Case 3:15-cr VLB Document 42 Filed 08/20/15 Page 1 of 11 UNITED STATES DISTRICT COURT DISTRICT OF CONNECTICUT

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1 Case 3:15-cr VLB Document 42 Filed 08/20/15 Page 1 of 11 UNITED STATES DISTRICT COURT DISTRICT OF CONNECTICUT UNITED STATES OF AMERICA : : Case No. 3:15cr64 (VLB) : v. : : : GEORGE GALLO : August 20, 2015 I. INTRODUCTION GOVERNMENT S RESPONSE TO THE DEFENDANT S SUPPLEMENTAL MEMORANDUM IN AID OF SENTENCING On August 14, 2015, the defendant filed a supplemental memorandum in aid of sentencing (the Supplemental Memorandum ). In his Supplemental Memorandum, Mr. Gallo concedes that the actual loss attributable to his offense is $117,617.63, but argues that the resulting loss enhancement overstates the seriousness of his criminal conduct. He also argues generally that the Court should ignore U.S.S.G. 2B1.1(b)(1) because it provides no legitimate guidance with respect to Mr. Gallo s culpability. The Government respectfully submits this memorandum in response to the Supplemental Memorandum. II. THE LOSS CALCULATION The defendant now concedes that the actual loss in this case is $117,617.63, and that eight levels are added to his offense level under U.S.S.G. 2B1.1(b)(1)(E). He is therefore withdrawing his objection to 28 and 35 of the PSR. 1

2 Case 3:15-cr VLB Document 42 Filed 08/20/15 Page 2 of 11 Having acknowledged the actual loss, the defendant asks the Court to vary from the guideline range because the loss overstates the seriousness of his offense conduct. According to Mr. Gallo, his conduct was not particularly serious because (1) his multiple misrepresentations were "borne out of a fear of losing his job" rather than a desire to defraud his victims; (2) he actually performed work that benefited Company No. 1 and the candidates; (3) he was unaware that his 10% fee would result in higher prices for candidates; and (4) he did not "pressure" candidates to use Company No. 1. As an initial matter, it is worth noting that the Government has not requested a sentence within the PSR's guideline range of 27 to 33 months. Mr. Gallo's view, however, that his conduct was so minimal as to warrant only a term of probation is unreasonable and reflects a failure to truly grasp the scope of his conduct. Mr. Gallo's arguments rely on an inaccurate assessment of the record, and ignore other serious aspects of his conduct, including his false statements to the FBI. See PSR 27. A. The Loss Does Not Overstate the Seriousness of the Offense It is now undisputed that numerous Republican campaigns were defrauded out of a total of $117, as a result of Mr. Gallo's lies. It is also undisputed that the victims losses corresponded directly to Mr. Gallo's personal gain. It is further undisputed that Mr. Gallo made multiple misrepresentations for the purpose of obtaining money by fraudulent pretenses. Indeed, he admitted as much during his change of plea colloquy. See Tr. of Waiver/Plea Hrg. ("Tr. ") 13 2

3 Case 3:15-cr VLB Document 42 Filed 08/20/15 Page 3 of 11 ("I did this with the intent to continue to receive a commission for my work on campaigns."). Against this basic backdrop and other troubling aspects of his conduct, it is difficult to conclude that a relatively modest eight-level enhancement corresponding to the actual loss suffered by victims overstates the seriousness of his conduct. Further, each of the mitigating rationales offered by Mr. Gallo is at odds with the evidence, his own prior statements and common sense. First, it is simply not true that, from 2008 through 2013, Mr. Gallo made and caused others to make misrepresentations "out of a fear of losing his job." If, in 2008, Mr. Gallo had truthfully disclosed his "prior relationship" with Company No. 1, there is no reason to think he would have been fired rather than simply forced to discontinue the relationship. More importantly, the clearest evidence that Mr. Gallo was driven by personal greed rather than employment concerns is the fact that he continued his relationship with Company No. 1 for five years after he first lied to Public Official No. 1 in If Mr. Gallo's true concern was keeping his job, it seems obvious that he would have quietly terminated his relationship with Company No. 1 in 2008 to minimize the risk that Public Official No. 1 would ever discover the relationship. As Mr. Gallo acknowledged to this Court when he entered his guilty plea, he lied to Public Official No. 1 "with the intent to continue to receive a commission for my work on campaigns." Tr. 13. Likewise, Mr. Gallo agreed with the Government's statement that his misrepresentations were "designed and did reasonably influence... Republican candidates for the House 3

4 Case 3:15-cr VLB Document 42 Filed 08/20/15 Page 4 of 11 of Representatives to part with their money or property." Tr. 35, 37:6. While it is certainly true that his disclosure of a multi-year fraud would have rightly cost him his job, this is not the reason that Mr. Gallo repeatedly lied and caused others to present false information. Mr. Gallo had one simple, overriding purpose in committing this crime: to fraudulently obtain over $117,000 for himself. In making this argument, Mr. Gallo suggests that his arrangement with Company No. 1 was merely a continuation of a prior relationship. This is not accurate. It was not until 2008 that Mr. Gallo reached out to Employee No. 1 to present a new opportunity arising from the CEP and its reforms. 1 At that time, Mr. Gallo advised Employee No. 1 that the CEP would lead to a large group of wellfunded Republican candidates and that Mr. Gallo controlled access to that group of candidates. During this conversation, Mr. Gallo advised Employee No. 1 that his proposal would be "good for [Company No. 1] and good for George Gallo." PSR 17. In short, the combination of the CEP's ability to fund a large crop of Republican candidates and Mr. Gallo's influence over that group of candidates as Chief of Staff led to this new opportunity. Counsel's suggestion that, in 2007, the 1 At various times prior to 2008 and his state employment, Mr. Gallo offered private political consulting services to certain candidates. In that connection, he had previously received compensation from Company No. 1. However, in 2008, Mr. Gallo was not serving as a private political consultant to legislative candidates. He was the Chief of Staff to the House Minority Leader. His proposal to Employee No. 1 was based on his new authority to serve as a gatekeeper not a private consultant who could provide or restrict access to Republican candidates. One indication that Mr. Gallo s proposal to Employee No. 1 represented a new and different arrangement is the fact that his 2008 compensation from Company No. 1 ($25,824.97) was more than double what he earned as a private consultant the preceding year. 4

5 Case 3:15-cr VLB Document 42 Filed 08/20/15 Page 5 of 11 business relationship passively "re-started" is wrong. The reason the relationship "re-started" is that George Gallo saw a new and big opportunity to make money and he invited Company No. 1 into that opportunity in exchange for a 10% cut. Second, Mr. Gallo argues that his offense is not particularly serious because notwithstanding his deception, Mr. Gallo "worked hard on behalf of the people to whom he made misrepresentations." Supplemental Memorandum at 5. Mr. Gallo forgets that providing such assistance was part of his actual job. He provided assistance to Republican candidates in his capacity as Chief of Staff and the lead architect of the HRCC. He received a generous salary from Connecticut taxpayers for this work. 2 To suggest now that Republican candidates received his services for free and were therefore fortunate to benefit from his work is disingenuous. The bottom line is that publicly financed Republican candidates, who were subject to spending caps, spent 10% of their direct mail budget on an undisclosed kickback to Mr. Gallo. As Mr. Gallo well knows, every dollar counts when a candidate is competing in a tightly-budgeted, competitive race. Mr. Gallo deprived candidates of the right to decide how to best spend their public funds. Mr. Gallo also argues that his on-the-ground coordination benefited Company No. 1. This too is irrelevant. Company No. 1 did not pay the 10% kickback in exchange for Mr. Gallo's coordination with campaigns. According to 2 It should be noted that it was highly improper for Mr. Gallo to engage in partisan campaign work as in his capacity as a high ranking state employee. Such work, however, was part of his portfolio as Chief of Staff. 5

6 Case 3:15-cr VLB Document 42 Filed 08/20/15 Page 6 of 11 Employee No. 1, he paid Mr. Gallo for access to a group of well-funded candidates that only Mr. Gallo could provide. Moreover, absent that 10% kickback, Employee No. 1 understood that Mr. Gallo would not have afforded Company No. 1 the opportunity. Third, Mr. Gallo claims that his offense conduct is not particularly serious because he was unaware that his 10% fee would result in a higher price for Republican candidates. In other words, even though he intended to fraudulently obtain the candidates' money, he did not intend for Company No. 1 to include that cost in the price to candidates. It is difficult to accept that an experienced and savvy political operative would have believed that Company No. 1 was simply absorbing $117, out of the goodness of its heart. Indeed, at Mr. Gallo's suggestion, the HRCC offered candidates only two direct mail options, and Company No. 1 was the vendor of first resort. As Mr. Gallo knew, Company No. 1 had no incentive to absorb such a significant cost where it lacked any meaningful competition from other vendors. Mr. Gallo acknowledged this self-evident fact during his plea colloquy when he said that candidates "probably" paid more due to his 10% fee than they otherwise would have. Tr. 14 ("I believed they paid what would probably be considered market rate, but still with my commission on top of it they probably paid more than they could have with my commission."). The Government respectfully submits that his attorneys' new statements to the contrary are not consistent with the facts or common sense. 6

7 Case 3:15-cr VLB Document 42 Filed 08/20/15 Page 7 of 11 Fourth, Mr. Gallo argues that he did not pressure candidates to use Company No. 1. He ignores the fact that pressure was not necessary. By selecting only two participating vendors, Mr. Gallo rigged the HRCC program so that Republican candidates would inevitably choose Company No. 1. That is precisely what happened. In fact, Company No. 1 was the vendor of first resort. The second vendor was included primarily to handle excess volume. B. U.S.S.G. 2B1.1 The defendant argues that the guidelines use of financial loss as one measure of culpability provides no legitimate guidance, and urges the Court to reject the guideline altogether. 3 To accept the defendant s irresponsible invitation would be to dismiss the considered judgment of the United States Sentencing Commission, Section 3553(a) and the longstanding consensus that financial harm to victims is a significant and appropriate measure of one s culpability. As the Government previously argued, this is not a case where Mr. Gallo s guideline range is based almost solely upon a monetary figure. See Defendant s Opening Sentencing Memorandum 4. In fact, the PSR s adjusted offense level is comprised of 13 levels that have nothing to do with the monetary loss. Further, this is not a case where the guideline range is unreasonably high because it is based on a hypothetical calculation of intended loss. In this case, Mr. Gallo s offense caused a clear and specific loss equal to his own fraudulent gain. It is entirely reasonable that his guideline range should reflect that loss. 3 The defendant also urges the Court to employ the suggestions of the American Bar Association, but provides no analysis as to how those suggestions would apply in this case. 7

8 Case 3:15-cr VLB Document 42 Filed 08/20/15 Page 8 of 11 Contrary to the defendant s suggestion, the relatively modest loss enhancement in this case does not negate the Court s consideration of other relevant factors, including the circumstances of the offense, Mr. Gallo s history and characteristics, the need for specific and general deterrence, etc. III. ABUSE OF A POSITION OF TRUST In his opening memorandum in aid of sentencing, the defendant objects to the two-level enhancement for abuse of a position of trust. In support of that objection, Mr. Gallo s counsel makes the following statements: 1. Mr. Gallo had no decision-making power in the [HRCC], Def. s Mem. In Aid of Sentencing Mr. Gallo was not responsible for overseeing any aspect of the [HRCC] operation, see id.; 3. Mr. Gallo had no discretion to choose vendors, id.; 4. Mr. Gallo lacked any authority to recommend vendors to campaigns, id. at 5; 5. [Mr. Gallo] did not possess a managerial role, and his work was closely overseen by his superiors, id. In the Government s view, the evidence supports the opposite conclusion, i.e., that Mr. Gallo had (1) substantial oversight authority of HRCC, (2) wide deference in selecting and negotiating with the HRCC s preferred vendors and (3) was uniquely positioned to conceal his offense given his largely unilateral relationship with the vendor. 4 In fact, Mr. Gallo s own statements at his change of plea do not support his counsel s written submissions to the Court. During that 4 The Government will be prepared to present testimony and exhibits on this issue at sentencing. 8

9 Case 3:15-cr VLB Document 42 Filed 08/20/15 Page 9 of 11 proceeding, the Government advised the Court that its evidence would establish, among other things, the following: [I]n approximately 2008, Mr. Gallo was serving as chief of staff to the House Minority Leader in the Connecticut General Assembly. That in that capacity Mr. Gallo was responsible for among other things overseeing the operations of the House Republican Campaign Committee.... Tr. 30 (emphasis added). Mr. Gallo was in a unique position at that time to provide access to this new well-funded group of candidates to campaign service vendors. Tr. 31. Following the Government s summary of Mr. Gallo s conduct, the Court engaged Mr. Gallo in the following colloquy: Court: Mr. Gallo: You heard Attorney Mattei state what the Government asserts and indicates that it would prove that you did at trial. Did you in fact do those things? Yes, I did. Tr In the Government s view, Mr. Gallo s responsibilities as Chief of Staff included strategic oversight of the HRCC. In that role, he had substantial discretion to select the HRCC s preferred direct mail vendors. Further, in that role, Mr. Gallo was the HRCC s point of contact for Company No. 1 and unilaterally negotiated the terms of Company No. 1 s access to House Republican candidates. As a result, Mr. Gallo was uniquely positioned to (1) demand a 10% kickback and (2) conceal the existence of that arrangement from his victims and HRCC staff. If necessary, the Government will be prepared to present supporting evidence at sentencing. 9

10 Case 3:15-cr VLB Document 42 Filed 08/20/15 Page 10 of 11 IV. CONCLUSION For the foregoing reasons and those presented in its opening memorandum, the Government respectfully submits that a sentence of 15 months imprisonment is appropriate and warranted in light of the sentencing factors set forth at 18 U.S.C. 3553(a). Respectfully submitted, DEIRDRE M. DALY UNITED STATES ATTORNEY CHRISTOPHER M. MATTEI ASSISTANT UNITED STATES ATTORNEY FEDERAL BAR NO. CT27500 U.S. Attorney s Office 157 Church Street New Haven, CT (203)

11 Case 3:15-cr VLB Document 42 Filed 08/20/15 Page 11 of 11 CERTIFICATE OF SERVICE I hereby certify that on August 20, 2015, a copy of the foregoing was filed electronically. Notice of this filing will be sent by to all parties by operation of the Court s electronic filing system. Parties may access this filing through the Court s system. CHRISTOPHER M. MATTEI ASSISTANT UNITED STATES ATTORNEY 11