UNITED STATES DISTRICT COURT EASTERN DISTRICT OF TENNESSEE AT KNOXVILLE

Transcription

1 UNITED STATES DISTRICT COURT EASTERN DISTRICT OF TENNESSEE AT KNOXVILLE UNITED STATES OF AMERICA, ) ) Plaintiff, ) ) v. ) No. 3:09-CR-19-1 ) JOSEPH D. BRANDENBURG, ) JUDGE PHILLIPS ) Defendant. ) SENTENCING MEMORANDUM OF THE UNITED STATES The United States of America, by and through the United States Attorney for the Eastern District of Tennessee, submits this Sentencing Memorandum pursuant to Rules 32 of the Federal Rules of Criminal Procedure and E.D.TN LR I. INTRODUCTION According to the Presentence Investigation Report ( PSR ), Defendant Joseph D. Brandenburg s advisory Sentencing Guidelines Range for imprisonment is a period of 46 to 57 months. For the reasons stated below, the United States respectfully submits that the Court should sentence the Defendant to a term of imprisonment toward the top of the Guideline range. II. FACTUAL BACKGROUND Joseph D. Brandenburg ( the Defendant ) was the owner and and Chief Executive Officer of Extreme Logistics, LLC, ( Extreme ), a trucking company based in Loudon County, Tennessee. The Defendant established a contractual relationship with Prime Financial Services, Inc. ( Prime ), a subsidiary of SunTrust Bank, under which Prime would factor loads of freight hauled by Extreme. Factoring is an arrangement under which a financing company purchases accounts receivable from a carrier in order to provide immediate cash flow to the carrier rather Case 3:09-cr Document 11 Filed 04/19/10 Page 1 of 9

2 than waiting for the carrier s client to pay upon the invoice, which can take 30 days or more. Under the agreement between Extreme and Prime, Prime would wire transfer payments for loads that Extreme certified it had hauled into Extreme s bank account. See Information [Doc. 1] at 3 and 4; Agreed Factual Basis [Doc. 6-1] at 2 and 3. Eventually, from approximately June 2004 through July 6, 2005, in order to fraudulently obtain funds from Prime, the Defendant began certifying or causing others to certify that loads had been hauled by Extreme when, in fact, they had not been hauled. This caused Prime to wire transfer funds to Extreme s bank account reflecting the receivable created by the shipment. The Defendant used some of the proceeds of the fraud to keep Extreme afloat; however, the Defendant laundered substantial sums of money through Extreme into other businesses that the Defendant controlled which were ultimately used for the for the Defendant s personal benefit. The proceeds of the fraud were used, among other things, for substantial improvements to the Defendant s residence, including a large swimming pool and pool house, a sand volleyball court, outdoor basketball court, costly weight equipment, a football field, a motocross track, a horseshoe pit, and all-terrain vehicles (four wheelers) for recreational use. See Agreed Factual Basis at 5-6 and 9; PSR at 25-27; see also, Pictures of Defendant s Residence, filed as Attachment 1. Eventually, Extreme collapsed when Prime refused to advance additional funds to Extreme after uncovering the fraud. Extreme abruptly shut down on March 6, 2006, leaving several Extreme truckers stranded mid-shipment, no longer able to purchase fuel for the tractor trailers they were driving. See PSR at 32. Page 2 of 9 Case 3:09-cr Document 11 Filed 04/19/10 Page 2 of 9

3 In addition to the fraud and money laundering, the Defendant filed false tax returns for 2004, 2005, and 2006 which failed to include as income the fraudulently-derived funds that he diverted from Extreme to his personal use. The total amount of taxes due to the IRS for those years, as set forth in the Plea Agreement, was $633,772.00, exclusive of interest. Plea Agreement at 9. III. BACKGROUND OF INVESTIGATION Upon learning of the false billings submitted to Prime, the United States initiated a lengthy, comprehensive investigation into the Defendant s wire fraud, money laundering scheme, and false tax returns. This investigation entailed a comprehensive review of voluminous financial records for the purpose of unraveling the complex financial dealings among the many entities controlled by the Defendant, including Extreme Logistics, Extreme Properties, Extreme Leasing, and Haven Ministries. Agents conducted interviews of more than 50 witnesses and reviewed voluminous bank records, bankruptcy filings and tax return information. Eventually, multiple meetings were held with the Defendant and his counsel in order to try to gain further insight into the scheme and resolve the charges prior to presenting an indictment to a federal grand jury. The Information, Plea Agreement, and Agreed Factual Basis are a product of the investigation and those meetings between government representatives and the Defendant and his attorney. The Defendant has waived his right to be indicted by a grand jury and was charged in an Information [Doc. 1] filed on February 6, The Plea Agreement [Doc. 6] and Agreed Factual Basis [Doc. 6-1] were signed on March 23, 2009, the date on which the Defendant Page 3 of 9 Case 3:09-cr Document 11 Filed 04/19/10 Page 3 of 9

4 entered his guilty pleas. IV. SENTENCING GUIDELINES AND 18 U.S.C. 3553(a) FACTORS The United States Probation Office has prepared a Presentence Investigation Report which computed the Defendant s advisory Sentencing Guidelines adjusted offense level, after acceptance of responsibility under 3E1.1(a) and (b), to be 23. The Defendant s criminal history category was determined to be I, yielding a range of imprisonment of 46 to 57 months. Although the Federal Sentencing Guidelines were rendered advisory in nature in United States v. Booker, 543 U.S. 220 (2005), the law is well-established that the Sentencing Guidelines are designed to carry out the objectives of 18 U.S.C. 3553(a). Rita v. United States, 551 U.S. 338, (2007). Consequently, a sentence within the advisory Guidelines range is presumptively reasonable on appellate review, as the Guidelines reflect Congressional efforts, through its mandates to the Sentencing Commission, to achieve the basic objectives of 18 U.S.C. 3553(a). Id. The Guidelines reflect a rough approximation of sentences that might achieve 3553(a) s objectives. Id. at 349. A sentence toward the top of the Defendant s advisory Guideline calculation in this case would be sufficient but not greater than necessary to achieve the purposes set forth in 3553(a). A. Nature and Circumstances of the Offenses and History and Characteristics of the Defendant The lengths to which the Defendant went to perpetuate the fraud and launder the proceeds, and the far-reaching effect of the collapse of Extreme Logistics suggest strongly suggest that a sentence at the top of the advisory Guidelines range is warranted. Though the Defendant s Guideline calculation is driven largely by the amount of fraud, there are some Page 4 of 9 Case 3:09-cr Document 11 Filed 04/19/10 Page 4 of 9

5 factors which are not fully reflected in the calculation which militate in favor of a top-of-therange sentence. For instance, the Defendant s efforts to deceive Prime s representatives were quite extensive and the Defendant enlisted the help of employees of Extreme to perpetrate the fraud. When Prime questioned the Defendant about the delays in getting paid, the Defendant ginned up a bogus letter which purportedly explained why it was taking a long period of time for Bowater, one of Extreme Logistics s biggest customers, to pay on the receivables factored by Prime. The Defendant s bogus letter purported to be written by an employee of Bowater on fake Bowater stationery. The Defendant provided the letter to Prime s representative to deceive Prime with a fictitious explanation as to why many of the receivables had not been paid after a long period of time following the shipments. This letter effectively lulled representatives of Prime to continue to advance funds to Extreme Logistics, thereby increasing the amount of fraudulent proceeds that the Defendant could continue to siphon out of Extreme for his personal, extravagant lifestyle. Ultimately, Prime pulled the plug on the scheme, causing the collapse of Exteme Logistics and the loss of jobs. Extreme s truck drivers were stranded, unable to purchase fuel for Extreme Logistics s trucks. PSR at 32. While these facts have, to some degree, been captured in the sophisticated means Specific Offense Characteristic (PSR at 39), the particularly elaborate, complex nature of the deception of the victim militate in favor of the top-of-guidelines sentence the United States seeks in this case. The Defendant s efforts defraud Prime were not purely motivated by a desire to rescue his business. The fraud was clearly designed to line the Defendant s own pockets and provide Page 5 of 9 Case 3:09-cr Document 11 Filed 04/19/10 Page 5 of 9

6 himself with extensive creature comforts and a fairly extravagant lifestyle, while at the same time his business was rolling toward financial ruin. The total amount of money diverted directly from Extreme Logistics to the Defendant, or from Extreme Logistics through Extreme Properties to the Defendant, exceeded $1.5 million. PSR at This income was not reported to the IRS. Additionally, although the parties agreed in the plea agreement that the loss was more than $1 million, the wording of the plea agreement reflects the agreement the United States was free to establish at sentencing that the actual loss was more than $1 million. Though Prime and the Defendant reached a bankruptcy settlement of $2.5 million, that settlement reached in the bankruptcy proceeding should not be considered to be the cap on the loss for Guidelines calculation purposes because this amount reflected a compromise settlement and was in part the result of mitigation efforts by Prime, without which the loss would have been significantly more 1 than the $2.5 million settled upon by the victim. Of course, loss for the purpose of the Guideline calculation under 2B1.1 is the greater of actual or intended loss. Application Note 3 to U.S.S.G. 2B1.1. As set forth in the sentencing memorandum, the investigation had determined that the Defendant had caused the submission of over $4 million in fraudulent invoices to Prime, 90 percent of which had been paid by July 6, PSR at 29, 38. At the time that the fraud was detected by the victim, the amount of 2 fabricated invoices was in excess of $3,600,000. The $2.5 million figure settled upon in the 1 See Affidavit of Walter A. Roberts, filed as Attachment 2. 2 Id. Page 6 of 9 Case 3:09-cr Document 11 Filed 04/19/10 Page 6 of 9

7 bankruptcy proceeding should not be the cap for the purpose of determining the loss for Guidelines purposes, as it does not reflect the victim s substantial effort to mitigate its losses by exercising its legal rights after the fraud was discovered. Application Note 3. E. to 2B1.1 of the Guidelines makes clear that post-discovery repayment of losses should not to be credited against the loss amount for the purposes of 2B1.1. The intended loss for Guidelines calculation purposes was, therefore, well above $2.5 million agreed to by Prime in the bankruptcy proceeding. Therefore, the losses for the purposes of 2B1.1 of the Sentencing Guidelines should be greater than $4 million. However, if the Court finds that the loss for the purposes of 2B1.1 are $1 million to 2.5 million, the intended losses are not fully reflected in the calculation of loss in the PSR and a sentence toward the top of the 46 to 57-month Guideline range would be warranted. B. Promoting Respect for the Law and Providing Just Punishment, and Deterring Others The sentence imposed by this Court should also reflect the seriousness of the offense, promote respect for the law, provide just punishment, and effectuate specific and general deterrence. See 18 U.S.C. 3553(a)(2)(A through C). Wire fraud, money laundering, and false tax returns are widespread offenses which are likely on the increase due to the troubled economic times that our Nation is currently facing. Fraud against lenders such as Prime Financial Services has certainly garnered the attention of the media and Congress, as it has been found to be partially to blame for our current financial crisis. A substantial sentence toward the top of the Guideline range will help deter other small businessmen from perpetrating fraud against their creditors when met with difficult business times. Even worse, Defendant s fraud and money Page 7 of 9 Case 3:09-cr Document 11 Filed 04/19/10 Page 7 of 9

8 laundering was motivated by his own rapacity, while Extreme Logistics struggled to remain afloat and ultimately failed after Defendant s fraud was uncovered. C. Avoiding Unwarranted Sentencing Disparities As set forth in 18 U.S.C. 3553(a)(6) the sentence imposed by the Court should reflect the need to avoid unwanted sentencing disparities. As this Court is well-aware, the Sentencing Reform Act of 1984, which precipitated the issuance of the Guidelines, was largely intended to promote reasonable uniformity in sentencing by narrowing the wide disparity in sentencing imposed for similar criminal offenses committed by similar offenders. United States Sentencing Commission Manual (2009), Chap. 1, Part A, 1.3. On of the primary purpose of the Guidelines is uniformity in sentencing. E.g, United States v. Simmons, 501 F.3d 620, 626 (6th Cir. 2007). National uniformity is generally taken into account by the Guidelines and consideration of the Guidelines is almost certainly the best indication of ordinary practice...." Id. (quoting United States v. Saez. 444 F.3d 15, 19 (1st Cir. 2000). There is certainly nothing about the Defendant or his personal situation that is atypical of other white collar criminal defendants that would take him out of the heartland of white collar defendants to warrant a sentence outside of his advisory Guideline range. The fact of the matter is that every defendant s circumstances are somewhat unique and every incarceration yields different hardships upon each defendant. An effort by the Defendant to compare his Guideline sentence to sentences imposed by other courts would be largely fruitless because such a comparison opens the door to endless rummaging by lawyers through sentences in other cases, each side finding random examples to support a higher or lower sentence, as their clients' Page 8 of 9 Case 3:09-cr Document 11 Filed 04/19/10 Page 8 of 9

9 interests dictate. Saez at 19. V. CONCLUSION For the reasons set forth above, the United States seeks a sentence toward the top of the Defendant s advisory Guidelines range of 46 to 57 months in order to fully and fairly reflect the egregiousness of his conduct and fulfill the sentencing goals set out in 18 U.S.C. 3553(a). Respectfully submitted this 19th day of April, James R. Dedrick United States Attorney By: /s/ Matthew T. Morris Matthew T. Morris Assistant U.S. Attorney CERTIFICATE OF SERVICE I hereby certify that on April 19, 2010, the foregoing was filed electronically. Notice of this filing will be sent by operation of the Court s electronic filing system to all parties indicated on the electronic filing receipt. Parties may access this filing through the Court s electronic filing system. By: /s/ Matthew T. Morris Matthew T. Morris Assistant U.S. Attorney Page 9 of 9 Case 3:09-cr Document 11 Filed 04/19/10 Page 9 of 9