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

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PAUL K. CHARLTON United States Attorney District of Arizona Richard I. Mesh Assistant U.S. Attorney Two Renaissance Square 40 N. Central Avenue, Suite 1200 Phoenix, Arizona 85004-4408 Arizona State Bar No. 02716 Telephone (602) 514-7500 [email protected]

UNITED STATES DISTRICT COURT 7 DISTRICT OF ARIZONA 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 United States of America, Plaintiff, v. Gene Lee Miller and Grace Marie Miller, Defendants. The United States of America, through its undersigned attorneys, hereby files the following objections to the Presentence Report. A. Objection to Presentence Report, Paragraph 34 1. The facts involved in the instant matter. The probation department assessed two additional levels as sentencing enhancements against the defendants based upon an abuse of public or private trust pursuant to United States Sentencing Guidelines, (U.S.S.G.) §3B1.3. Among the factors that separated the Millers from other gold coin sellers was that they advertised their merchandise via Christian print media and radio stations. Additionally, as part of their sales presentations, they freely talked of their Christian religious commitments. In fact, they quoted scripture in sales literature as reasons for owning gold Gene Miller's position as a minister in his church and Grace Miller's work within her church were clearly factors that influenced their customers' decisions to purchase gold coins through the Millers. However, none of their victims were in a clergy-penitent relationship with the Millers. None GOVERNMENT'S OBJECTIONS TO PRESENTENCE REPORT AND SENTENCING RECOMMENDATION CR-04-0811-PHX-EHC

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of the victims sought out the Millers for spiritual guidance. While it is undoubtedly true that each of the victims placed their trust in the Millers to abide by the terms of the buy back guarantee, such a trust is not the predicate to invoke the additional sanctions under § 3B1.3. The following legal analysis reveals an insufficient basis for the imposition of this enhancement from a legal stand point, irrespective of the moral standpoint. 2. Legal Analysis "Public or private trust" refers to a position of public or private trust characterized by professional or managerial discretion and significantly less supervision than other employees. U.S. v. Viola, 35 F.3d 37, 45 (2 nd Cir. 1994). It is irrelevant whether the defendant was "personally trusted" by the victim. Federal Sentencing Guideline Handbook, (Nov. 2002 edition), citing, U.S. v. Bailey, 227 F.3d 792 (7 th Cir. 2000). The evidence must show that the defendant's position with the victim of the offense significantly facilitated the commission of the offense. U.S. v. Grudry, 199 F.3d 1150 (10 th Cir. 1999). An abuse of trust enhancement may not be imposed on a defendant convicted of fraud solely because of a violation of legal obligation to be truthful and a victim's reliance on a misrepresentation. See United States v. Broderson, 67 F. 3d 452, 455-56 (2nd Cir. 1995). Every fraud involves these elements. Instead, a court must determine the "extent to which the [defendant's] position provides the freedom to commit a difficult-to-detect wrong." United States v. Barrett, 178 F.3d 643, 646 (2 nd Cir. 1999). In other words, the defendant's position must involve discretionary authority. See Broderson, id at 455-56. In addition, this discretion must have been entrusted to the defendant by the victim. See Broderson, id at 456. One of the categories where the enhancement is appropriate is for persons who occupy a fiduciary relationship with the victims. U.S. v. Hirsch, 239 F.3d 221 (2 nd Cir. 2001) holding that an investment advisor held a position of trust, thereby distinguishing U.S. v. Jolly, 102 F.3d 46 (2 nd Cir. 1996) in which investors had an arms length contractual relationship with the defendant, as was the case here. This "arms length" relationship is the significant parallel in the Miller case to the facts in, Jolly, id. Ordinary commercial relationships do not ordinarily justify an abuse 2

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of trust enhancement. U.S. v. Brown, 47 F.3d 198, 205 (7 th Cir. 1995). The fact that a defendant was a professional stock trader and licensed attorney was held not to justify an increase for abuse of trust where the court found no evidence between the defendant and victims of a "special, close, or personal attachment or fiduciary relationship." U.S. v. Morris, 286 F.3d 1291 (11 th Cir. 2002) (finding that although defendant's status as an attorney may have been used to develop trust with the victims, there were no facts to support the conclusion he occupied a position of trust.) 3. Argument In order to hold the Millers accountable under the enhancement for abuse of position of trust, under the circumstances of this case, it must follow that it is being done so because of their religious faith and not that of their victims. Other than that of a common Christian faith with some of the victims, the Millers held no religious ministerial relationship to these people. In the final analysis, each of the victims listed in the indictment had only a commercial relationship with the Millers. Each of the victims freely negotiated in the commercial marketplace for the best terms as to their promissory note interest rate and manner of payment of their "loan interest." Some received monthly interest payment terms and others sought and obtained an up front, full payment of interest. Undoubtedly, all of these people "personally trusted" the Millers, but that degree of their "faith" in the Millers was insufficient to bring into play the §3B1.3 enhancement. The Millers did not have any discretionary control over the victim's finances or property. Clearly, if the Millers had enjoyed a clergy pertinent relationship or even if the victims were part of the Millers religious congregation, an entirely different scenario would apply to the present situation. Then the language of § 3B1.3 would apply in this situation. While the religious belief and affiliation of each of the Miller's customers is unknown, common sense leads to the conclusion that some of them were most likely not of the Millers' faith. Given the pure business nature of the transactions between these people, of an assumed different faith, and the Millers, there would be no basis for seeking the imposition of the abuse of trust enhancement. As to any losses these customers may have sustained, it would have come 3

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from the exact same conduct to which the Millers have pled guilty. It would only seem logical that if people become victims through the same conduct of the defendants, the same enhancements should or should not apply, irrespectively of the religious connection of the defendants to their victims. The enhancement requires a "position of public or private trust." It is insufficient that the victim in a commercial transaction felt an affinity with the defendant because they were of a common religious background or faith, or that they shared a similar childhood or educational experiences, or had a common geographical origin. B. Objection to Presentence Report, Paragraph 77 The presentence report accurately reflects the impact of the plea agreement stipulation that the "sentencing calculation of the total offense level will not exceed level 14 . . . " Plea agreement, paragraph 2(a)(2). While the presentence report independently arrived at a total offense level of 16, it did not provide the court with the foregoing analysis which led to the government's agreement not to seek the abuse of trust enhancement. The prosecution has a duty to assist the court to arrive at a legally correct sentence so as to avoid appellate error. The foregoing government analysis establishes that as a matter of law there is an insufficient factual basis for the imposition of abuse of trust enhancement and as such, the government stipulated with the defense not to include that enhancement as part of the sentencing calculation. C. Objection to Presentence Report, Paragraph 80 The presentence report suggests in paragraph 80, that "an upward departure may be warranted" because the victims declared the value of their coins was greater than the then existing market value. The problem with this reasoning is that it seeks to substitute the civil measure of damages arising from a breach of contract, rather than use of the criminal standard for determining loss. The guidelines set the fair market value of the property on the day of its conversion as the measure of loss for sentencing purposes. (U.S.S.G. § 2F1.1 Application Note 8, and § 2B1.1, Application Note 2.) There is no question but that the Millers had a contractual obligation to repurchase within 4

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one year for the original sale price any gold coins which were subject to their "buy back guarantee." In that regard, each of the victims had an expectation that if the Millers had lived up to the "buy back guarantee," the victims would have recovered their original purchase price. However, no crime was committed incident to the Millers' failure to honor that obligation. In the event of a civil suit to recover their losses, the victims most likely would have received a civil judgment but the Millers would not have faced a criminal sanction. The victims' judgments would be awarded on a standard of the preponderance of the evidence, whereas in a criminal case the burden of proof is beyond a reasonable doubt. These evidentiary standards are not interchangeable anymore so than are the different measures of loss in criminal cases as opposed to civil cases. Therefore, it would be wrong to impose a greater sentence against the Millers because of their potential civil liability. D. Conclusion and Sentencing Recommendation. On the basis of all the forgoing, it is respectfully requested that the court calculate a total offense level of 14 in this matter and impose sentences accordingly. Further, the government respectfully recommends that the court impose the mid range sentence of 18 months as to each defendant as it is clear they were equally involved in the misrepresentations that brought about the victims' losses and equally profited from their illegal activity. The court should order restitution as to each victim based upon the total value of their coins on the day of the coins' conversion. However, each defendant has indicated to the court at the time of their guilty pleas and in the presentence report that they wished to "pay back the victims." See Grace Miller PSR, para 28, and Gene Miller PSR, para 29. Therefore, if they are sincere in that regard, they should be willing to voluntarily undertake a restitution order for the value of the converted coins under the buy back guarantee contract price as noted in paragraph 8 of the PSR. By the same reasoning, they should be willing to be held liable and accountable to those customers noted in paragraph 24 of each presentence report for the buy back value of those coins for which they failed to make payment. These recommendations take into account the seriousness of the offense, the absence of a 5

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prior criminal record as to either defendant, and the comments of the victims on the issue of the sentence. Respectfully submitted this 30 th day of November, 2005. PAUL K. CHARLTON United States Attorney District of Arizona S/Richard I. Mesh

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S/Richard I. Mesh Joe Keilp 1440 E. W ashington Suite 100 Phoenix, AZ 85034 Attorney for Grace Miller Greg Clark 45 W . Jefferson St., 12 th Floor Phoenix, AZ 85003-2330 Attorney for Gene Miller CERTIFICATE OF SERVICE I hereby certify that on the 30 th of November, 2005, 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:

Richard I. Mesh Assistant U.S. Attorney

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Susan E. Otero Supervisory U.S. Probation Officer 401 W . W ashington St., Ste. 160 Phoenix, AZ 85003 S/Richard I. Mesh I hereby certify that on the 30 th day of November, 2005, I served the attached document by fax on the following, who are not registered participants of the CM/ECF system:

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