KEVIN A. TATE WINNING STATEGIES SEMINAR - OMNI OCEANFRONT RESORT HILTON HEAD ISLAND, SOUTH CAROLINA FEBRUARY 19, 2015

KEVIN A. TATE
  WINNING STATEGIES SEMINAR
     OMNI OCEANFRONT RESORT
HILTON HEAD ISLAND, SOUTH CAROLINA
         FEBRUARY 19, 2015

OFFENSES DISCUSSED
   CONSPIRACY
     WORKMANS COMP/BENEFITS FRAUD
     TELEMARKETING FRAUD
     SECURITIES FRAUD
     TAX FRAUD
     HEALTH CARE FRAUD
     MORTGAGE FRAUD
     COPYRIGHT INFRINGEMENT

LOSS AMOUNT DETERMINES JAIL TIME

WHAT IS “LOSS”
   “Loss Is The Greater Of Actual Or Intended Loss.” 2B1.1 n. 3
    (A)
     ACTUAL LOSS
      ○ “Reasonably Foreseeable Pecuniary Harm” 2B1.1 n. 3 (A) (i)
     INTENDED LOSS
      ○ “Pecuniary Harm That Was “Intended” 2B1.1 n. 3 (A) (ii)
          Most Courts Hold That Intended Loss is “Subjective
           Intent” Of The Defendant. See e.g. United States v.
           Dozie, 27 F.3d 95, 99 (4th Cir. 1994); United States v.
           Middlebrook, 553 F.3d 572, 578 (7th Cir. 2009)
           (collecting cases)
      ○ Guideline Commentary Is Authoritative and Binding On The
         Court. See Stinson v. United States, 508 U.S. 36 (1993)
         (unless the commentary violates Constitution or statute)

LIMITING THE APPLICATION OF U.S.S.G.
1B1.3 (RELEVANT CONDUCT)
   MUST ELICIT FACTS AND EVIDENCE AT TRIAL OR
    SENTENCING HEARING THAT LIMITS CLIENT’S
    INVOLVEMENT IN SCHEME TO DEFRAUD
     Rule of Lenity Applies To Guidelines. United States v.
      Fuentes-Barahona, 111 F.3d 651 (9th Cir. 1997) ( Courts
      must “infer rationale most favorable to the defendant”)
      ○ Apply Principle To Definition of Terms i.e.
         “Pecuniary Harm” and “Victim”
     Define The Scope Of The Conspiracy
      ○ Defendant Not Liable For Acts of Co-Conspirators
         Occurring Before He Joined Conspiracy Or After She
         Withdrew Or Exited Conspiracy

LIMITING THE APPLICATION OF U.S.S.G. 1B1.3
(RELEVANT CONDUCT)
   Mere Knowledge Of Criminal Activity Does Not Make Defendant
    Liable For All Losses Associated With The Conspiracy. United
    States v. Bolden, 325 F.3d 471, 499 (4th Cir. 2003); United
    States v. Studley, 47 F.3d 56, 57 (2d. Cir. 1995)
   Alleged Relevant Conduct Must Be Criminal Not Merely a Civil
    Wrong. See United States v. Bernegger, 661 F.3d 232 (5th Cir.
    2011)
   WHO HAS THE BURDEN TO PROVE LOSS AND RELEVANT
    CONDUCT ?
       ○ Government Has Burden To Prove Loss Within A Certain
          Range By A Preponderance Of The Evidence. See United
          States v. Miller, 316 F.3d 495, 503 (4th Cir. 2003); United
          States v. Liveoak, 377 F. 3d 859 (8th Cir. 2004); United
          States v. Renick, 273 F.3d 1009 (11th Cir. 2001)

GOVERNMENT BENEFITS FRAUD
   2B1.1
      NET LOSS TO GOVERNMENT BASED ON AMOUNT OF
       BENEFITS UNLAWFULLY RECEIVED. See United States v.
       Catone, 2014 WL 5158197 (C.A. 4 (N.C.) October 15, 2014.
      SHADWICK FORMULA MUST BE APPLIED TO DETERMINE
       LOSS
         MUST DETERMINE ACTUAL AMOUNT EARNED WHILE
          RECEIVING BENEFITS TO DETERMINE IF BENEFITS
          WOULD HAVE BEEN TERMINATED OR MERELY REDUCED
   18 U.S.C. 1920
     BIFURCATED STATUTE THAT CAN BE MISDEMEANOR OR
      FELONY BASED ON LOSS AMOUNT
     GOVERNMENT MUST ALLEGE AND JURY MUST FIND
      LOSS IN EXCESS OF $1,000.00 FOR FELONY. See United
      States v. Catone, 2014 WL 5158197 (C.A. 4 (N.C.) October 15,
      2014. (vacating felony conviction)

TELEMARKETING FRAUD
   U.S.S.G 2B1.1
     Pin Down Losses Associated With Client’s “Call
        Center”
       VOP Network Records and Call Logs
       Purported Victim Interviews
       For Costa Rican Call Centers Determine How
        Many Other Call Centers Were Operating
        During Time Frame Of Conspiracy
       Did Workers or Co-Defendants Work For More
        Than One Call Center
       Can Actual Victims Be Identified To Tie
        Pecuniary Harm to An Actual Victim In
        Establishing Loss

SECURITIES FRAUD
 “PUMP AND DUMP” AND “PONZI SCHEMES”
 2B1.1
     Government Prefers “Gain” Where Defendant
     Reaped Huge Profits 2B1.1 Application Note 3. See
     Also, United States v. Rosen, 409 F.3d 535, 550
      ○ Gain can only be used when loss cannot be reasonably
        determined
      ○ “MARKET CAPITALIZATION TEST”
         ESTIMATING LOSS TO THE PUBLIC, United States v.
          Ebbers, 458 F.3d 110, 128 (2d Cir. 2006)
         IMPROPER BECAUSE LOSS TO PUBLIC AT LARGE IS TOO
          NON-SPECIFIC TO SHOW ACTUAL PECUIANARY HARM
         *CIRCUIT SPLIT BETWEEN 9TH VS. 10TH, 2ND AND 5TH
           CAUSATION

SECURITIES FRAUD
   APPLICABLE CREDITS AGAINST LOSS
     MONEY RETURNED TO INVESTORS PRIOR TO
      CRIME BEING DETECTED
     STOCK “BUY BACKS”
     Is Commencement Or Notice Of SEC Investigation
      Amount To Crime Being “Detected” ?
   Intended Or Actual Loss
     Always press for actual loss traceable to the
      Defendant’s conduct
 Will Be Stuck With Court’s Reasonable Estimate. United
  States v. Guang, 511 F.3d 110, 123 (2d Cir. 2007)
 Attempt To Determine Actual Victims In Order To Limit
  Losses

TAX FRAUD
   2T4.1 FOR CORRESPONDING LOSS
            OR
   BASE OFFFENSE LEVEL OF 6 FOR NO TAX LOSS
   DEFENSES
     DOES NOT INCLUDE INTEREST AND PENALTIES,
      EXCEPT FOR WILLFULL EVASION CASES CHARGED
      UNDER 26 U.S.C. 7201. APPLICATION NOTE 1.
     WHEN TAX LOSS IS “UNCERTAIN” COURT MAY USE
      THE DREADED “REASONABLE ESTIMATE”
   PRESUMPTIONS IN DETERMINING TAX LOSS
     FILING FALSE RETURN WHERE GROSS INCOME WAS
      UNDEREPORTED TAX LOSS IS:
         28 % OF UNDEREPORTED INCOME (34 % FOR CORPORATION),
          PLUS 100% OF ANY FALSE CREDITS 2T4.1 (C) (1) (A)

TAX FRAUD
   PRESUMPTIONS IN DETERMINING TAX LOSS
     IF OFFENSE INVOLVED IMPROPERLY CLAIMING
      DEDUCTIONS OR EXEMPTIONS:
       28 % OF AMOUNT IMPROPERLY CLAIMED (34 % FOR
         CORPORATION) PLUS 100 % OF ANY FALSE
         CREDITS. 2T4.1 (C) (1) (B)
     IF DEDUCTION WAS DESIGNED FOR FUTURE
      EVASION:
       28 % OF AMOUNT IMPROPERLY CLAIMED
         DEDUCTION (34 % FOR CORPORATION) PLUS 100 %
         OF ANY FALSE CREDITS 2T4.1 (C) (1) (C)
     FOR A FALSE MIXED CORPORATE AND INDIVIDUAL
      RETURN
         THE TAX LOSS IS THE AGGREGATE LOSS FOR THE OFFENSES
          ADDED TOGETHER 2T4.1 (C) (1) (D)
     FOR FAILURE TO FILE OFFENSES
         THE AMOUNT OF TAX THE TAXPAYER OWED BUT DID NOT PAY.
          2T4.1 (C) (2).

TAX FRAUD
   WHO HAS THE BURDEN OF PROOF
     THE DEFENDANT MUST DEMONSTRATE
      THAT LOSS IN PSR IS INACCURATE SEE
      United States v. Clark, 139 F.3D 485 (5TH Cir.
      1998)
     GOVERNMENT MUST PROVE TAX LOSS
      WITH RELIABLE EVIDENCE. United States v.
      Schroeder, 536 F.3d 747 (7th Cir. 2008).
     RELEVANT CONDUCT
      ○ MAY INCLUDE NON-INDICTED TAX YEARS
      ○ TAX YEARS OUTSIDE THE STATUTE OF LIMITATIONS
      ○ UNCHARGED AND ACQUITTED CONDUCT

HEALTHCARE FRAUD
   2B1.1
     NET LOSS TO GOVERNMENT. SEE United States v.
      Haussmann, 315 F.3d 952, 960 (7th Cir. 2003) (finding loss in
      Medicare Fraud is net economic deprivation).
     EXCLUSIONS AND CREDIT AGAINST LOSS
         LOSS MUST BE REDUCED BY UNPAID CLAIMS; RETURNED
          DURABLE MEDICAL EQUIPMENT AND CICIL FORFEITURES.
          SEE U.S.S.G. 2B1.1 n. 3(D) (i) and (E) (i) and (ii).
     VALUE OF SERVICES RENDERED:
              United States v. Miller, 316 F.3d 495, 503 (4th Cir. 2003) (Must subtract
              value of legitimate services performed from fraudulently billed amount);
              United States v. Dawkins, 202 F.3d 711, 715 (4th Cir. 2000) (same); United
              States v. Liveoak, 377 F.3d 867 (8th Cir. 2004) (remanding with instructions
              to credit for value of services rendered against loss figures).

         LIMIT RELEVANT CONDUCT TO SCOPE OF CONPSPIRACY
          THAT DEFENDANT WAS INVOLVED

MORTGAGE FRAUD
   What is the Loss per Property?
     100% of the loan

     Loan - Value of Home = Loss

     “Equity Spread”

     0% of the Loan

Who is the Victim?

 Seller                         Secondary
          Closing   Lender
                                 Market

                      Is loss reported by Victim
                      for restitution the same as
                      “loss” for the Guidelines?

USSG § 2B1.1, n 3(E)(ii)
  Loss shall be reduced by the following:

  In a case involving collateral pledged or
  otherwise provided by the defendant, the
  amount the victim has recovered at the time
  of sentencing from disposition of the
  collateral, or if the collateral has not been
  disposed of by that time, the fair market value
  of the collateral at the time of sentencing

USSG § 2B1.1, n.3(D)(i)
   USSG § 2B1.1, n.3(D)(i)
    - Exclusions from Loss - Loss shall not
    include the following: Interest of any
    kind, finance charges, late fees,
    penalties, amounts based on an agreed-
    upon return or rate of return, or other
    similar costs

PRACTICE TIPS FOR MORTGAGE
FRAUD LOSS
   AT TRIAL ELICIT SPECIFIC TESTIMONY/EVIDENCE ON
    THE FOLLOWING TOPICS
     WHAT HAPPENED TO THE LOANS
      ○ WAS IT SOLD ON THE SECONDARY MARKET TO
        INVESTORS OR FANNIE OR FREDDIE MAC
      ○ IF A FORECLOSURE, WHEN AND WHY DID
        FORECLOSURE OCCUR ?
   SWORN EVIDENCE/TESTIMONY ON LOSS
     LOSS AMOUNT WILL DETERMINE IF CLIENT GOES TO
      JAIL IF CONVICTED

THE MYTH OF COLLATERAL DAMAGES

 Procedural Sentencing Error Occurs When Court
  Improperly Calculates Advisory Guideline Range.
  United States v. Gall, 552 U.S. 38, 51 (2007)
 Collateral Damages Cannot Be “Actual” or
  “Intended” Loss. Why ?
 ○ Unintended Victims
 ○ Non-Specific Pecuniary Harm
 ○ No Subjective Intent By Defendant To Cause Harm
   To The Public At Large

COPYRIGHT INFRINGEMENT
 USSG § 2B1.1
 * Warez Groups*
     TO PROVE LOSS GOVERNMENT MUST FIRST
      SHOW THAT DOWNLOADED OR UPLOADED
      COPYRIGHTEDWORK WAS “SUBSTANTIALLY
      SIMILAR” TO ORIGINAL WORK AND WAS
      “FUNCTIONAL” AT THE TIME OF DOWNLOAD
      OR UPLOAD SEE United States v. Slater, 348 F.3d
      666, 668 (7th Cir. 2003)
     VALUATION PROCESS
      ○ MULTIPLY THE NUMBER OF INFRINGED ITEMS BY
        THEIR AVERAGE RETAIL VALUE
         * CAN ALLOW FOR SOME SHOPPING CREATIVITY *

Final Thoughts
1. Know your case before negotiating
2. If Loss is an issue determine n.3(E)(ii)
   amount and be ready to fight for it!
3. Develop § 3553(a) arguments based on
client’s role in overall offense