United States v. Rainbird
| Decision Date | 19 December 2011 |
| Docket Number | No. CR 09-2964 JB,CR 09-2964 JB |
| Parties | UNITED STATES OF AMERICA, Plaintiff, v. PAUL D. RAINBIRD, and JUNE L. ORTIZ, Defendants. |
| Court | U.S. District Court — District of New Mexico |
THIS MATTER comes before the Court on: (i) the Response of the United States to Presentence Investigation Report, filed September 30, 2011 (Doc. 117)("Response to PSR"); and (ii) the Defendant Paul Rainbird's Objections to the Presentence Investigation Report, Reply to Response of the United States to Presentence Investigation Report, and Sentencing Memorandum in Support of a Variance, filed September 30, 2011 (Doc. 118)("Objections to PSR"). The Court held a sentencing hearing on October 14, 2011. The primary issues are whether the Court should: (i) apply a 2-level enhancement under U.S.S.G. § 3B1.3 based on Defendant Paul D. Rainbird allegedly abusing a position of trust; (ii) apply a 2-level enhancement under U.S.S.G. § 3B1.3 based on Rainbird allegedly using a special skill to commit his offenses; (iii) apply a 4-level enhancement under U.S.S.G. § 3B1.1 based on Rainbird allegedly being the leader or organizer of otherwise extensive criminal activity; (iv) accept Rainbird and Plaintiff United States of America's stipulated amount of $94,500.00 in restitution; and (v) downwardly vary on Rainbird's sentence. Because the Court does not conclude that Rainbird held a position of trust or abused any position of trust he held, the Court will not apply a 2-level enhancement under U.S.S.G. § 3B1.3. Because Rainbird possessed no special skills, the Court will not apply the 2-level enhancement under U.S.S.G. § 3B1.3. Because Rainbird was not the leader or organizer of otherwise extensive criminal activity, the Court will not apply a 4-level enhancement under U.S.S.G. § 3B1.1(a). Because Rainbird has not contested the United States Probation Office ("USPO") applying the enhancement, the Court will apply a 2-level enhancement under U.S.S.G. § 3B1.1(c) for organizers, leaders, managers, or supervisors of criminal activity. Because the parties have stipulated to an amount of $94,500.00 in restitution, the Court will accept the stipulation and order Rainbird to pay this amount in restitution pursuant to the stipulation. The Court will downwardly vary to a sentence of 33 months.
Rainbird is co-Defendant June L. Ortiz' uncle. He is fifty-eight years old and is roughly 20 years older than Ortiz. Rainbird was a "trusted tribal member" of the Pueblo de San Ildefonso, New Mexico. Presentence Investigation Report ¶ 53, at 17 (disclosed Sept. 20, 2011)("PSR"). Rainbird attended school at St. John's College in Santa Fe, New Mexico in 1973. See PSR ¶ 78, at 21. He then attended the College of Santa Fe in 1976. See PSR ¶ 78, at 21. He earned a bachelor's degree in political science. See PSR ¶ 78, at 21. From 1977 to 1978, Rainbird attended the School for the State Judiciary in Reno, Nevada. See PSR ¶ 79, at 21. Rainbird then went to graduate school from 1983 to 1985 where he took graduate classes in public administration. See PSR ¶ 80, at 21. Rainbird has served as a tribal judge "off and on" since 1977. PSR ¶ 85, at 22. Rainbird served as the Chief Judge for the Pueblo de San Ildefonso from 1999 to 2005. See PSR ¶ 85, at 22. Rainbird served as the Lieutenant Governor for the Pueblo de San Ildefonso from 2008 to 2010. See PSR ¶ 83, at 21-22.
Bureau of Alcohol, Tobacco, Firearms, and Explosives ("ATF") agents began investigating Rainbird and Ortiz for failure to comply with certain laws regarding the sale of cigarettes and cigarette taxes. PSR ¶¶ 10-13, at 6-7. Businesses in the State of New Mexico that sell cigarettes must affix a New Mexico tax-paid stamp on every pack of cigarettes "at a cost of $.91 (now $1.60) per pack of twenty cigarettes." PSR ¶ 11, at 6. An exception to this requirement exists for "duly licensed" Native Americans who obtain cigarettes "for sale or use on the reservation in which they are an enrolled tribal member." PSR ¶ 11, at 6-7. When a business that sells cigarettes does not comply with this law, it has a cost advantage on cigarettes over other businesses in New Mexico. See PSR ¶ 11, at 7.
Rainbird and Ortiz were involved in several businesses that sold cigarettes to out-of-state customers and to customers not on Native American reservations. See PSR ¶¶ 10, 13, at 6-7. Rainbird controlled these businesses. See PSR ¶ 10, at 6. He organized them and supervised Ortiz. See PSR ¶ 52, at 16. An investigation revealed that, "from 2003 to 2008, Rainbird and Ortiz sold contraband cigarettes to approximately 6,000 out-of-state customers over the Internet without cigarette excise taxes being paid on those cigarettes and without reporting these sales to out-of-state tobacco tax administrators as required by the Jenkins Act," 15 U.S.C. §§ 375-78. PSR ¶ 13, at 7. During this time period, "Rainbird purchased approximately 826,048 cartons of cigarettes (165,209,740 cigarettes) at a purchase price totaling approximately $18,907,120.25, with a retail value of approximately $26,141,526.08." PSR ¶ 13, at 7. "On these Internet, contraband, off-Pueblo, tax-exempt cigarette sales, Rainbird realized a gross profit . . . of approximately $7,234,405.83." PSR ¶ 13, at 7. "This figure may be reduced downward to approximately $5,346,293.01 after costs of postage are taken into account." PSR ¶ 13, at 7. "The estimated tax loss to the State of New Mexico calculated during th[e] investigation was more than approximatelyseven million five hundred thousand dollars ($7,500,000)." PSR ¶ 12, at 7. Rainbird and Ortiz were the two "authorized signers on the bank accounts where payments for orders through the web site" that facilitated these out-of-state sales "were deposited." PSR ¶ 19, at 8.
Other states and governmental entities challenged some of these businesses' practices. For instance, the City of New York brought a suit for violations of the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1961-1968, and Jenkins Act in City of New York v. Smokes-Spirits.Com, Inc., 541 F.3d 425 (2d Cir. 2008). See PSR ¶ 26, at 10. The Supreme Court of the United States ultimately heard some of the issues in that case from the United States Court of Appeals for the Second Circuit in Hemi Group, LLC v. City of New York, 130 S.Ct. 983 (2010). See PSR ¶ 26, at 10. ATF agents purchased cigarettes from one of Rainbird's business as part of their investigation. See PSR ¶ 30, at 11. During their investigation, they also observed through surveillance the delivery of a large number of cigarettes to one of Rainbird's businesses. See PSR ¶ 31, at 11.
On October 8, 2009, a federal grand jury charged Rainbird and Ortiz in a fifty-nine count Indictment with the following: (i) Count 1: Conspiracy in violation of 18 U.S.C. § 371; (ii) Counts 2-9: Mail Fraud, in violation of 18 U.S.C. § 1341; (iii) Counts 10-33: Possession, Sale and Transport of Contraband Cigarettes, in violation of 18 U.S.C. § 2342(a); (iv) Counts 34-46: False Statement or Representation Regarding Cigarette Recordkeeping, in violation of 18 U.S.C. § 2342(b); (v) Counts 47-54: Engaging in Monetary Transactions Derived from Specified Unlawful Activity, in violation of 18 U.S.C. § 1957; (vi) Counts 55-59: Reports to State Tobacco Tax Administrator, in violation of 15 U.S.C. § 376; and (vii) Forfeiture in violation of 18 U.S.C. § 981(a)(1)(A) and (D), and 28 U.S.C. § 2461(a). See Indictment (Doc. 1).
On December 3, 2003, a grand jury, in a fifty-eight count superseding indictment, charged Rainbird and Ortiz with the following: (i) Count 1: Conspiracy in violation of 18 U.S.C. § 371; (ii) Counts 2-9: Mail Fraud, in violation of 18 U.S.C. § 1341; (iii) Counts 10-32: Possession, Sale and Transport of Contraband Cigarettes, in violation of 18 U.S.C. § 2342(a); (iv) Counts 33-45: False Statement or Representation Regarding Cigarette Recordkeeping, in violation of 18 U.S.C. § 2342(b); (v) Counts 46-53: Engaging in Monetary Transactions Derived from Specified Unlawful Activity, in violation of 18 U.S.C. § 1957; (vi) Counts 54-58: Reports to State Tobacco Tax Administrator, in violation of 15 U.S.C. § 376; (vii) Forfeiture in violation of 18 U.S.C. § 981(a)(1)(A) and (D), and 28 U.S.C. § 2461(c); and (viii) Forfeiture in violation of 18 U.S.C. § 982. See Superseding Indictment (Doc. 20). Before entering a guilty plea, Rainbird filed a motion to dismiss the Superseding Indictment. See Motion to Dismiss: Count 2-9, Mail Fraud; Count 10-32, Possession, Sale and Transport of Contraband Cigarettes; Counts 33-45, False Statement or Representation Regarding Cigarette Recordkeeping; Count 46-53, Engaging in Monetary Transaction Derived from Specified Unlawful Activity; Counts 54-58, Reports to State Tobacco Tax Administrator, filed February 14, 2011 (Doc. 82).
Rainbird, pursuant to a Plea Agreement, filed July 15, 2011 (Doc. 106), pled guilty to Count 32, Count 33, and Counts 54 through 58 of the Superseding Indictment. See Plea Agreement ¶ 3, at 2. Count 32 charged him with a violation of 18 U.S.C. § 2342(a), that being possession, sale and transport of contraband cigarettes. Count 33 charged him with a violation of 18 U.S.C. § 2342(b), that being false statement or representation regarding cigarette recordkeeping. Counts 54 through 58 charged him with a violation of 15 U.S.C. § 376 "as that section existed at the time of the charged conduct prior to the March 31, 2010 amendment," that being reports to state tobacco tax administrator. Plea Agreement ¶ 3, at 2. The parties "mutually acknowledge[d] that the offensesalleged in Counts 32 and 33 are felonies and that" the offenses alleged in Counts 54 through 58 "are misdemeanors." Plea Agreement ¶ 3, at 2. The parties agreed that Rainbird would pay "a restitution amount of $94,500.00 of which the amount of $34,500.00 shall be made to the New Mexico Taxation and Revenue Department and of which the...
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