Free Response - District Court of Arizona - Arizona

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

UNITED STATES DISTRICT COURT DISTRICT OF ARIZONA United States of America CR-04-883-PHX-SMM Plaintiff, v. Christopher Brian Blackwood, Defendant. The United States submits its response as to defendant's objections to the presentence GOVERNMENT'S RESPONSE TO DEFENDANT'S OBJECTIONS TO PRESENTENCE REPORT

15 report. 16 RESPONSE TO OBJECTION I: 17 The defendant objects to comments in paragraph 16 of the presentence report's account 18 of what co-defendant Magee told investigators. The defendant apparently disagrees with that 19 version of events and insists his explanation of the circumstances in paragraph 23 and 24 of the 20 presentence report is more accurate. The court need not resolve this issue, however, in order to 21 impose a reasonable sentence in this case, in accordance with 18 U.S.C. 3553(a). It matters little 22 whether he used Mr. Magee's home telephone number to activate the credit card and told Magee 23 to use the credit card to obtain as much money as possible. There has been no adjustment made 24 for role in the offense. The report fairly reflects Mr. Magee's words as his, and Mr. 25 Blackwood's as his. There is no confusion about who said what. 26 27 28 1

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What is clear from Mr. Blackwood's comments in paragraph 23 and 24 is that the

2 defendant agreed to partake in criminal activity (the use of fraudulently obtained credit cards) 3 with others (Magee, Schlobohm, and Shultz) and that it was reasonably foreseeable that those 4 others were doing things (fraudulently obtaining and using credit card) in furtherance of that 5 conduct. He concedes he knew that others were submitting change of address forms to reroute 6 mail to Ms. Schlobohm's address. He also knew that one of the co-defendants, Ms. Schlobohm, 7 agreed to have credit cards sent to her house and further that she also ordered something from 8 Target for one of her children in a transaction which he believed was fraudulent. He also 9 acknowledged some drug deals where he received people's profiles and information, such as 10 customer membership information, from a video store. This information would have no intrinsic 11 value, unless used for identity theft and fraud, such as fraudulently obtaining and using credit 12 cards. 13 Clearly, Mr. Blackwood knew other of his associates were making fraudulent applications

14 and rerouting mail in order to obtain credit cards in the names of others and, that thereafter, they 15 would use those cards to make unauthorized transactions with no intention of paying for the 16 goods or services so obtained. Mr. Blackwood received some of the benefits of that in terms of 17 lodging and other items purchased in Sedona. Indeed, he personally used a credit card bearing 18 another person's name on several occasions in Sedona to make unauthorized purchases. These 19 facts permit the court to impose a reasoned sentence without requiring the court to determine 20 factually whether Mr. Blackwood activated one card or told Mr. Magee to use the credit card to 21 obtain as much money as possible. 22 23 24 RESPONSE TO OBJECTIONS II, III & IV: Defendant's objection to paragraph's 29, 48, & 49 of the presentence report concerns the

25 amount of loss of approximately $12,000 and the number of victims at ten or more, with the 26 defendant asserting that only $837.16 of that loss is attributable to him. It is true defendant 27 personally used one card in the name of Joanne Green to make approximately nine transactions 28 2

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1 at a Circle K store which, together with transactions made by others on that card, resulted in 2 $837.16 worth of loss. According to the defendant, he did not apply for this card, did not have 3 it sent to his address, and did not activate the card. But he did use the unlawfully obtained card 4 to gain personal benefits. Mr. Blackwood knew full well that others in this group were obtaining 5 credit cards and that they were doing so to make unauthorized purchases. While he did not take 6 every step in the chain of events from application to use, he knew what others were doing and 7 that he benefitted from their efforts. He participated in this venture with a will to bring it about. 8 He was part of a "criminal plan, scheme, endeavor, or enterprise undertaken...in concert with 9 others, whether or not charged as a conspiracy." (See §1B1.3, Application Note 2). It was a 10 jointly undertaken criminal activity. 11 This losses caused by others were reasonably foreseeable conduct under Section 1B1.3.

12 As application note 2 to Section 1B1.3 points out, "the conduct of others that was both in 13 furtherance of, and reasonable foreseeable in connection with, the criminal activity jointly 14 undertaken by the defendant is relevant conduct under this provision." 15 The Chase Bank credit card in the name of Joanne Green used by Mr. Blackwood was

16 initiated by an internet application on July 4, 2004 and the credit card was sent out by mail on 17 July 7, 2004. It was sent to Schlobohm's address. On July 15, 2004, the credit card was 18 activated by a telephone call made from number (602) 348-8930. Co-defendant's Schlobohm, 19 Magee, and Schultz all agree this was the cell phone number used by Erica Schultz. Mr. 20 Blackwood was in a relationship with Ms. Schultz at the time the Chase Bank card was activated 21 and used. 22 Co-defendant Magee took Mr. Blackwood and Ms. Schultz to Sedona, Arizona, and

23 dropped them off there. They stayed at a hotel where the Joanne Green credit card was 24 presented for payment. Meals were obtained via credit card from a local restaurant, and a 25 number of transactions were made at a local Circle K store. Security videos show Mr. 26 Blackwood using the card and signing Joanne Green's name. The same credit card was used by 27 Ms. Schultz to charge a horseback ride and a meal in Sedona. As Mr. Blackwood admitted, he 28 3

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1 created a ruse so he could convince the sales clerk at Circle K that he had Joanne Greene's 2 authority to use the card, when in fact he knew he did not. 3 Mr. Blackwood knew that others in the group were rerouting mail so they could receive

4 mail to which they were not entitled and that his co-defendants were engaging in a fraudulent 5 scheme with the credit cards. Specifically, he said he saw Mr. Magee submit at least two change 6 of address forms to re-route mail to the Schlobohm address. He further told investigators that 7 Ms. Schlobohm agreed to have credit cards sent to her house and that she also ordered something 8 from Target for one of her children in a transaction he believed to be fraudulent. Mr. Blackwood 9 said Ms. Schlobohm "knew everything that was going on in relation to the fraud at her house." 10 How else could this be construed but that he, too, knew everything that was going on in relation 11 to the fraud. Given these facts, it was reasonably foreseeable that there would be additional 12 victims and additional fraud losses beyond the transactions he made while he had the Joanne 13 Greene card in his possession. He should be accountable for those losses as well. 14 The government believes this information, which comes from the case report in the

15 matter, is sufficient to support a finding that defendant Blackwood is accountable for the entire 16 loss of approximately $12,000 as reasonably foreseeable conduct in a jointly undertaken venture. 17 Should the court be inclined to disagree, however, the government would request an evidentiary 18 hearing at which time it could present additional evidence in support of its position. 19 20 21 MEASURE OF PROOF Defendant contends the government must prove the amount of loss in this case by proof

22 beyond a reasonable doubt. Defendant is mistaken. 23 The measure of proof required in this case is a preponderance of the evidence standard.

24 The burden of proof for sentencing issues rests on the party seeking the adjustment. The 25 Supreme Court, referencing the Comments to the Sentencing Guidelines (Section 6A1.3) 26 indicated that a preponderance of the evidence is the appropriate standard: "it is `appropriate' 27 that facts relevant to sentencing be proved by a preponderance of the evidence." United States 28 4

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1 v. Watt, 519 U.S. 148, 156 (1997). The Supreme Court in United States v. Booker did not 2 change this general rule. See United States v. Booker, 125 S.Ct. 738 (2005). The Ninth Circuit 3 Court of Appeals, like most of the courts that have considered this issue, approves of this 4 comment in the guidelines and applies the preponderance of the evidence standard as the general 5 rule. See United States v. Restrepo, 946 F.2d 654 (9th Cir. 1991). See also, United States v. 6 Coleman, ___F.Supp 2d ___, No. CR-2-02-130, 2005 WL 1226622 at *4 (S.D. Ohio, May 24, 7 2005), citing cases from the First, Second, Fifth, Sixth, and Seventh Circuits approving a 8 preponderance standard. The Ninth Circuit recently reaffirmed this rule in United States v. 9 Johansson, 249 F3d. 848 (9th Cir. 2001), noting that as a general matter, due process is satisfied 10 by a preponderance of the evidence. Johansson, 249 F.3d at 853. 11 This rule is subject to limited exceptions. The Johansson Court described various factors

12 influencing whether due process requires a heightened evidentiary standard. These include: (1) 13 whether the enhanced sentence falls within the maximum sentence for the crime alleged in the 14 indictment; (2) whether the enhanced sentence negates the presumption of innocence or the 15 prosecution's burden of proof for the crime alleged in the indictment; (3) whether the facts 16 offered in support of the enhancement create new offenses requiring separate punishment; (4) 17 whether the increase in sentence is based on the extent of a conspiracy (applicable here even 18 though not charged); (5) whether the increase in the number of offense levels is less than or 19 equal to four; and (6) whether the length of the enhanced sentence more than doubles the length 20 of the sentence authorized by the initial sentencing guideline range in a case where the defendant 21 would otherwise have received a relatively short sentence. Id. at 854. 22 The Ninth Circuit has consistently applied a preponderance of the evidence standard

23 when, as here, an enhancement is based on the extent of a conspiracy. See United States v. 24 Riley, 335 F.3d 919 (9th Cir. 2003); United States v. Harrison-Philpot, 978 F.2d 1520 (9th Cir. 25 1992). As recently as 2003, the Ninth Circuit has found this factor controlling: "The fourth 26 factor controls our analysis. We have applied the preponderance of the evidence standard where 27 an increase in sentence is based on the extent of a conspiracy as opposed to uncharged conduct." 28 5

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1 United States v. Melchor-Zaragoza, 351 F.3d 925, 929 (9th Cir. 2003). Likewise, the Johansson 2 Court worked through these factors and decided its case based on this factor. Johansson, 249 3 F.3d at 855. 4 Here, a preponderance of the evidence standard is appropriate because the amount of loss

5 is based on the extent of the conspiracy. Mr. Blackwood is accountable for all the losses 6 reasonably foreseeable which resulted from actions in furtherance of the conspiracy. Moreover, 7 none of the other factors merit a heightened evidentiary standard. The sentence is within the 8 statutory maximum, and none of the facts involve new offenses. Also, neither the increase in 9 the number of offense levels nor the length of the sentence authorized by the initial sentencing 10 guideline range make a higher evidentiary standard appropriate. 11 While the increase in offense levels from a base of seven is more than four levels, this

12 factor is not dispositive. The Johansson Court explicitly noted that, "The fact that the increase 13 was more than four levels, however, means merely that Johansson's due process claim does not 14 fail on the ground that his offense level was increased by four or fewer levels." Johansson, 249 15 F.3d at 855-56. Similarly, the Ninth Circuit in Hopper rejected the notion that this factor should 16 control the analysis. See Hopper, 177 F.3d at 833. 17 Furthermore, deviation from the rule based on this factor would cause functionally

18 illogical results in fraud cases. The scheme for computing sentences in fraud cases involves 19 enhancements based upon increasing loss amounts, with additional levels added for any amounts 20 that exceed $5,000. (See §2B1.1(b)(1)). The threshold of a four level increase to the base 21 offense would occur in any case where losses exceed $10,000 ­ this would mean that, were 22 defendant correct, almost all of the fraud cases filed in federal court would require a heightened 23 burden of proof to determine the actual loss or intended loss, whichever is greater. (See §2B1.1, 24 Application Note 3(A). The application notes themselves suggest otherwise, as they permit the 25 court to make a reasonable estimate of loss, rather than engage in detailed and precise 26 accounting. (See §2B1.1, Application Note 3(C)). "The court need only make a reasonable 27 estimate of the loss. The sentencing judge is in a unique position to assess the evidence and 28 6

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1 estimate the loss based upon that evidence. For this reason, the court's loss determination is 2 entitled to appropriate deference." Id. 3 The Ninth Circuit has faced this question before. The Johansson Court was not swayed

4 by the fact that an increase of more than four levels occurred because, as the court noted, "[the 5 defendant's] offense level was increased because of the nature and extent of the offense to which 6 he pled guilty, rather than for acquitted or uncharged crimes." Johansson, 249 F.3d at 857. The 7 Johansson Court noted two cases where the Ninth Circuit had held that due process was not 8 satisfied by the preponderance standard. See United States v. Mezas de Jesus, 217 F.3d 638 9 (9th Cir. 2000) (involving a nine-level increase for an uncharged kidnapping); United States v. 10 Hopper, 177 F.3d 824 (9th Cir. 1999) (involving a seven-level increase based on acquitted 11 conduct). Johansson distinguished itself from these cases by noting, "...unlike Hopper and 12 Mezas de Jesus, [the defendant's] offense level was increased because of the nature and extent 13 of the offense to which he pled guilty, rather than for acquitted or uncharged crimes..." 14 Johansson, 249 F.3d at 857. The Melchor-Zaragoza Court was similarly unpersuaded that a 15 five-level increased should have resulted in a heightened standard of proof, because it resulted 16 from the extent of the conspiracy, and not from uncharged or acquitted conduct. Melchor17 Zaragoza, 351 F.3d at 929. In Riley, a fraud case where the offense level was increased eight 18 levels based on losses and intended losses from a conspiracy, the court commented that, "the fact 19 that an enhancement is based on the extent of a conspiracy for which the defendant was 20 convicted weighs heavily against the application of the clear and convincing standard of proof." 21 Riley, 335 F.3d at 926. Therefore, a preponderance of the evidence standard is appropriate 22 because defendant Blackwood's sentence is based on the extent of loss caused by a conspiracy. 23 This same issue, what the burden of proof should be at sentencing, was recently

24 considered by another court of this district. The issue was presented in United States v. Jagdish 25 Singh, CR-03-00540-PHX-DGC. Judge Campbell concluded on June 17, 2005, that the 26 appropriate standard to apply was a preponderance of the evidence in that case, where the 27 ultimate intended loss exceeded $400,000, based on the same arguments made here. 28 7

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CONCLUSION For the foregoing reasons the defendant's objections to the presentence report should be

3 overruled. The Total Offense Level should be Level 13. The loss exceeded $10,000 and there 4 were 10 or more victims. 5 6 7 8 /S/ 9 10 11 12 13 14 15 I hereby certify that on August 3, 2005, I electronically transmitted the attached document 16 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: 17 Jane L. McClellan Assistant Federal Public Defender 18 19 I hereby certify that on August 3, 2005, I served the attached document by fax 20 on the following, who is not registered participant of the CM/ECF system: 21 22 23 24 25 26 27 28 8 Kelly Heitkam U. S. Probation Officer CERTIFICATE OF SERVICE DANIEL R. DRAKE Assistant U.S. Attorney PAUL K. CHARLTON United States Attorney District of Arizona Respectfully submitted this 3rd day of August, 2005.

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