third, when back-filling the
KCG or TE accounts with Agriprocessors checks, rather than write a large check in an
even dollar amount, defendant asked accounts payable clerk Debbie Preuser to break
the checks into smaller, seemingly random amounts to make them “look legitimate.”
(See Preuser TT; Gov. T Exb. 2021 pp. 6-7). All told, defendant manipulated bank
transactions at three separate levels – each in a manner to make the transactions look
The Eighth Circuit has determined “[u]nder the plain language of § 2S1.1,
layering constitutes sophisticated laundering. ... The guideline does not require a finding
that each layer was composed of a complex transaction.” United States v. Pizano, 421
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F.3d 707, 731 (8th Cir. 2005); accord United States v. Miles, 360 F.3d 472, 482 (5th Cir.
2004) (“When an individual attempts to launder money through ‘two or more levels of
transactions,’ the commentary clearly subjects an individual to the sophisticated
laundering enhancement”). For these reasons, defendant’s money laundering
transactions were sufficiently sophisticated and a two-level enhancement is appropriate
under USSG § 2S1.1(b)(3).
XI. SUMMARY OF ADVISORY GUIDELINE RANGE
In accordance with the above, defendant’s objections to the U.S. Probation
Office’s scoring of the U.S. Sentencing Guidelines should be overruled, and
defendant’s guideline sentence should be calculated as follows:
Bank Fraud, False Statements, Wire Fraud, Mail Fraud and Packers Act
A. Pursuant to USSG §2B1.1(a)(1), defendant’s base offense level is 7.
B. Pursuant to USSG §2B1.1(b)(1)(L), an enhancement of 22 levels should
apply based upon a loss of more than $20,000,000.
C. Pursuant to USSG §2B1.1(b)(2)(A), a 2-level upward adjustment applies
based upon the offense involving 10 or more victims.
D. Pursuant to USSG §2B1.1(b)(9)(C), a 2-level upward adjustment applies
based upon the offense involving sophisticated means.
E. Pursuant to USSG §3B1.1(b), a 4-level upward adjustment should be
applied based upon defendant’s role as a organizer or leader of criminal
activity that involved five or more participants or was otherwise extensive.
F. Pursuant to USSG §3B1.3, a 2-level upward adjustment should be
applied based upon defendant abusing a position of trust in a manner that
significantly facilitated the commission or concealment of the offense.
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G. Pursuant to USSG §3C1.1, a 2-level upward adjustment should be
applied based upon defendant’s obstruction of justice and attempts to
obstruct justice.
Money Laundering Counts
A. Pursuant to USSG §2S1.1(a)(1), defendant’s base offense level is 33.
B. Pursuant to USSG §2S1.1(b)(2)(b), a 2-level upward adjustment applies
based upon defendant’s convictions under 18 U.S.C. § 1956.
C. Pursuant to USSG §2S1.1(b)(3), a 2-level upward adjustment applies
based upon the offense involving sophisticated laundering.
D. Pursuant to USSG §3B1.1(b), a 4-level upward adjustment should be
E. Pursuant to USSG §3B1.3, a 2-level upward adjustment should be
F. Pursuant to USSG §3C1.1, a 2-level upward adjustment should be
XII. A GUIDELINE SENTENCE IS WARRANTED
As noted above, the government asks that defendant be treated no differently
than other defendants sentenced by the Court. Defendant should be sentenced
consistent with the advisory guideline range calculated by the U.S. Probation Office
unless compelling grounds for a variance are shown. Although the government
anticipates a separately filed motion for variance by defendant, the government
responds as follows to the Kimbrough set forth in defendant’s objections.
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A. The Court Should Reject Defendant’s Kimbrough Challenge to the Loss
Defendant argues “the loss table overstates the seriousness of the offense.”
(Defendant’s Objections at 31). Defendant asserts the “loss table is irrational and
unsupported by empirical evidence.” Id. Citing Kimbrough v. United States, 552 U.S.
85 (2008), defendant asserts a sentence consistent with the loss table would result in a
sentence inconsistent with 18 U.S.C. § 3553(a). Defendant is wrong. The loss table
was based on empirical evidence and as a result of Congressional directives. A
variance from the guideline sentence here would be inconsistent with the holding in
Kimbrough. Finally, even if the Court had the authority to vary downward under a
Kimbrough theory, it should not do so in this case.
Pre-guidelines, “[m]ost judges believe[d] that the suffering experience by a white-
collar person as a result of apprehension, public indictment, and conviction as well as
the collateral disabilities incident to each – loss of job, revocation of a professional
license, diminishment of status in the community – [was] itself a kind of punishment.”
Wheeler, Mann, and Sarat, Sitting in Judgment: The Sentencing of White collar
Criminals, at 144-45 (1988). Congress, and the Federal Sentencing Guidelines
Commission, disagreed.
“Congress viewed deterrence as ‘particularly important in the area of white collar
crime.’” Mistretta v. United States, 488 U.S. 361, 375 n.9 (1989) (citing S.Rep. No.98-
225, at 76 (1983)). “Congress was especially concerned that prior to the Sentencing
Guidelines, ‘[m]ajor white collar criminals often [were] sentenced to small fines and little
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or no imprisonment.” Id. The Senate Report on the Sentencing Reform Act “gave
specific examples of areas in which the prevailing sentences might be too lenient,
including the treatment of major white-collar criminals.” Id. Accord, United States v.
Ebbers, 458 F.3d 110, 129 (2nd Cir. 2006) (“[T]he Guidelines reflect Congress’ judgment
as to the appropriate national policy for [white-collar] crimes . . ..” ); United States v.
Mueffelman, 470 F.3d 33, 40 (1st Cir. 2006) (noting the importance of “the minimization
of discrepancies between white- and blue-collar offenses.”).
In conducting its empirical analysis, the Federal Sentencing Guidelines
Commission found a significant discrepancy in the way in which white-collar versus
blue-collar criminals were treated.
The commission found in its data significant discrepancies between the
pre-Guideline punishment of certain white-collar crimes, such as fraud,
and other similar common law crimes, such as theft. The Commission’s
statistics indicated that where white-collar fraud was involved, courts
granted probation to offenders more frequently than in situations involving
analogous common law crimes; furthermore, prison terms were less
severe for white-collar criminals who did not receive probation.
Breyer, The Federal Sentencing Guidelines and the Key Compromises on Which They
Rest, 17 Hofstra L. Rev. 1, 19 (1988).
Although the commission found the sentences for white-collar crime significantly
more lenient, its “‘[e]mpirical analysis of pre-guidelines practice’” showed that loss
amount was one of the two most important factors that determined sentence length.
See, e.g., United States v. Hoffecker, 530 F.3d 137, 200-201 (3rd Cir. 2008) (quoting
background comment to USSG §2F1.1); United States v. Achiekwelu, 112 F.3d 747,
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757 (4th Cir. 1997) (same); United States v. Akindele, 84 F.3d 948, 953-54 (7th Cir.
1996) (same); United States v. Alpert, 28 F.3d 1104, 1109 (11th Cir. 1994) (same);
United States v. Gregorio, 956 F.2d 341, 347 (1st Cir. 1992); United States v. Benskin,
926 F.2d 562, 566 (6th Cir. 1991) (same). To reflect the empirical findings that loss
amount was a key determinant of pre-guideline sentencing, the Commission created a
“dollar loss table that substitutes an objective and quantifiable measure of loss in place
of a district court’s subjective determinations.” Alpert, 28 F.3d at 1109. Over the years
since adoption of the Guidelines, the Commission has periodically adjusted the loss
table based on direction from Congress. See, e.g., USSG App. C. amends 596
(amending USSG §2B1.1 in response to directive in Pub. L. 105-318 and 105-172); 637
(amending USSG §2B1.1 in response to directive in the USA Patriot Act, Pub. L. 107-
56); 647 (amending USSG §2B1.1 in response to directive in the Sarbanes-Oxley Act of
2002, Pub. L. 107-204); 653 (same); 654 (amending USSG §2B1.1 in response to
directive in the Homeland Security Act of 2002, Pub. L. 107-296); 655 (amending
USSG §2B1.1 in response to directive in inter alia the USA Patriot Act, Pub. L. 107-56);
665 (amending USSG §2B1.1 in response to directive in Pub. L. 108-29).
In Kimbrough and Spears v. United States, --- U.S. ----, 129 S. Ct. 840 (2009),
the Supreme Court established that district courts’ disagreements with, and variance
from, the crack cocaine guidelines on pure policy grounds were “not suspect” on
appellate review because the crack cocaine guidelines did “not exemplify the
Commission’s exercise of its characteristic institutional role” in establishing guidelines
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based on empirical study. Spears, --- U.S. ----, 129 S. Ct. at 842-43. Where, however,
the guidelines are based on such empirical study, they are due greater deference.
Kimbrough, 552 U.S. at 107-108. Moreover, the language of Kimbrough suggests
where the guidelines were promulgated in response to Congressional directive, district
court’s have less discretion to vary. Kimbrough, 552 U.S. at 102-103 (finding no
“implicit directive” by Congress regarding the crack guidelines in the 1986 Anti-Drug
Abuse Act).
Defendant’s argument that the loss guidelines lack empirical support, similar to
the crack cocaine guidelines, is wrong. (Defendant’s Objections p. 31). As explained
above, the loss guidelines were the result of empirical study by the Commission,
reflective of the exercise of its “characteristic institutional role.” As such, they may not
be lightly swept aside, to be substituted with a district court’s subjective determination.
Moreover, the loss guidelines have been adjusted in response to Congressional
directives. Accordingly, unlike the crack cocaine guidelines, the loss guidelines are due
greater deference.
Defendant argues the loss guidelines are “irrational.” (Defendant’s Objections, at
31). Again, defendant is wrong. Unlike drug quantity, loss amount was found by the
Commission’s empirical study to be one the primary basis upon which pre-Guideline
sentences were determined. There is rational reason for this. There is a logical tie
between the amount of loss suffered by a victim in a white-collar case, and the criminal
culpability of the defendant. Drug quantity, in contrast, has a more attenuated
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connection to a victim’s suffering. Nor is drug quantity as logically tied to the scope of
the criminal conduct, particularly where, as with crack cocaine, the offense levels for
drug quantity differed so dramatically based on drug type. The amount of loss suffered
by a victim as a result of a fraud bears a realistic and logical relationship to the scope of
a defendant’s criminal conduct.
Regardless, it is abundantly clear the Kimbrough does “not hold that a district
court must disagree with any sentencing guideline, whether it reflects a policy judgment
of Congress or the Commission’s ‘characteristic’ empirical approach.” United States v.
O’Connor, 567 F.3d 395, 398 (8th Cir. 2009) (citing United States v. Barron, 557 F.3d
866, 871 (8th Cir. 2009), and United States v. Battiest, 553 F.3d 1132, 1136-37 (8th Cir.
2009). Thus, assuming the Court has the authority to vary from the Guidelines under a
Kimbrough theory, it should not do so here. The loss amount in this case accurately
reflects the scope of defendant’s criminal culpability. The loss suffered here was not
the result of an arbitrary calculation or an accidental event, but, rather, the direct result
of years of systemic falsification of invoices, the diversion of funds, the laundering of
proceeds, and obfuscation by fabrication of false financial statements and reports.
Therefore, even if the Court has the authority to vary from the loss guidelines, it should
not do so in this case because the loss guidelines accurately reflects the extent and
nature of defendant’s criminal culpability.
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B. Grounds for an Upward Departure
In the event the Court calculates the advisory guidelines in substantially the
same manner as done so by the U.S. Probation Office and urged by the government,
the government anticipates no upward departure would be necessary to achieve an
adequate sentence in this matter. However, it bears noting there are several grounds
which would justify an upward departure in this case. These would include a departure
for extraordinary obstruction of justice not adequately taken into account by the
guidelines (see §5K2.0(a)(3)), and a departure for criminal conduct which did not enter
into the determination of the guideline range (see §5K2.21).
1. Extraordinary Obstruction of Justice
USSG §5K2.0(a)(3) provides:
DEPARTURES BASED ON CIRCUMSTANCES PRESENT TO A DEGREE NOT
ADEQUATELY TAKEN INTO CONSIDERATION. – A departure may be
warranted in an exceptional case, even though the circumstance that forms the
basis for the departure is taken into consideration in determining the guideline
range, if the court determines that such circumstance is present in the offense to
a degree substantially in excess of, or substantially below, that which ordinarily is
involved in that kind of offense.
In this case, defendant repeatedly obstructed justice. Yet the guidelines only allow for a
single, two-level enhancement based upon a single instance of obstruction. Thus,
defendant’s obstructive conduct was “present in the offense to a degree substantially in
excess of” the norm and should otherwise be taken into account at sentencing. Indeed,
defendant had already earned an obstruction of justice enhancement well before taking
the stand and giving false testimony at trial. His obstruction actually began long before
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his arrest. Some additional sanction would seem appropriate to punish defendant for
his relentless obstructive behavior.39
2. Other Criminal Conduct
With regard to criminal conduct which did not enter into the determination of the
guideline range, section 5K2.21 states:
The court may depart upward to reflect the actual seriousness of the offense
based on conduct (1) underlying a charge dismissed as part of a plea agreement
in the case, or underlying a potential charge not pursued in the case as part of a
plea agreement or for any other reason; and (2) that did not enter into the
determination of the applicable guideline range.
USSG § 2K2.21. Here, the record establishes defendant committed an unprecedented
amount of criminal conduct which has not entered into the determination of the advisory
guidelines. For example, defendant led one of the most extensive alien harboring
conspiracies in the history of the Northern District of Iowa. Defendant financed an effort
to obtain fake resident alien cards for dozens of illegal workers. Defendant regularly
paid employees in cash and under the table. And defendant made illicit cash payments
to the former mayor of Postville.40 While the guidelines certainly call for a lengthy
In a similar sense, the Court should consider the jury’s findings that defendant
committed bank fraud four different ways – and one of which would have supported his
Defendant boldly asserts in his objections that, “[w]hile defendant does not deny
that he loaned [the former mayor] money, he believed initially the loans were made in good
faith and were legitimate. Later, [the mayor] extorted additional ‘loans’ from
Agriprocessors.” (Defendant’s Objections p. 24). Based upon defendant’s objections,
there does not appear to be any dispute that these so-called “loans” (which were never
repaid) were not legitimate. While defendant characterizes the payments as extortion, they
were, regardless, improper payments to a local government official – payments defendant
71ofof74
sentence, this case is extraordinary in view of the amount of criminal conduct not taken
into account. The Court should consider these extraordinary circumstances in
fashioning an appropriate sentence.
XIII. FINE
The PSR at ¶¶ 398 to 406 calculates the guideline fine range for the defendant
as between $25,000 and $366,349,686. The advisory guidelines require imposition of a
fine in all cases unless “defendant establishes that he is unable to pay and is not likely
to become able to pay any fine.” USSG §5E1.2(a); see also United States v. Berndt, 86
F.3d 803, 808 (8th Cir. 1996) (“The defendant has the burden of proving that he cannot
pay the fine.”). Section 5E1.2, lists the following eight factors for the Court to evaluate
in assessing a fine:
(1) the need for the combined sentence to reflect the seriousness of the
offense (including the harm or loss to the victim and the gain to the
defendant) to promote respect for the law, to provide just punishment and
to afford adequate deterrence;
(2) any evidence presented as to the defendant’s ability to pay the fine
(including the ability to pay over a period of time) in light of his earning
capacity and financial resources;
(3) the burden that the fine places on the defendant and his dependants
relative to alternative punishments;
(4) any restitution or reparation that the defendant has made or is obligated to
never reported to law enforcement. Whether characterized as extortion or bribes,
defendant made the payments to curry favor with an elected public official. The payments
constitute yet one more example of the depth of defendant’s corrupt business practices.
72ofof74
(5) any collateral consequences of conviction, including civil obligations
arising from the defendant’s conduct;
(6) whether the defendant previously had been fined for a similar offense;
(7) the expected costs to the government of any term of probation, or term of
imprisonment, and term of supervised release imposed; and
The amount of the fine should always be sufficient to ensure that the fine, taken
together with other sanctions imposed, is punitive. USSG §5E1.2.
At the sentencing hearing, as discussed below, the United States will request a
restitution obligation in excess of $20,000,000. In addition, the United States will
request that the restitution obligation be made due and payable immediately as
defendant has failed to disclose any financial information which would demonstrate he
does not have the ability to pay the full amount immediately. If the Court were to only
order a portion of the amount due and payable immediately, the government would
request that it be allowed to pursue all other reasonable means pursuant to 18 U.S.C.
§ 3664(m)(1)(A) to collect the entire restitution amount. Assuming the Court orders the
requested restitution obligation, then the government acknowledges the restitution order
may impact what fine amount the Court may choose to impose. However, since
defendant refuses to provide financial information and has otherwise failed to meet his
burden of demonstrating that he cannot pay a fine, a fine should be imposed.
73ofof74
XIV. RESTITUTION
Pursuant to 18 U.S.C. § 3663A(c)(1)(A)(ii), restitution in this case is mandatory.
The total amount of restitution to the victim banks41 should be $26,919,419. The
restitution should be apportioned between FBBC and MBFB according to their
respective positions with regard to the loan (69% for First Bank and 31% for MB
Financial). Accordingly, the total restitution to First Bank would be $18,574,399, and
the total restitution to MB Financial would be $8,345,020.
Defendant contends MBFB is not a victim under 18 U.S.C. § 3663A as
Agriprocessors was not in privity of contract with MBFB and did not borrow money
directly from MBFB. Defendant’s argument fails.
This Court has wide discretion in ordering restitution. United States v. Ross, 210
F.3d 916, 923-24 (8th Cir. 2000). Section 3663A(a)(2) defines a victim as:
a person directly and proximately harmed as a result of the commission of an
offense for which restitution may be ordered including, in the case of an offense
that involves as a element a scheme, conspiracy or patter of criminal activity, any
person directly harmed by the defendant’s criminal conduct in the course of the
scheme, conspiracy, or pattern.
In this case, MBFB was directly and proximately harmed by defendant’s fraud in
excess of $8,000,000. Defendant was aware that MBFB was a participant in the loan
and even made false statements to MBFB as part of his offense conduct. Phil Lykens
testified that a representative of MBFB was present when defendant made the
In addition, the government will be seeking restitution for Waverly Sales, Inc. in the
amount of $3,800.51, and for any other Packer’s Act victim who submits an allowable
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statements leading to his conviction on Count 101 of the Indictment. (Lykens TT
10/20/09 p. 54; see also Gov. T Exb. 2000 p. 44 (discussion of participants at section
9.9 of the loan agreement)).
Because MBFB was directly and proximately harmed by defendant’s crimes,
defendant’s objection should be overruled, and defendant should be ordered to pay
restitution directly to MBFB. Alternatively, MBFB’s portion of the restitution should be
order payable to FBBC for distribution to MBFB.
For the above reasons, defendant should be sentenced consistent with the
recommendations of the U.S. Probation Department and any additional record made by
the government at sentencing.
STEPHANIE M. ROSE
I certify that I electronically served a copy of
the foregoing document to which this
certificate is attached to the parties or By: s/ PETER E. DEEGAN, JR.
attorneys of record, shown below, on April 9,
UNITED STATES ATTORNEY Assistant United States Attorney
401 1st Street SE, Suite 400
BY: s/S. Van W eelden
COPIES TO: Counsel of Record 319-363-6333; 319-363-1990 (Fax)
Peter.deegan@usdoj.gov
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