Opinion
09 Cr. 1176-01 (RWS)
12-11-2012
UNITED STATES OF AMERICA v. JOHN SCOTT CLARK, Defendant.
SENTENCING OPINION
Sweet, D.J.
On April 4, 2012, John Scott Clark ("Clark" or "Defendant") allocated to Counts 1 through 4 for conspiracy to commit money laundering, conspiracy to commit bank fraud, conspiracy to operate an illegal gambling business, and obstruction of justice. For the reasons set forth below, Clark will be sentenced to 21 months' imprisonment to be followed by 3 years' supervised release. Defendant will forfeit to the United States any assets obtained via the commission of the instant offense. Clark will also be required to pay a special assessment of $400 and a fine of $2,000. Prior Proceedings
Information 09 CR 1176 (RWS) was filed in the Southern District of New York on December 14, 2009.
Count 1 charges that from at least February 2008 through April 2009, in the Southern District of New York and elsewhere, Clark, and others, transferred monetary funds from the United States to another country to facilitate the operation of an illegal gambling business.
Count 2 charges that from at least February 2008 through April 2009, in the Southern District of New York and elsewhere, Clark, and others, executed a scheme to defraud financial institutions, the deposits of which were FDIC insured, by means of false representations.
Count 3 charges that from at least February 2008 through April 2009, in the Southern District of New York and elsewhere, Clark, and others, operated an illegal online poker business, in violation of 18 U.S.C. § 1955, and, in May and June 2008, the online poker business processed financial transactions through Clark for gamblers in the United States in the Southern District of New York.
Count 4 charges that in July 2009, in the Southern District of New York and elsewhere, Clark, coached a person he knew to be a subject of an investigation in the Southern District of New York with respect to a phone call Clark knew would be recorded by the FBI.
Clark was arrested June 30, 2009, and detained until his release on July 6, 2009, when he was released on a $500,000 PRB, secured by $50,000 cash, with regular pretrial supervision, to include travel restriction to SDNY/EDNY, District of Utah, and District of Nevada. On February 19, 2010, the pretrial supervision component of Clark's bail was terminated.
Clark's sentencing is currently scheduled for December 11, 2012. The Sentencing Framework
In accordance with the Supreme Court's decision in United States v. Booker, 543 U.S. 220 (2005), and the Second Circuit's decision in United States v. Crosby, 397 F.3d 103 (2d Cir. 2005), the sentence to be imposed was reached through consideration of all of the factors identified in 18 U.S.C, § 3553(a), including the advisory Guidelines. Thus, the sentence to be imposed here is the result of a consideration of:
(1) the nature and circumstances of the offense and the history and characteristics of the defendant;18 U.S.C. § 3553(a). A sentencing judge is permitted to find all the facts appropriate for determining a sentence, whether that sentence is a so-called Guidelines sentence or not. See Crosby, 397 F.3d at 114-15. The Defendant
(2) the need for the sentence imposed —
(A) to reflect the seriousness of the offense, to promote respect for the law, and to provide just punishment for the offense;(3) the kinds of sentences available;
(B) to afford adequate deterrence to criminal conduct;
(C) to protect the public from further crimes of the defendant; and
(D) to provide the defendant with needed educational or vocational training, medical care, or other correctional treatment in the most effective manner;
(4) the kinds of sentence and the sentencing range established for -
(A) the applicable category of offense committed by the applicable category of defendant as set forth in the guidelines . . .;(5) any pertinent policy statement . . . [issued by the Sentencing Commission];
(6) the need to avoid unwarranted sentence disparities among defendants with similar records who have been found guilty of similar conduct; and
(7) the need to provide restitution to any victims of the offense.
The Court adopts the facts set forth in the Presentence Investigation Report ("PSR") with respect to the Defendant's personal and family history. The Offense Conduct
The following description draws from the PSR. The specific facts of the underlying conduct are adopted as set forth in that report. The investigation into the instant offense was conducted by the Federal Bureau of Investigation ("FBI"). Background
Beginning in the late 1990s, various businesses, most of which were located outside of the United States, began offering various forms of "real money" online gambling over the internet to customers in the United States and around the world. The vast majority of users of these gambling websites were gamblers of games to bet on, ranging from sporting events, to poker, to casino games. These websites continued to operate notwithstanding warnings from the Department of Justice ("DOJ") that the operation of an internet gambling business violated multiple federal criminal laws, and in spite of the federal prosecution of off-shore gambling businesses since 1998.
In October 2006, the Unlawful Internet Gambling Enforcement Act ("UIGEA") was signed into law. The UIGEA makes it a crime for persons "engaged in the business of betting or wagering" to "knowingly accept credit cards, electronic fund transfers, checks and other financial instruments in connection with unlawful internet gambling. Also in 2006, both before and after the enactment of UIGEA, and in reliance on federal statutes in effect prior to the passage of the UIGEA, DOJ brought several enforcement actions relating to internet gambling, including the arrest of the founder of BETonSPORTS, in July 2006 (who has since pled guilty), and the arrests in January 2007 of the founders of NETeller PLC, a on-line "e-wallet" that was primarily used by United States gamblers to transfer funds to and from internet gambling websites, including websites offering gambling on poker games exclusively.
Following the enactment of UIGEA and the DOJ enforcement actions described above, several large industry leading publically traded corporations that offered online gambling to United States residents, stopped doing business in the United States. However, other privately held online gambling companies, which were either already offshore, or relocated offshore following the passage of the UIGEA, continued to market their games in the United States and to accept payments from United States customers.
Although illegal internet gambling companies keep their computer servers, management and support staff offshore, they must rely on the United States financial system both to obtain money from gamblers and to pay those gamblers who wish to withdraw funds from the online gambling companies. However, because virtually all significant United States financial institutions refuse to handle financial transactions related to internet gambling, the offshore internet gambling companies and the payment processors who served them must, as a matter of course, deceive United States financial institutions in order to conduct these transactions. Based on the FBI's review of records from several internet gambling companies, and interviews with numerous executives for such companies, billions of dollars each year are transferred to and from the United States bank accounts to offshore internet gambling companies through transactions disguised as non-gambling related.
The FBI spoke at length, on multiple occasions, with three individuals who previously worked for leading internet poker companies and who had significant responsibility for obtaining payment processing solutions for these companies. These individuals ("Poker Processor 1," "Poker Processor 2," and "Poker Processor 3") (collectively, the "Senior Poker Processors") have provided information that has been corroborated by each other, by documents, and by other sources, and has proven to be reliable. According to the Senior Poker Processors, internet gambling companies are able to move gambling funds into and out of the United States through conduct designed to deceive United States banks. Specifically, according to the Senior Poker Processors, as corroborated by the FBI's review of financial records and conversations with representatives of financial institutions:
At present, the leading internet gambling companies rely in part on credit cards to obtain funds from United States customers. Mastercard and Visa require that these poker companies, through the banks serving them, apply a specific transaction code to credit card charges to fund the poker accounts, "7995," so that the member banks who issue the credit cards to United States customers know that the transaction is online gambling-related and can determine whether or not the bank will allow their cardholders to use their credit cards for internet gambling transactions. Virtually all United States issuing banks block their cardholders to use their credit cards on "7995" coded gambling transactions. As a result, the major online gambling companies utilize external payment processors who help them trick United States issuing banks into treating the transactions as non-gambling. The external payment processors create dummy corporations nominally providing non-gambling services (such as online web stores selling various merchandise), build phony web sites for these dummy corporations (so that, if a bank employee checks, the company will seem legitimate), and a non-7995 code to charges by these dummy corporations. The Senior Poker Processors have indicated that when a consumer pays by credit card on one of these gambling sites, the site well inform the customer on the name of the dummy non-gambling merchant that will appear on his or her credit card statement, a fact that the FBI confirmed by speaking with multiple gamblers (and reviewing screenshots, i.e. printouts taken from the computer screens of their gambling activity) who have used credit cards to fund their online gaming accounts.
Online gambling companies also rely on external payment processors that use the Automated Clearing House system, or "ACH system," both to obtain money from United States-based gamblers and to pay those gamblers seeking to withdraw funds from the gambling companies. The ACH system, which is administered by the Federal Reserve, allows for fast and efficient electronic funds transfers to and from individuals' checking accounts through "e-checks: or "electronic checks." External payment processors with access to the ACH system can "pull" money from individual consumer bank accounts (i.e. debit the consumer's account) and route it to gambling companies (typically based abroad) and "push" money from the gambling companies into individual checking accounts to pay winnings (i.e. credit the consumer's account). Typically, a gambler simply logs onto the web site of an internet gambling company and chooses "e-check" or some similarly described option and enters his or her United States bank account information to complete these transactions. However, because United States banks cannot lawfully process ACH payments relating to online gambling, the external payment processing companies must take steps to deceive financial institutions in order to induce them to allow such ACH processing. So, as is the case with credit card processing, external payment processors create phony non-gambling internet businesses (complete with web pages, and in many cases corporate formalities) and represent to banks that they are processing on behalf of these businesses.
Off-shore internet gambling companies also need to deceive banks in order to settle gambling transactions with gamblers who wish to cash out their positions, i.e. withdraw their gambling "winnings" or, even if they have lost money, withdraw what remains of the funds initially deposited with the internet gambling company. The most cost-effective way to promptly pay gamblers in the United States is to mail checks drawn on bank accounts located in the United States. Therefore, offshore internet gambling companies maintain accounts in United States banks holding substantial funds. The offshore internet gambling companies attempt to disguise their connections to these United States bank accounts, in large part because of fear of seizure by law enforcement authorities, by opening accounts through external payment processors and using account holders with generic sounding names not associated with gambling. The external payment processors opening these accounts typically tell United States banks that checks will be issued from the accounts in connection with the operation of a non-gambling business, such as the issuance of consumer rebate checks.
Examples of Deceptive ACH Transactions
The fact that internet gambling companies use deceptive methods in their ACH processing has been corroborated by those who have made ACH deposits on gambling websites. For example, the FBI spoke to several gamblers about their ACH deposits in February 2009 into accounts controlled by the leading online poker website serving the United States market ("Poker Company 1"). The information these gamblers provided has been supported by documents that the FBI reviewed, including screenshots of the Poker Company 1 website, e-mails from the online gambling companies to the gamblers, and bank statements. All of the gamblers' deposits and subsequent transactions were made in New York City, including in the Southern District of New York. This information and these documents show the following:
"ONESHOPCENTER"
On one date in February 2009, Gambler 1 made a deposit into his/her Poker Company 1 account via "e-check," through the ACH system. After making the deposit, Poker Company 1 sent Gambler 1 an e-mail stating that "this transaction will appear on your bank statement as ONESHOPCENTER (or an abbreviated version). On a second date in February 2009, Gambler 1 made an additional deposit and received essentially the same message from Poker Company 1.
According to bank records, Gambler 1's payments to Poker Company 1 were "batched" through the ACH system to an account maintained at a bank in Arizona (the "Arizona Bank"), through which tens of millions of dollars were transferred via the ACH system between January and May of 2009, and through which more than $50 million was ultimately transferred outside the United States. The "descriptor" associated with both transactions on the bank records identified the merchant as "ONESHOPCENTER."
There is a website accessible via the internet at "www.oneshopcenter.com" that appears, at first blush, to be a legitimate website offering clothing and jewelry for sale. In fact, a representative of the Arizona Bank stated that she checked several of the websites referenced in the ACH descriptors and was satisfied that the merchant was real. In fact, however, the website is simply a false front for Poker Company 1. The FBI knows this, for among other reasons, because on March 3, 2009, an associate of Gambler 1 sent an email to "billing@oneshopcenter.com" stating that s/he had placed an order for a silver necklace but that his/her confirmation notice had said to send a check for payment for the necklace without any indication as to where the payment should be sent. Approximately one hour later, "Manfred," a "Poker Company 1 Cashier Specialist," writing from the e-mail address "support@PokerCompany 1.com," responded, "I do not quite understand your email. Please elaborate on your request." The associate of Gambler 1 responded again that s/he simply needed to know where to send the check for the necklace. A few hours later, "Diana," another "Poker Company 1 Cashier Specialist," e-mailed back: "Note that you are contacting Poker Company 1 support, we are an Online Poker company, visit us at www.PokerCompany1.com. "Diana" did not address the request about how to pay for the necklace.
"MYGOLFLOCATION"
On a date in February 2009 Gambler 2 made a deposit into his/her Poker Company 1 account via "e-check." After making the deposit, Poker Company 1 sent Gambler 2 an email stating that "this transaction will appear on your bank statement as MYGOLFLOCATION{or an abbreviated version). The "descriptor" associated with this transaction Gambler 2's bank statement identified the merchant as "MYGOLFLOCATION."
There was also a website accessible via the internet at www.mygolflocation.com which appeared to be in the business of selling golf equipment. In fact, however, the "mygolflocation.com" website is simply a false front for Poker Company 1. The FBI knows this, for among other reasons, because on March 18, 2009 an individual e-mailed
"billing@mygolflocation.com" and stated "You guys may want to know that there is a problem with your web site. I saw a travel putter I wanted to get as a gift to someone but the check out form doesn't work." Approximately one and a half hours later, "Haydee," writing from "Poker Company 1 Payment Services" and using the e-mail address paymentservices@pokerCompany1.com wrote back, "We have been contacted by our echeck processor regarding a charge made to your checking account. Please be so kind and respond if you have an open account with Poker Company 1."
The Australian ACH Processing Channel and Clark
Poker Processor 3, who previously worked as a senior payment processor for a major internet poker website, has informed the FBI that a company located in Australia provides ACH payment processing for multiple online gambling websites (the "Australian Gambling Processor"), and previously provided ACH processing for Poker Company 1 and its chief United States-facing competitor ("Poker Company 2") until it failed to pay those poker websites millions of dollars. Poker Processor 3 further informed the FBI that the Australian Gambling Processor, like other ACH processors, used false merchants names and phoney websites in order to deceive United States banks into believing that the ACH transactions that they were processing were for some purpose other than gambling. Poker Processor 3's statements have been corroborated by, among other things, information from a bank in the United States which refused to process transactions linked to the Australian Gambling Processor after receiving reports that the company was linked to internet gambling. Additionally, according to published reports, Poker Company 2 has filed a lawsuit against the Australian Gambling Processor in Australia seeking to collect millions of dollars owed to it.
Because the Australian Gambling Processor is based in Australia, and because the ACH system requires access to United States bank accounts to process ACH transactions, the Australian Gambling Processor has had to rely on individuals in the United States to set up ACH processing accounts for gambling transactions. For the reasons set forth below, the FBI knows that Clark has established ACH processing accounts for the Australian Gambling Processor and is otherwise associated with that company. Specifically:
The FBI interviewed a representative of a Florida bank (the "Florida Bank"), and reviewed Florida Bank records, and knows that from February 2008 through July 2008, Clark processed more than $700,000,000 of ACH transactions for the Australian Gambling Processor through an account he was a signer on at the Florida Bank. The Florida Bank representative indicated that the Florida Bank stopped processing the Australian Gambling Processor transactions because, despite repeated requests from the bank representative, neither Clark nor representatives of the Australian Gambling Processor could identify the purpose of the ACH transactions or provide any "proof of authorization" for the transactions (essentially, an ACH record showing that the individual had authorized the ACH withdrawal from his or her bank account on behalf of a particular merchant).
According to public records Clark is associated with more than 100 corporate entities, many of which are linked to Quasar Corporate Services, Inc., of which Clark is President. Many of Clark's entities overlap with Australian Gambling Processor entities in that they either (i) share similar names or (ii) share identical domain name registrants. Additionally, according to a representative of a building management company, an employee of Quasar ("Clark Associate 1") leased an apartment in a Las Vegas apartment building as a "corporate rental" and then provided the space to the founder and owner of the Australian Gambling Processor. An employee of a company linked to Clark Associate 1 also sponsored United States visas for several employees of the Australian Gambling Processor.
One of Clark's primary business banks, located in Utah (the "Utah Bank") has closed Clark's business accounts after learning that they were associated with internet gambling and money laundering. Another FBI agent has spoken to a representative of the Utah Bank, who indicated that Clark previously maintained between approximately 200 to 250 bank accounts with the Utah Bank in various, similar sounding names, and on behalf of numerous companies with virtually identical websites. The Utah Bank representative further stated that money was frequently transferred between and among Clark's accounts at the Utah Bank without any business purpose ascertainable to the Utah Bank, and that more than $150 million was ultimately transferred to offshore accounts. In early 2009 the Utah Bank discovered that some of Clark's accounts had been transferring more than $10 million in large, whole-dollar transactions to a bank account linked to an IRS seizure of a gambling processing company. The Utah Bank ultimately terminated Clark's accounts.
Clark's Fraudulent ACH Processing Through ACH Processor 1 & Comerica Bank
"ACH Processor 1" is a service provider that contracts with merchants to provide them with ACH processing services. ACH Processor 1 processes these transactions at accounts in multiple banks, including Comerica Bank, which is insured by the FDIC. ACH Processor 1's agreement with Comerica Bank, which the FBI has seen,provided that ACH Processor 1 could only process transactions for certain lawful activities, and specifically excluded online gaming. Since 2007, ACH Processor 1 has been cooperating with the Government in connection with this online gaming investigation.
The FBI has reviewed documents obtained from ACH Processor 1 and spoken to both the owner of ACH Processor 1 (the "ACH Processor 1 Owner") and the Risk Manager for ACH Processor 1 ("the Risk Manager"), regarding payment processing ACH Processor 1 engaged in on behalf of Clark, through one of Clark's companies. Based on the FBI's conversations with the ACH Processor 1 Owner, the Risk Manager, and a review of ACH Processor 1 documents, the FBI is aware that Clark sought and obtained an agreement with ACH Processor 1 to provide ACH processing services for what Clark claimed was a payday loan business.
Specifically, in approximately May 2008, Clark submitted an application to ACH Processor 1 on behalf of "Draftlink LLC," representing in the application - and in statements Clark made to the Risk Manager - that Draftlink, which Clark said he owned, was in the business of processing "e-check" payments from individuals who wanted to use e-checks to repay money owed for payday loans. Specifically, according to Clark, DraftLink LLC offered payday loans over the internet and then collected repayments of those loans electronically, via the ACH system. Clark sought ACH Processor 1's services in obtaining a bank account through which Draftlink would be able to process the "payday loan" repayments and ACH Processor 1's services in processing the ACH transactions in that bank account through the ACH network. According to Poker Processor 3, who spoke to the FBI on this subject, external payment processors serving the gambling industry sometimes disguise their ACH debits from gamblers1 accounts by claiming they are transactions for payday lenders.
After performing some initial due diligence on Clark and reviewing the web site for Draftlink - which, on its face, appeared to be a payday loan website, albeit one not presently functioning, ACH Processor 1 agreed to process transactions for Clark through an account at Comerica Bank. The agreement initially provided that ACH Processor 1 would hold the first $6,000,000 of incoming e-check payments from the individuals repaying their alleged loans as a reserve against chargebacks (payments back to the debited consumer account where the account lacked sufficient funds, or where the consumer disputes the charge) and other problems.
From conversations with the ACH Processor 1 Owner, the Risk Manager, and the FBI's review of ACH Processor 1 documents, the FBI learned that in approximately June 2008 ACH Processor 1 began processing transactions for DraftLink LLC through a Comerica Bank account. This included processing ACH debits from bank accounts located in the Southern District of New York. Shortly after it started processing these transactions, however, ACH Processor 1 learned that Draftlink was not processing "payday loan" repayments as Clark had represented, but was instead processing illegal gambling transactions. ACH Processor 1 came to this conclusion based on the following information;
After approximately one week of processing, the Risk Manager noted that many of the payments from United States customers for DraftLink LLC were in amounts of hundreds of dollars, and, in numerous cases, the same customers would make deposits several days in a row. ACH Processor 1 had processed payments for other payday lenders before and, in the experience of ACH Processor 1, true repayments of payday loans were typically for smaller dollar amounts and were made at regular periodic intervals (such as weekly) and not several days in a row.
The Risk Manager looked at the web sites for the supposed "payday loan" services that Clark and his associates had provided to ACH Processor 1 and learned that the sites did not actually enable an individual to obtain or repay a payday loan and, instead, appeared to be inoperative. When ACH Processor 1 asked representatives of DraftLink LLC, to provide "proof of authorization" for a sampling of the transactions, that is, screen shots or some other proof that the customer had authorized DraftLink LLC to make the debit on a payday loan website, and proof of the purpose of the debit - DraftLink LLC was unwilling to do so.
The Risk Manager then checked some of the names of the individuals whose accounts were debited through DraftLink LLC and found that several of these individuals had previously been customers of NETeller PLC - an "e-wallet" used predominantly for gambling. A further, more comprehensive, study by ACH Processor 1 revealed that approximately 3 5% of the U.S. bank accounts making supposed "payday" loan payments to Draftlink LLC through ACH Processor 1 previously had been used to fund e-wallet accounts with NETeller PLC.
On July 8, 2008, ACH Processor 1 stopped processing transactions for Draftlink and informed the FBI that the Draftlink account appeared to be used to fund online gambling transactions. The Risk Manager then informed Clark and his associates, that ACH Processor 1 would stop processing for Draftlink and hold onto the funds in Draftlink's account at Comerica Bank (by then, approximately $3 million) while it reviewed the transactions. While neither the Risk Manager nor anyone else at ACH Processor 1 told Clark or his associates that the freeze was related to internet gambling, two of Clark's associates, Clark Associate 1 (previously identified in paragraph 15b) and Clark Associate 2, asked the Risk Manager if the bank suspected the transactions were related to internet gambling. Another Clark Associate ("Clark Associate 3") informed the Risk Manager that Draftlink had "inadvertently" processed ACH transactions to load debit cards out of the account rather than payday loans.
Clark and his associates refused to accept ACH Processor 1's decision to stop processing Draftlink's transactions and to hold onto approximately $3 million dollars in the Comerica Bank account, and demanded that the ACH Processor 1 Owner and the Risk Manager repay Clark immediately, notwithstanding the fact that under Draftlink's agreement with ACH Processor 1, ACH Processor 1 had up to two years' to return the majority of the funds if suspicious transactions were identified in the processing account. The Risk Manager and the ACH Processor 1 Owner told Clark and his associates that the money could not be returned because the bank had put a hold on the funds while awaiting proof that the transactions were valid. Clark Associate 1 then called the Risk Manager and stated that he would "kill anyone who took their money" and further announced that they would come to ACH Processor 1's offices the following day.
In September 2008, the FBI spoke to one of the individuals whose checking account was debited by "Draftlink" through ACH Processor 1 and s/he stated that the transaction had been to fund his/her internet gambling account at either Poker Company 1 or Poker Company 2. Clark's Fraudulent Processing Through ACH Processor 2 & The National Bank of California
In July 2008, around the time that Clark encountered difficulties processing transactions through ACH Processor 1, and CLARK sought to obtain ACH processing services from "ACH Processor 2" for what he claimed was "payday loan" processing. The FBI had spoken to representatives of ACH Processor 2 and National Bank of California (which is insured by the FDIC), and reviewed documents provided by these sources. From these sources, the FBI learned the following:
On July 1, 2008, Clark submitted an application to ACH Processor 2 for ACH Processor 2 to perform payment processing on behalf of a company called "Viable Processing Solutions" ("Viable"), which, Clark claimed, was in the business of processing payday loans. Although Clark guaranteed the processing account, the owner of Viable was listed as Clark Associate 4. ACH Processor 2 began processing ACH transactions for Viable on or about September 16, 2008, and processed more than $16 million in transactions over approximately five weeks through the National Bank of California. Some of the transactions were from bank accounts located in the Southern District of New York.
On September 23, 2008, a manager from National Bank of California e-mailed two individuals at ACH Processor 2, noting that a customer had attempted to return a $100 ACH deposit made into the Viable bank account with the descriptor "increasedfunds.com." When the manager called the telephone number identified for "increasedfunds.com" he was referred to a customer support representative in Australia who stated that he worked for the Australian Gambling Processor. As described in paragraph 14 above, the Australian Gambling Processor is a payment processor serving the internet gambling industry. ACH Processor 2 relayed these concerns to Clark Associate 1, who initially responded in an e-mail that this was simply the customer service center for Viable. In another e-mail of that same day, drafted by Clark Associate 3 and copied to Clark, Clark Associate 3 apologized for the "confusion" and claimed that the transactions actually were not for payday loans but were for "debit card loads for general e-commerce." From speaking to Poker Processor 3, the FBI knows that ACH processors serving the internet gambling industry sometimes disguise gambling transactions as involving the loading of debit cards.
Based on the above, ACH Processor 2 ceased processing for the Viable account in October 2008. Since that time, ACH Processor 2 has conducted a preliminary analysis showing a significant overlap between bank accounts used by NETeller's e-wallet customers and bank accounts debited by Viable through ACH transactions. Also, after National Bank of California closed the Viable bank account, the bank received a letter from an attorney who stated that he represented the Australian Gambling Processor and that the Australian Gambling Processor was entitled, by assignment, to collect Viable funds held by National Bank of California.
Obstruction of Justice
Following his arrest, Clark made efforts to cooperate with the Government. As part of this cooperation, Clark was directed by the FBI to record a call with his former partner (Curtis Pope) to discuss the processing of internet poker transactions. Prior to making the recorded call, however, Clark secretly contacted his former partner and told him that he would be calling to ask about whether they should engage in online poker processing, and that his partner should say "no." Clark did this because he did not want to be involved in a proactive investigation against his former partner and believed that having his partner say "no" on a recorded call to future poker processing would render moot the FBI 1s request for his assistance in this regard. The Relevant Statutory Provisions
For Count 1, pursuant to 18 U.S.C. § 1956(h), the maximum term of imprisonment is 20 years. For Count 2, the maximum term is 30 years' imprisonment, per 18 U.S.C. § 1349. For Count 3, the maximum term of imprisonment is five years per 18 U.S.C. § 371. For Count 4, the maximum term of imprisonment is ten years, per 18 U.S.C. § 1503.
For Counts 1 and 4, the maximum term of supervised release is three years, per 18 U.S.C. § 3583(b)(2). For Count 2, the maximum term of supervised release is five years, per 18 U.S.C. § 3583(b)(1). For Count 3, the maximum term of supervised release is one year, per 18 U.S.C. § 3583(b)(3).
For Counts 1, 3, and 4, the defendant is not eligible for probation because he is being sentenced at the same time to a term of imprisonment on a different count or case, pursuant to 18 U.S.C. § 3561(a)(3). For Count 2, the defendant is not eligible for probation because the instant offense is a Class B felony, pursuant to 18 U.S.C. § 3561(a)(1).
For Count 1, the maximum fine is $500,000, per 18 U.S.C. § 1956(h). For Count 2, the maximum fine is $1 million, per 18 U.S.C. § 1349. For Counts 3 and 4, the maximum fine is $250,000 pursuant to 18 U.S.C. § 3571. A special assessment of $400 is mandatory ($100 per count), pursuant to 18 U.S.C. § 3013.
As a result of committing the offenses alleged in Counts 1 through 4 of the Information the defendant shall forfeit to the U.S., pursuant to 18 U.S.C. §§ 1963(a)(1), (a)(2), and (a)(3), all property real and personal, involved in the offense or traceable to such property. The Guidelines
The November 1, 2010 edition of the United States Sentencing Commission Guidelines Manual has been used in this case for calculation purposes, pursuant to § 1B1.11(a). The Court finds the following with respect to Defendant's applicable offense level, criminal history, recognition of responsibility, and term of imprisonment:
Pursuant to the grouping provisions found in §3D1.2(b), Counts 2, 3 and 4 will group, as the counts involve the same victim and two or more acts or transactions connected by a common criminal objective or constituting part of a common scheme or plan. Pursuant to §3D1.2(c), these counts then group with Count 1, as one of the counts embodies conduct that is treated as a specific offense characteristic in, or adjustment to, the guideline applicable to another of the counts. Pursuant to §3D1.3(a), "[i]n the case of counts grouped together pursuant to §3D1.2(a)-(c), the offense level applicable to a Group is the offense level, determined in accordance with Chapter Two and Parts A, B, and C of Chapter Three, for the most serious of the counts comprising the Group, i.e., the highest offense level of the counts in the Group." As shown below, the most serious of the counts is Count 1.
The Guideline for Count 1, a violation of 21 U.S.C. § 1956(h) is found in § 2S1.1. Pursuant to § 2S1.1(a)(1), the base offense level is the offense level for the underlying offense from which the laundered funds were derived, if (A) the defendant committed the underlying offense (or would be accountable for the underlying offense under subsection (a)(1)(A) of §1B1.3 (Relevant Conduct); and (B) the offense level for that offense can be determined.
The underlying offense is found in §2B1.1 and involved the processing of illegal gambling funds. Pursuant to §2Bl.l(a)(1), the base offense level is seven. Because the loss/gain was between $5,000 and $10,000, the base offense level is increased two levels, pursuant to §2B1.1(b)(1)(B). Per §2B1.1(10), because the offense involved sophisticated means, a two-level increase is warranted. A two-level obstruction of justice enhancement is warranted, per §3C1.1. Lastly, pursuant to §2S1.1(b)(2)(B), the offense level is increased two levels because the defendant was convicted under 18 USC 1956, resulting in a total offense level of 15.
The Guideline for Count Two, a violation of 18 U.S.C. § 1349 is found in §2B1.1. Pursuant to §2Bl.l(a), the base offense level is seven. Because the loss/gain was between $5,000 and $10,000, the base offense level is increased two levels, pursuant to §2B1.1(b)(1)(B)Per §2B1.1(10), because the offense involved sophisticated means, a two level increase is warranted. A two-level obstruction of justice enhancement is warranted, per §3C1.1., resulting in a total offense level of 13.
The guideline for Count Three, a violation of 18 U.S.C. § 371 is found in §2X1.1 which states that the base offense level is the guideline for the substantive offense, plus any adjustments from such guideline for any intended offense conduct that can be established with reasonable certainty. The substantive offenses are violations of 18 U.S.C. § 1955, which is covered by §2E3.1, and provides for a base offense level of 12 pursuant to §2E3.1(a)(1), plus, a two-level obstruction of justice enhancement is warranted, per §3C1.1, resulting in a total offense level of 14.
As the defendant was convicted under 18 U.S.C. § 1503, the applicable guideline is §2J1.2. Per §2J1.2(a), the base offense level is 14.
As reflected above, the offense that results in the highest offense level is Count 1, and the base offense level is 9.
Pursuant to §2Sl.l(b)(2)(B), the offense level is increased two levels because the defendant was convicted under 18 U.S.C. § 1956. Per §3C1.1, a two-level enhancement is warranted as the defendant was convicted of one count of Obstruction of Justice.
Based on the defendant's plea allocution, we believe that the defendant has shown recognition of responsibility for the offense. Pursuant to §3E1.1(a), the offense is reduced two levels.
According to the PSR, the total offense level is 11.
The defendant has no known criminal convictions. Therefore, the defendant has zero criminal history points and a Criminal History Category I.
Based on a total offense level of 11 and a Criminal History Category of I, the Guidelines range for imprisonment is 8 to 14 months.
The Government does not dispute the Probation Department's conclusion that all four counts could be grouped (PSR ¶ 32), meaning that "the offense level . . . is the offense level determined in accordance with Chapter Two and Parts A, B and C of Chapter Three, for . . . the highest offense level of the counts in the Group." (U.S.S.G. § 3D.13(a)). Nor does the Government dispute that Count 1, the money laundering count, provides for the highest base offense level and thus should be used in calculating the offense level for the entire group. However, the Government submits that this level is 18 and not 15 as set forth in paragraph 35 of the PSR.
Pursuant to U.S.S.G. § 231.1(a)(1) the base offense level is the offense level "for the underlying offense from which the laundered funds were derived" because "the defendant committed the underlying offense." However, the underlying offense is the operation of an illegal gambling business, not bank fraud. The money laundering conspiracy count charges international "promotion" laundering pursuant to 18 U.S.C. § 1956(a)(2)(A), and accuses the defendant of transferring money between the United States and foreign countries "with intent to promote the carrying on of a specified unlawful activity, to wit, the operation of an illegal gambling business." Accordingly, the base offense level should be the base offense level for illegal gambling, which is 12 (U.S.S.G. § 2E3.1(a)). There is then a 2 level enhancement because the conviction was under 18 U.S.C. § 1956 (U.S.S.G. § 2S1.1(b)(2)(B)), a 2 level enhancement for sophisticated laundering (U.S.SG. § 2S1.1(3)), and a 2 level enhancement for obstruction (U.S.S.G. § 3C1.1). Accordingly, the total offense level is 18 rather than 15.
In addition, the following additional changes to PSR require correction:
• In paragraph 39, the base offense level for Count 1 should be 12, not 9.
• In paragraph 40, an additional two levels should be added pursuant to U.S.S.G. § 2S1.1 (3) because the offense involved sophisticated laundering (on top of the 2 level increase for a § 1956 violation, for a total of 4 levels).
• Based on these changers, the adjusted offense level in paragraph 44 should be 18, not 13.
• Based on these changes, the adjustment for acceptance of responsibility in paragraph 45 should be 3 levels rather than 2.
• Based on these changes, the adjusted offense level and total offense level set forth in paragraphs 46 and 48 should be 15 rather than 11.
Accordingly, the applicable guidelines range is 18-24 months', not 8-14 months'.
The Guidelines range for Counts 1 and 4 is a term of supervised release is at least one year but not more than three years, pursuant to §5D1.2(a)(2). For Count 2, the guideline range for a term of supervised release is at least two years but not more than five years, pursuant to §5D1.2(a)(1). For Count 3, the guideline range for a term of supervised release is one year, per §5D1.2(a)(3). If a sentence of imprisonment of one year or less is imposed, a term of supervised release is not required but is optional, pursuant to §5D1.1(b).
Because the applicable guideline range is in Zone B of the Sentencing Table, the defendant is eligible for probation provided that the court imposes a condition that substitutes intermittent confinement, community confinement, or home detention for at least eight months, pursuant to §5B1.1(a)(2). If the court imposes probation, the term must be at least one year but not more than five years because the offense level for the instant offense is 11, pursuant to §5B1.2(a)(1).
The fine range for the instant offense is from $2,000 to $1.5 million, pursuant to §5E1.2(c)(3)(A) and (c)(4). Subject to the defendant's ability to pay, in imposing a fine, the Court shall consider the expected costs to the Government of any imprisonment, probation, or supervised release pursuant to §5E1.2(d)(7). The most recent advisory from the Administrative Office of the United States Courts suggests a monthly cost of $2,357.01 to be used for imprisonment, a monthly cost of $328.20 for supervision, and a monthly cost of $2,153.22 for community confinement. The Remaining Factors of 18 U.S.C. § 3553(a)
Having engaged in the Guidelines analysis, this Court also gives due consideration to the remaining factors identified in 18 U.S.C. § 3553(a) to impose a sentence "sufficient, but not greater than necessary," as is required by the Supreme Court's decision in Booker, 543 U.S. 220, and the Second Circuit's decision in Crosby, 397 F.3d 103.
In light of the Court's statutory responsibility "to 4 impose a sentence sufficient, but not greater than necessary' to accomplish the goals of sentencing," Kimbrough v. United States, 552 U.S. 85, 102 (2007) (quoting 18 U.S.C. § 3553(a)), and having considered the Guidelines and all of the factors set forth in § 3 553(a), it is determined that a downward departure from the Guidelines sentence is warranted in the instant case.
Under 18 U.S.C. § 3553(a)(1), the Court considers "the nature and circumstances of the offense and the history and characteristics of the defendant." Pursuant to 18 U.S.C. i 3553 (2)(A), the Court weighs the need for the sentence imposed to reflect the seriousness of the offense, to promote respect for the law, and to provide just punishment for the offense.
The probation officer has no information concerning the offense or the offender that would constitute additional factors which would impact on sentencing. However, the probation officer has found no factors that would support upward movement within the guideline range. In addition, their recidivism concerns are somewhat diminished due to the Defendant's lack of criminal history and age. The Sentence
For the instant offense, Clark will be sentenced to 21 months, and 3 years' of supervised release.
Clark is directed to report to the nearest United States Probation Office within seventy-two hours of release to commence his term of supervised release. It is recommended that Defendant be supervised by the district of his residence.
As mandatory conditions of his supervised release. Clark shall: (1) not commit another federal, state, or local crime; (2) not illegally possess a controlled substance; (3) not possess a firearm or destructive device; and (4) cooperate in the collection of DNA as directed by the probation officer. The mandatory drug testing condition is suspended based on the Court's determination that the Defendant poses a low risk of future substance abuse.
Furthermore, the standard conditions of supervision (1-13), set forth in the judgment, shall be imposed with the additional special conditions:
(1) Defendant shall provide the probation officer with access to any requested financial information.
(2) Defendant shall not incur new credit charges or open additional lines of credit without the approval of the probation officer unless the Defendant is in compliance with the installment payment schedule.
The Defendant shall pay a fine of $2,000 to be paid in full immediately.
As a result of committing the offense alleged in Counts 1 through 4, Defendant will forfeit any assets obtained via the commission of the instant offense.
A special assessment of $400, payable to the United States, is mandatory and shall be due immediately.
The terms of this sentence are subject to modification at the sentencing hearing scheduled for December 11, 2012.
It is so ordered. New York, NY
December 11, 2012
_________________
ROBERT W. SWEET
U.S.D.J.