Free Objection to Presentence Investigation Report - District Court of Arizona - Arizona

1 LAW OFFICES OF MICHAEL J. BRESNEHAN, P.C. Michael J. Bresnehan, Esquire 2 1761 East McNair Drive, Suite 101 Tempe, AZ 85283-5002 3 480-345-7032 [email protected] 4 State Bar No.: 009415 5 Attorney for Defendant 6 7 8 9 10 11 vs. 12 KINDY JONAGAN, 13 14 15 COMES NOW the defendant, by and through the undersigned attorney, and hereby objects Defendant. United States of America, Plaintiff, IN THE UNITED STATES DISTRICT COURT DISTRICT OF ARIZONA Case No.: CR-04-00820-006-PHX-FJM OBJECTION TO PRESENTENCE REPORT

16 to the Presentence Report prepared in this case, all for the reasons set forth in the accompanying 17 18 19 20 21 22 23 24 25 26 27 28 Case 2:04-cr-00820-FJM Document 246 Filed 05/08/2006 Page 1 of 12 s/ Michael J. Bresnehan Attorney for Defendant RESPECTFULLY SUBMITTED this 8th day of May, 2006 by MICHAEL J. BRESNEHAN, P.C. memorandum of points and authorities.

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MEMORANDUM OF POINTS AND AUTHORITIES FACTUAL INACCURACIES Paragraph 9: It would appear that the sum of $5,897,494 which is described as profit, appears, rather, to be gross revenues, after charge backs. Corporate Industries probably earned little or no profit during the relevant period, as evidenced by its chronic difficulty meeting payroll,

7 and its inability to timely make its payroll deposits. 8 Paragraph 12: Kindy Jonagan challenges the bald assertion that it was difficult for

9 consumers to obtain refunds because the "800" numbers given to them were either not staffed or the 10 11 12 13 customer service representatives advised that they were unable or not authorized to provide a refund. While some victims did report having difficulty getting through to speak with customer

14 service representatives, and others reported dissatisfaction with the representatives they did speak 15 with, the company maintained a fully staffed and functional customer service department 16 comprised of approximately 10-12 customer service phone representatives and a manager. The 17 18 19 20 phone representatives kept detailed logs of the incoming calls, and, from those logs, it would appear that their function was to attempt to remedy problems reported by customers. While some of the customer representatives may have told customers they were unable to provide refunds, the

21 company, in fact, appears to have had a procedure for providing refunds in cases where the 22 customer did not earlier agree to the terms presented by the sales verifiers. This was determined by 23 playing back the audio recorded conversations ("genies") between the company's telephone sales 24 25 26 27 verification representative and the customer. Where the customer clearly had not agreed to the terms of the sale, a refund was processed, at least in those cases that came to the attention of Kindy Jonagan. During the relevant time period, a substantial number of refunds were processed

28 personally by Ms. Jonagan. Case 2:04-cr-00820-FJM Document 246 Filed 05/08/2006 2 Page 2 of 12

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Paragraph 20: This paragraph distorts Ms. Jonagan's role at Corporate Industries during

2 the relevant time period, leaving one with the impression that she did nothing but run interference 3 4 5 6 7 for Corporate Industries, deflecting complaints. That depiction is neither fair nor accurate. Kindy was not a regular member of the customer service department, let alone a manager in that department. Moreover, she did not do payroll. She was an administrative clerk. Kindy's primary duty at Corporate Industries was reconciling two specific accounts. When

8 Kindy arrived each day at work, she had two reports on her desk. The first was a list of sales from 9 the previous day, which was essentially a list of customers who had agreed to purchase the product. 10 11 12 13 The report was compiled by another Corporate Industries employee and faxed each night to ACH, which performed wire transfers for the company. The other report was created and faxed by ACH to the company each morning. It documented the sales (list of customers and their account

14 information) from the previous day and each customer's payment status. Next to each sale, ACH 15 included a payment comment, such as "paid," "cancelled," "NSF," or "incorrect routing number." 16 17 18 19 20 Kindy performed two main tasks with these reports, keeping track of information she gathered about each sale (including customer name, address, and phone number) on an Excel spreadsheet. First, she compared the two reports, making sure the ACH list contained each and every sale documented on the Corporate Industries sales list. If a customer was missing from the

21 ACH list, Kindy typed a note on the Excel spreadsheet, and a manager would later access and 22 update the customer's computer file accordingly. Any sales that were to be post-dated were also 23 noted on the spreadsheet. Second, Kindy reviewed the payment status notes on the ACH report. 24 25 26 27 She then typed the payment status of each sale on her Excel spreadsheet. If a sale was marked "incorrect routing number," Kindy compared the routing number on the ACH report with the number in Corporate Industries' database. If, indeed, a discrepancy existed, Kindy listened to the

28 verification recording (or "genie") for the customer's own recitation of his or her routing number. Case 2:04-cr-00820-FJM Document 246 Filed 05/08/2006 3 Page 3 of 12

1 Often, numbers had been transposed by the telephone sales representative (TSR) who had entered 2 them into the database. Kindy would type a note on her Excel spreadsheet regarding the problem, 3 4 5 6 and include the correct routing number, if possible. Kindy believes the purpose of her reconciling accounts and entering data in the computer was to ensure that the customer service representatives had a correct and up-to-date picture of each

7 account in case a customer called-in with questions or complaints. The reconciling process was 8 also a mechanism to check for double-billing. Kindy recalls one occasion when she realized certain 9 customers had been double-billed. The customers were refunded immediately. Kindy assumes that 10 11 12 13 accounts she inputted in Excel as "NSF" or "incorrect routing number" were reviewed by management and resubmitted to ACH for payment at a later date. In addition to her primary function involving reconciling the above-described accounts,

14 Kindy opened and distributed company mail on a daily basis. She also sometimes signed for 15 incoming packages, but did not open them. Kindy picked up mail from the mailbox outside, 16 stamped it with the date received, and sorted it. The majority of the mail went to Kindy's 17 18 19 20 supervisor, Elaine Morewitz. Kindy kept letters from government agencies (e.g., Attorneys General Offices) and the Better Business Bureaus to check for the payment status and/or agreement to purchase of named customers. In other words, she would check the customer's computer file to

21 verify that the customer had actually paid and been sent a product. Sometimes, she also reviewed 22 the customer's "genie" recording, to check if the customer had said "yes" to purchasing a product. 23 Kindy made a handwritten note regarding payment status and/or agreement to purchase on each 24 25 26 27 letter. Kindy put the BBB letters on Elaine Morewitz's desk, which Elaine then took care of. She faxed the Attorneys General letters to Glenn Erikson, the company's compliance attorney. Using the information Kindy gathered, Mr. Erikson responded to the Attorneys General letters

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Occasionally, Kindy assisted customer service representatives with calls from customers.

2 Both she and Elaine Morewitz helped during particularly busy times and with particularly difficult 3 4 5 6 or disruptive customers. During busy times, Kindy acted as a messenger for the customer service manager, relaying information about a customer to a manager in a different department. Kindy was used for this purpose because her office was near the customer service department, and the

7 customer service manager did not want to leave his area. When a customer became difficult and 8 disruptive, Kindy would help out by checking the customer's "genie" recording for an agreement to 9 purchase. If the customer clearly said "yes" to the sale on the recording, Kindy would play the 10 11 12 13 recording for the customer over the phone. In many, but not all, of those cases, the customer was not granted a refund. If the customer said "no" to the sale on the recording, Kindy would seek authorization to give the customer a refund. If the agreement to purchase was questionable, she

14 would refer the call to a manager. As mentioned, Kindy, as well as the customer service 15 representatives, made detailed notes in the customer's computer file every time a customer called. 16 They also kept a handwritten log of each call, which the customer service manager reviewed each 17 18 19 20 day for questions only he could address. Kindy was also responsible for mailing refunds to customers. About once a week, one of the managers gave Kindy a list of customers who were entitled to refunds. She would check the

21 computer for each customer's address and then fill out a request for cash to purchase money orders. 22 Elaine Morewitz gave her the cash, which Kindy took to a grocery store, convenience store, or bank 23 to get money orders. Kindy then mailed the money orders to customers. Kindy was instructed by 24 25 26 27 Harvey Sloniker to use money orders. Eventually, however, Corporate Industries used ACH to electronically transfer funds back to a customer's account. Kindy occasionally helped out at the front (reception) desk when the receptionist was absent

28 or needed a break. At the front desk, Kindy answered incoming calls, which were generally people Case 2:04-cr-00820-FJM Document 246 Filed 05/08/2006 5 Page 5 of 12

1 calling about jobs. The front desk phone did not receive customer calls. Kindy recorded messages 2 for TSRs and managers on a message pad. 3 4 5 6 Kindy also performed certain human resource tasks. She was the contact person at Corporate Industries for the alarm company (because she was "always available"). She also was the contact person for the company's insurance carriers and the person who filled out insurance-

7 related forms. She delivered checks to Corporate's insurance carrier for workers' compensation 8 coverage on one occasion. The check was pre-signed by Harvey, and she filled in the appropriate 9 premium payment. She also completed and signed employment verification forms ­ a task done by 10 11 12 13 14 Elaine Morewitz and the receptionist, as well. Similarly, she responded to Department of Economic Security and Department of Labor complaints regarding unemployment claims and employee pay issues. Kindy handled new employee packets and tax forms after employees had completed them.

15 Employees received these materials during training class. The receptionist checked completed 16 packets and tax forms for incorrect or missing information. Any incorrect or incomplete materials 17 18 19 20 21 were given to a manager. The receptionist gave the complete and correct packets to Kindy. She double-checked them and signed the packets. She faxed the tax forms to the company's accountant, John Desiderio. Finally, Kindy assisted Elaine Morewitz, and later, Elaine's successor, Lianne Selzer, with

22 the purchase of office supplies, such as printer cartridges, pens, and phone message books. She 23 also accompanied Elaine and Lianne to the bank. 24 25 26 27 Kindy did not see the sales scripts that were being used by the TSRs to sell American Financial Savings. Indeed, she was not involved in the marketing end of the business at all. Obviously, she was familiar with the verification scripts (which, facially, appeared legitimate), but

28 she was not aware of any editing that was done during the verification process. (See verification Case 2:04-cr-00820-FJM Document 246 Filed 05/08/2006 6 Page 6 of 12

1 script attached hereto as exhibit "A"). 2 3 4 5 6 Paragraph 21: Elaine Morewitz's self-serving and uncorroborated allegation that Kindy Jonagan instructed her to lie to the Grand Jury is false. Ms. Morewitz, who apparently has traded information for a grant of immunity, admitted to being involved in, or privy to, all sorts of illegal activities at Corporate Industries, including the

7 following: 8 1. She embezzled (by her report) approximately $15,000 from Corporate Industries during

9 her tenure there as its chief financial officer and Harvey Sloniker's confidant; 10 11 12 13 14 2. She forged other people's names on checks, loan documents, bank signature cards, lease agreements, as well as Harvey Sloniker's personal and corporate income and payroll tax returns; 3. She knew the business was engaging in fraudulent marketing practices; 4. She claims to have known that Harvey Sloniker instructed his tax accountant, John

15 Desiderio, to inflate the company's expenses to avoid taxes, and that this was done, in part, by Mr. 16 Sloniker expensing personal (non-business) items; 17 18 19 20 5. She claims to have known that Harvey Sloniker was hiding money at an investment firm under Richard Nail's name; 6. She claims to have known that Corporate Industries' employee, Brian Wright, falsified

21 payroll records for Harvey Sloniker; 22 7. She admittedly participated in bank fraud by asking Richard Nail to send a false

23 confirmation letter on Morgan Stanley/Dean Witter letterhead that Mr. Sloniker had $250,000 in an 24 25 26 27 28 account there so that Mr. Sloniker would qualify for a home loan; 8. She claims to have known that John Desiderio created false W-2 forms for Richard Nail for use in obtaining a home loan; and the list goes on... These admissions on the part of Elaine Morewitz lead one to the inescapable conclusion that

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1 Ms. Morewitz was/is unscrupulous, corrupt and dishonest, with a powerful motive to lie given the 2 trouble she was in. 3 4 5 6 Ms. Morewitz knew, at the time she made the aforementioned claim against Ms. Jonagan, that the government had targeted Kindy Jonagan for prosecution, and, no doubt, was very motivated to provide the agents with what she thought they wanted, apparently without regard for

7 the truth. 8 Paragraph 25: For the reasons stated above, Ms. Jonagan vehemently asserts that she did

9 not unlawfully obstruct justice in this case. 10 11 12 13 Paragraph 26: As previously discussed herein, Ms. Jonagan was not a customer service manager. She was not even a regular member of the customer service department at Corporate Industries. She had no authority to hire, fire, promote, demote, train or even direct the activities of

14 the employees in the customer service department (or any other department, for that matter). 15 Paragraph 27: This paragraph refers to a period of time during early 2002 when customers

16 started complaining about not receiving their credit card and gift packets. Unknown to Kindy and 17 18 19 20 the customer service personnel, the fulfillment company in Florida that produced the fulfillment packets went out of business, and ceased shipping the packets to Corporate Industries' customers. As the volume of complaints increased, Harvey Sloniker met with Kindy and the customer service

21 employees and, without telling them what had actually happened, assured them that everything 22 would be fine, and to tell the customers their packets would be arriving soon. Again, unknown to 23 Kindy and most of the other employees at Corporate Industries, Harvey Sloniker traveled to 24 25 26 27 28 Florida, rented a truck and picked up a truckload of fulfillment packets from the fulfillment company's warehouse and brought the packets back to Arizona, presumably intending to have his company mail them out to the customers. Thus, while it is true that Kindy and some of the customer service representatives made up

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1 stories during the spring of 2002 regarding the delays in the delivery of the fulfillment packages to 2 assuage angry customers, they did it with the sincere belief that Harvey Sloniker was aware of and 3 4 5 6 7 had addressed the problem, and the customers would be receiving their packets. At no time did Kindy believe that the company was receiving money from customers with no real intent to send them the fulfillment packets. The issue of Kindy using a pseudonym when refunding customers is a "red herring". It is

8 common practice in the telemarketing industry for employees not to reveal their full identities to the 9 faceless public for a variety of practicable, non-sinister reasons (e.g., privacy, security, etc.). One 10 11 12 13 14 might ask, rhetorically, what sinister motive could be inferred from the use of a pseudonym when performing a function (e.g., processing refunds) designed to satisfy the customers and redress their grievances? Paragraph 28: Kindy Jonagan did not realize until the Spring of 2002 that the company

15 was apparently promising a major credit card rather than the catalogue card, the application for a 16 major credit card, and the other items that were being delivered. It should be remembered that the 17 18 19 20 sales verification representative's script informed the customers they were receiving an application for a major credit card, not the card itself. That is the only script that Kindy was familiar with. Kindy's suspicions were aroused by the sheer and ever-increasing numbers of customers

21 complaining that they had been promised a major credit card. It was still later that she noticed a 22 substantial increase in complaints related to the non-delivery of the fulfillment packets. Also, quite 23 late in the game, she suspected that the company was targeting people with poor credit because of 24 25 26 27 information she received through the rumor mill. However, she asserts that Harvey Sloniker and the other marketing managers were very secretive regarding the predictive dialer data base used by the TSRs, and, was never told through official channels what population was targeted by the

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Paragraph 63: Kindy Jonagan was not a customer service manager. As earlier discussed

2 herein, she helped the customer service department on an ad hoc basis and in a support capacity. 3 4 5 6 ARGUMENT For the reasons discussed above, an increase for obstruction of justice is inappropriate. Moreover, Kindy Jonagan is entitled to a 4-point reduction for minimal participation in the

7 telemarketing fraud scheme. Ms. Jonagan played no role, whatsoever, in creating the enterprise, 8 financing the enterprise or managing the enterprise. She joined the company several years after its 9 inception, believing at the time the company was legitimate. She did not attend marketing or 10 11 12 13 strategy meetings. She did not attend management junkets or retreats. She never stood to gain a financial windfall from her work at the company, and held no ownership interest (or promise of same) in the company. She was a clerk performing administrative functions. She had absolutely

14 nothing to do with the fraudulent marketing practices of the company. She was not shown the sales 15 scripts used by the telemarketers. She did not hire, fire, promote, demote, punish or even direct the 16 activities of other employees. Although she was described on some of the company's boilerplate 17 18 19 20 letters and documents variously as "director" and "manager", in reality, she was neither. The government's position that Kindy played a central role in deflecting customer complaints is grossly overplayed. She was but one of many people who fielded customer

21 complaints and inquiries. The company had a stand-alone customer service department with a 22 manager. Kindy helped out when she had time. Early on, Kindy had no authority to approve 23 refunds, but she recalls processing many refunds at the direction of those above her in the 24 25 26 27 28 hierarchy. By early 2002, she had acquired authority to independently approve refunds, and she did so where it was clear from the "genie" recording that the customer had not approved the sale or the transfer of the funds from the customer's account. Under all these circumstances, Kindy is entitled to a 4-point reduction for minimal role.

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Finally, Kindy Jonagan's admission that she thought the company was targeting people with

2 poor credit does not make it so. It is incumbent upon the government to establish that the company 3 4 5 6 was, in fact, targeting people with poor credit. Once that threshold has been reached, then the government must establish that people with poor credit constitute, per say, a "vulnerable victim" class. Certainly, banks, car dealers, and other businesses legitimately target this population and

7 provide them with products and services at a premium that might otherwise not be available to 8 them. The government has not met its burden here, and there should not be a step up for 9 "vulnerable victims". 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Case 2:04-cr-00820-FJM Document 246 Filed 05/08/2006 11 Page 11 of 12 s/ Michael J. Bresnehan Attorney for Defendant RESPECTFULLY SUBMITTED this 8th day of May, 2006 by MICHAEL J. BRESNEHAN, P.C. With the above in mind, the defendant respectfully moves this Court to adopt the following Offense Level Computation: OFFENSE LEVEL COMPUTATION Base Offense Level (§2B1.1(a)) Loss greater than $2,500,000 (§2B1.1(b)(1)(J)) > 50 victims (§2B1.1(b)(2)(B)) Minimal participant (§3B1.2(a)) Adjusted Offense Level Acceptance of Responsibility Total Offense Level 6 +18 + 4 - 4 24 -3 21

1 2 3 CERTIFICATE OF SERVICE

X I hereby certify that on May 8, 2006, I electronically transmitted the attached document to the 4 Clerk's Office using the CM/ECF System for filing and transmittal of a Notice of Electronic Filing to the following CM/ECF registrants: 5 Gary Restaino, Esq. Craig W. Haraga 6 Assistant U.S. Attorney US Probation Office 7 X I hereby certify that on May 8, 2006, I served the attached document as a courtesy copy by COURIER SERVICE on the following: 8 9 Honorable Frederick J. Martone United States District Judge 10 X I hereby certify that on May 8, 2006, I served the attached document by Mail on the following, 11 who are not registered participants of the CM/ECF System: 12 Kindy Jonagan Defendant 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Case 2:04-cr-00820-FJM Document 246 Filed 05/08/2006 12 Page 12 of 12 s/ Michael J. Bresnehan