Case 1:12-cr-00129-RLY-TAB Document 109 Filed 10/15/13 Page 1 of 24 PageID #: 461 UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF INDIANA INDIANAPOLIS DIVISION UNITED STATES OF AMERICA, ) ) Plaintiff, ) ) v. ) No. 1:12-CR-00129-RLY-TAB ) WILLIAM F. CONOUR, ) ) Defendant. ) UNITED STATES SENTENCING COMMENTARY The United States of America by its attorneys, James A. Lewis, United States Attorney for the Central District of Illinois, and Jason M. Bohm, Assistant United States Attorney, as Special Attorneys to the United States Attorney General, files its sentencing commentary. Background William Conour, the defendant, was a prominent personal injury lawyer in Indiana. He portrayed an image of being highly successful. He drove luxury cars including Bentley, Mercedes, and Porsche. He lived in a mansion, had a condo in Carmel, and a horse farm north of Indianapolis. He had luxury boxes at concerts and sporting events. He gave $450,000 to the Indiana University School of Law to create the William and Jennifer Conour Atrium. He simultaneously portrayed himself as an ethical professional. In a promotional video for his law firm the defendant stated:
Case 1:12-cr-00129-RLY-TAB Document 109 Filed 10/15/13 Page 2 of 24 PageID #: 462 The Conour Law Firm focuses on representing seriously, catastrophically injured persons and persons who had been wrongfully killed. We have chosen to focus on this area of serious personal injury and we have been very serious about pursuing professionalism as part of that career. A lawyer s background is very helpful to his clients, the more the lawyer knows about the liability aspects of the case and the medical aspects of the case, the more the lawyer can do for his client. In a second promotional video, the defendant stated: The major long-term goal we consider for our client is economic security. The injury has already happened, the tragedy has occurred, there is nothing we can do about that, but providing some type of future financial security and all the medical care that needs to be provided is what we can do for our client or for his family. In reality, however, the images the defendant portrayed were mirages. Rather than being highly successful, the defendant stole nearly $7 million dollars from his clients to finance his lavish lifestyle. Rather than being an ethical professional, the defendant disregarded the Indiana Oath of Attorneys and preyed upon the defenseless, the oppressed or those who cannot afford adequate legal assistance. These are precisely the type of people that the defendant, like all Indiana lawyers, took an oath to serve. Rather than serving his clients, the defendant understood the legal system and consistently exploited it to his advantage. His clients were largely naïve to the legal system and relied on the defendant to navigate the system for them. They also relied on the settlements of their claims for compensation to replace either their inability to work or the permanent loss of a wage earner. In exchange for his services, the defendant generally took 40% of the settlement in attorney s fees. For the 36 identified victims in 2
Case 1:12-cr-00129-RLY-TAB Document 109 Filed 10/15/13 Page 3 of 24 PageID #: 463 this case, the defendant was paid nearly $3.5 million dollars in attorney s fees and nearly $100,000 in expenses. 1 The defendant, however, stole another $6.7 million from his clients through the use of false annuities, fraudulent trusts, and general deception. He used that money to further his lavish lifestyle and to pay other clients for previous settlements, similar to a Ponzi-scheme. Even after his conduct was discovered, the defendant continued to exploit his knowledge of the legal system to his benefit. He was arrested and made his initial appearance on April 27, 2012. At that hearing he was ordered not to transfer or otherwise dispose of any assets. Four days after this hearing, the defendant consented to a divorce with his wife in Kosciusko County, Indiana (where neither he nor his wife had any discernible connection). Numerous assets were transferred pursuant to this uncontested divorce without this Court s knowledge and, conversely, without the divorce court s knowledge of this Court s order. The defendant and his wife, however, continued to maintain a lifestyle that involved attending sporting events, movies, and social functions together. The defendant also maintained his lavish lifestyle with money he had obtained under the guise of obtaining legal counsel. The defendant s lifestyle ultimately ended when his bond was revoked because of these actions. Following his incarceration, the defendant pled guilty on July 15, 2013. Days later, the defendant, against the advice of his counsel, gave a jailhouse interview to the 1 An additional $1,050,000 in attorney s fees and $41,459.40 in expenses were paid to referring attorneys. 3
Case 1:12-cr-00129-RLY-TAB Document 109 Filed 10/15/13 Page 4 of 24 PageID #: 464 Indianapolis Star. He denied the very conduct he had pled guilty to. He claimed he did not operate a Ponzi-scheme and was not nefarious. Rather, the defendant blamed his failings on a cash-flow problem. He has never shown remorse for his actions nor truly accepted responsibility for his conduct. The defendant s conduct has negatively impacted countless individuals. Primarily, it has affected his victims. A man, paralyzed as the result of his accident, now requires state aid for medical treatment rather than money he should have received. A woman died indigent in a nursing home, while more than $200,000 sat in a trust account for her benefit. A mother and her children struggle to get by after their husband and father s death. The money that should have supported them and paid for college is gone. Some funds have been recovered for these victims. 2 It is unlikely, however, that they will be made whole. The defendant s conduct also damaged the legal profession. A 2012 Gallup poll showed that lawyers had a low honesty rating with the public. 3 Actions like those of the defendant contribute to this rating and further undermine the public s confidence in 2 To date, the money recovered is made up of the funds previously held in the Court s registry $450,000 contributed by Indiana University and $30,000 contributed by the Indiana Trial Lawyers Association. Additions will be made with the proceeds of the Marshal s sale of the assets seized from the defendant s mansion, and a contribution from one of the defendant s daughters. 3 Gallup Poll, Congress Retains Low Honesty Rating, available at http://www.gallup.com/poll/159035/congress-retains-low-honesty-rating.aspx (last visited October 10, 2013). 4
Case 1:12-cr-00129-RLY-TAB Document 109 Filed 10/15/13 Page 5 of 24 PageID #: 465 the justice system. The justice system now has an opportunity to sentence the defendant for his conduct. The sentence must reflect the seriousness of the offense, promote respect for the law, provide just punishment, deter other criminal conduct, and protect the public from further crimes of the defendant. The United States recommends a sentence at the statutory maximum, 240 months, as the appropriate sentence. The United States Objections To The Presentence Investigative Report The United States Probation Office issued the presentence investigative report (PSR) on October 11, 2013. The United States maintains two unresolved objections to the PSR. 1. The Court Should Apply a Two-Level Enhancement for Sophisticated Means The PSR fails to include a two-level sentencing increase because the offense otherwise involved sophisticated means. USSG 2B1.1(b)(10)(C). The United States asserts that the defendant s massive fraud scheme, which involved the complex and intricate use of trust accounts and structured settlements to defraud 36 victims of nearly $7 million, warrants an increase under the guidelines for sophisticated means. According to the guidelines, sophisticated means refers to especially complex or especially intricate offense conduct pertaining to the execution or concealment of an offense. USSG 2B1.1, comment. (n.8(b)). Although the commentary gives some examples of conduct that ordinarily warrant the enhancement, the list is not exhaustive and merely suggests the wide variety of criminal behavior covered by the guideline. United States v. Knox, 624 F.3d 865, 872 (7th Cir. 2010); United States v. Wayland, 549 F.3d 5
Case 1:12-cr-00129-RLY-TAB Document 109 Filed 10/15/13 Page 6 of 24 PageID #: 466 526, 528 (7th Cir. 2008). The enhancement is proper when the conduct shows a greater level of planning than a typical fraud or the conduct, viewed as a whole, was more intricate than the garden variety offense. United States v. Sheneman, 682 F.3d 623, 631-32 (7th Cir. 2012); see also Knox, 624 F.3d at 870-71. Not all of the offense conduct needs to be elaborate for the adjustment to apply, as long as the conduct viewed as a whole constituted a sophisticated scheme. United States v. Ghaddar, 678 F.3d 600, 602 (7th Cir. 2012). If fact, even if all the defendant s individual actions are unsophisticated, the enhancement should apply where the overall scheme was complex and sophisticated. Wayland, 549 F.3d at 529. The guideline covers a wide variety of fraudulent criminal behavior, United States v. Green, 648 F.3d 569, 576-77 (7th Cir. 2011), and covers any scheme that involves more planning or concealment than a typical fraud. United States v. Landwer, 640 F.3d 769, 772 (7th Cir. 2011). A sophisticated scheme need not exhibit intelligence or expertise, and it does not matter that a defendant s own sloppiness or errors may have contributed to the unraveling of his scheme. Wayland, 549 F.3d at 529. In this case, the defendant s complex and intricate use of trust accounts and structured settlements demonstrates that his scheme involved more planning and concealment than a typical fraud. As part of the scheme, the defendant created at least 14 separate trust accounts with an Ohio financial institution, even though his personal injury practice was located in Indiana. (PSR 7-9) When he negotiated settlements on behalf of his personal injury clients, he convinced many of those clients to accept a 6
Case 1:12-cr-00129-RLY-TAB Document 109 Filed 10/15/13 Page 7 of 24 PageID #: 467 structured settlement rather than a lump-sum settlement. The use of the trust accounts and the structured settlements allowed the defendant both to execute his scheme and to avoid detection. More specifically, it allowed him to execute his scheme based on the trust agreement that he had negotiated with the Ohio financial institution. The agreement allowed him to fund the trusts on a yearly basis with funds only sufficient to enable the financial institution to issue monthly checks for a year, thereby allowing the defendant to illegally retain the bulk of the settlements for his own purposes. (PSR 9) Without these trust funds and structured settlements, the defendant would have been required to turn over the entire settlement proceeds to his victims and been unable to fraudulently use the money for his own purposes. Additionally, the trust accounts and structured settlements also allowed the defendant to avoid detection of his scheme. Because they were receiving their monthly checks, the victims were deceived into believing that their trust accounts were fully funded and had no reason to believe the defendant had taken their money for his own purposes. Thus, the defendant s conduct, viewed as a whole, in using trust accounts and settlement agreements constituted a sophisticated scheme and the enhancement should be applied. See United States v. Springer, No. 10-5055, 2011 WL 5068095, at *7 (10th Cir. Oct. 26, 2011) (affirming the sophisticated means enhancement where defendant used his highly-regulated client trust account as an instrument of fraud ). 7
Case 1:12-cr-00129-RLY-TAB Document 109 Filed 10/15/13 Page 8 of 24 PageID #: 468 The defendant s scheme is much more sophisticated than the typical fraud scheme where Section 3B1.1 of the guidelines applies. Cf. United States v. Jones, 530 F.3d 1292, 1307 (10th Cir. 2008) (affirming conviction because scheme was readily distinguishable from less sophisticated means by which the myriad crimes within the ambit of 2B1.1 may be committed ). For example, the United States Attorney s Office for the Central District of Illinois has recently charged fraud schemes that involved a vendor falsely claiming to buyers that his environmentally harmful product was organic, a funeral home director falsely inflating an appraisal of his business to obtain a bank loan, a developer falsely submitting invoices for work that was not completed to obtain an economic stimulus loan, a car dealer selling collateral without telling his lender, a real estate developer providing false income tax returns to the bank to obtain a loan, and a realtor spending his client s escrow money without their knowledge. Here, the defendant s complex and intricate scheme is much more sophisticated than those and other typical fraud cases that fall under Section 3B1.1. In fact, the defendant s complex and intricate use of trust accounts and settlement agreements is much more sophisticated than many other fraud schemes where reviewing courts have affirmed the sophisticated means application. See, e.g., United States v. Robinson, 538 F.3d 605, 607-08 (7th Cir. 2008) (applying enhancement in counterfeit check fraud scheme where defendant used fictitious contact information); United States v. Fiorito, 640 F.3d 338, 351 (8th Cir. 2011) (applying enhancement in relatively simple mail fraud scheme because scheme spanned three years, involved 11 8
Case 1:12-cr-00129-RLY-TAB Document 109 Filed 10/15/13 Page 9 of 24 PageID #: 469 victims, and involved repetitive and coordinated conduct); United States v. Ratliff, No. 09-7037, 2010 WL 1645144 at *10 (10th Cir. Apr. 26, 2010) (affirming enhancement in simple bank fraud embezzlement case because defendant forged a bill of sale and opened phony bank account); United States v. Cox, 07-6264, 2009 WL 4885266 at *4 (6th Cir. Dec. 16, 2009) (affirming enhancement even though individual actions lacked sophistication, because defendant set up accounts that made it appear victim s money was being transferred to charities); United States v. Conner, 537 F.3d 480, 492 (5th Cir. 2008) (affirming enhancement even though five victim credit card scheme was not the most sophisticated fraud because some of the means used were sophisticated). The sheer length and success of the scheme tends to show its sophistication and that it was no simple scam. See Sheneman, 682 F.3d at 32 (applying enhancement after finding fraud was no simple scam ). The scheme began by at least 2008 and continued until at least 2012. (PSR 11-20) Thus, through the use of the trust accounts and settlement agreements, the defendant was able to execute his scheme and avoid detection for four years while he defrauded 36 victims of almost $7 million. 4 Courts have previously applied the sophisticated means enhancement where a defendant 4 Independent of the loss amount and the number of victims (which provide enhancements elsewhere in the guidelines), the defendant s repeated and deliberate steps in planning, executing, and concealing his fraud for over four years merits the sophisticated means enhancement. See Landwer, 640 F.3d at 772. Nonetheless, a slight, or even significant, overlap between facts that justify an upward adjustment for sophisticated means and an upward adjustment under a different guidelines provision does not prohibit the Court from applying both since the same facts can serve as a foundation for both upward adjustments. Robinson, 538 F.3d at 608. 9
Case 1:12-cr-00129-RLY-TAB Document 109 Filed 10/15/13 Page 10 of 24 PageID #: 470 repeatedly and successfully executed and avoided detection of a scheme over a long period of time. See., e.g., Green, 648 F.3d at 577 (applying enhancement where scheme lasted three years and involved numerous fraudulent transactions); Landwer, 640 F.3d at 771 (applying enhancement where elaborate scheme lasted seven years while defendant liquidated clients funds for his own use and sent trumped-up letters to clients falsely reassuring them); Knox, 624 F.3d at 871 (applying enhancement because defendant s actions in tricking lenders and falsifying loan applications to the tune of $7 million required intricate maneuvers); United States v. Allan, 513 F.3d 712 (7th Cir. 2008) (applying enhancement where defendant evaded discovery for over a year by creating phony documents); Wayland, 549 F.3d at 529 (finding conduct more intricate than a typical fraud scheme where nine-year scheme involved a series of coordinated fraudulent transactions); United States v. Rettenberger, 344 F.3d 702, 709 (7th Cir. 2003) (finding sophisticated means where defendant engaged in careful execution and coordination over an extended period). 2. The Court Should Apply a Two-Level Enhancement for Violation of a Court Order The PSR fails to include a two-level sentencing increase for the violation of any prior, specific judicial... order. USSG 2B1.1(b)(9)(C). The defendant violated at least three specific court orders that each required him to purchase annuities for his clients. Under the plain language of the guideline, his failure to comply with the following specific, judicial orders warrants an increase under the guidelines. 10
Case 1:12-cr-00129-RLY-TAB Document 109 Filed 10/15/13 Page 11 of 24 PageID #: 471 W.S. died when the trench he was working in collapsed. The defendant eventually represented his widow, S.S., and their two minor children in the wrongful death suit. When the suit was resolved, the presiding Hamilton County Superior Judge entered an order authorizing the compromise and settlement of claim. The order provided that S.S. was to receive an annuity of $328,857 (paying $2,000 per month for 240 months) and her two young children were to receive annuities of $100,000 each (paying them $10,000 at ages 18, 19, 20, and 21, while they were in college, with the balance to be paid at age 25). 5 Rather than purchase the annuities as required by the court order, the defendant simply financed two years of payments to S.S. and did not fund any portion of the children s annuities. Despite the court order, neither S.S. nor her children have received any further annuity payments. A.W. died when he fell off a roof during a construction accident. The defendant represented his estate in the wrongful death claim. As part of the settlement, the presiding Huntington County Circuit Judge entered an order approving the purchase of an annuity for A.W. s minor beneficiary. Specifically, the judge ordered the purchase of an annuity for A.W. s minor son and sole surviving heir in the amount of $132,775.82, which was required to pay $15,000 per year for five years upon the son s high school graduation with the balance distributed on his 25th and 30th birthdays. 6 In violation of 5 The order also authorized 445,692.38 to [the] Conour Law Firm, LLC for services rendered. The defendant complied with this portion of the order. 6 The order also authorized $200,000 in attorney s fees to the Conour Law Firm and other attorneys. The defendant complied with this portion of the order. 11
Case 1:12-cr-00129-RLY-TAB Document 109 Filed 10/15/13 Page 12 of 24 PageID #: 472 this order, the defendant never purchased the annuity for A.W. s minor son. The minor son has not received any of the court ordered annuity payments. R.B. died during an electrical accident on the construction project he was working on. The defendant represented the estate in the wrongful death suit. The presiding LaGrange County Circuit Judge entered an order requiring an annuity to be purchased for the surviving widow, L.B. 7 Rather than purchase the annuity; the defendant financed $23,000 in payments to L.B. The remaining balance of nearly $400,000 remains unpaid. The defendant was required by these orders to take a specific action, namely, to purchase annuities for his clients. He deliberately failed to comply. This violation of [a] prior, specific judicial... order [is] not addressed elsewhere in the guidelines, therefore warranting the two-level enhancement. USSG 2B1.1(b)(9)(C). Application Note 7(C) to this guideline provides that a defendant who does not comply with such a prior, official judicial... warning demonstrates aggravated criminal intent and deserves additional punishment. The Seventh Circuit has found that an attorney, like the defendant, who violates court orders in the process of executing a fraudulent scheme is deserving of the enhancement. United States v. Parolin, 239 F.3d 922, 927-29 (7th Cir. 2001). 7 The order also authorized $230,966.81 in attorney s fees to the Conour Law Firm. The defendant complied with this portion of the order. 12
Case 1:12-cr-00129-RLY-TAB Document 109 Filed 10/15/13 Page 13 of 24 PageID #: 473 The only question appears to be whether the enhancement would constitute double counting. Since none of the other sentencing guidelines in this case specifically address the defendant s failure to comply with the court orders, the enhancement should apply. For instance, the abuse of position of trust enhancement applies in this case because of the trust the defendant violated as an attorney for the victims. [I]t is possible that he both abused the trust of his victims, while simultaneously violating a judicial order. Id. at 928. No doubt the fiduciary relationship that the defendant enjoyed as the attorney for his victims permitted him to carry out his scheme. His abuse of that fiduciary relationship warrants the abuse of position of trust enhancement. However, [that] enhancement in no way directly accounts for [the defendant s] violation of particular judicial orders. Id. at 929. Neither does the enhancement for obstruction of justice account for his violation of judicial orders. The obstruction of justice enhancement is properly applied in this case because the defendant violated this Court s order not to dissipate assets and because the defendant engaged in deception in his dealings with this Court. (D.E. #82) The violation of this Court s orders and the violation of state court orders warrant different enhancements obstruction of justice (USSG 3C1.1) and violation of court order (USSG 2B1.1(b)(9)(C)), respectively. This is not double counting because each [enhancement is] based on distinct conduct. United States v. Favara, 615 F.3d 824, 828 (7th Cir. 2010) (finding that enhancements for obstruction of justice and violation of a court order can be simultaneously applied). As a result, the defendant should receive 13
Case 1:12-cr-00129-RLY-TAB Document 109 Filed 10/15/13 Page 14 of 24 PageID #: 474 the enhancement for violating a court order in addition to the other applicable enhancements. Response to the Defendant s Objection The defendant maintains numerous objections. For the reasons below, this Court should overrule each of the objections. 1. Amount of Loss The defendant objects to the amount of loss in the PSR. The PSR calculated the loss at approximately $6.7 million. The defendant believes the amount of loss is inflated by approximately $700,000. This Court need only make a reasonable estimate of the loss. USSG 2B1.1, comment. (n.3(c)). In the end, this objection will have no effect on the guideline calculation because the amount of loss is more than $2.5 million and less than $7 million. USSG 2B1.1(b)(1)(J). The United States believes that the PSR has calculated the amount of loss correctly and will be prepared at sentencing to answer any factual questions for the Court. In addition, the amount of a victim s loss may be determined up to 90 days after sentencing should additional time be needed to fix the restitution amount. 18 U.S.C. 3664(d)(5). 2. Vulnerable Victim The Presentence Report (PSR) includes a four-level increase because the offense involved a large number of vulnerable victims. (PSR 35) The defendant has objected to this four-offense level increase on two grounds. First, he argues that that there was 14
Case 1:12-cr-00129-RLY-TAB Document 109 Filed 10/15/13 Page 15 of 24 PageID #: 475 no nexus between the victims vulnerability and his fraud scheme. Second, he argues that the number of victims in the case does not qualify as a large number. Each of these objections is without merit. a. The Defendant s Defrauded Personal Injury Clients Were Vulnerable Victims The guidelines mandate that a defendant s offense level must be increased by two levels if the defendant knew or should have known that a victim of the offense was a vulnerable victim. USSG 3A1.1(b)(1). The guidelines define a vulnerable victim as a person who is unusually vulnerable due to age, physical or mental condition, or who is otherwise particularly susceptible to the criminal conduct. USSG 3A1.1, comment. (n.2(b)). Paragraph 27 of the PSR details the vulnerabilities of the victims in this case. The defendant appears to concede that many, if not all, of the 36 victims in this case meet this definition due to their injury, age, or language barrier. The concession is wise, because it could not be credibly argued that minors, unsophisticated non-native English speakers, and individuals suffering from severe personal injuries or dealing with a loved one s death, and the resulting financial hardships, do not meet the definition of a vulnerable victim. See, e.g. United States v. Julian, 427 F.3d 471, 489-90 (7th Cir. 2005) (applying enhancement based on economic vulnerability of victims); United States v. Sims, 329 F.3d 937, 944 (7th Cir. 2003) (applying enhancement based on age and lack of financial sophistication of victims); United States v. Parolin, 239 F.3d 922, 926-27 (7th Cir. 2001) (limited ability to write English factor that qualified victim as vulnerable). 15
Case 1:12-cr-00129-RLY-TAB Document 109 Filed 10/15/13 Page 16 of 24 PageID #: 476 The defendant notes, however, that the defendant always dealt with representatives of the victims and argues that the victims vulnerable condition played no role in the fraud. He claims that, because there is no causal nexus between the vulnerability and the fraud, the enhancement should not apply. Factually, this argument is not supported by any evidence. For example, the PSR notes that victim S.S. was distraught over her husband s death and relied on the defendant to guide her during this time. See Parolin, 239 F.3d at 927 (death of husband and lack of financial sophistication qualified victim as vulnerable). Legally, this argument ignores the plain language of Section 3A1.1(b)(1), which does not require that the vulnerability caused the fraud, but only requires that the victim be particularly susceptible to the criminal conduct. Section 3A1.1(b)(1), on its own terms, applies if the defendant knew or should have known that a victim of the offense was a vulnerable victim. The guideline and its accompanying commentary contain no requirement of a causal nexus between the vulnerability and the fraud or that the defendant targeted the victims because of their vulnerability. Instead, the enhancement plainly applies if the defendant knew or should have known of the vulnerability. Here, there is no doubt that the defendant intimately knew of each of the victim s vulnerability as their personal injury lawyer. The Seventh Circuit has held that the vulnerable victim enhancement does not require that a defendant specifically target the victim because of the vulnerability. United States v. Snyder, 189 F.3d 640, 649 (7th Cir. 1999). Moreover, the Eighth Circuit 16
Case 1:12-cr-00129-RLY-TAB Document 109 Filed 10/15/13 Page 17 of 24 PageID #: 477 rejected this argument in a case directly on point. United States v. Moskal, 211 F.3d 1070, (8th Cir. 2000). Moskal was a personal injury attorney who embezzled approximately $2.4 million from his clients, referring attorneys, and his own law firm. Id. at 1072. At sentencing, he received a two-level enhancement because the district court singled out three disabled clients and found that the defendant knew or should have known that some of his victims were vulnerable. Id. at 1073. On appeal, the defendant argued that the district court should have been required to show a nexus between the vulnerability and the criminal conduct. The Eighth Circuit soundly rejected this argument: Moskal s contention may have had some force under the guideline that was in effect prior to 1995, but the guideline application notes no longer require that the defendant target his victim because of the vulnerability. Id. The defendant also argues that the enhancement should not apply because, [b]y its nature, personal injury representation will involve clients who are in many cases, by definition, vulnerable. In other words, he seems to argue that, because almost all of his clients were vulnerable, the enhancement should not apply. This argument would turn the guideline on its head, allowing a defendant who solely defrauded vulnerable victims to avoid the enhancement, while applying the enhancement to a defendant whose class of victims included only a few vulnerable victims. The Seventh Circuit has previously rejected such reasoning. United States v. Calimlin, 538 F.3d 706 (7th Cir. 2008). In Calimlin, the district court refused to apply the vulnerable victim enhancement in a forced labor case because all of the victims, by the 17
Case 1:12-cr-00129-RLY-TAB Document 109 Filed 10/15/13 Page 18 of 24 PageID #: 478 nature of the offense, appeared to share the same vulnerability (i.e., illegal aliens). The Seventh Circuit held that the district court erred in failing to apply the enhancement: The question here is whether the vulnerability of the victim is to be measured against the general population or against the group comprised of the likely victims of this crime. If the former, Martinez is vulnerable, but if the latter (as the district court thought), then she is no worse off than any other victim of these crimes. In the latter case, the vulnerability of the victim would already have been built into the offense Guideline, and it would be double-counting to apply the enhancement.... The Calimlims assert, in essence, that any victim of forced labor is by definition vulnerable, and so a vulnerable-victim enhancement would be redundant. This is not the case: with enough muscle, it would be possible to coerce a perfectly able-bodied, English-speaking, independent American citizen into forced labor. The district court erred by failing to recognize that there are more ways to commit the forced labor crime than the one the Calimlims chose.... For example, somebody who uses mail fraud to victimize the aged should be punished more than a person who victimizes younger (and presumably more capable) people: the law recognizes that preying on the elderly is more culpable than many other instances of mail fraud. Even though Martinez may not have been especially vulnerable among the population of illegal aliens, she was among the most vulnerable of the broader group who are forced into labor. The Calimlims victimized her by targeting her special vulnerability.... Lest there be any doubt about our position on the question raised by the Calimlims, we clarify today that where vulnerability is not already accounted for in the Guidelines, we will apply the vulnerable-victim enhancement when the victim is a member of a group typically vulnerable to the particular manifestation of the general offense committed by the defendant, whether or not the victim is otherwise unusually vulnerable. Id. at 716-17 (citations omitted). Thus, the vulnerable victim enhancement must be applied in this case. The defendant has been convicted of mail fraud. The mail fraud guidelines themselves do 18
Case 1:12-cr-00129-RLY-TAB Document 109 Filed 10/15/13 Page 19 of 24 PageID #: 479 not incorporate an enhancement for vulnerable victims. There are many ways to commit mail fraud that do not involve vulnerable victims. In this case, however, the group of likely victims were all members of a group (personal injury victims) typically vulnerable to a fraud scheme. Compared to the general population, these victims were particularly vulnerable, and their vulnerability made the defendant s scheme easier to execute, harder to detect, and more deserving of an increased punishment. b. Thirty-Six Victims Qualifies as a Large Number Under the Guidelines The PSR applies an additional two-level increase pursuant to 3A1.1(b)(2) because the offense involved a large number of vulnerable victims. Without elaboration, the defendant objects that the number of vulnerable victims in this case should not qualify as a large number under the guideline. The defendant s undeveloped argument is without merit. As noted above, based on the factors detailed in the PSR, all 36 of the victims in this case qualify as vulnerable victims. Thirty-six victims qualifies as a large number under the guidelines. See., e.g., United States v. Price, No. 09-1055, 2011 WL 2558806, at *2 (3rd Cir. June 29, 2011) (over 40 minor victims constituted large number ); United States v. Kaufman, 546 F.3d 1242, 1268, 1269 (10th Cir. 2008) (holding that more than 10 vulnerable victims could qualify as a large number ); United States v. Fake, No. 07-1284, 2008 WL 723866, at *3-4 (3rd Cir. Mar. 17, 2008) (finding no clear error where district court applied enhancement because more than 10 vulnerable victims). 19
Case 1:12-cr-00129-RLY-TAB Document 109 Filed 10/15/13 Page 20 of 24 PageID #: 480 In fact, if 50 or more vulnerable victims were required before the 3A1.1(b)(2) adjustment for a large number of victims applied, the provision would be rendered meaningless in fraud cases. The commentary to the fraud guidelines specifically instructs that, if a four-level enhancement for more than 50 victims under 2B1.1(b)(2)(B) applies, an enhancement under 3A1.1(b)(2) shall not apply. USSG 2B1.1, comment. (n.4(d)). Thus, in fraud cases, a large number must include less than 50 vulnerable victims to prevent 3A1.1(b)(2) from being superfluous. Under the guideline and the cases, 36 vulnerable victims qualifies as a large number. 3. Acceptance of Responsibility/Obstruction of Justice Finally, the defendant objects to his failure to receive a reduction for acceptance of responsibility. Generally, when a defendant pleads guilty and truthfully admits his conduct, he will receive a reduction for acceptance of responsibility. However, this may be outweighed by conduct of the defendant that is inconsistent with such acceptance of responsibility. USSG 3E1.1, comment. (n.3). Conduct resulting in an enhancement [for obstructing justice] ordinarily indicates the defendant has not accepted responsibility for his criminal conduct. Id., comment. (n.4). In this case, the defendant has not truthfully admitted his conduct and has repeatedly obstructed justice. He has not shown any remorse for his actions and has not accepted responsibility for his actions. The defendant has consistently lacked candor about his conduct. At his plea hearing when the Court asked what happened, the defendant stated: 20