Solid Sentencing Memorandum, Post-Booker
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF OHIO
EASTERN DIVISION
UNITED STATES OF AMERICA :
:
Plaintiff, :
:
:
v. : Case No. CR-2-01-48
:
ALGIS JULIUS GALE, : JUDGE HOLSCHUH
:
Defendant. :
_____________________________________________________________
ALGIS GALE’S SENTENCING MEMORANDUM
PART II
_____________________________________________________________
Now comes Algis J. Gale, through counsel, and hereby submits the following sentencing memorandum for this Court’s review and consideration.
Respectfully submitted,
/s/ Kort Gatterdam
Max Kravitz (0023765)
Kort Gatterdam (0040434)
KRAVITZ, GATTERDAM & BROWN, LLC
145 E. Rich St.
Columbus, Ohio 43215
Tel: (614) 464-2000
Fax: (614) 464-2002
COUNSEL FOR DEFENDANT
MEMORANDUM IN SUPPORT
A. Statement of the Case and Facts
Algis J. Gale (Gale) was indicted on March 13, 2001, and charged with one count of mail fraud and two counts of wire fraud. The indictment alleged that Gale attempted to defraud Midbanc, Inc. concerning a $50,000 loan to purchase two classic Cadillac cars.
The actions which formed the basis for the indictment occurred in 1996. The loan documents were signed in April, 1996 and the transaction would have been completed had Midbanc, Inc. delivered the cars, as promised, to Gale. However, after Airinhos Serradas called Midbanc, the cars were stopped in transit and never delivered.
The evidence from the hearings held and documents that have been filed in this matter reveal that Algis Gale is a classic car collector. Gale collects the classic vehicles, restores them, enters them into shows, movies, etc. He also sells the vehicles, once restored, for a profit. Unlike the typical mail or wire fraud case, the evidence reveals that had Gale received the vehicles, he had every intention of paying Midbanc back. The Government has admitted such is the case. (See Dan Brown 1/16/04 letter to Phelps Jones at p.3)
The allegations against Gale were the subject of civil litigation in New York which began in 1997. The interview summary shows the government had all the pertinent documents and confronted Gale with those documents during the December, 1998 interview. The indictment itself states that Gale’s “scheme” continued “up to on or about December 9, 1998”, (the date F.B.I. interviewed Gale). Gale made certain admissions during the F.B.I interview. Still, the government filed no charges against him until approximately two and one half years after Gale’s interrogation.
Gale was indicted in March, 2001, shortly before the statute of limitations was set to expire. This Court held motions hearings on Gale’s motion to suppress, his motion to dismiss for pre-indictment delay and motion to dismiss for failure to comply with the statute of limitations. On January 28, 2003, Gale pled guilty to Count 1 of the indictment while the remaining two counts were dismissed.
Since the plea, there have been a number of issues the parties and United States Probation Office have discussed concerning the Presentence Investigation Report (“PIR”). Regardless of how this Court interprets the guidelines, for or against Gale, 18 U.S.C. 3553(a) and the substantial and unique downward departure issues under the guidelines make a sentence of imprisonment unwarranted.
B. Standard of Review.
(1) Blakely-Booker. This Court has permitted Defendant to address the impact of Blakely v. Washington (2004), 124 S.Ct. 2531; United States v. Booker and United States v. Fanfan. United States v. Booker (Jan. 12, 2005), U.S. Nos. 04-104, 04-105, 2005 WL 50108 at *15 (Stevens, J., writing for the majority) upon the instant case. Sentencing is set for June 7, 2005.
In Blakely v. Washington (2004), 124 S.Ct. 2531, the United States Supreme Court held that all facts relevant to the "statutory maximum" sentence must be submitted to a jury and proved beyond a reasonable doubt. The "statutory maximum" was defined as the maximum penalty permitted under applicable sentencing provisions, based solely on the facts reflected in the jury verdict, rather than the sentence that might be imposed based upon additional facts found by the sentencing court. Blakely, 124 S.Ct. at 2536-37, 2539 (emphasis in original). It is of little import "[w]hether the judicially determined facts require a sentence enhancement or merely allow it" where "the verdict [or facts admitted by the defendant] alone does not authorize the sentence." Blakely, 124 S.Ct. at 2538 n.8 (emphasis in original). The Court condemned enhancements of guideline sentences not "based on facts proved to his peers beyond a reasonable doubt, but on facts extracted after trial from a report compiled by a probation officer who the judge thinks more likely got it right than got it wrong..." Blakely, at 2542.
In Blakely, the issue of whether the defendant had acted with "deliberate cruelty," the fact upon which the trial judge had relied to increase the defendant's sentence, had not been submitted to the jury or proved beyond a reasonable doubt. By imposing a term of imprisonment based on this finding beyond the base range prescribed by Washington's sentencing provisions, the trial judge had violated the defendant's rights to a jury trial and proof beyond a reasonable doubt.
In United States v. Booker (2005), 125 S.Ct. 738, the Court held that the United States Sentencing Guidelines ("USSG") violate a defendant's constitutional rights in two ways. First, the Act violates Sixth Amendment rights, because it requires judges, not juries, to decide facts which affect the maximum sentences to which defendants are exposed. Second, it violates Fifth Amendment rights, because it requires judges to find those facts by a preponderance of the evidence, rather than "beyond a reasonable doubt," and does not limit the sentence calculation to facts alleged in the indictment. In other words, the constitutional rights recognized in Blakely are both applicable and consistent with a constitutional federal sentencing scheme.
Prior to Booker, 18 U.S.C. 3553(b)(1) required a judge to impose a sentence within the guidelines unless additional facts were found by the court, and required the applicable guideline range to be determined and thus increased, enhancement by enhancement, on the basis of non-jury factfinding. In United States v. Fanfan, No, 04104 (January 12, 2005), the majority applied a severance analysis to determine that the proper judicial remedy for this unconstitutionality is not to strike down the entire statutory scheme (including the guidelines), and not to engraft additional protective procedures onto the present scheme (e.g., jury trial of guideline enhancements), but rather to "excise" the particular provisions of the statute which it found to create the unconstitutionality- 3553(b)(1)(which makes a guideline sentence mandatory unless a departure can be justified on the basis of judicial factfinding) and 3742(e)(which sets forth the strict standards of appellate review). Without those sections in place, the Court reasoned, the Guidelines no longer establish different statutory “maximums" for each level of offense. Thus the Blakely principle is not violated.
Therefore, Fanfan leaves in place, as the binding law of federal sentencing, principally section 3553(a) of title 18 (as well as section 3553(c) and section 3742(f), most importantly). That means that the judge, at sentencing, is obligated to impose the sentence which is "sufficient but not greater than necessary" to achieve the broad social purposes of sentencing described in section 3553(a)(2). The sentence which is minimally sufficient to serve its public purposes is what the law demands now, and the statute makes quite clear that this sentence is not necessarily or even presumptively a guideline sentence. The guidelines have not been made "advisory" in the sense of being the sole reference point or even the beginning point for the judge's exercise of discretion.
In Booker, the Court concluded that the Sixth Amendment as construed in Blakely does apply to USSG sentencing. Therefore, any fact necessary to support a sentence exceeding the maximum authorized by the facts established by a plea of guilty or a jury verdict must be admitted by the defendant or proved to a jury beyond a reasonable doubt, or else the Sixth Amendment is violated. United States v. Oliver, 397 F.3d 369, 378 (6th Cir. Feb. 2, 2005).
In Blakely, the United States Supreme Court defined the “statutory maximum” sentence that a court may impose as follows:
Our precedents make clear, however, that the ‘statutory maximum’ for Apprendi purposes is the maximum sentence a judge may impose solely on the basis of the facts reflected in the jury verdict or admitted by the defendant. * * * In other words, the relevant ‘statutory maximum’ is not the maximum sentence a judge may impose after finding additional facts, but the maximum he may impose without any additional findings. When a judge inflicts punishment that the jury’s verdict alone does not allow, the jury has not found all the facts ‘which the law makes essential to the punishment,” * * * and the judge exceeds his proper authority.
Id. at 2537 (emphasis in original)(citations omitted). The United States Supreme Court held that the facts admitted in Blakely’s guilty plea were insufficient to support the exceptional 90-month sentence imposed after the sentencing judge made additional factual findings, and Blakely’s sentence was therefore invalid under the Sixth Amendment. Id. at 2538.
(2) United States v. Webb. On April 6, 2005, the Sixth Circuit decided the case of United States v. Webb, 403 F.3d 373, (6th Cir. 2005). Although the Sixth Circuit declined to specify precisely what weight the district courts must give to the appropriate Guidelines range, or any other 18 U.S.C. 3553(a) factor, the panel decision held that whether a sentence is “reasonable” is not dependent on whether it comports with the Guidelines, but is a “concept of flexible meaning, generally lacking precise boundaries.” Webb, 403 F.3d at n.9. The Sixth Circuit noted that if “reasonableness” were equated with a Guideline sentence, such a standard “would effectively re-institute mandatory adherence to the Guidelines” that was condemned in Blakely. Webb, supra, citing United States v. Crosby, 397 F.3d 103, 115 (2d Cir. 2005).
The Webb court held:
[W]e read Booker as instructing appellate courts in determining reasonableness to consider not only the length of the sentence but also the factors evaluated and the procedures employed by the district court in reaching its sentencing determination. Thus, we may conclude that a sentence is unreasonable when the district judge fails to “consider” the other factors listed in 18 U.S.C. 3553(a), and instead simply selects what the judge deems an appropriate sentence without such required consideration.” Booker, 125 S. Ct. at 757 . . .
Webb, supra.
Therefore, this Honorable Court need not hold an evidentiary hearing to resolve any factual disputes raised in Gale’s and the Government’s correspondence to the probation department and this Court. See, Webb, 403 F.3d at 384 n.6 (“we decline to address whether a district judge must always calculate the precise appropriate Guidelines range in order to comply with Booker. . . [The] ‘precise calculation of the applicable Guidelines range may not be necessary’ in certain situations where the district judge imposes a non-Guidelines sentence.”).
(3) Additional Authority. In addition to the aforementioned cases, Gale submits additional cases which were not available at the time he submitted his initial sentencing memorandum. To prepare for a federal sentencing in the post-Booker world, counsel must attempt to canvass new cases from the circuits on almost a daily basis. This, of course, is an impossible task. Nevertheless, the law firm of Kravitz, Gatterdam & Brown, LLC do the best they can.
United States v. Kosinski, Sixth Circuit No. 03-2414, 2005 WL 64777 (March 22, 2005)(district court could not base tax loss on facts not submitted to the jury; 30 month sentence reduced to the loss reflected in the jury’s verdict, i.e., the minimum under the guidelines).
United States v. Williams, 355 F. Supp.2d 903 (N.D.Ohio E.D. Feb. 4, 2005)(amount of financial loss caused by defendant’s alleged fraud was a fact that could not be used to help convict him or to increase his sentence unless it was admitted by defendant or expressly found by the jury beyond a reasonable doubt).
United States v. Davis, 397 F.3d 340, 350 (6th Circuit Jan. 21, 2005)(amount of loss not an element of the offense or argued to jury; independent fact-finding by sentencing judge in making an amount of loss calculation violated the Sixth Amendment).
United States v. Yagar, ____F.3d ____, 2005 WL 873322 (6th Cir. April 18, 2005)(trial court improperly enhanced offense based on the number of victims).
United States v. Jones, ____F.3d ____, 2005 WL 857027*7 (6th Cir. April 15, 2005)(remand when sentence for amount of ephedrine was based on a finding of fact not made by the jury).
United States v. Jaber, ____F.Supp. 2d ____, 2005 WL 605787 (D.Mass. March 16, 2005)(generally and footnote 24).
C. Sentencing Guideline Issues
(1) Base Offense Level and Loss Incurred
Using the 1995 Sentencing Guidelines (see Gale’s 4/1/04 memorandum on minimal planning), the base level for the offense which Gale pled guilty to is 6 pursuant to 2B1.1(a). The question is how many points the offense should be elevated based on the loss incurred by Midbanc. As a threshold matter, Gale asserts that the Court is limited under Blakely-Booker to a base offense level of 6 unless Gale admits or the jury determines that the amount of the loss exceeds $5,000. A determination of the “statutory maximum” must precede and cabin a determination of the USSG for purposes of 18 U.S.C. 3553(a)(4). When a fact is not proven at trial utilizing proof beyond a reasonable doubt, unless the Defendant stipulates the facts supporting an enhancement (which Gale does not) or consents to judicial fact-finding (which Gale does not), those facts cannot be used to enhance a guideline level. In this case, application of 18 U.S.C 3553(a), as well as an application of the USSG, demands that a non-incarcerative sentence within Zone A is required.
If the Court believes it can compute an “advisory” guideline sentence above the minimum, the loan amount for the two vehicles was $60,000. Thus, the loss cannot exceed that number (so the maximum increase in point level is 5 points). In calculating the loss to Midbanc, the appropriate amount is less than $30,000. One vehicle was sold to Gale by Tom Rydalch for $17,000 plus sales tax. The other vehicle was sold to Mr. Gale by Ed Cholokian for $15,000 plus sales tax.
Gale paid a number of other expenses in preparation for the shipment of the vehicles from the West coast. He paid $2500 to Ed Rini to secure space for the cars and to have Rini order rare parts to begin the restoration process. (see Exhibit 1, affidavit of Ed Rini) The Ed Rini affidavit adds support to the argument that Gale did not seek to simply take the money from Midbanc and run. To the contrary, he sought to borrow the money to purchase and restore the cars.
Gale also purchased a commercial garage where he would store the cars. He had made a $5000 downpayment for the garage when the cars were stopped in transit. In addition, Gale made downpayments of $1000 to seller Rydalch (attached at Exhibit 2) and $2000 to seller Cholokian. Gale also had to obtain insurance (attached at Exhibit 3) and various other more minimal costs in preparation for the arrival of the vehicles. Gale spent over $10,500 in various up front fees and expenses and $32,000 to purchase the vehicles, for a total of $42,500, when the vehicles were stopped in transit. All of these actions taken by Gale show his intent to repay the loans.
Gale also paid a deposit to Desert Auto Transport in Arizona. Gale had to pay Desert Transport a deposit to have them transport the vehicles from California to New York. Due to the passage of time, the defense was unable to track down the man named Denny from Desert Transport who had started the process of transporting the vehicles when Pat McClintick of Midbanc ordered that the transport be stopped. Again, this show’s Gale’s intent to buy and restore the vehicles as opposed to a scheme to simply take the proceeds of the loans and not repay Midbanc.
When concerns were raised by the co-applicant on the loans, Key Bank (the bank that actually provided the funds for the loan) demanded that Pat McClintick of Midbanc pay the entire loan amount ($60,000) back to them. Pat McClintick, who supposedly understood the value of classic cars, did not act appropriately to minimize Midbanc’s potential loss. She hurriedly resold the cars back to Ed Cholokian for approximately $18,000-$20,000 for both cars. These are the same cars Gale had just purchased from Cholokian and Rydalch for approximately $12,000-$14,000 more just several weeks or months before Midbanc sold them back to Cholokian.
In addition, Cholokian then put the same cars on the market in May, 1997 and asked for a total of $16,500 for the 1946 Cadillac and $22,500 for the 1947 Cadillac. (attached at Exhibit 4). If sold for this price, Cholokian would have made a profit of approximately $19,000 in less than a year without having to do a thing for the cars. Counsel discussed this matter with a former owner of the 1947 Cadillac, Michael Canyon. Canyon made inquiries of Gale to determine whether Cholokian had title to the car that Canyon used to own. (see Exhibit 4A, letter from Michael Canyon).
It is questionable why Midbanc would agree to take this loss when the cars were in exactly the same condition as when Gale had negotiated the sale of the vehicles. Moreover, Jeff Weinstein, a land developer from New York who knows Gale, called Pat McClintick from Midbanc and offered $40,000 for the two vehicles. (see Exhibit __, affidavit of Jeff Weinstein) McClintick was not interested in Weinstein’s offer. He called her back 1-2 weeks later and offered $50,000. McClintick never bothered to return Weinstein’s call. Gale’s Counsel, Kort Gatterdam, spoke to Michael Canyon who owned the 1947 Cadillac before Tom Rydalch. He said the car was easily worth anywhere from $15,000-$20,000 before restoration. Midbanc clearly has failed to mitigate its damages which would have been less than $20,000 had it negotiated with Weinstein.
In addition, the literature and affidavits attached to this memorandum support the argument that the vehicles were each worth over $60,000 when restored. (see Exhibits 5, 2 and 6-8, affidavits of Jeff Weinstein, Ed Rini, Hemmings used car value guide) There was no reason to unload the cars, with a buyer willing to pay substantially more, for such a low price if McClintick had knowledge, as she testified to, of classic cars.
When reviewing all of the aforementioned, the increase as suggested by the presentence investigation is unwarranted. Since Gale actually purchased the vehicles for $32,500 and obtained loans totaling $60,000, the intended loss in this case can not be any more than $27,500 (the amount above the purchase price for the vehicles) which is less than $40,000. Thus, the offense level can only be increased four points. United States v. Watkins, 994 F.2d 1192 (6th Cir.1993).
If actual loss is used, Midbanc’s failure to act in a commercially reasonable manner in disposing of the cars contributed substantially to its loss. See 5K2.10. Midbanc’s actions are not commercially reasonable. Horizon Savings v. Wooten, 73 Ohio App.3d 501 (9th Dist. 1991). “Good faith…requires the secured party to use its best efforts to maximize the price for the collateral and to have reasonable regard for the debtor’s interests.” Huntington National Bank v. Elkins, 53 Ohio St.3d 79, 81 (1990). Not only did Midbanc have knowledge of a buyer willing to pay twice what Midbanc sold the cars back to Cholokian for but Midbanc, being in the business of providing loans to classic car buyers (see testimony of Pat McClintick), should have known that the cars were worth substantially more than the price it hurriedly sold them back to Ed Cholokian. (See also exhibits attached to April 30, 2003 letter which show the value of the cars)
Pat McClintick did not act appropriately to minimize Midbanc’s loss. Gale took steps, through Jeff Weinstein, to insure that Midbanc had no loss but Midbanc refused. Gale is not responsible for Midbanc’s inaction and ineptness in disposing of the vehicles. Midbanc’s loss would have been $10,000 or less if it had attempted to mitigate its damages. Consequently, Gale’s base offense level should not be increased at all, or only be increased by two or three points, for a total of eight or nine points.
(2) Attempt
U.S.S.G. 2X1.1 describes the attempt section of the Sentencing Guidelines Manual. Gale’s conduct is more appropriately characterized as an attempt rather than a completed act. The offense is an attempt because Serradas called Midbanc and advised that he was not a party to the transactions. Although the loan money was sent out, the cars were never delivered to Gale, therefore, any scheme or plan to obtain the cars was unsuccessful. The guidelines and the caselaw interpreting this section of the guidelines look to the subjective intent of the defendant. United States v. Aideyan, 11 F.3d 74 (6th Circ. 1993); United States v. Watkins, 994 F.2d 1192 (6th Cir. 1993).
In this case, Gale did not believe the transaction was complete until he received the cars. After all, the entire purpose of the loan was to receive the cars, restore them and sell them for a profit. Since the cars never reached New York and Gale’s possession, the offense is an attempt and pursuant to the guidelines, a three point decrease is warranted.
(3) Sophisticated Means
The parties are in agreement that the offense does not involve sophisticated means.
(4) Acceptance of Responsibility
The parties have agreed that pursuant to U.S.S.G. Section 3E1.1(a), Gale deserves a downward adjustment of two points for his acceptance of responsibility.
(5) Criminal History
Gale’s criminal history was categorized as a Category VI with 20 points according to the PIR. (See para. 53) A close review of Gale’s criminal history shows that the sentences in paragraphs 43-47 of the PIR are all related cases pursuant to 4A1.2(a)(2). The offenses were part of a continuous course of conduct. Review of the indictments, arrest dates, plea dates, and sentencing dates and statement of Gale’s trial attorney prove that these acts were joined together for sentencing purposes on May 6, 1982 as one scheme plan or system.
The Probation Officer counted 12 points for these offenses. Gale argues only 3 points should be counted towards criminal history. Thus, Gale’s criminal history point total should be reduced from 20 to 11 (20-9) which would move Gale from criminal history VI to criminal history V. See also, United States v. Lindholm, 24 F.3d 1078 (9th Cir. 1994) (consolidated priors committed to November 1, 1991 Amendment concerning intervening arrests should be treated as related even if separated by arrest).
(6) Gale’s Total Score
Using the 1995 Guidelines, Gale’s total score is:
Base Offense Level: 6
Loss between $20,000-$39,999: +4 (add +3 if loss between $10,000 - $19,999)
Attempt: -3
Acceptance of Responsibility: -2
Total: 1 - 6 (depending on the Court’s calculations) with a Criminal History of V.
D. Downward Departure Issues
Gale has significant downward departure issues. These issues overlap the factors set forth in 18 U.S.C. 3553(a)(1-7) and will be discussed in tandem.
In October, 2004, Gale’s wife of forty one years, Danute Tautvilas lost her long battle with cancer. His son continues to go through a bitter divorce and the house the Gale’s lived in is being sold this month. Gale’s health, including high blood pressure and prostate problems have gotten worse. Obviously this has been a difficult time in Gale’s life. 18 U.S.C. 3553(a)(1). To impose a sentence of incarceration at this time would be devastating to Gale.
Gale relies upon the arguments made previously and exhibits submitted by separate cover on this date. The factors under 18 U.S.C. 3553 do not warrant a sentence of incarceration nor do the guidelines. Gale has proven throughout this litigation which began over four years ago, that he can and will comply with probation sanctions. He has also proven by his lack of criminal conduct since this incident almost 10 years ago, that recidivism is now unlikely. 18 U.S.C. 3553(a)(1). See also, United States v. Gaskill, 991 F.2d 82 (3d Cir. 1993); United States v. Haversat, 22 F.3d 790 (8th Cir. 1994); United States v. Dusenberry, 9 F.3d 110 (6th Cir. 1993); United States v. Hildebrand, 152 F.3d 756 (8th Cir. 1998).
While Gale does live with his son, his son is going through an ugly divorce and has a number of issues of his own. Gale’s son is also going through a bankruptcy as a result of his divorce. Mr. Gale will turn 71 on May 29. Gale has had recent eye problems and prostate problems. He began treatments for his prostate in March and the once a week treatments last until June 8, 2004.
(2) Conduct Less Serious than the Typical Heartland Conduct for the Offense
Another factor warranting departure is that the conduct which occurred in this case, while contrary to the United States Code, is less serious than the typical heartland conduct covered by the guideline for this offense and the loss table overstates the seriousness of the offense. Koon v. United States, 518 U.S. 81 (1996); United States v. Gale, 188 F.3d 354 (6th Cir. 1999); United States v. Sicken, 223 F.3d 1169 (10th Cir. 2000); United States v. Oligmueller, 198 F.3d 669 (8th Cir. 1999); United States v. Stockheimer, 157 F.3d 1082, 1091 (7th Cir. 1998); United States v. Walters, 87 F.3d 663 (5th Cir. 1996); United States v. Monaco, 23 F.3d 793 (3d Cir. 1994). See also, 18 U.S.C. 3553(a)(1).
The act of buying the classic cars was done to make a profit; not to defraud Midbanc out of $60,000. If Gale had intended to defraud Midbanc, he would not have provided truthful information about his home address, phone number, or any other information that would trace him to the New York area. He would not have picked a bank he had done business with in the past. He would not have continued to maintain contact with Midbanc after the cars were stopped in transit or sought, through counsel, other ways to obtain the cars. He would not have put downpayments on the cars, parts, a garage, insurance, etc. All of these acts show Mr. Gale was serious about purchasing the cars and restoring them. As the Government stated in its January 16, 2004 letter to U.S. Probation, were it not for the actions of Serradas contacting Midbanc, the transactions “may well have resulted in the complete repayment of the $60,00 in loans, with no one being the wiser.” (1/16/04 ltr. at 3)
Gale has been a classic car collector and enthusiast for years. He has bought, restored, and admired classic cars as a hobby. He did not enter into these loans with the intent on ruining his reputation and good will among the classic car fraternity of which he has been a member for some time. Counsel attaches some of the paraphernalia and documentation of Gale’s longstanding involvement with classic cars as evidence of his involvement in this area. (Attached at Exhibits 17 – 21).
While the means chosen to obtain his goal were improper, the evidence clearly shows he intended to pay Midbanc back and his conduct in this regard is different from the typical mail or wire fraud case. In addition, given the money Gale has already paid prior to and after the conduct was discovered, the loss to Midbanc is overstated by the U.S.S.G. manual. Therefore, there is no need to afford adequate deterrence or to protect the public from further crimes of the defendant. 18 U.S.C. 3553(a)(2).
(3) Post-Offense Restitution.
In 1995, post-offense restitution could be a factor that can be considered for downward departure. United States v. Garlich, 951 F.2d 161, 163 (8th Cir. 1991). Shortly after the loan fell through, litigation ensued in New York against Gale and his business partner Gary DeTrano. There was litigation by Airinhos Serradas, the unknowing coapplicant and separate litigation by Midbanc.
The documents Gale has been able to obtain show that Gale paid a total of $100,185.00 to Serradas. The judgment was satisfied on August 12, 1997. (see certificate of disposition of judgment) The same attorney who represented Serradas, Mitchell Troyetsky, also represented Midbanc in its civil suit against Gale and DeTrano. According to one of the attorneys who represented Gale, George Gavalas, Gale was down from $65,000 to $20,000 owed a number of years ago when Gavalas represented Gale. (see Exhibit 9, letter from Martin Dorfman, Esq.) In addition, Gale made over $10,000 in downpayments for the vehicles back in 1996. Thus, Gale has paid back well over the amount of the loans to both Midbanc and Serradas.
There is no evidence that DeTrano paid any of the judgment despite his involvement in the wrongdoing. In fact, when DeTrano recently filed for bankruptcy, he listed Gale, Midbanc and Serradas as creditors to whom he owed unspecified amounts of money. (see Exhibit 10, bankruptcy petition of Gary DeTrano)
Gale disputes Midbanc’s statement that it believes it is still owed $43,000. It is unclear how Midbanc arrived at that number since the loan was for $60,000 and they sold the cars for $20,000, leaving a balance of $40,000 back in 1996. The presentence investigation notes a payment of $5000 and states the amount owed is $38,982.06 (paragraph 89) although in the initial presentence investigation report, the amount owed was $35,000 (paragraph 89, initial psi).
It is also our contention that Gale is only responsible for part of the loss to Midbanc. United States v. Arutunoff, 1 F.3d 1112 (10th Cir. 1993). Gale has always maintained that Gary DeTrano had a large role in what happened with the loan process. Unfortunately, due to the passage of time, proof on this matter has been difficult to obtain. Evidence of DeTrano’s involvement can be found in the civil suits filed by Serradas and Midbanc against both Gale and DeTrano; the fact that DeTrano lists Midbanc and Serradas as a creditor in his bankruptcy petition; and several affidavits that shed light on Gary DeTrano’s business practices and reputation. (see Exhibits 22 – 25, affidavits of Frank and Rita Stewart, Glen Rowan, and Richard Sberlati) Included with this evidence is the affidavit of Glen Rowan who indicated Midbanc attorney Mitchell Troyetsky called him in 1996-1997 in an attempt to have him place blame on Gale . These are not just the thoughts or ideas of Gale but documentary evidence in the form of lawsuits and others who know the reputation and character of DeTrano.
Counsel represents to the Court that he has spoken to one of Gale’s previous attorneys, Jules Levy from New York. Levy does recall entering an appearance on behalf of both Gale and DeTrano involving the Midbanc and Serradas litigation. He also was aware of Gale’s wife and DeTrano doing real estate transactions and that DeTrano owed Gale’s wife money. This would account for why one of the Midbanc checks went to Gale’s wife. See 18 U.S.C. 3553(a)(7).
(4) Pre-Indictment Delay
Another matter Gale believes warrants a downward departure is preindictment delay. United States v. Saldana, 109 F.3d 100 (1st Cir. 1997); United States v. Cornielle, 171 F.3d 748 (2d Cir. 1999); United States v. Sanchez-Rodriguez, 161 F.3d 556 (9th Cir. 1998); United States v. Brown, 959 F.2d 63, 66 (6th Cir. 1992); United States v. Rogers, 118 F.3d 466, 475-476 (6th Cir. 1997).
The conduct became known to Midbanc in April, 1996. Midbanc went to authorities in Ohio and New York in 1996. Early in 1997, the FBI became involved. Midbanc gave the FBI all the documents it needed as soon as they met. Gale gave statements to the FBI in 1998. No indictment was issued until less than 1 month before the statute of limitations expired in March, 2001. As a result of the 3-4 year delay, Gale was unable to produce evidence that would have assisted in his defense. Rather than restate the arguments previously made, Gale direct’s the Court’s attention to the post-evidentiary hearing brief filed in June, 2002 which fully sets out the facts testified to at the evidentiary hearing.
(5) Loss of Business Assets and Source of Income
Another downward departure consideration is the loss of business, assets, and source of income. United States v. Gaind, 829 F.Supp. 669 (S.D.N.Y. 1993). The money Gale has had to spend over the years paying Serradas, Midbanc, and attorneys to defend him in regard to this incident combined with the medical expenses for the care of his wife have financially crippled him. Moreover, his son’s recent divorce and bankruptcy have added to Gale’s financial responsibilities. Gale must continue to work to support his wife and himself and to pay off his debts rather than enjoy retirement. See 18 U.S.C. 3553(a)(7).
(6) Post Offense Rehabilitation
The offense in question occurred in April, 1996. There is no evidence that Gale has engaged in any further conduct outside the law since this offense. Gale did not flee his home in New York after the offense. Moreover, since his indictment in March, 2001, Gale has been supervised by pretrial services in New York. Gale has been a model supervisee. He has reported when required and complied with all terms and conditions of his release for the last three years.
The evidence suggests that Gale is an appropriate candidate for probation. By not engaging in criminal conduct for the last eight years, his age and health factors, and his ability to comply with pretrial release all show Gale has rehabilitated himself since this offense. This too should be considered as a factor weighing in favor of downward departure.
(7) Conclusion
The Sixth Circuit has permitted sentencing courts to aggregate factors to allow for a downward departure even if a single factor may not warrant a downward departure. United States v. Gale, 188 F.3d 354 (6th Cir. 1999) citing U.S. v. Koon, 518 U.S. 81 (1996). The factors in this case take it out of the typical heartland offense and warrant a significant departure. Koon v. United States, 518 U.S. 81 (1996); United States v. Gale, 188 F.3d 354 (6th Cir. 1999); United States v. Sicken, 223 F.3d 1169 (10th Cir. 2000); United States v. Oligmueller, 198 F.3d 669 (8th Cir. 1999); United States v. Stockheimer, 157 F.3d 1082, 1091 (7th Cir. 1998); United States v. Walters, 87 F.3d 663 (5th Cir. 1996); United States v. Monaco, 23 F.3d 793 (3d Cir. 1994).
When reviewing the facts of the case and the surrounding circumstances, the totality of the circumstances warrant a sentence of some form of probation or house arrest. United States v. Sabino, 274 F.3d 1053 (6th Cir. 2001); United States v. Gale, 188 F.3d 354 (6th Cir. 1999); United States v. Rivera, 994 F.2d 942 (1st Cir. 1993).
Respectfully submitted,
/s/ Kort Gatterdam
Max Kravitz (0023765)
Kort Gatterdam (0040434)
KRAVITZ & KRAVITZ, LLC
145 E. Rich St.
Columbus, Ohio 43215
Tel: (614) 464-2000
Fax: (614) 464-2002
COUNSEL FOR DEFENDANT
CERTIFICATE OF SERVICE
The undersigned hereby certifies that on May 2, 2005, he electronically filed the foregoing Sentencing Memorandum with the Clerk of Court using the CM/ECF system which will send notification of such filing to Dan Brown, Assistant United States Attorney, 303 Marconi Blvd. Suite 200, Columbus, Ohio 43215.
/s/ Kort Gatterdam
Kort Gatterdam
For more information on the impact of Booker on federal cases, contact:
David Finn
FOR THE SOUTHERN DISTRICT OF OHIO
EASTERN DIVISION
UNITED STATES OF AMERICA :
:
Plaintiff, :
:
:
v. : Case No. CR-2-01-48
:
ALGIS JULIUS GALE, : JUDGE HOLSCHUH
:
Defendant. :
_____________________________________________________________
ALGIS GALE’S SENTENCING MEMORANDUM
PART II
_____________________________________________________________
Now comes Algis J. Gale, through counsel, and hereby submits the following sentencing memorandum for this Court’s review and consideration.
Respectfully submitted,
/s/ Kort Gatterdam
Max Kravitz (0023765)
Kort Gatterdam (0040434)
KRAVITZ, GATTERDAM & BROWN, LLC
145 E. Rich St.
Columbus, Ohio 43215
Tel: (614) 464-2000
Fax: (614) 464-2002
COUNSEL FOR DEFENDANT
MEMORANDUM IN SUPPORT
A. Statement of the Case and Facts
Algis J. Gale (Gale) was indicted on March 13, 2001, and charged with one count of mail fraud and two counts of wire fraud. The indictment alleged that Gale attempted to defraud Midbanc, Inc. concerning a $50,000 loan to purchase two classic Cadillac cars.
The actions which formed the basis for the indictment occurred in 1996. The loan documents were signed in April, 1996 and the transaction would have been completed had Midbanc, Inc. delivered the cars, as promised, to Gale. However, after Airinhos Serradas called Midbanc, the cars were stopped in transit and never delivered.
The evidence from the hearings held and documents that have been filed in this matter reveal that Algis Gale is a classic car collector. Gale collects the classic vehicles, restores them, enters them into shows, movies, etc. He also sells the vehicles, once restored, for a profit. Unlike the typical mail or wire fraud case, the evidence reveals that had Gale received the vehicles, he had every intention of paying Midbanc back. The Government has admitted such is the case. (See Dan Brown 1/16/04 letter to Phelps Jones at p.3)
The allegations against Gale were the subject of civil litigation in New York which began in 1997. The interview summary shows the government had all the pertinent documents and confronted Gale with those documents during the December, 1998 interview. The indictment itself states that Gale’s “scheme” continued “up to on or about December 9, 1998”, (the date F.B.I. interviewed Gale). Gale made certain admissions during the F.B.I interview. Still, the government filed no charges against him until approximately two and one half years after Gale’s interrogation.
Gale was indicted in March, 2001, shortly before the statute of limitations was set to expire. This Court held motions hearings on Gale’s motion to suppress, his motion to dismiss for pre-indictment delay and motion to dismiss for failure to comply with the statute of limitations. On January 28, 2003, Gale pled guilty to Count 1 of the indictment while the remaining two counts were dismissed.
Since the plea, there have been a number of issues the parties and United States Probation Office have discussed concerning the Presentence Investigation Report (“PIR”). Regardless of how this Court interprets the guidelines, for or against Gale, 18 U.S.C. 3553(a) and the substantial and unique downward departure issues under the guidelines make a sentence of imprisonment unwarranted.
B. Standard of Review.
(1) Blakely-Booker. This Court has permitted Defendant to address the impact of Blakely v. Washington (2004), 124 S.Ct. 2531; United States v. Booker and United States v. Fanfan. United States v. Booker (Jan. 12, 2005), U.S. Nos. 04-104, 04-105, 2005 WL 50108 at *15 (Stevens, J., writing for the majority) upon the instant case. Sentencing is set for June 7, 2005.
In Blakely v. Washington (2004), 124 S.Ct. 2531, the United States Supreme Court held that all facts relevant to the "statutory maximum" sentence must be submitted to a jury and proved beyond a reasonable doubt. The "statutory maximum" was defined as the maximum penalty permitted under applicable sentencing provisions, based solely on the facts reflected in the jury verdict, rather than the sentence that might be imposed based upon additional facts found by the sentencing court. Blakely, 124 S.Ct. at 2536-37, 2539 (emphasis in original). It is of little import "[w]hether the judicially determined facts require a sentence enhancement or merely allow it" where "the verdict [or facts admitted by the defendant] alone does not authorize the sentence." Blakely, 124 S.Ct. at 2538 n.8 (emphasis in original). The Court condemned enhancements of guideline sentences not "based on facts proved to his peers beyond a reasonable doubt, but on facts extracted after trial from a report compiled by a probation officer who the judge thinks more likely got it right than got it wrong..." Blakely, at 2542.
In Blakely, the issue of whether the defendant had acted with "deliberate cruelty," the fact upon which the trial judge had relied to increase the defendant's sentence, had not been submitted to the jury or proved beyond a reasonable doubt. By imposing a term of imprisonment based on this finding beyond the base range prescribed by Washington's sentencing provisions, the trial judge had violated the defendant's rights to a jury trial and proof beyond a reasonable doubt.
In United States v. Booker (2005), 125 S.Ct. 738, the Court held that the United States Sentencing Guidelines ("USSG") violate a defendant's constitutional rights in two ways. First, the Act violates Sixth Amendment rights, because it requires judges, not juries, to decide facts which affect the maximum sentences to which defendants are exposed. Second, it violates Fifth Amendment rights, because it requires judges to find those facts by a preponderance of the evidence, rather than "beyond a reasonable doubt," and does not limit the sentence calculation to facts alleged in the indictment. In other words, the constitutional rights recognized in Blakely are both applicable and consistent with a constitutional federal sentencing scheme.
Prior to Booker, 18 U.S.C. 3553(b)(1) required a judge to impose a sentence within the guidelines unless additional facts were found by the court, and required the applicable guideline range to be determined and thus increased, enhancement by enhancement, on the basis of non-jury factfinding. In United States v. Fanfan, No, 04104 (January 12, 2005), the majority applied a severance analysis to determine that the proper judicial remedy for this unconstitutionality is not to strike down the entire statutory scheme (including the guidelines), and not to engraft additional protective procedures onto the present scheme (e.g., jury trial of guideline enhancements), but rather to "excise" the particular provisions of the statute which it found to create the unconstitutionality- 3553(b)(1)(which makes a guideline sentence mandatory unless a departure can be justified on the basis of judicial factfinding) and 3742(e)(which sets forth the strict standards of appellate review). Without those sections in place, the Court reasoned, the Guidelines no longer establish different statutory “maximums" for each level of offense. Thus the Blakely principle is not violated.
Therefore, Fanfan leaves in place, as the binding law of federal sentencing, principally section 3553(a) of title 18 (as well as section 3553(c) and section 3742(f), most importantly). That means that the judge, at sentencing, is obligated to impose the sentence which is "sufficient but not greater than necessary" to achieve the broad social purposes of sentencing described in section 3553(a)(2). The sentence which is minimally sufficient to serve its public purposes is what the law demands now, and the statute makes quite clear that this sentence is not necessarily or even presumptively a guideline sentence. The guidelines have not been made "advisory" in the sense of being the sole reference point or even the beginning point for the judge's exercise of discretion.
In Booker, the Court concluded that the Sixth Amendment as construed in Blakely does apply to USSG sentencing. Therefore, any fact necessary to support a sentence exceeding the maximum authorized by the facts established by a plea of guilty or a jury verdict must be admitted by the defendant or proved to a jury beyond a reasonable doubt, or else the Sixth Amendment is violated. United States v. Oliver, 397 F.3d 369, 378 (6th Cir. Feb. 2, 2005).
In Blakely, the United States Supreme Court defined the “statutory maximum” sentence that a court may impose as follows:
Our precedents make clear, however, that the ‘statutory maximum’ for Apprendi purposes is the maximum sentence a judge may impose solely on the basis of the facts reflected in the jury verdict or admitted by the defendant. * * * In other words, the relevant ‘statutory maximum’ is not the maximum sentence a judge may impose after finding additional facts, but the maximum he may impose without any additional findings. When a judge inflicts punishment that the jury’s verdict alone does not allow, the jury has not found all the facts ‘which the law makes essential to the punishment,” * * * and the judge exceeds his proper authority.
Id. at 2537 (emphasis in original)(citations omitted). The United States Supreme Court held that the facts admitted in Blakely’s guilty plea were insufficient to support the exceptional 90-month sentence imposed after the sentencing judge made additional factual findings, and Blakely’s sentence was therefore invalid under the Sixth Amendment. Id. at 2538.
(2) United States v. Webb. On April 6, 2005, the Sixth Circuit decided the case of United States v. Webb, 403 F.3d 373, (6th Cir. 2005). Although the Sixth Circuit declined to specify precisely what weight the district courts must give to the appropriate Guidelines range, or any other 18 U.S.C. 3553(a) factor, the panel decision held that whether a sentence is “reasonable” is not dependent on whether it comports with the Guidelines, but is a “concept of flexible meaning, generally lacking precise boundaries.” Webb, 403 F.3d at n.9. The Sixth Circuit noted that if “reasonableness” were equated with a Guideline sentence, such a standard “would effectively re-institute mandatory adherence to the Guidelines” that was condemned in Blakely. Webb, supra, citing United States v. Crosby, 397 F.3d 103, 115 (2d Cir. 2005).
The Webb court held:
[W]e read Booker as instructing appellate courts in determining reasonableness to consider not only the length of the sentence but also the factors evaluated and the procedures employed by the district court in reaching its sentencing determination. Thus, we may conclude that a sentence is unreasonable when the district judge fails to “consider” the other factors listed in 18 U.S.C. 3553(a), and instead simply selects what the judge deems an appropriate sentence without such required consideration.” Booker, 125 S. Ct. at 757 . . .
Webb, supra.
Therefore, this Honorable Court need not hold an evidentiary hearing to resolve any factual disputes raised in Gale’s and the Government’s correspondence to the probation department and this Court. See, Webb, 403 F.3d at 384 n.6 (“we decline to address whether a district judge must always calculate the precise appropriate Guidelines range in order to comply with Booker. . . [The] ‘precise calculation of the applicable Guidelines range may not be necessary’ in certain situations where the district judge imposes a non-Guidelines sentence.”).
(3) Additional Authority. In addition to the aforementioned cases, Gale submits additional cases which were not available at the time he submitted his initial sentencing memorandum. To prepare for a federal sentencing in the post-Booker world, counsel must attempt to canvass new cases from the circuits on almost a daily basis. This, of course, is an impossible task. Nevertheless, the law firm of Kravitz, Gatterdam & Brown, LLC do the best they can.
United States v. Kosinski, Sixth Circuit No. 03-2414, 2005 WL 64777 (March 22, 2005)(district court could not base tax loss on facts not submitted to the jury; 30 month sentence reduced to the loss reflected in the jury’s verdict, i.e., the minimum under the guidelines).
United States v. Williams, 355 F. Supp.2d 903 (N.D.Ohio E.D. Feb. 4, 2005)(amount of financial loss caused by defendant’s alleged fraud was a fact that could not be used to help convict him or to increase his sentence unless it was admitted by defendant or expressly found by the jury beyond a reasonable doubt).
United States v. Davis, 397 F.3d 340, 350 (6th Circuit Jan. 21, 2005)(amount of loss not an element of the offense or argued to jury; independent fact-finding by sentencing judge in making an amount of loss calculation violated the Sixth Amendment).
United States v. Yagar, ____F.3d ____, 2005 WL 873322 (6th Cir. April 18, 2005)(trial court improperly enhanced offense based on the number of victims).
United States v. Jones, ____F.3d ____, 2005 WL 857027*7 (6th Cir. April 15, 2005)(remand when sentence for amount of ephedrine was based on a finding of fact not made by the jury).
United States v. Jaber, ____F.Supp. 2d ____, 2005 WL 605787 (D.Mass. March 16, 2005)(generally and footnote 24).
C. Sentencing Guideline Issues
(1) Base Offense Level and Loss Incurred
Using the 1995 Sentencing Guidelines (see Gale’s 4/1/04 memorandum on minimal planning), the base level for the offense which Gale pled guilty to is 6 pursuant to 2B1.1(a). The question is how many points the offense should be elevated based on the loss incurred by Midbanc. As a threshold matter, Gale asserts that the Court is limited under Blakely-Booker to a base offense level of 6 unless Gale admits or the jury determines that the amount of the loss exceeds $5,000. A determination of the “statutory maximum” must precede and cabin a determination of the USSG for purposes of 18 U.S.C. 3553(a)(4). When a fact is not proven at trial utilizing proof beyond a reasonable doubt, unless the Defendant stipulates the facts supporting an enhancement (which Gale does not) or consents to judicial fact-finding (which Gale does not), those facts cannot be used to enhance a guideline level. In this case, application of 18 U.S.C 3553(a), as well as an application of the USSG, demands that a non-incarcerative sentence within Zone A is required.
If the Court believes it can compute an “advisory” guideline sentence above the minimum, the loan amount for the two vehicles was $60,000. Thus, the loss cannot exceed that number (so the maximum increase in point level is 5 points). In calculating the loss to Midbanc, the appropriate amount is less than $30,000. One vehicle was sold to Gale by Tom Rydalch for $17,000 plus sales tax. The other vehicle was sold to Mr. Gale by Ed Cholokian for $15,000 plus sales tax.
Gale paid a number of other expenses in preparation for the shipment of the vehicles from the West coast. He paid $2500 to Ed Rini to secure space for the cars and to have Rini order rare parts to begin the restoration process. (see Exhibit 1, affidavit of Ed Rini) The Ed Rini affidavit adds support to the argument that Gale did not seek to simply take the money from Midbanc and run. To the contrary, he sought to borrow the money to purchase and restore the cars.
Gale also purchased a commercial garage where he would store the cars. He had made a $5000 downpayment for the garage when the cars were stopped in transit. In addition, Gale made downpayments of $1000 to seller Rydalch (attached at Exhibit 2) and $2000 to seller Cholokian. Gale also had to obtain insurance (attached at Exhibit 3) and various other more minimal costs in preparation for the arrival of the vehicles. Gale spent over $10,500 in various up front fees and expenses and $32,000 to purchase the vehicles, for a total of $42,500, when the vehicles were stopped in transit. All of these actions taken by Gale show his intent to repay the loans.
Gale also paid a deposit to Desert Auto Transport in Arizona. Gale had to pay Desert Transport a deposit to have them transport the vehicles from California to New York. Due to the passage of time, the defense was unable to track down the man named Denny from Desert Transport who had started the process of transporting the vehicles when Pat McClintick of Midbanc ordered that the transport be stopped. Again, this show’s Gale’s intent to buy and restore the vehicles as opposed to a scheme to simply take the proceeds of the loans and not repay Midbanc.
When concerns were raised by the co-applicant on the loans, Key Bank (the bank that actually provided the funds for the loan) demanded that Pat McClintick of Midbanc pay the entire loan amount ($60,000) back to them. Pat McClintick, who supposedly understood the value of classic cars, did not act appropriately to minimize Midbanc’s potential loss. She hurriedly resold the cars back to Ed Cholokian for approximately $18,000-$20,000 for both cars. These are the same cars Gale had just purchased from Cholokian and Rydalch for approximately $12,000-$14,000 more just several weeks or months before Midbanc sold them back to Cholokian.
In addition, Cholokian then put the same cars on the market in May, 1997 and asked for a total of $16,500 for the 1946 Cadillac and $22,500 for the 1947 Cadillac. (attached at Exhibit 4). If sold for this price, Cholokian would have made a profit of approximately $19,000 in less than a year without having to do a thing for the cars. Counsel discussed this matter with a former owner of the 1947 Cadillac, Michael Canyon. Canyon made inquiries of Gale to determine whether Cholokian had title to the car that Canyon used to own. (see Exhibit 4A, letter from Michael Canyon).
It is questionable why Midbanc would agree to take this loss when the cars were in exactly the same condition as when Gale had negotiated the sale of the vehicles. Moreover, Jeff Weinstein, a land developer from New York who knows Gale, called Pat McClintick from Midbanc and offered $40,000 for the two vehicles. (see Exhibit __, affidavit of Jeff Weinstein) McClintick was not interested in Weinstein’s offer. He called her back 1-2 weeks later and offered $50,000. McClintick never bothered to return Weinstein’s call. Gale’s Counsel, Kort Gatterdam, spoke to Michael Canyon who owned the 1947 Cadillac before Tom Rydalch. He said the car was easily worth anywhere from $15,000-$20,000 before restoration. Midbanc clearly has failed to mitigate its damages which would have been less than $20,000 had it negotiated with Weinstein.
In addition, the literature and affidavits attached to this memorandum support the argument that the vehicles were each worth over $60,000 when restored. (see Exhibits 5, 2 and 6-8, affidavits of Jeff Weinstein, Ed Rini, Hemmings used car value guide) There was no reason to unload the cars, with a buyer willing to pay substantially more, for such a low price if McClintick had knowledge, as she testified to, of classic cars.
When reviewing all of the aforementioned, the increase as suggested by the presentence investigation is unwarranted. Since Gale actually purchased the vehicles for $32,500 and obtained loans totaling $60,000, the intended loss in this case can not be any more than $27,500 (the amount above the purchase price for the vehicles) which is less than $40,000. Thus, the offense level can only be increased four points. United States v. Watkins, 994 F.2d 1192 (6th Cir.1993).
If actual loss is used, Midbanc’s failure to act in a commercially reasonable manner in disposing of the cars contributed substantially to its loss. See 5K2.10. Midbanc’s actions are not commercially reasonable. Horizon Savings v. Wooten, 73 Ohio App.3d 501 (9th Dist. 1991). “Good faith…requires the secured party to use its best efforts to maximize the price for the collateral and to have reasonable regard for the debtor’s interests.” Huntington National Bank v. Elkins, 53 Ohio St.3d 79, 81 (1990). Not only did Midbanc have knowledge of a buyer willing to pay twice what Midbanc sold the cars back to Cholokian for but Midbanc, being in the business of providing loans to classic car buyers (see testimony of Pat McClintick), should have known that the cars were worth substantially more than the price it hurriedly sold them back to Ed Cholokian. (See also exhibits attached to April 30, 2003 letter which show the value of the cars)
Pat McClintick did not act appropriately to minimize Midbanc’s loss. Gale took steps, through Jeff Weinstein, to insure that Midbanc had no loss but Midbanc refused. Gale is not responsible for Midbanc’s inaction and ineptness in disposing of the vehicles. Midbanc’s loss would have been $10,000 or less if it had attempted to mitigate its damages. Consequently, Gale’s base offense level should not be increased at all, or only be increased by two or three points, for a total of eight or nine points.
(2) Attempt
U.S.S.G. 2X1.1 describes the attempt section of the Sentencing Guidelines Manual. Gale’s conduct is more appropriately characterized as an attempt rather than a completed act. The offense is an attempt because Serradas called Midbanc and advised that he was not a party to the transactions. Although the loan money was sent out, the cars were never delivered to Gale, therefore, any scheme or plan to obtain the cars was unsuccessful. The guidelines and the caselaw interpreting this section of the guidelines look to the subjective intent of the defendant. United States v. Aideyan, 11 F.3d 74 (6th Circ. 1993); United States v. Watkins, 994 F.2d 1192 (6th Cir. 1993).
In this case, Gale did not believe the transaction was complete until he received the cars. After all, the entire purpose of the loan was to receive the cars, restore them and sell them for a profit. Since the cars never reached New York and Gale’s possession, the offense is an attempt and pursuant to the guidelines, a three point decrease is warranted.
(3) Sophisticated Means
The parties are in agreement that the offense does not involve sophisticated means.
(4) Acceptance of Responsibility
The parties have agreed that pursuant to U.S.S.G. Section 3E1.1(a), Gale deserves a downward adjustment of two points for his acceptance of responsibility.
(5) Criminal History
Gale’s criminal history was categorized as a Category VI with 20 points according to the PIR. (See para. 53) A close review of Gale’s criminal history shows that the sentences in paragraphs 43-47 of the PIR are all related cases pursuant to 4A1.2(a)(2). The offenses were part of a continuous course of conduct. Review of the indictments, arrest dates, plea dates, and sentencing dates and statement of Gale’s trial attorney prove that these acts were joined together for sentencing purposes on May 6, 1982 as one scheme plan or system.
The Probation Officer counted 12 points for these offenses. Gale argues only 3 points should be counted towards criminal history. Thus, Gale’s criminal history point total should be reduced from 20 to 11 (20-9) which would move Gale from criminal history VI to criminal history V. See also, United States v. Lindholm, 24 F.3d 1078 (9th Cir. 1994) (consolidated priors committed to November 1, 1991 Amendment concerning intervening arrests should be treated as related even if separated by arrest).
(6) Gale’s Total Score
Using the 1995 Guidelines, Gale’s total score is:
Base Offense Level: 6
Loss between $20,000-$39,999: +4 (add +3 if loss between $10,000 - $19,999)
Attempt: -3
Acceptance of Responsibility: -2
Total: 1 - 6 (depending on the Court’s calculations) with a Criminal History of V.
D. Downward Departure Issues
Gale has significant downward departure issues. These issues overlap the factors set forth in 18 U.S.C. 3553(a)(1-7) and will be discussed in tandem.
In October, 2004, Gale’s wife of forty one years, Danute Tautvilas lost her long battle with cancer. His son continues to go through a bitter divorce and the house the Gale’s lived in is being sold this month. Gale’s health, including high blood pressure and prostate problems have gotten worse. Obviously this has been a difficult time in Gale’s life. 18 U.S.C. 3553(a)(1). To impose a sentence of incarceration at this time would be devastating to Gale.
Gale relies upon the arguments made previously and exhibits submitted by separate cover on this date. The factors under 18 U.S.C. 3553 do not warrant a sentence of incarceration nor do the guidelines. Gale has proven throughout this litigation which began over four years ago, that he can and will comply with probation sanctions. He has also proven by his lack of criminal conduct since this incident almost 10 years ago, that recidivism is now unlikely. 18 U.S.C. 3553(a)(1). See also, United States v. Gaskill, 991 F.2d 82 (3d Cir. 1993); United States v. Haversat, 22 F.3d 790 (8th Cir. 1994); United States v. Dusenberry, 9 F.3d 110 (6th Cir. 1993); United States v. Hildebrand, 152 F.3d 756 (8th Cir. 1998).
While Gale does live with his son, his son is going through an ugly divorce and has a number of issues of his own. Gale’s son is also going through a bankruptcy as a result of his divorce. Mr. Gale will turn 71 on May 29. Gale has had recent eye problems and prostate problems. He began treatments for his prostate in March and the once a week treatments last until June 8, 2004.
(2) Conduct Less Serious than the Typical Heartland Conduct for the Offense
Another factor warranting departure is that the conduct which occurred in this case, while contrary to the United States Code, is less serious than the typical heartland conduct covered by the guideline for this offense and the loss table overstates the seriousness of the offense. Koon v. United States, 518 U.S. 81 (1996); United States v. Gale, 188 F.3d 354 (6th Cir. 1999); United States v. Sicken, 223 F.3d 1169 (10th Cir. 2000); United States v. Oligmueller, 198 F.3d 669 (8th Cir. 1999); United States v. Stockheimer, 157 F.3d 1082, 1091 (7th Cir. 1998); United States v. Walters, 87 F.3d 663 (5th Cir. 1996); United States v. Monaco, 23 F.3d 793 (3d Cir. 1994). See also, 18 U.S.C. 3553(a)(1).
The act of buying the classic cars was done to make a profit; not to defraud Midbanc out of $60,000. If Gale had intended to defraud Midbanc, he would not have provided truthful information about his home address, phone number, or any other information that would trace him to the New York area. He would not have picked a bank he had done business with in the past. He would not have continued to maintain contact with Midbanc after the cars were stopped in transit or sought, through counsel, other ways to obtain the cars. He would not have put downpayments on the cars, parts, a garage, insurance, etc. All of these acts show Mr. Gale was serious about purchasing the cars and restoring them. As the Government stated in its January 16, 2004 letter to U.S. Probation, were it not for the actions of Serradas contacting Midbanc, the transactions “may well have resulted in the complete repayment of the $60,00 in loans, with no one being the wiser.” (1/16/04 ltr. at 3)
Gale has been a classic car collector and enthusiast for years. He has bought, restored, and admired classic cars as a hobby. He did not enter into these loans with the intent on ruining his reputation and good will among the classic car fraternity of which he has been a member for some time. Counsel attaches some of the paraphernalia and documentation of Gale’s longstanding involvement with classic cars as evidence of his involvement in this area. (Attached at Exhibits 17 – 21).
While the means chosen to obtain his goal were improper, the evidence clearly shows he intended to pay Midbanc back and his conduct in this regard is different from the typical mail or wire fraud case. In addition, given the money Gale has already paid prior to and after the conduct was discovered, the loss to Midbanc is overstated by the U.S.S.G. manual. Therefore, there is no need to afford adequate deterrence or to protect the public from further crimes of the defendant. 18 U.S.C. 3553(a)(2).
(3) Post-Offense Restitution.
In 1995, post-offense restitution could be a factor that can be considered for downward departure. United States v. Garlich, 951 F.2d 161, 163 (8th Cir. 1991). Shortly after the loan fell through, litigation ensued in New York against Gale and his business partner Gary DeTrano. There was litigation by Airinhos Serradas, the unknowing coapplicant and separate litigation by Midbanc.
The documents Gale has been able to obtain show that Gale paid a total of $100,185.00 to Serradas. The judgment was satisfied on August 12, 1997. (see certificate of disposition of judgment) The same attorney who represented Serradas, Mitchell Troyetsky, also represented Midbanc in its civil suit against Gale and DeTrano. According to one of the attorneys who represented Gale, George Gavalas, Gale was down from $65,000 to $20,000 owed a number of years ago when Gavalas represented Gale. (see Exhibit 9, letter from Martin Dorfman, Esq.) In addition, Gale made over $10,000 in downpayments for the vehicles back in 1996. Thus, Gale has paid back well over the amount of the loans to both Midbanc and Serradas.
There is no evidence that DeTrano paid any of the judgment despite his involvement in the wrongdoing. In fact, when DeTrano recently filed for bankruptcy, he listed Gale, Midbanc and Serradas as creditors to whom he owed unspecified amounts of money. (see Exhibit 10, bankruptcy petition of Gary DeTrano)
Gale disputes Midbanc’s statement that it believes it is still owed $43,000. It is unclear how Midbanc arrived at that number since the loan was for $60,000 and they sold the cars for $20,000, leaving a balance of $40,000 back in 1996. The presentence investigation notes a payment of $5000 and states the amount owed is $38,982.06 (paragraph 89) although in the initial presentence investigation report, the amount owed was $35,000 (paragraph 89, initial psi).
It is also our contention that Gale is only responsible for part of the loss to Midbanc. United States v. Arutunoff, 1 F.3d 1112 (10th Cir. 1993). Gale has always maintained that Gary DeTrano had a large role in what happened with the loan process. Unfortunately, due to the passage of time, proof on this matter has been difficult to obtain. Evidence of DeTrano’s involvement can be found in the civil suits filed by Serradas and Midbanc against both Gale and DeTrano; the fact that DeTrano lists Midbanc and Serradas as a creditor in his bankruptcy petition; and several affidavits that shed light on Gary DeTrano’s business practices and reputation. (see Exhibits 22 – 25, affidavits of Frank and Rita Stewart, Glen Rowan, and Richard Sberlati) Included with this evidence is the affidavit of Glen Rowan who indicated Midbanc attorney Mitchell Troyetsky called him in 1996-1997 in an attempt to have him place blame on Gale . These are not just the thoughts or ideas of Gale but documentary evidence in the form of lawsuits and others who know the reputation and character of DeTrano.
Counsel represents to the Court that he has spoken to one of Gale’s previous attorneys, Jules Levy from New York. Levy does recall entering an appearance on behalf of both Gale and DeTrano involving the Midbanc and Serradas litigation. He also was aware of Gale’s wife and DeTrano doing real estate transactions and that DeTrano owed Gale’s wife money. This would account for why one of the Midbanc checks went to Gale’s wife. See 18 U.S.C. 3553(a)(7).
(4) Pre-Indictment Delay
Another matter Gale believes warrants a downward departure is preindictment delay. United States v. Saldana, 109 F.3d 100 (1st Cir. 1997); United States v. Cornielle, 171 F.3d 748 (2d Cir. 1999); United States v. Sanchez-Rodriguez, 161 F.3d 556 (9th Cir. 1998); United States v. Brown, 959 F.2d 63, 66 (6th Cir. 1992); United States v. Rogers, 118 F.3d 466, 475-476 (6th Cir. 1997).
The conduct became known to Midbanc in April, 1996. Midbanc went to authorities in Ohio and New York in 1996. Early in 1997, the FBI became involved. Midbanc gave the FBI all the documents it needed as soon as they met. Gale gave statements to the FBI in 1998. No indictment was issued until less than 1 month before the statute of limitations expired in March, 2001. As a result of the 3-4 year delay, Gale was unable to produce evidence that would have assisted in his defense. Rather than restate the arguments previously made, Gale direct’s the Court’s attention to the post-evidentiary hearing brief filed in June, 2002 which fully sets out the facts testified to at the evidentiary hearing.
(5) Loss of Business Assets and Source of Income
Another downward departure consideration is the loss of business, assets, and source of income. United States v. Gaind, 829 F.Supp. 669 (S.D.N.Y. 1993). The money Gale has had to spend over the years paying Serradas, Midbanc, and attorneys to defend him in regard to this incident combined with the medical expenses for the care of his wife have financially crippled him. Moreover, his son’s recent divorce and bankruptcy have added to Gale’s financial responsibilities. Gale must continue to work to support his wife and himself and to pay off his debts rather than enjoy retirement. See 18 U.S.C. 3553(a)(7).
(6) Post Offense Rehabilitation
The offense in question occurred in April, 1996. There is no evidence that Gale has engaged in any further conduct outside the law since this offense. Gale did not flee his home in New York after the offense. Moreover, since his indictment in March, 2001, Gale has been supervised by pretrial services in New York. Gale has been a model supervisee. He has reported when required and complied with all terms and conditions of his release for the last three years.
The evidence suggests that Gale is an appropriate candidate for probation. By not engaging in criminal conduct for the last eight years, his age and health factors, and his ability to comply with pretrial release all show Gale has rehabilitated himself since this offense. This too should be considered as a factor weighing in favor of downward departure.
(7) Conclusion
The Sixth Circuit has permitted sentencing courts to aggregate factors to allow for a downward departure even if a single factor may not warrant a downward departure. United States v. Gale, 188 F.3d 354 (6th Cir. 1999) citing U.S. v. Koon, 518 U.S. 81 (1996). The factors in this case take it out of the typical heartland offense and warrant a significant departure. Koon v. United States, 518 U.S. 81 (1996); United States v. Gale, 188 F.3d 354 (6th Cir. 1999); United States v. Sicken, 223 F.3d 1169 (10th Cir. 2000); United States v. Oligmueller, 198 F.3d 669 (8th Cir. 1999); United States v. Stockheimer, 157 F.3d 1082, 1091 (7th Cir. 1998); United States v. Walters, 87 F.3d 663 (5th Cir. 1996); United States v. Monaco, 23 F.3d 793 (3d Cir. 1994).
When reviewing the facts of the case and the surrounding circumstances, the totality of the circumstances warrant a sentence of some form of probation or house arrest. United States v. Sabino, 274 F.3d 1053 (6th Cir. 2001); United States v. Gale, 188 F.3d 354 (6th Cir. 1999); United States v. Rivera, 994 F.2d 942 (1st Cir. 1993).
Respectfully submitted,
/s/ Kort Gatterdam
Max Kravitz (0023765)
Kort Gatterdam (0040434)
KRAVITZ & KRAVITZ, LLC
145 E. Rich St.
Columbus, Ohio 43215
Tel: (614) 464-2000
Fax: (614) 464-2002
COUNSEL FOR DEFENDANT
CERTIFICATE OF SERVICE
The undersigned hereby certifies that on May 2, 2005, he electronically filed the foregoing Sentencing Memorandum with the Clerk of Court using the CM/ECF system which will send notification of such filing to Dan Brown, Assistant United States Attorney, 303 Marconi Blvd. Suite 200, Columbus, Ohio 43215.
/s/ Kort Gatterdam
Kort Gatterdam
For more information on the impact of Booker on federal cases, contact:
David Finn
posted by Dallas Federal Criminal Defense Attorney - David Finn at 2:09 PM
0 Comments:
Post a Comment
<< Home