U.S. v. Garro

• Decision Date: 28 February 2008
• Docket Number: No. 06-50513.,06-50513.
• Citation: 517 F.3d 1163
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. James F. GARRO, Defendant-Appellant.
• Court: U.S. Court of Appeals — Ninth Circuit

517 F.3d 1163

UNITED STATES of America, Plaintiff-Appellee, v. James F. GARRO, Defendant-Appellant.

No. 06-50513.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted September 25, 2007.

Filed February 28, 2008.

Frank J. Ragen, Julie A. Blair, and Michael Pancer, San Diego, CA, for the appellant James Garro.

Karen P. Hewitt, United States Attorney, Bruce R. Castetter and Mark R. Rehe, Assistant United States Attorneys, San Diego, CA, for appellee the United States.

Appeal from the United States District Court for the Southern District of California; M. James Lorenz, District Judge, Presiding. D.C. No. CR-02-02429-MJL.

Before: J. CLIFFORD WALLACE, SANDRA S. IKUTA, and N. RANDY SMITH, Circuit Judges.

WALLACE, Senior Circuit Judge:

Garro appeals from his 135-month prison sentence after a jury conviction of eight counts of wire fraud, see 18 U.S.C. § 1343, eleven counts of money laundering, see 18 U.S.C. §§ 1956(a)(1)(A)(i), (a)(1)(B)(i), and one count of tax evasion, see 26 U.S.C. § 7201. He argues that the district court erroneously applied the Sentencing Guidelines and imposed an unreasonable sentence under 18 U.S.C. § 3553(a). We have jurisdiction pursuant to 18 U.S.C. § 3742 and we affirm Garro's sentence.¹

I.

In September and October of 1999, Garro, holding himself out to be a self-employed financial consultant for foreign countries wanting to stimulate their economies, raised $37.5 million dollars from five investors: (1) TLC America ($20 million); (2) Child's Hope ($10 million); (3) Kelldeer & Carrington ($3.5 million); (4) Veronica Disabello ($2 million); and (5) Curtis Martin ($2 million). The money was for the purpose of entering what Garro called a "Leveraged Investment Program," which would buy and resell "medium term bank notes" in foreign markets. Each investor entered into a written contract with Garro's business entity, Sienna Financial, Ltd., and was promised at least double his or her investment in fifteen days.

On October 28, 1999, Garro sent investors a letter indicating that one phase of the program was complete and that each investor could expect a wire transfer of profits no later than November 1, 1999. Garro prepared this letter with the help of Louis Cimaglia. During the course of the scheme, Garro used Cimaglia as a "long-distance secretary" from Cimaglia's home in Maryland. Cimaglia was a point of contact with investors and would create documents, send and receive faxes, and field investor telephone calls for Garro. For his role in Garro's scheme, Cimaglia pled guilty to one count of conspiracy to commit wire fraud.

November 1 came and went without payment of any profits. After this date passed, investors began contacting Garro with concerns. On November 10, 1999, Garro sent a letter apologizing and explaining that the profits were even greater than anticipated but were so high that they "had come under strict scrutiny" and been delayed. The letter promised that 200% profits would be in investors' bank accounts no later than November 17, 1999.

November 17 passed with no disbursement of profits. On December 3, 1999, Garro had Cimaglia send another letter indicating that the money was ready for disbursement but that Garro had to travel personally to banks to effect the wire transfers. Contrary to that and subsequent assurances, no investor received promised profits. In the end, no investor received any profits.

In fact, the investor money was never invested at all. Investors deposited the money into an escrow account and later released it into Garro's control. Garro then moved the money from the escrow to a couple of Bank of America accounts held by a corporation that he incorporated and owned, Navajo Capital. Once the money was in Garro's Navajo Capital corporate accounts, he used it to buy and remodel three homes, manipulating the transactions to mask his involvement in the purchases.

For example, Garro purchased a Santa Fe, New Mexico, residence through Santa Fe Abstract, Ltd. To do this, he moved $30 million from one of Navajo Capital's Bank of America accounts to one of its Union Bank accounts, then moved $25 million from the Union Bank account to a U.S. Bank account held by Citation Financial Management to obscure his transactions further. That money was then moved to another account at U.S. Bank. Then, $17.49 million was transferred from the second Citation Financial Management account to a Texas Bank One account held by Merlin Financial, an entity Garro owned, and then to yet another Texas Bank One account held by Merlin Financial. Merlin Financial then wired $2,344,635 to Santa Fe Abstract. Garro, through another of Navajo Capital's Bank of America accounts, had also directly wired $260,000 to Santa Fe Abstract. The Santa Fe home was then paid for in cash by Camelot International, LLC, another entity created by Garro. Garro signed the purchase agreement in the name "Elissa M. Dee," his employee. He also wrote a letter, signed Elissa Dee, directing the seller that the buyer's name remain confidential.

Garro used similarly complex transactions involving multiple bank accounts, corporate shells, cash, and others' names to purchase homes in La Jolla and Encinitas, California. Most of the rest of the investor money stayed in accounts held by Garro and his corporate entities. No money was ever put into the investment programs he described to investors.

After failing to receive profits, the investors each eventually demanded their money back. TLC America, after investing $20 million on September 13, 1999, became worried when no profits appeared. On October 12, 1999, Garro returned $4 million of its principal. On November 5, 1999, after TLC America's president, Ernest Cossey, told Garro that he was very concerned about the investment, Garro sent TLC America another $2 million along with a letter assuring Cossey that the program was still working and profits were forthcoming. This failed to reassure Cossey, who wrote Garro on November 12, 1999, stating that TLC America did not wish to remain in the program and asking Garro to return the rest of its principal. Garro asked Cossey to be patient, telling him that the money was coming, and returned another $4 million of TLC America's principal on December 16, 1999. TLC America continued to contact Garro asking for its money back without success. Finally, on September 29, 2000, Garro agreed to convey his La Jolla home to TLC America to repay the remainder of TLC America's principal.

Child's Hope also became concerned after investing $10 million on September 24, 1999, and failing to see profits within the promised fifteen days. Child's Hope's director began to "dog [Garro] every day to get[Child's Hope's] funds back." On November 18, 1999, a Child's Hope lawyer sent Garro a letter demanding that he return the money in full and threatening legal action. Garro initially refused to comply but on November 24, 1999, he returned $3.5 million to Child's Hope. Child's Hope signed a release acknowledging that it had received the $3.5 million on December 8, 1999, but at that point "didn't feel like there was any validity to the program itself" and wanted to get out of the scheme. After months of pestering, Garro wired Child's Hope the remaining $6.5 million of its principal on January 20, 2000.

Kelldeer & Carrington never received back the $3.5 million that they had invested, despite negotiations and agreements with Garro. Disabello eventually received all but $550,000 of her principal. Martin received all $2 million of his principal in November 1999.

The Federal Bureau of Investigation (FBI) began investigating Garro in 2000. He was arrested in October 2002 for wire fraud. On March 15, 2005, a twenty-count indictment charged Garro with wire fraud, money laundering, and tax evasion. On April 4, 2005, after a seven-day trial, a jury returned guilty verdicts on all twenty counts. Following a two-day sentencing hearing, on August 25, 2006, Garro was sentenced to 135 months in prison, three years of supervised release, and over six-million dollars in restitution.

II.

We review the district court's interpretation of the Sentencing Guidelines de novo, the district court's application of the Guidelines to the facts for abuse of discretion, and the district court's factual findings for clear error. United States v. Cantrell, 433 F.3d 1269, 1279 (9th Cir.2006). Although the Guidelines are only advisory, a material error in calculating the sentencing range is grounds for resentencing. Id. at 1280.

A.

Garro first argues that the district court erroneously calculated the amount of loss for sentencing purposes. Under the applicable set of Sentencing Guidelines, Garro's crime carried a base level of six. See USSG § 2F1.1(a) (1998). The district court found that the amount of loss in Garro's fraudulent scheme exceeded $20 million, resulting in a sixteen-level increase. See USSG § 2F1.1(b)(1)(Q) (1998). Garro contends that the district court erred in calculating the amount of loss for sentencing purposes by failing to offset the money that he received by the money that he returned to investors. A calculation of the amount of loss is a factual finding reviewed for clear error. See United States v. Lawrence, 189 F.3d 838, 844 (9th Cir.1999). The "loss need not be determined with precision," but "need only [be] a reasonable estimate . . . given the available information." United States v. Bussell, 504 F.3d 956, 960 (9th Cir.2007) (quoting USSG § 2F1.1, cmt. n. 8 (1994)).

Although Garro did, in some form or another, return a substantial portion of the money he had taken, the district court found that most of the money that Garro returned could not be credited to him because it was returned after his scheme was detected, and an amount of loss for sentencing purposes is only offset by money returned "prior to the discovery of the offense." United States v. Bright, 353 F.3d 1114, 1118 (9th Cir.2004); United States v. Stoddard, 150...