Free Response - District Court of Arizona - Arizona

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DANIEL G. KNAUSS United States Attorney District of Arizona DANIEL R. DRAKE Assistant U.S. Attorney Arizona State Bar No. 003781 [email protected] Two Renaissance Square 40 N. Central Avenue, Suite 1200 Phoenix, Arizona 85004-4408 Telephone: (602) 514-7500

UNITED STATES DISTRICT COURT DISTRICT OF ARIZONA United States of America, Plaintiff, v. Christopher Shawn Muse, Tatia Marie Valenzuela, Drina Levette Johnston, Defendants. CR-04-0952-PHX-SMM Joint Response to Defendants' Objections to the Pre-sentence Reports

15 I. Introduction 16 The Court has raised certain questions about restitution and the amount of loss in the case. 17 Each defendant has asserted they should be held accountable only for the amount of loss 18 occasioned by their own fraudulent transactions, and each contends they should not be held 19 liable for restitution in excess of $41,000. 20 This memorandum will first address concepts of relevant conduct, the specific conduct 21 at issue in this case, and the manner in which the conduct meets the legal tests for inclusion as 22 relevant conduct. Then it will address restitution. 23 A brief review of the facts as outlined in the Pre-Sentence Report (PSR) and the Postal 24 Inspection Service Report (Postal Report) on this matter show that there was indeed a pattern 25 of criminal activity evidencing a common scheme or plan, a jointly undertaken criminal activity. 26 In fact, given statements that Muse showed others how to run the scam, he would be accountable 27 28

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1 for their actions as an aider and abbettor. As a result, the relevant conduct for each defendant 2 includes the loss caused or intended by their co-defendants. 1/ 3 4 II. Overview of The Scheme to Defraud 5 From 2001 until August 9, 2004, Christopher Shawn Muse (Muse) executed a scheme to

6 defraud financial institutions and merchants by using falsely assumed identities and a pattern of 7 deposits, check writing, and withdrawals that left the institutions and merchants holding 8 worthless paper for goods Muse purchased. Muse was joined in 2004 by Tatia Marie Valenzuela 9 (Valenzuela), and Drina Levette Johnston (Johnston) and, as a result, was able to increase the 10 number of checks written and goods obtained. This also increased the losses suffered by 11 victims. 12 Defendants used false identities to open checking accounts, often discarding one identity

13 when it had been used to inflict losses and adopting another to repeat the scheme. Once a 14 checking account was opened defendants would make a sizeable deposit­typically about 15 $2,000­and then write checks far in excess of the account deposited­frequently $7,000 to 16 $15,000. Check writing usually occurred in a short time, often less than three days, roughly the 17 time it would take the first checks to reach the bank. Then, before the bank had received the 18 checks, defendants would withdraw the funds deposited, leaving the account depleted, and 19 someone holding worthless paper. In some instances the financial institution took the loss. In 20 others the victims were the merchants who sold goods and took checks in payment. 21 The participants in the scheme were from the Los Angeles area, traveled to the Phoenix,

22 and opened checking accounts at a number of area banks and credit unions. Defendants used 23 fictitious social security numbers or the names and social security numbers of others to open the 24 accounts. They frequently obtained picture identification documents from local community 25 colleges in the assumed names. Defendants then obtained Arizona identification cards in 26 Only defendant Muse is accountable for his conduct in 2001, as that preceded by years 27 the involvement of his co-defendants. 28
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1 assumed names, and used that identification to open the fraudulent accounts. Defendants used 2 a common "stash house" to hold the purchased goods before transporting the goods to California 3 for return or resale. 4 5 III. 6 Basic Considerations of Relevant Conduct A defendant's sentence should be determined on his or her relevant conduct. Guideline

7 Section 1B1.2 (b). Relevant conduct includes not only the acts committed by a defendant, but 8 those (1) acts where the defendant aided or abetted the acts; (2) all reasonably foreseeable acts 9 of others in furtherance of jointly undertaken criminal activity; and, (3) all acts that were part of 10 the same course of conduct or common scheme or plan as the offense of conviction. Section 11 1B1.3. Thus, there are three related concepts that expand accountability beyond those acts 12 committed personally by the defendant. As the Application Notes direct, "a defendant may be 13 accountable for particular conduct under more than one subsection of this guideline." 14 Application Note 2(a)(1). The conduct should be counted as relevant conduct so long as it meets 15 one of the foregoing tests for relevant conduct. 16 17 Jointly Undertaken Criminal Activity The application notes to Section 1B1.3 make clear that jointly undertaken conduct must

18 be both (1) in furtherance of the jointly undertaken criminal activity and (2) reasonably 19 foreseeable in connection with that activity. Section 1B1.3, Application Note 2. A court should 20 make specific finding both as to the the scope of the agreement and the foreseeability of the 21 other's conduct. Id. 22 23 Course of Conduct and Common Scheme or Plan The "course of conduct" and "common scheme" concepts are related but distinct

24 concepts, as the Second Circuit noted in U.S. v. Shonubi, 998 F.2d 84, 89 (1993). In deciding 25 whether a defendant has been involved in a "course of conduct," the court looks for an 26 identifiable pattern of behavior which continued over time. The focus is on the nature of the acts 27 and their repetition. Key factors in the analysis for course of conduct, according to the Ninth 28
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1 Circuit, are sufficient similarity and temporal proximity to suggest that repeated instances of 2 criminal behavior constitute a pattern of criminal conduct. United States v. Hahn, 960 F.2d.903, 3 910 (9th Cir. 1992). 4 components. Id. 5 "A "common scheme or plan," in contrast, requires a connection among the participants Thus, similarity, regularity, and temporal proximity are essential

6 and occasions." Shonubi, 998 F.2d at 89. Application Notes to Section 1B1.3 explain that in 7 order for two or more offenses to constitute part of a common scheme or plan, they must be 8 substantially connected to each other by at least one common factor, such as common victims, 9 common accomplices, common purpose, or similar modus operandi. Note 9(A). 10 In United States v Harvey, 413 F.3d 850 (8th Cir. 2005), the court dealt with a fraudulent

11 check ring much like the one at bar. The court's analysis, therefore, while not controlling, is 12 persuasive. The Eighth Circuit outlined factors showing that two defendants planned and carried 13 out a scheme involving false identification and counterfeit checks. Holding the defendants 14 activities met the definition of jointly undertaken activity, the court noted the defendants had 15 traveled together for at least two months prior to their arrest; and were seen together on several 16 occasions. They also shared resources to carry out the scheme, in that they used the same 17 apartment and van in their activities. 423 F.3d. at 854. 18 The court then identified factors relevant to a foreseeability analysis under "jointly

19 undertaken activity." Those included benefitting from the actions of another and demonstrating 20 a substantial commitment to the criminal scheme. Each defendant benefitted by sharing 21 resources, the court noted, and "by being able to cover more territory, and thereby ...[being] able 22 to pass more checks, obtain more identities, and better avoid detection." (Id.) The court 23 observed that both defendants demonstrated substantial commitment to the scheme in that they 24 traveled together "working to obtain false identifications to pass counterfeit checks for at leaset 25 two or three months" prior to their arrest. (Id.) The van in which they were arrested contained 26 birth certificates and identification cards, as well as scraps of paper with birth dates, social 27 security numbers, and credit card numbers, including expiration dates. Thus, the court 28
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1 concluded, the breadth, duration, and scope of their joint operations demonstrated their 2 substantial commitment to the criminal scheme. 413 F.3d at 855. As a result, each defendant's 3 relevant conduct included the activities of the other. 4 Defendant Muse's reliance upon United States v. Mellen, 393 F.3d 175 (D.C.Cir. 2005),

5 is misplaced because that case is factually distinguishable. Mellen's wife was engaged in a 6 broad scheme to defraud. Mellen took part in one act in furtherance of the scheme with a will 7 to bring about the objective of that act­stealing a laptop computer. Thus, he was guilty or 8 responsible criminally for the full extent of the broader scheme. He did not participate in any 9 of the other acts taken by his wife, nor did he do anything to further his efforts. His 10 accountability at sentencing should have been limited to that one act relating to the laptop 11 computer and not the entire scheme. See Application Notes 5, 6, and 8. 12 Mellen fits the role of Defendant O. Muse, on the other hand, is more like Defendant Q,

13 a "drug dealer" who pools his resources and profits with other "drug dealers." By his own 14 admission, he needed money, so he participated in the scheme with Valenzuela. He drove her 15 to Phoenix knowing she planned to create fictitious accounts. He knew she was opening 16 accounts, that is, more than one account, and he drove her to various banks and merchants to 17 commit the fraud. He must have seen her carry bag after bag from the store, and helped her 18 transfer them to the stash house. Muse said he was paid for his services, so he was participating 19 and benefitting from the actions of Valenzuela, by his own admission. 20 According to other evidence, Muse told Valenzuela she could earn money from opening

21 false accounts and showed her how to it. In line with Valenzuela's statement she could "earn 22 money" for opening accounts, Johnston she opened accounts under the direction of others and 23 was paid for every account she opened, although she did not say who paid her. Muse was in the 24 bank when Drina Johnston made a $1,800 cash deposit. He effected ATM transactions on an 25 account controlled by Valenzuela. He was with both at the stash house chocked full of 26 fraudulently obtained goods on the day he was arrested with Valenzuela and Johnston. The facts 27 in this case are starkly different than those in Mellen, and lead to a different result. 28
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1 IV. 2 3

The Conduct and Connections of These Defendants A. Their Own Description of the Operation

Each of the defendants was interviewed on August 9, 2004, following their arrest. They

4 also spoke with probation officers about their conduct. The statements below are derived from 5 those two sources and only those sources. 6 7 1. Muse

Muse initially denied to Postal Inspectors that he was the individual pictured on bank

8 video pictures. He later stated that he had made several withdrawals and a couple of deposits 9 from accounts not belonging to him. He stated that friends would ask him to do this, and they 10 would pay him $30 to $40. He continued to relate that he did not know the names on the 11 accounts and that it didn't matter to him. He stated that he has done this about 10 times. 12 Muse told the probation officer that he was involved in this offense. He stated his

13 business was slow and he needed money to pay rent and other bills. Muse stated he was 14 recruited by Valenzuela because he had a driver's license. He reported they drove to Phoenix 15 and he knew her plans were to create fictitious bank accounts. The defendant indicated 16 Valenzuela began to obtain identification and open the accounts. He drove her to various banks 17 and merchants to commit the fraud. Muse stated he received a total of approximately $1,100 and 18 possessed approximately $900 at the time of his arrest. 19 20 2. Valenzuela

During questioning following her arrest, Valenzuela admitted obtaining the two Arizona

21 drivers licenses in Jacobus's name and opening up the Desert Schools Federal Credit Union 22 account in Jacobus's name. She stated that she used a Mesa community college ID and a birth 23 certificate to obtain the drivers licenses. Valenzuela stated that she has used the identity of three 24 others to open up accounts at Bank One, Wells Fargo and Desert Schools Federal Credit Union. 25 She stated that she would open up an account with $100 and then go shopping with the checks 26 from the opened accounts. Valenzuela stated that she would not discuss the involvement of the 27 others contacted (Muse and Johnston). 28
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1

Valenzuela told the probation officer the details in the factual basis of the plea agreement

2 were accurate, and fully admitted her conduct in the offense of conviction as well as all other 3 acts alleged in the indictment. She explained prior to her illegal conduct, she was experiencing 4 mental health issues for which she began to self-medicate via alcohol and prescription drug 5 abuse. She lost her job and had no income. She was friends with related case defendant 6 Lashondra Long, whose boyfriend was co-defendant Muse. Muse advised Valenzuela she could 7 earn money from opening false accounts and showed her how to do it. 8 9 3. Johnston

Following her arrest on August 9, 2004, Johnston was interview by Postal Inspectors.

10 Johnston stated she was not working and had not worked in several years. When asked why she 11 would open a bank account when she has no money or a job, Johnston stated she has income but 12 would not elaborate on how she obtained her income. Johnston admitted she opened accounts 13 under the direction of others and received monetary gain for doing it. She stated she receives 14 money for every account she opens. When asked how much, she would not say. She finally 15 stated it was enough money to take care of her and her baby. Johnston stated she opened 16 approximately three accounts and she also used the name of Latoya Jones. 17 She admitted she had opened a Bank of America checking account in her name on March

18 7, 2004. Johnston admitted she had opened a Bank of America checking account in the name 19 of Natasha Jones on August 2, 2004. Johnston stated she opened the account in March with $ 20 100. She stated she also opened the account using Natasha Jones' name with $ 100. 21 She admitted she had written several checks to numerous merchants in the Phoenix area

22 from the Natasha Jones account. She also admitted she went to Target on Thursday August 5, 23 2004 and wrote a check off the account. Johnston was shown a Target surveillance photograph 24 of the transaction and she admitted it was her in the picture. When asked if Chris Muse 25 accompanied her in Target when she wrote checks from the Natasha Jones account she stated 26 he did not. She called him from Target to get a ride. He had picked her up. 27 28
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1

Johnston stated she never made returns on the merchandise she had purchased during this

2 scheme. She stated she just buys the stuff and gives it to the person she is supposed to give it 3 to. Johnston stated she is told what to buy and how much to spend. She stated there are rules, 4 such as, she is never allowed to buy something for herself. She is told to buy an item and is told 5 the maximum amount she can pay for it. She then comes out of the store with the merchandise 6 and gives it to who she was instructed to give it to. Johnston stated Tatia Valenzuela was the 7 person who gave her instructions. Johnston stated she has written thousands of dollars worth 8 of checks from the fraudulent accounts. 9 When interviewed by a probation officer, she admitted the factual basis of the plea

10 agreement. 11 12 13 B. Statements of Others Regarding Muse

Valenzuela mentioned that she was friends with Lashondra Long, the girlfriend or wife

14 of co-defendant Muse and a defendant in CR-05-01237-PHX-EHC. Muse is shown in some 15 of the bank surveillance photographs making deposits to or withdrawals from fraudulent 16 accounts used in that case. Two of the defendants in that case also described the role Muse 17 played in transporting them from California to Arizona to carry out the scheme to defraud, as 18 well as taking the fraudulently obtained goods they purchased with worthless checks. They were 19 supposed to be paid for their efforts by Muse, but the payments fell short. Transcripts of the 20 sentencing proceedings of Michael Williamson and Lloyd Lydia where those statements were 21 made have been ordered. They will be furnished to the court and counsel when obtained. 22 23 24 C. Examples of Common Scheme, Concerted Action, and Connections Among the Defendants As shown in more detail below, there was a similarity, regularity, and temporal

25 proximity to the offense conduct. There was a connection among the actors and the actions. 26 27 28
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1.

Muse defrauding Compass Bank, 2001

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1

The first example of the scheme to defraud that operated from November 2000 until

2 August 2004, was carried out by defendant Muse in 2001. Muse applied for an Arizona 3 Identification Card (ID Card) in a falsely assumed name­Christopher Simms­and used that 4 identification and another person's social security number to open a bank account with Compass 5 Bank. He made a sizable cash deposit and then, in quick order, withdrew the deposit and wrote 6 a number of checks to local merchants which, of course, were returned unpaid because there was 7 no money in the account. 8 Among the merchant victims were Best Buy, Burlington Coat Factory, Home Depot,

9 Lowes, Staples, Target, and Walmart. He also wrote checks to Lashondra Long. (See 10 spreadsheet of account activity attached, Attachment 1.) 11 12 2. Johnston and Muse Defrauding Bank of America, March 2004

On March 3, 2004, Johnston opened a Bank of America account using her true name.

13 However, she used a social security account number that did not belong to her, it belonged to a 14 male. On March 5, 2004, she entered a Bank of America branch with co-defendant Christopher 15 Muse and deposited $1,900 into the account. Between March 5 and 8, 2004, 17 checks totaling 16 $5,676.39 were written against the account. On March 8, Johnston withdrew $1,885 from the 17 account, leaving it with insufficient funds to cover the checks written in the preceding two days. 18 19 3. Valenzuela and Muse Defrauding Desert Schools, April 2004

A third example occurred in April 2004. On April 12, defendant Valenzuela opened a

20 checking and a savings account at Desert Schools Federal Credit Union (Desert Schools), using 21 the name and social security number of Michelle B. Jacobus. She gave an address of 1120 S. 22 Sycamore, #230, Mesa, AZ. For proof of identification, she presented an Arizona ID card 23 showing matching information. On April 26, 2004, Valenzuela made a $2,200 cash deposit to 24 the Jacobus checking account, and proceeded to write checks. One such check was written to 25 "the Apple Store" for $2145.92 on April 26. That was returned unpaid, however, because 26 $1,845 was withdrawn on April 27, 2004, from the Jacobus account at another branch of Desert 27 Schools, leaving the account depleted. On April 26 and 27, checks were written against the 28
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1 Jacobus account for $3,545.54, far in excess of the funds deposited. It was the same pattern 2 followed by Muse in 2001. 3 A total of $7,696.99 in worthless checks were written against the Jacobus account. Two

4 of those checks, totaling $1,500, were made payable to Latoya Jones, an identity used by co5 defendant Drina Johnston. Among the common victims on this account were; The Apple Store, 6 Home Depot, Lowes, Staples, Target, and Walmart. (See spreadsheet of account activity 7 attached, Attachment 2.) 8 Bank surveillance photographs show co-defendant Christopher Muse making an ATM

9 withdrawal from the Jacobus account on April 14, 2004. He is also shown in a series of ATM 10 transactions on April 27, 2004, during which he submitted an empty envelope for a purported 11 $300 deposit, and withdrew $380 in cash within minutes. 12 13 4. Valenzuela Defrauding Wells Fargo, June 2004

Another example involved Valenzuela, this time using the identity of Sonja Beal to open

14 an account at Wells Fargo Bank on June 24, 2004. She deposited an additional $2,200 on June 15 26, 2004. On June 28 she withdrew $10 from the account. On June 29 she withdrew $2,250 16 from the account, which would have left a balance of $40. That is, it would have left a $40 17 balance but for the $4,714.52 in checks written on June 28 and 29. Those checks caused Wells 18 Fargo or local merchants more than $4,650 in losses. 19 One of the checks involved was made payable to Connie Avalos, yet another identity used

20 by Valenzuela. Among the common victims defrauded were: Home Depot and Target. (See 21 spreadsheet of account activity attached, Attachment 3.) 22 23 5. Johnston Defrauding Bank of America, August 2004

Johnston opened a new checking account at Bank of America on August 2, 2004, using

24 the name Natasha S. Jones. She presented a Glendale Community College identification card 25 and an Arizona ID card in that name. On August 5, Johnston deposited $1,800 in cash into the 26 account. Fifteen checks totaling $7,183.84 were written against the account on August 5 and 27 6, 2004, far in excess of the funds deposited. 28
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1

Among the common victims on this account were: The Apple Store, Best Buy, Burlinton

2 Coat Factory, Home Depot, Southwest Airlines, and Target. (See spreadsheet of account activity 3 attached, Attachment 4.) 4 On August 5, 2004, the day of the cash deposit, Johnston was picked up by Muse after

5 defrauding Target. Johnston wrote a check against the account for $538.98 at a Target store 6 located in Chandler, Arizona, according to store video surveillance. Johnston left the store with 7 the purchased goods, handed the bagged merchandise to co-defendant Christopher Muse, and 8 then got into the passenger's seat of a car. Muse put the merchandise in the trunk of that car, got 9 into the driver's seat, and then drove away. The car Muse was driving had been seen by Target 10 investigators at other Target stores in the area where similar fraudulent checks had been 11 presented that week. 12 On August 9, 2004, Phoenix Police found co-defendants Muse, Valenzuela, and Johnston

13 in the car mentioned above. It was a rental vehicle. Christopher Muse rented it at the Los 14 Angeles International Airport, according to a Fraud Investigator for Budget Rental Cars. 15 16 6. Additional Examples of the Common Method of Operation

Additional account analyses for accounts used by Valenzuela and Johnston show the

17 scheme was carried out on a number of other accounts. Valenzuela used eight different 18 accounts. (See spreadsheets attached as Attachment 7.) Johnston used a total of six different 19 accounts. (See spreadsheets attached as Attachment 8.) 20 21 7. Common Victims

In addition to the common victims noted above, the Restitution Total by Merchant or

22 Bank spreadsheet shows considerable number of common victims. (See Attachment 6.) 23 Foremost among them are computer or electronics stores that sell easily transportable, readily 24 resalable, high dollar items. The Apple Store, Best Buy, Circuit City, and Comp USA each 25 suffered losses in the range of $5,000 or more based on checks written by Valenzuela and 26 Johnston. Another type of common victim was home improvement or construction stores, such 27 28
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1 as Home Depot or Lowes. The items purchased their included similarly portable, resalable, high 2 cost goods, some of which might even have been used in Muse's contracting business. 3 4 8. Common Accomplices

All three co-defendants were arrested together riding in the Budget Rental car rented by

5 Muse and used to pick-up Johnston after she defrauded Target on August 5. Muse said he was 6 recruited for this by Valenzuela. Valenzuela said she was recruited by Muse. Valenzuela is a 7 friend of Lashondra Long, a co-defendant in a related case with a similar scheme. Long is also 8 the wife or girlfriend of Muse. Johnston said she was told what to buy and who to give the 9 goods to, but would not go beyond saying that Valenzuela gave her most of the instructions. 10 11 9. Common Addresses

All three defendants were from the Los Angeles, California area yet used the same Mesa,

12 Arizona addresses to receive the checks. The information on its availability had to come from 13 a common or shared source. Valenzuela and Johnston opened accounts using three common 14 addresses: 15 16 17 18 19 20 21 22 23 24 25 26 27 28 10. Common Appearances 2343 W. Main, #2066 Mesa, AZ Address 1120 S. Sycamore #230 Mesa, AZ 13201 S. Wakial Loop Phoenix, AZ True Name Valenzuela Johnston Valenzuela Johnston Valenzuela Johnston Assumed Name Michelle Jacobus Kimberly Jo Garner Myesha Gail Gray Michelle Jacobus Myesha Gail Gray Connie Avalos Latoya Jones Natasha Jones

Muse and Johnston were seen together in the Bank of America branch were Johnston made a large cash deposit. Muse was outside Target with Johnston after she made a fraudulent transaction. Bank ATM video depicts Muse effecting ATM transactions on the Jacobus account
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1 used by Valenzuela. On August 9, 2004, all three were found in the same Budget Rental car 2 Muse used to pick up Johnston after she wrote a fraudulent check to Target on August 5, 2004. 3 4 11. Common Travelers

Some defendants traveled on the same flights to and from Phoenix on tickets paid for

5 by checks drawn on fraudulent accounts. (See spreadsheet of Southwest Airlines Itineraries 6 attached as Attachment 5.) 7 8 12. Common "Stash House"

Postal Inspectors found a "stash house" or apartment located at 13820 S. 44th St., #1066,

9 Phoenix, Arizona, that was used to hold the fraudulently obtained goods until they could be 10 returned for cash or taken to California where they were resold or returned for cash. Valenzuela 11 rented that apartment using the name and identity of Michelle Jacobus. Phoenix Police 12 encountered all three co-defendants at the apartment on August 9, 2004. The defendants arrived 13 at the apartment in the Budget Rental Car rented by Muse. 14 15 13. Common Funds and Expenses

The defendants frequently wrote checks from one fraudulent identity to another, or use

16 checks drawn on one account identity to pay for airline tickets for another, including Lashondra 17 Long, Muse's current wife or girlfriend. (See Attachment 5, Southwest Airlines Itineraries.) 18 Michelle Jacobus checks were written to LaToyia Jones, an identity used by Johnston. (See 19 Attachment 2.) Two different Valenzuela identities were involved in a Sonja Beal check written 20 to Connie Avaolos. (See Attachment 3.) Muse also wrote checks from his Compass Bank 21 account to Lashondra Long, a defendant in CR 05-1237-PHX-EHC and friend of Valenzuela's,. 22 (See Attachment 1.) 23 24 E. The Relevant Conduct Here Includes the Actions of Each Co-defendant in 2004 The following facts demonstrate the conduct of each defendant in this case was

25 reasonably foreseeable to the others, with the exception of Muse's activity in 2001, and was . 26 While the defendants may have attempted to keep identities and accounts separate to reduce the 27 chance of discovery, they operated in concert with each other at virtually every step. They 28
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1 traveled together. They wrote checks to each other. They were arrested together. They used a 2 common stash house to hold the goods. 3 Each defendant stood to benefit from the acts of the others. The fraudulently obtained

4 merchandise was taken to a common stash house before it was returned or resold. The 5 defendants who opened the accounts were paid for their activities from the proceeds of items 6 returned or sold from the common stash, according to Johnston. Muse acknowledges he 7 participated in this to make money, and helped Valenzuela knowing that she was going to carry 8 out the fraudulent scheme. Having carried out the scheme himself in 2001, Muse stayed in the 9 background and let Valenzuela and Johnston open the accounts and write the checks. 10 In sum, then, the conduct at issue here constitutes "jointly undertaken activity" since it

11 was (1) in furtherance of the fraud scheme all defendants were participating in, and (2) 12 reasonably foreseeable in connection with that activity. It meets the "course of conduct" and 13 "common scheme or plan" because there was an identifiable pattern of behavior which continued 14 over time, and the offenses were substantially connected to each other by common factors, 15 including common victims, common accomplices, common purpose, and a similar modus 16 operandi. 17 18 IV. 19 Restitution and Loss The government attempted to treat the defendants individually in the penalty portion of

20 the plea agreements (reaching differing agreements) and extract an agreement that they would 21 be responsible for the restitution for losses cause by others, not merely their own. The language 22 chosen to effect the restitutionary goal appears flawed, as the court has noted. 23 Defendants agreed to make restitution "to the victims in this case without regard to the

24 charges in the indictment or the offense of conviction in the amount of approximately $41,000, 25 the precise amount to be determined by the court at sentencing." Each defendant contends this 26 language puts a cap on the amount of restitution he or she can be ordered to pay, and that cap is 27 28
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1 "approximately $41,000." They ignore the other language of the paragraph, and seek to 2 construct an intent for the clause that did not exist. 3 Ambiguities in a plea agreement are typically construed against the government, as it

4 drafted the agreement. The government submits the language of the agreement does not 5 establish a cap at $41,000, as it clearly provided the amount of restitution will be determined by 6 the court at sentencing. To the extent defendant were laboring under the impression the 7 language created a cap, then they knew they were agreeing to pay restitution up to the amount 8 of cap. The Court could carry out the agreements as defendants view them, yet insure that most 9 of defendants' victims are not left without the possibility of recovering their losses, by ordering 10 each defendant to pay restitution of $41,000. In other words, each defendant would be ordered 11 to pay $41,000, the amount they contend they agreed to pay, for a total of $123,000. 12 Each of the defendants was advised that they would be required to pay restitution,

13 according to the language of the agreement. They were also told they might be required to pay 14 a fine of $250,000 in the case of Johnston, and $1 Million for Muse and Valenzuela. Given their 15 assertion that they agreed to pay $41,000, they should have no objection to an order requiring 16 that. 17 Three sets of spreadsheets are provided in support of the amount of loss and the victims

18 deserving restitution. The first shows the total losses of more than $130,000, suffered by banks 19 and merchants as a result of the scheme. It delineates which defendant was involved, and to 20 what extent, in the losses suffered by that victim. (See attached spreadsheet, Attachment 6.) The 21 support for those figures come from Attachment 1, the Muse-Simms account analysis, and a set 22 of spreadsheets showing the accounts used by Valenzuela (See attached spreadsheets, 23 Attachment 7), and those used by Johnston (See attached spreadsheets, Attachment 8.) 24 Those attachments establish the victims to whom restitution should be paid. The Court

25 will determine the amount of restitution, in accordance with the plea agreement. 26 27 V. 28 Conclusion
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1

Based on the foregoing analysis and the materials attached hereto, this Court should enter

2 orders overruling the defendant's objections to the Pre-Sentence Report. 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
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S/Daniel R. Drake DANIEL R. DRAKE Roger Margolis Attorney for Defendant Valenzuela David Fuller Attorney for Defendant Johnston I hereby certify that on May 18, 2007, I electronically transmitted the attached document to the Clerk's Office using the CM/ECF system for filing and transmittal of a Notice of Electronic Filing to the following CM/ECF registrants: Jerry Hernandez Attorney for Defendant Muse

Respectfully submitted this 18th day of May, 2007. DANIEL G. KNAUSS United States Attorney District of Arizona /S/Daniel R. Drake DANIEL R. DRAKE Assistant U.S. Attorney

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