United States v. Nathanson

• Decision Date: 10 June 2013
• Docket Number: Case No. SACR 05–00301–CJC.,Case No. SACV 12–01978–CJC.
• Citation: 948 F.Supp.2d 1055
• Court: U.S. District Court — Central District of California
• Parties: UNITED STATES of America, Plaintiff, v. Colin NATHANSON, Defendant.

948 F.Supp.2d 1055

UNITED STATES of America, Plaintiff,

v.Colin NATHANSON, Defendant.

Case No. SACV 12–01978–CJC.

Case No. SACR 05–00301–CJC.

United States District Court,

C.D. California,

Southern Division.

June 10, 2013.

Robert J. Keenan, AUSA, Santa Ana, CA, for Plaintiff.

Colin Nathanson, San Pedro, CA, Pro Se, Defendant.

ORDER DENYING MOTION TO VACATE, SET ASIDE OR CORRECT SENTENCE BY A PERSON IN FEDERAL CUSTODY UNDER 28 U.S.C. § 2255

CORMAC J. CARNEY, District Judge.

I. INTRODUCTION

Petitioner Colin Nathanson is serving a 27–year sentence for organizing and directing a sham investment scheme through which he defrauded more than 2,500 victims of at least $24 million over several years. On October 20, 2008, Mr. Nathanson pleaded guilty to all counts of a six-count indictment charging him with mail fraud in violation of 18 U.S.C. § 1341. He was sentenced by this Court on August 19, 2009. Following his unsuccessful appeal to the Ninth Circuit and petition for writ of certiorari to the United States Supreme Court, Mr. Nathanson now brings this petition for resentencing under 28 U.S.C. § 2255 on the grounds that his sentence was imposed in violation of the Constitution or laws of the United States.

More specifically, Mr. Nathanson contends that this Court improperly considered his poverty when determining his sentence and that he received ineffective assistance of counsel because his trial and appellate counsel failed to object to this consideration. He also argues that the Court incorrectly applied the leadership enhancement under § 3B1.1 of the Sentencing Guidelines when it calculated the applicable advisory guideline range. Mr. Nathanson is wrong. The Court did not increase Mr. Nathanson's sentence because of his poverty. The Court increased his sentence because he did not return the millions of dollars that he stole from thousands of innocent people and did not mitigate the devastating loss that he cruelly inflicted on them. Nor did the Court incorrectly apply the § 3B1.1 leadership enhancement. As aptly stated by the Ninth Circuit when it affirmed Mr. Nathanson's sentence: “The district court properly applied a four-level enhancement to Nathanson's sentence premised on his leadership role in the scheme to defraud.” Mr. Nathanson's petition is DENIED.

II. FACTUAL BACKGROUND

Mr. Nathanson, along with his “50/50 business partner” Daniel Rish, concocted a sophisticated Ponzi scheme used by Mr. Nathanson to steal money from unsuspecting investors through a variety of entities including telemarketing businesses, “consulting”firms, media funds, and golf companies. ¹ (Dkt. No. 42 [Plea Agreement] ¶ 9(b).) ² Using the telemarketing entities he controlled, Mr. Nathanson solicited investors to invest in the “Nathanson Investment Trust” (“NIT”) from January 2000 through March 2004.³ ( Id. ¶ 9(b).) Mr. Nathanson told investors they were purchasing an ownership share in a privately-owned, Internet-based company (the “Internet Company”) that had purportedly developed software to enhance advanced Internet security applications. ( Id.) He caused the investors to be told, inter alia, that the Internet Company would soon be proceeding to an initial public offering (“IPO”), that funds were needed to increase the net worth of the Internet Company in advance of the IPO, that each investor would receive an ownership interest in the Internet Company, that each investor's money would be refunded if the IPO did not go forward, and later, that the Internet Company had elected to forego the IPO in lieu of a merger deal with an undisclosed public company. ( Id. ¶ 9(c).) Mr. Nathanson, with the assistance of Mr. Rish, sent letters to NIT investors representing to them that the money had been invested as promised. ( Id. ¶ 9(d).) In one letter, Mr. Nathanson wrote: “Thank you very much for the confidence and trust you bestowed upon me, and I want you to know that you can rest assured you're in good hands.... Thanks again for your trust. Very shortly we're going to share this success. I'm really looking forward to that.” (Dkt. No. 57 [Victim Letters] Exh. 5 at 2; PSR ¶ 53.) As a result of Mr. Nathanson's activities, several hundred investors sent approximately $28.4 million to NIT for investment in the Internet Company. (Plea Agreement ¶ 9(h).)

In reality, the Internet Company did not exist. Mr. Nathanson has admitted that “the Private Internet Company was utterly fictitious, and there never was a planned IPO or merger negotiations with any Public Company.” ( Id. ¶ 9(e).) The investors' money was never used to acquire an ownership interest in any company; rather, at Mr. Nathanson's direction the investor funds were immediately diverted, misappropriated, and used by Mr. Nathanson and others for unrelated purposes. ( Id.) For example, $8.8 million was used to fund Mr. Nathanson's failing golf businesses Play Big and Giant Golf, and over $10.5 million was transferred to other entities, partnerships, companies, and funds controlled by Mr. Nathanson and Mr. Rish. ( Id. ¶ 9(h).) Mr. Nathanson spent $2.1 million of NIT investment money on indulgent personal expenses, including gambling expenses and three homes located in Coto de Caza and Trabuco Canyon, California. (PSR ¶ 27.) ⁴ Only $4,297,723 was returned to investors as refunds and payments. (Plea Agreement ¶ 9(h).)

In addition to the NIT scheme, Mr. Nathanson and Mr. Rish organized the sale and offering of other unregistered securities through fraudulent means. ( Id. ¶ 9(i).) Mr. Nathanson solicited investment in Giant Golf and Big Play by falsely representing that the companies were successful and on the verge of an IPO. ( Id.) But in fact, Giant Golf and Big Play never made any net profits from operations and never went public. (PSR ¶ 30.) Mr. Nathanson solicited investments in other entities he controlled with Mr. Rish, including “WePlayPoker.com” and partnerships involving Interactive Video Data Service (“IVDS”) licenses purchased at Federal Communications Commission auctions. Investors were falsely told that these investments paid returns between 2–5% per month. ( Id. ¶ 9(i).) Like the investments made in the NIT scheme, funds invested in Mr. Nathanson and Mr. Rish's other entities were diverted to pay off other investors or directed to unrelated activities. Id. Mr. Nathanson undertook these sales despite the fact that he had been ordered to cease and desist from selling unregistered securities by the state of California in 1994, the state of Ohio in 2002, and the state of North Dakota in 2004. ( Id. ¶ 9(f).) These orders were never disclosed to investors. Mr. Nathanson also did not disclose to investors that he had been under investigation by the Securities and Exchange Commission (“SEC”) since 2003. Id.

Mr. Nathanson's schemes had devastating impacts on his victims.⁵ He deceived thousands of individuals, including his own employees. The Court reviewed letters from victims and heard victim testimony at Mr. Nathanson's sentencing hearing, including the following excerpts. Edward W. wrote as follows:

I invested a total of $30,075 in four separate transactions between 1993 and 1995.... The significance of my losses is great to me and my family, I would likely be using the money, and its (hopefully) appreciated value over the years to help finance the education of my ten grandchildren. Now this will be impossible. As a family physician, now retired after 44 years in practice, I cannot fully fathom, nor express my dismay over being “taken” by Mr. Nathanson and his associates. I hope you will consider my story, as well as that of many other investors, and impose the maximum sentence on Mr. Nathanson. He has done irreparable harm to so many!!!

(Victim Letters Exh. 4 (emphasis in original).) Another investor submitted the following:

My name is Richard M P. I represent my father Herbert P and my brother Steven P. Collectively we invested one hundred thousand dollars in Colin Nathanson's deception. The money had been intended for our daughters (2) college education which is to begin soon. The quality and ability to finance their future schooling has been deeply compromised. When Mr. Nathanson and his employee Sheila Green look you in the eyes and lie repeatedly for three years with the intention to harm and deceive, the light of humanity is greatly dimmed. I pray that the punishment you hand down will be abundantly clear to him and to others, who may seek to harm in this heartless and unconconscionable [sic] way!

( Id. Exh. 1 (emphasis in original).) A New York attorney submitted a letter on behalf of his client, stating in part:

Fred N invested $23,000 in Millennium Technical Corp—one of Nathanson's corporations that he was taking public with “an IPO”. Mr. N unfortunately believed the positive letters he received from Nathanson and colleagues and continued to pour his hard earned money into this flim-flam.... It is truly tragic for him and many others. This man belongs in jail. There are no assets to be recovered.

( Id. Exh. 3.) At Mr. Nathanson's sentencing hearing, the following was read to the Court by one victim on behalf of another:

I, Deanna Aikens, a former employee of his, was disinstated [sic] to learn that Mr. Nathanson had used so many people financially and he had deceived many more. I thought my stock in the company was going to provide me with a future necessary egg and means of one day retiring with some stability in my senior years. I was a very dedicated and committed employee. I worked very hard at this firm. I lived in a one-bedroom apartment and drove a clunker truck, but I thought that one day I would own a home and drive a new car if I kept working hard for Mr. Nathanson. While he was out spending the millions driving a fancy car, traveling the world and living like a king, I was just happy to have a job and an apartment and a truck that broke down every couple of months.... But after Mr. Nathanson was arrested, I lost my job. I had to rent a room in a...