usa v minkow - memorandum of usa in support of sentencing

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LAURA E. DUFFY United States Attorney MARK W. PLETCHER State of Colorado Bar No. 34615 Assistant U.S. Attorney Federal Office Building 880 Front Street, Room 6293 San Diego, California 92101-8893 Telephone: 619.546.9714 Email: [email protected] Attorneys for the United States of America

IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF CALIFORNIA

UNITED STATES OF AMERICA ) ) ) )

v. ) )

BARRY MINKOW, ) ) )

Defendant. ) ) )

)

Case No.: 14-CR-0153-MMA MEMORANDUM OF THE UNITED STATES IN SUPPORT OF SENTENCING

Date: April 28, 2014 Time: 10:30 a.m.

The United States of America, by and through its counsel, Laura E. Duffy,

United States Attorney, and Mark W. Pletcher, Assistant United States Attorney,

hereby files its Memorandum In Support of Sentencing.

INTRODUCTION

The United States respectfully recommends that the Court impose upon Barry

Minkow ("defendant") a sentence within the applicable United States Sentencing

Guideline ("U.S.S.G." or "Guidelines"), including a period of incarceration of 60

months, a three-year period of supervised release, and a $100 special assessment.

Finally, as set forth in Paragraph X.H.3 of the plea agreement between the parties, the

United States respectfully requests that defendant be ordered to pay restitution to the

Case 3:14-cr-00153-MMA Document 17 Filed 04/22/14 Page 1 of 12

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San Diego Community Bible Church (SDCBC) in the sum of $3,515,000 million and

to pay back taxes and penalties as assessed by the IRS.

As described below, after application of the United States Sentencing Guidelines,

including appropriate specific offense enhancements in Section 2, and applicable

departures in Section 3, defendant's properly calculated Adjusted Offense Level is 24.

According to the United States Probation Office, defendant has earned three criminal

history points, resulting in Criminal History Category II. Plotting these coordinates

results in an advisory Guideline range of 57-71 months, bounded by the statutory

maximum of 60 months incarceration for a violation of 18 U.S.C. 371.

FACTUAL BACKGROUND OF THE OFFENSE OF CONVICTION

The "relevant period" is just short of a decade -- from in or about May 2001 until

at least March 14, 2011. During this time, defendant was the pastor at San Diego

Community Bible Church (SDCBC), a position that he held until March 2011. By

2001, defendant had also founded the Fraud Discovery Institute (FDI), a for-profit

investigative firm that aimed to detect and expose fraudulent business activities.

During the relevant period, in the Southern District of California and elsewhere,

defendant Barry Minkow and others knowingly and unlawfully conspired, confederated

and agreed: (1) to commit offenses against the United States, to wit (a) mail fraud, in

violation of Title 18, United States Code, Section 1341; (b) wire fraud, in violation of

Title 18, United States Code, Section 1343; and (c) bank fraud, in violation of Title 18,

United States Code, Section 1344; and (2) to defraud the United States of and

concerning its governmental functions and rights by impeding, impairing, obstructing

and defeating the lawful functions of the Internal Revenue Service (IRS) in the

ascertainment, assessment and collection of federal income taxes.


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The objects of the conspiracy were for defendant and his conspirators to

fraudulently obtain the unauthorized use and benefit of over $3 million from SDCBC,

its parishioners, and its lenders and to conceal such diversion from the IRS in an attempt

to reduce the conspirators tax obligations to the United States.

Much has been written about the life and times of Barry Minkow. A summary

from Fortune Magazine and Wikipedia are attached for reference as Exhibit A and B.

Yet even for the defendants gloriously disastrous previous illegal schemes and

the accompanying compendium of lies and deceit, the facts of this case are aggravated.

They show a professional con man expertly plying his craft in an effort to line his

pockets with millions of dollar in order to fund his own Hollywood movie. The movie

trailer from YouTube is attached as Exhibit C.

Really though the facts show a predator from the pulpit ravaging those widowers

and elderly, among others, that he convinced to trust him most intimately. Exhibits

D-I exemplify that this crime went far beyond money and greed, ultimately consuming

the congregants of SDCBC physically and emotionally.

Defendant used every mechanism available to him to steal money. At its most

simple, defendant flatly stole money from the Sunday collection plate. Over the

course of nearly a decade, defendant also used any number of additional mechanisms to

bleed every dollar possible from SDCBC and its congregants.

As set forth in the plea agreement, defendant and his conspirators (a) fraudulently

convinced several financial institutions in the San Diego area to open a dozen

unauthorized bank accounts in the name of SDCBC, and to give defendant control over

such accounts and the funds they contained; (b) forged signatures on checks and drew

unauthorized checks on legitimate SDCBC financial accounts for the benefit of the

conspirators, totaling more than $300,000; (c) diverted and deposited checks drawn on


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legitimate SDCBC accounts into unauthorized accounts controlled by the conspirators,

totaling more than $47,000; (d) diverted and deposited SDCBC member donation

checks into unauthorized accounts controlled by the conspirators, totaling more than

$1.3 million; (e) diverted SDCBC member donations and payments from legitimate

SDCBC accounts, made through PayPal, to accounts controlled by the conspirators,

totaling more than $515,000; (f) charged unauthorized personal expenses on SDCBC

credit cards; (g) obtained unauthorized loans in the name of SDCBC from financial

institutions totaling $450,000; (h) obtained unauthorized loans based on legitimate,

pre-existing SDCBC loans, totaling more than $1.4 million; (i) obtained funds directly

from individual SDCBC members which were intended for SDCBC and converted

those funds to the conspirators use and benefit; (j) caused the tax identification number

of SDCBC to be used, without authority, to open unauthorized SDCBC financial

accounts in order to conceal from the IRS the true ownership and control of the funds

converted to defendants use and benefit; and (k) concealed from the IRS the income

defendant received during the decade-long conspiracy.

Two incidents in particular personify the depravity, though any number of

specific incidents could have equally been chosen. In late 2008, Brett Wrights wife

was diagnosed with cancer, and defendant, as the pastor at SDCBC, counseled the

Wright family during her illness and death. Soon after she passed away, Wright met

with defendant to discuss honoring his wife by making a donation in her name. At that

time, defendant indicated he was working an organization, Samaritans Purse, which

needed money to build a hospital in Darfur, Sudan. Defendant instructed Wright to

draft the $75,000 check payable to SDCBC and that he would forward the money. As

instructed, Wright wrote the check to SDCBC, noting Samaritans Purse and Darfur in

the subject line and for deposit only on the back. Shortly thereafter, defendant


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forwarded to Wright an email purportedly from a Jim Loscheder of Samaritans

Purse, confirming receipt of the Wright gift as applause from heaven.

Defendant signed his email, Love in Christ, Barry.

Defendant also forwarded the Jim Loscheder confirmation email to Wrights

daughter, Megan Bierman, writing: I believe we are honoring your moms heart

directly helping the sick and needy in Darfur through this hospital construction. . . . .

I sent it to your dad but wanted you to see this because of how important it is for me for

you to see what is going on through moms gift to this outreach.

Nearly two years later, in 2011, amid the unraveling web of lies, Wright

contacted Samaritans Purse directly, only to learn they never received his gift, and Jim

Loschieder (note the correct spelling) does work at Samaritans Purse, but he never sent

the email purporting to thank Wright for the gift. See Exhibit J.

Patricia Kuebitz, another elderly SDCBC parishioner, suffered similarly. Over

the course of several years, defendant convinced Kuebitz to give him nearly $300,000,

money she had inherited as well as money tapped from her home equity line of credit.

To give legitimacy to these requests, defendant bedazzled Kuebitz with a series of

promissory notes and other sophisticated financial transaction. All of it was for

nothing, though, and Kuebitz never saw any of the money repaid. Now, in the

aftermath, instead of sitting on a sizeable nest egg, Kuebitz, who is raising her 15 year

old granddaughter, finds herself deeply in debt, afraid of losing her home, and ashamed

she cannot provide for her granddaughter the way she wishes she could.

On January 2, 2014, defendant wrote to the Board of Elders at SDCBC,

confessing his sins. See Exhibit K. In that letter, defendant exalted 2 Timothy 3:4-5

as an apt description of himself and his conduct at SDCBC: They will betray their

friends, be reckless, be puffed up with pride, and love pleasure rather than God. They


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will act religious but they will reject power that could make them godly. In

closing, defendant eerily repeats the same fraudulent and deceitful words he wrote

years before to Brett Wright, congratulating him on the honorarium in his wifes name.

Love in Christ, Barry.

Now, years later, writing a Victim Impact Letter, Brett Wright, when asked what

the Judge should know about the defendant, responded: Minkow held himself out in

a position of trust; a pastor of a flock, always touting the grace of his rehabilitation; in

fact, at all of these times he continued to engage in his criminal behavior. I believe he

is a sociopath based on his complete lack of conscience. See Exhibit D at 2.

Ultimately, over the course of a decade, defendant fraudulently received gross

unauthorized funds of approximately $3,085,000, from which he made payments back

to or on behalf of SDCBC of approximately $1,435,000, resulting in a net unauthorized

gain to the defendant of approximately $1,650,000. That money has not been repaid.

On top of that, defendant obtained unauthorized loans of approximately $1,865,000.

SDCBC and its congregation remain beset with much of this debt today, with little or no

prospect of repaying it any time soon. See, e.g., Exhibits E, G.

SENTENCING CONSIDERATIONS

A. One-Level Additional Departure Pursuant to U.S.S.G. '3E1.1(b)

The Sentencing Guidelines provide that, in addition to the two-level downward

adjustment for acceptance of responsibility, under certain circumstances, a defendant

may be awarded an additional one-level downward adjustment. This additional level

applies if (1) the offense level determined prior to the two-level reduction is level 16 or

greater; and (2) defendant has assisted authorities in the investigation or prosecution of

his own misconduct by timely notifying authorities of his intention to enter a plea of


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guilty, thereby permitting the government to avoid preparing for trial and permitting the

government and the Court to allocate their resources efficiently.

In this case, the Probation Office has recommended and the United States

concurs that defendant should receive the two-level downward adjustment for

acceptance of responsibility under U.S.S.G. '3E1.1(a). Conditioned upon the Court

affirming that recommendation and granting this two-level adjustment, the United

States, hereby, moves for an additional one-level downward adjustment based on the

defendant's timely notification of his intention to plead guilty, which permitted the

government to allocate efficiently its prosecutorial resources.

CRIMINAL FINE

The Court shall impose a fine in all cases, except if the defendant establishes that

he is unable to pay and not likely to become able to pay. U.S.S.G. ' 5E1.2(a). In this

case, as discussed in the pre-sentence report, defendant appears to have no resources to

pay a criminal fine over and above those resources required to pay his mandatory

restitution obligation, as discussed below.

RESTITUTION

As set forth in Paragraph X.H.3 of the plea agreement, the United States

respectfully requests the Court order defendant to pay restitution in the amount of

$3,515,000 to SDCBC, representing net unauthorized funds received of $1,650,000 and

net unauthorized loan proceeds of $1,865,000.

In addition, defendant has agreed to pay back taxes and penalties, as assessed by

the IRS after the completion of all full financial audit.

RECOMMENDATION

Imposing a sentence of 60-months incarceration, consistent with Adjusted

Offense Level 24 and Criminal History Category II (57-71 months) would be sufficient


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but not greater than necessary to account for the nature and circumstances of the offense

and the characteristics of the defendant, reflect the seriousness of defendant's crimes,

promote respect for the law, provide just punishment for the offenses, afford sufficient

general and specific deterrence, and avoid unwarranted sentencing disparities.

Far from a heartland fraud case, defendants conduct was callous and predatory.

After spending considerable time in prison in the early 1990s, SDCBC gave defendant a

second chance, a shot at redemption, or put in defendants terms, a do-over. They

accepted him to their congregation, with open hearts and Christian forgiveness. From

the pulpit and in private conversations, defendant never shied from his criminal past, in

fact, actively touting his redemption to gain the trust of his parishioners.

Yet almost immediately defendant, having identified SDCBC as an easy mark,

began to steal money from the Church and its congregation. Using the stolen money

and misappropriated loan proceeds, defendant also began to cultivate his cult of

personality, founding his for-profit Fraud Discovery Institute (FDI), appearing as a

talking head on TV, and funding a Hollywood blockbuster about his life. Not content

simply making a movie about himself, defendant insisted that he star in the movie

alongside well-known Hollywood actors James Caan and Ving Rhames.

In the pursuit of the personification of Barry Minkow, nothing was sacrosanct.

From counseling a grieving family and then stealing the $75,000 honorarium donated in

the deceaseds memory, to preying on a single, elderly woman raising her

granddaughter, defendant used every deceit imaginable to slowly bleed SDCBC as an

institution and its congregants personally of every last dollar.

Inserted into the familiar rubric of the Sentencing Guidelines, the nature and

circumstances of the offense are extraordinary and aggravated. The scheme was

enduring, and the means used to accomplish it were sophisticated. Yet it was the


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predation of a pastor upon his trusting flock that set this crime apart, made even more

remarkable because of the do-over SDCBC had bestowed upon the defendant.

These facts alone easily justify a sentence of 60-months incarceration.

The history and characteristics of the defendant are well-known and counsel as

well for the imposition of the recommended sentence of 60-months incarceration. The

words set forth in Exhibits D-I echo resoundingly here: sociopath, no conscience,

zero remorse, epitome of arrogance, dangerous, the list goes on.

That defendant has mustered kind comments on his behalf is not surprising. As

SDCBC Pastor Scott Lowther put it: Barry is a likable man with his quirky

personality, [but] he will suck people dry without any thought to the evil in it. Pastor

Lowther ultimately concludes: Barry is very dangerous and should not be on the

streets at all. His life of constant crime, lying and deception has hurt hundreds of

people and never once has he owned responsibility for his crimes (except when he is

looking for leniency when he tries to incite sympathy from the judges). With these

letters, inspiring such sympathy is exactly the defendants intent.

Defendant ultimately asks again and again for a do-over. Yet SDCBC granted

the defendant that do-over, and to show for that act of compassion, SDCBC was

victimized financially and emotionally over the course of a decade. Relevant now in

the context of defendants request for yet another do-over, as so many have

cautioned: Fool me once, shame on you. Fool me twice, shame on me.

That this 60-month sentence should run consecutive to his undischarged term

from the Southern District of Florida is beyond serious argument. In his one-page

request for this extraordinary relief essential asking to the Court to impose little or no

jail time for the devastation wrought on SDCBC and its followers defendant

understandably cites no statute, case law, or other recognized basis to justify this result.


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This scheme began in 2001, well-prior to the short and distort securities fraud

(occurring in 2008-09) for which he is currently incarcerated, and it lasted after the

securities fraud had ended. The victims of the two crimes are vastly different, there a

publicly traded corporation and its shareholders, and here, a community bible church

and its congregants. The schemes themselves also bore no resemblance whatsoever.

It is unsurprising, therefore, that the Court in the Southern District of Florida did

not impose sentence considering defendants victimization of SDCBC. Defendant was

not charged with that conduct, and it was not presented as relevant conduct. It formed

no portion of the sentencing presentations and, as understood by counsel of the United

States, the Court made no mention of SDCBC at sentencing. Nor did this conduct

form any portion of the restitution order entered in Miami.

A sentence of 60 months incarceration will provide adequate general deterrence.

What a 60-month sentence will not do is provide adequate specific deterrence against a

career criminal who will assuredly recidivate when he is released. Nor will it likely

promote respect for the law by this scofflaw defendant. So, instead, it must protect the

public from further crimes by the defendant and provide just punishment, condemning

the depravity and accounting for not just the financial losses, but the emotional

destruction endured by SDCBC and its congregation.


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CONCLUSION

Accordingly, the United States respectfully requests that the Court sentence

defendant to a period of incarceration of 60 months, a period of supervised release of

three years, and a $100 special assessment. No criminal fine is warranted; however,

the United States requests that defendant be ordered to pay restitution to SDCBC in the

sum of $3,515,000 and to pay back taxes and penalties as assessed by the IRS.

DATED: April 21, 2014

Respectfully submitted

/s/ Mark W. Pletcher Mark W. Pletcher Assistant U.S. Attorney


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IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF CALIFORNIA

UNITED STATES OF AMERICA ) ) ) )

v. ) )

BARRY MINKOW, )

Defendant. )

Case No.: 14-CR-0153-MMA CERTIFICATE OF SERVICE

IT IS HEREBY CERTIFIED THAT:

I, Mark W. Pletcher, am a citizen of the United States and am at least eighteen years

of age. My business address is 880 Front Street, Room 6293, San Diego, California

92101. I am not a party to the above-entitled action.

I have caused service on Mark Adams, Esq. of the Memorandum of the United

States in Support of Sentencing by electronically filing the foregoing with the Clerk of the

District Court using its ECF System, which electronically notifies him.

I declare under penalty of perjury that the foregoing is true and correct.

Executed on April 22, 2014.

/s/ Mark W. Pletcher MARK W. PLETCHER

Assistant U.S. Attorney


v. )v. )

usa v minkow - memorandum of usa in support of sentencing

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