U.S. Department of Justice

United States Attorney Southern District of New York

The Silvio J. Mollo Building One Saint Andrews Plaza New York, New York 10007

November 3, 2014

BY ECF & ELECTRONIC MAIL The Honorable Valerie E. Caproni United States District Judge Southern District of New York Thurgood Marshall United States Courthouse 40 Foley Square New York, New York 10007 Re: United States v. Marvin Jemal, 14 Cr. 117 (VEC) Dear Judge Caproni: The Government writes respectfully in response to the Courts Order dated November 3, 2014, and in advance of the sentencing in the above-referenced case scheduled for November 5, 2014 at 2:00 p.m. For the following reasons, the Government believes that Nelson Brandt qualifies as a victim under the Mandatory Victim Restitution Act (MVRA), 18 U.S.C. 3663A, and, therefore, that he is owed restitution by the defendant. The MVRA requires restitution where (a) the offense was committed by fraud or deceit and (b) an identifiable victim or victims has suffered a physical injury or pecuniary loss. 18 U.S.C. 3663A(a)(1), (c)(1)(A)(ii), (c)(1)(B). A victim means a person directly and proximately harmed as a result of the commission of an offense . . . including, in the case of an offense that involves as an element a scheme, conspiracy, or pattern of criminal activity, any person directly harmed by the defendants criminal conduct in the course of the scheme, conspiracy, or pattern. Id. 3663A(a)(2).1 1 The MVRAs definition of victim tracks identically the definition of victim provided in the Victim Witness Protection Act (VWPA), 18 U.S.C. 3663(a)(2), the general, discretionary restitution statute that preceded and was partially superseded by the MVRA. In particular, both the MVRA and the VWPA, as amended, require identical causation standards i.e., the victim's harm must be directly and proximately caused by the defendants criminal

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Critically, [a] district court's statutory authority to award restitution under the MVRA is limited to awards to victims of the offense of conviction. United States v. Archer, 671 F.3d 149, 170 (2d Cir. 2011) (quoting In re Local # 46 Metallic Lathers Union, 568 F.3d 81, 85 (2d Cir. 2009)). Further, restitution is authorized only for losses that [were] . . . directly caused by the conduct composing the offense of conviction, and only for the victims actual loss. United States v. Marino, 654 F.3d 310, 319-20 (2d Cir. 2011) (quoting United States v. Silkowski, 32 F.3d 682, 689 (2d Cir.1994), and United States v. Germosen, 139 F.3d 120, 130 (2d Cir.1998)) (alterations in original). In this case, the defendant was convicted of bank fraud, in violation of 18 U.S.C. 1344 and 2, based on his participation between May 2009 and October 2009 in a scheme to defraud Israel Discount Bank of New York (IDB). Specifically, the defendant and his co-conspirator submitted false and fraudulent invoices and other documentation to IDB in order to induce IDB to provide funds under the Factoring Agreement between IDB and the defendants company, ENE. (PSR 13). By October 28, 2009, at the time of default, ENE had drawn down $6,530,096.33 million under the Factoring Agreement. (PSR 14). By August 2014, IDB had successfully recouped a portion of ENEs outstanding draws, but was still owed approximately $2,729,422.71. (Id.). The Governments investigation determined that approximately $1,974,203.68 was a result of fraudulent invoices that the defendant caused ENE to submit to IDB. (Id.). As part of his plea agreement, the defendant agreed that the loss amount was between $1 million and $2.5 million, and further agreed to pay restitution to IDB in the amount of $2,729,422.71. (PSR 7). In a motion file October 30, 2014 (10/30/14 Brandt Motion), Nelson Brandt, an investor in ENE, seeks to be declared a victim of the defendants bank fraud scheme under the MVRA. Brandt served as a personal guarantor of the Factoring Agreement between ENE and IDB. When ENE defaulted on the Factoring Agreement and the defendant failed to repay IDB, the bank sued Brandt, who settled IDBs claim for $1.5 million. In his motion, counsel for Brandt contends that Brandt was directly harmed in the course of the defendants scheme when the loans [the] defendant fraudulently obtained went into default. (Id. at 10). The Government agrees. The defendants bank fraud scheme was a direct and proximate cause of at least a portion of the loss that Brandt suffered, i.e., the $1.5 million that Brandt paid to IDB as a guarantor of the Factoring Agreement. Through the various misrepresentations that the defendant caused ENE to make to IDB regarding its receivables and inventory, the defendant increased the amount of draws outstanding under the Factoring Agreement by at least $1,974,203.68. Further, the defendants misrepresentations to IDB themselves constituted events of default under the Factoring Agreement. Thus, because the defendant knew that the fraud

activity. 18 U.S.C. 3663A(a)(2); id. 3663(a)(2). See United States v. Marino, 654 F.3d 310, 317 (2d Cir. 2011).

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would cause ENE to incur obligations under the Factoring Agreement that it was not in a financial position to repay, and that the fraud would cause ENE to default under the agreement, it was reasonably foreseeable that Brandt, as a guarantor of that agreement, would suffer pecuniary harm as a result of the bank fraud. Nevertheless, the full amount of the $1.5 million payment that Brandt made to IDB cannot be shown to be attributable to the defendants bank fraud. Under the terms of his guaranty, Brandt was obligated to repay the full amount outstanding on the Factoring Agreement in the event of default. At the time the defendant engaged in the fraud, however, ENE had already incurred (legitimate) outstanding draws under the Factoring Agreement. Further, at the time of the default, the full amount outstanding under the Factoring Agreement was $6,530,096.33. Of this amount, the Government has only been able to prove that $1,974,203.68 is attributable to the false invoices that the defendant caused ENE to submit to IDB. Accordingly, the Government believes that Brandt is entitled to restitution in the amount of his loss that is proportionate to the amount outstanding under the Factoring Agreement at the time of default that was attributable to the fraud, i.e., $1,974,203.68 out of $6,530,096.33, or 30.2%. Thus, the defendant owes Brandt restitution of $453,485.73 as a victim of the bank fraud. Respectfully submitted, PREET BHARARA United States Attorney By: ________________________________ Daniel S. Noble Assistant United States Attorney (212) 637-2239 cc: Benjamin Brafman, Esq. Joshua Kirshner, Esq. Attorneys for Marvin Jemal David Kurtz, Esq. Attorney for Nelson Brandt

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