US v. Sneed, Crim. No. 91-CR-122.
| Decision Date | 19 February 1993 |
| Docket Number | Crim. No. 91-CR-122. |
| Citation | 814 F. Supp. 964 |
| Parties | UNITED STATES of America, Plaintiff, v. Steven SNEED, Herman Graulich, and Brent Gundersen, Defendants. |
| Court | U.S. District Court — District of Colorado |
COPYRIGHT MATERIAL OMITTED
Gerald J. Rafferty and Kenneth R. Fimberg, Asst. U.S. Attys., Denver, CO, for plaintiff.
Marcella T. Clark, Lowery and Lowery, Lowery Suite, Denver, CO, for Sneed.
M. Kathryn Bradley, Denver, CO, for Graulich.
David A. Lane, Denver, CO, for Gundersen.
MEMORANDUM OF SENTENCING HEARING AND REPORT OF STATEMENT OF REASONS
Counsel for the Government, defense counsel, and defendants were present for the sentencing hearing on January 22, 1993. The hearing thereafter continued on January 25, 1993, and February 11, 1993. Based on the hearing, the reports concerning presentence investigation of each defendant, and all other materials submitted to the court, I enter the following findings, conclusions, and orders:
1. Pursuant to rule 32(c)(3) of the Federal Rules of Criminal Procedure, each defense attorney and defendant was timely provided a copy of the report of the presentence investigation concerning that defendant (together with all addenda to the respective reports), excluding only the final recommendation as to sentence. No other information was withheld. Defendants and counsel have had the opportunity to read and discuss the presentence investigation reports.
2. Defendants and counsel were afforded the opportunity to speak, to present information in mitigation (or, in the case of the Government, aggravation) of the sentence, to comment on the reports, to introduce testimony or other information relating to any alleged inaccuracy in the reports, and to comment on the probation officer's determination and on other matters relating to the appropriate sentence.
3. The bulk of the evidence introduced at the hearing concerned the question of whether Mr. Graulich should receive an upward adjustment for obstruction of justice. The Government also introduced letters written by a prosecutor to Mr. Gundersen and Mr. Sneed concerning their possible cooperation in certain matters. Except as expressly noted otherwise in this memorandum, I have considered all evidence introduced at the sentencing hearing, all evidence produced during trial and pre-trial proceedings, and the facts recited in the presentence investigation reports (including all attachments and addenda) in imposing sentences in this case. Factual findings necessary to the resolution of disputes are summarized below.
4. Congress has provided by statute that a sentencing court is ordinarily to apply the guidelines in effect on the date a defendant is sentenced. 18 U.S.C.A. § 3553(a)(4), (5) (West 1985 & Supp.1992). See also U.S.S.G. § 1B1.11(a) (Nov. 1992). The statute, however, is limited by the operation of the Ex Post Facto Clause, which "prohibits retroactive application of a changed guideline if the change disadvantages the defendant." E.g., United States v. Saucedo, 950 F.2d 1508, 1513 (10th Cir.1991) (citation omitted).
5. In making its offense computations in this case, the probation department did not use the current version of the guidelines. Instead, it used the United States Sentencing Commission Guidelines Manual which took effect on November 1, 1989, evidently on the ground that some aspects of the fraud guidelines were revised after the offenses charged here had been committed. Observing that section 2F1.1(b)(1) was amended on November 1, 1989, to provide more severe adjustments in offense levels for fraudulent schemes where the loss exceeds $40,000, Mr. Sneed objects to the probation department's use of the 1989 guidelines manual and maintains that application of the amendments in his case would violate the Ex Post Facto Clause of the United States Constitution. See U.S.S.G. App. C, amend. 154 (Nov. 1989) (). He urges that I use the 1988 version of the guidelines.
6. Here, retroactive application of the guideline amendments which took effect on November 1, 1989, would plainly disadvantage Mr. Sneed, assuming that I were to attribute to him a loss exceeding $40,000. The issue is whether use of the 1989 amendments amounts to retroactive application of those amendments. The probation department suggests that there is no issue concerning retroactivity because relevant conduct for which Mr. Sneed is responsible occurred on or after November 1, 1989. Specifically, the probation department observes that "on November 1, 1989, defendant Sneed wired $6,615.21 from a brokerage account with J.W. Gant (monies set aside to purchase Monarch stock) to an account in his name at Rigg's National Bank of Virginia in Alexandria." Second Addendum to the Presentence Report (Sneed) at A-2.
7. I do not think the evidence introduced at trial supports inclusion of Mr. Sneed's act on November 1, 1989, as part of his "relevant conduct." The SEC suspended all trading in the fraudulent Monarch stock on October 13, 1989. Although the Superseding Indictment alleged a securities fraud scheme which extended to October 19, 1990, I find by a preponderance of the evidence that the fraudulent manipulation ended on October 13, 1989, and was never resumed. Mr. Sneed could not have reasonably foreseen the two isolated acts of co-conspirators which allegedly occurred after suspension of trading. Therefore, all acts for which Mr. Sneed was responsible were complete on October 13, 1992. "Relevant conduct," under all present and past versions of the guidelines, includes acts "that occurred during the commission of the offense of conviction, in preparation for that offense, or in the course of attempting to avoid detection or responsibility for that offense." U.S.S.G. § 1B1.3(a)(1) (Nov. 1992). See also, e.g., U.S.S.G. § 1B1.3(a)(1) (Nov. 1988). I am satisfied that Mr. Sneed's opportunistic misappropriation of funds set aside for additional manipulations of the Monarch stock was a separate, subsequent legal wrong which did not occur during commission of the offense of conviction, since the securities fraud had already ended and was never resumed. I also do not believe that the funds were misappropriated in an attempt to avoid detection of the fraud. Mr. Sneed took the money because he was desperate for funds and knew (as the Government observes) that the FBI agent posing as a stock manipulator was hardly in a position to complain. Based on the finding that Mr. Sneed's relevant conduct was complete before November 1, 1989, I conclude that use of an amendment effective as of that date would be a prohibited ex post facto application of the amendment. I therefore apply the 1988 fraud table. See U.S.S.G. § 2F1.1(b) (Nov. 1988). In addition, consistent with the sentencing commission's so-called "one book" rule, I will use the 1988 version of the guidelines manual on other issues as well. See U.S.S.G. § 1B1.11(b)(2) (Nov. 1992). I will refer to later versions of the guidelines only where the later version clarifies the earlier guideline. Id.
8. The guideline for offenses involving fraud or deceit requires the sentencing court to adjust the base offense level by raising the level in increments corresponding to the amount of "loss" involved. See U.S.S.G. § 2F1.1(b) (Nov. 1988). This case presents an issue which is apparently one of first impression: how should a court determine the amount of loss where the fraud convictions result from an undercover "sting" operation set up by the Government? Because the Government carefully controlled the undercover "sting" operation here so as to avoid inflicting an actual loss on anyone, defendants argue that no loss adjustment is appropriate.
9. A jury has found defendants guilty of securities fraud, mail fraud, and wire fraud based on defendants' involvement in putting together a nearly-worthless corporation and then manipulating the price of its shares upwards through a series of controlled trades. An undercover FBI agent posed as an unscrupulous businessman who was interested in acquiring a worthless "shell" corporation, increasing the apparent value of the corporation's shares by manipulation, and offering the spuriously-valued shares as security for a bank loan which he wanted to obtain. As the undercover operation progressed, the undercover agent was introduced to Mr. Sneed, then to Mr. Gundersen, and finally to Mr. Graulich. Each defendant became involved in some aspect of the scheme.
10. One of the rules which the Government established for its undercover operation was that none of the nearly-worthless shares would ever be sold to a member of the public. The Government therefore faced a problem: if no shares were to be sold to the public, what was the undercover agent supposedly trying to accomplish in manipulating the price of the stock? This problem begat the ruse that the undercover agent wanted to present the stock, at its spuriously-inflated value, to secure a loan of $3,000,000 from an off-shore bank.
11. The exact identity of the person or persons who hatched the bank-loan ruse and devised the curious terms of the loan transaction is obscure. It is clear, however, that the terms were invented by a Government agent, official, and/or informer, not by any defendant. Because the terms of the loan have some potential significance in determining the amount of loss, they must be summarized here.
12. The loan which the schemers supposedly sought was in the amount of $3,000,000. Government Ex. 1-2H. The bank, however, was not going to disburse this entire amount to the schemers. It was to retain $810,000 as a reserve to secure three-years worth of interest. With $680,000, it was to purchase some sort...
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