Case 3:14-cr-00153-MMA Document 17 Filed 04/22/14 Page 1 of 12 1 2 3 4 5 6 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: mark.pletcher@usdoj.gov Attorneys for the United States of America 7 8 IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF CALIFORNIA 9 10 11 UNITED STATES OF AMERICA 12 13 14 15 16 v. BARRY MINKOW, Defendant. ) ) ) ) ) ) ) ) ) ) ) ) Case No.: 14-CR-0153-MMA MEMORANDUM OF THE UNITED STATES IN SUPPORT OF SENTENCING ) Date: Time: April 28, 2014 10:30 a.m. 17 18 The United States of America, by and through its counsel, Laura E. Duffy, 19 United States Attorney, and Mark W. Pletcher, Assistant United States Attorney, 20 hereby files its Memorandum In Support of Sentencing. 21 INTRODUCTION 22 The United States respectfully recommends that the Court impose upon Barry 23 Minkow ("defendant") a sentence within the applicable United States Sentencing 24 Guideline ("U.S.S.G." or "Guidelines"), including a period of incarceration of 60 25 months, a three-year period of supervised release, and a $100 special assessment. 26 Finally, as set forth in Paragraph X.H.3 of the plea agreement between the parties, the 27 28 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 2 of 12 1 San Diego Community Bible Church (“SDCBC”) in the sum of $3,515,000 million and 2 to pay back taxes and penalties as assessed by the IRS. 3 As described below, after application of the United States Sentencing Guidelines, 4 including appropriate specific offense enhancements in Section 2, and applicable 5 departures in Section 3, defendant's properly calculated Adjusted Offense Level is 24. 6 According to the United States Probation Office, defendant has earned three criminal 7 8 9 10 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 11 12 13 14 15 16 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. 17 During the relevant period, in the Southern District of California and elsewhere, 18 defendant Barry Minkow and others knowingly and unlawfully conspired, confederated 19 and agreed: (1) to commit offenses against the United States, to wit (a) mail fraud, in 20 violation of Title 18, United States Code, Section 1341; (b) wire fraud, in violation of 21 Title 18, United States Code, Section 1343; and (c) bank fraud, in violation of Title 18, 22 United States Code, Section 1344; and (2) to defraud the United States of and 23 concerning its governmental functions and rights by impeding, impairing, obstructing 24 and defeating the lawful functions of the Internal Revenue Service (“IRS”) in the 25 ascertainment, assessment and collection of federal income taxes. 26 27 28 2 12-CR-0153-MMA Case 3:14-cr-00153-MMA Document 17 Filed 04/22/14 Page 3 of 12 1 The objects of the conspiracy were for defendant and his conspirators to 2 fraudulently obtain the unauthorized use and benefit of over $3 million from SDCBC, 3 its parishioners, and its lenders and to conceal such diversion from the IRS in an attempt 4 to reduce the conspirators’ tax obligations to the United States. 5 6 7 8 9 10 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 defendant’s 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 11 12 13 14 15 16 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. 17 Defendant used every mechanism available to him to steal money. At its most 18 simple, defendant flatly stole money from the Sunday collection plate. Over the 19 course of nearly a decade, defendant also used any number of additional mechanisms to 20 bleed every dollar possible from SDCBC and its congregants. 21 As set forth in the plea agreement, defendant and his conspirators (a) fraudulently 22 convinced several financial institutions in the San Diego area to open a dozen 23 unauthorized bank accounts in the name of SDCBC, and to give defendant control over 24 such accounts and the funds they contained; (b) forged signatures on checks and drew 25 unauthorized checks on legitimate SDCBC financial accounts for the benefit of the 26 conspirators, totaling more than $300,000; (c) diverted and deposited checks drawn on 27 28 3 12-CR-0153-MMA Case 3:14-cr-00153-MMA Document 17 Filed 04/22/14 Page 4 of 12 1 legitimate SDCBC accounts into unauthorized accounts controlled by the conspirators, 2 totaling more than $47,000; (d) diverted and deposited SDCBC member donation 3 checks into unauthorized accounts controlled by the conspirators, totaling more than 4 $1.3 million; (e) diverted SDCBC member donations and payments from legitimate 5 SDCBC accounts, made through PayPal, to accounts controlled by the conspirators, 6 totaling more than $515,000; (f) charged unauthorized personal expenses on SDCBC 7 8 9 10 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 11 12 13 14 15 16 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 defendant’s use and benefit; and (k) concealed from the IRS the income defendant received during the decade-long conspiracy. 17 Two incidents in particular personify the depravity, though any number of 18 specific incidents could have equally been chosen. In late 2008, Brett Wright’s wife 19 was diagnosed with cancer, and defendant, as the pastor at SDCBC, counseled the 20 Wright family during her illness and death. Soon after she passed away, Wright met 21 with defendant to discuss honoring his wife by making a donation in her name. At that 22 time, defendant indicated he was working an organization, Samaritan’s Purse, which 23 needed money to build a hospital in Darfur, Sudan. Defendant instructed Wright to 24 draft the $75,000 check payable to SDCBC and that he would forward the money. As 25 instructed, Wright wrote the check to SDCBC, noting Samaritan’s Purse and Darfur in 26 the subject line and “for deposit only” on the back. Shortly thereafter, defendant 27 28 4 12-CR-0153-MMA Case 3:14-cr-00153-MMA Document 17 Filed 04/22/14 Page 5 of 12 1 forwarded to Wright an email purportedly from a “Jim Loscheder” of Samaritan’s 2 Purse, confirming receipt of the Wright gift as “applause from heaven.” 3 Defendant signed his email, “Love in Christ, Barry.” 4 Defendant also forwarded the “Jim Loscheder” confirmation email to Wright’s 5 daughter, Megan Bierman, writing: “I believe we are honoring your mom’s heart 6 directly helping the sick and needy in Darfur through this hospital construction. . . . . 7 8 9 10 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 mom’s gift to this outreach.” Nearly two years later, in 2011, amid the unraveling web of lies, Wright contacted Samaritan’s Purse directly, only to learn they never received his gift, and Jim 11 12 13 14 15 Loschieder (note the correct spelling) does work at Samaritan’s 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, 16 money she had inherited as well as money tapped from her home equity line of credit. 17 To give legitimacy to these requests, defendant bedazzled Kuebitz with a series of 18 promissory notes and other sophisticated financial transaction. All of it was for 19 nothing, though, and Kuebitz never saw any of the money repaid. Now, in the 20 aftermath, instead of sitting on a sizeable nest egg, Kuebitz, who is raising her 15 year 21 old granddaughter, finds herself deeply in debt, afraid of losing her home, and ashamed 22 she cannot provide for her granddaughter the way she wishes she could. 23 On January 2, 2014, defendant wrote to the Board of Elders at SDCBC, 24 confessing his sins. See Exhibit K. In that letter, defendant exalted 2 Timothy 3:4-5 25 as an apt description of himself and his conduct at SDCBC: “They will betray their 26 friends, be reckless, be puffed up with pride, and love pleasure rather than God. They 27 28 5 12-CR-0153-MMA Case 3:14-cr-00153-MMA Document 17 Filed 04/22/14 Page 6 of 12 1 will act religious but they will reject power that could make them godly….” In 2 closing, defendant eerily repeats the same fraudulent and deceitful words he wrote 3 years before to Brett Wright, congratulating him on the honorarium in his wife’s name. 4 “Love in Christ, Barry.” 5 Now, years later, writing a Victim Impact Letter, Brett Wright, when asked what 6 the Judge should know about the defendant, responded: “Minkow held himself out in 7 8 9 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. 10 Ultimately, over the course of a decade, defendant fraudulently received gross 11 12 13 14 15 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. 16 SDCBC and its congregation remain beset with much of this debt today, with little or no 17 prospect of repaying it any time soon. See, e.g., Exhibits E, G. 18 SENTENCING CONSIDERATIONS 19 A. One-Level Additional Departure Pursuant to U.S.S.G. '3E1.1(b) 20 The Sentencing Guidelines provide that, in addition to the two-level downward 21 adjustment for acceptance of responsibility, under certain circumstances, a defendant 22 may be awarded an additional one-level downward adjustment. This additional level 23 applies if (1) the offense level determined prior to the two-level reduction is level 16 or 24 greater; and (2) defendant has assisted authorities in the investigation or prosecution of 25 his own misconduct by timely notifying authorities of his intention to enter a plea of 26 27 28 6 12-CR-0153-MMA Case 3:14-cr-00153-MMA Document 17 Filed 04/22/14 Page 7 of 12 1 guilty, thereby permitting the government to avoid preparing for trial and permitting the 2 government and the Court to allocate their resources efficiently. 3 In this case, the Probation Office has recommended and the United States 4 concurs that defendant should receive the two-level downward adjustment for 5 acceptance of responsibility under U.S.S.G. '3E1.1(a). Conditioned upon the Court 6 affirming that recommendation and granting this two-level adjustment, the United 7 8 9 10 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 11 12 13 14 15 16 17 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 18 As set forth in Paragraph X.H.3 of the plea agreement, the United States 19 respectfully requests the Court order defendant to pay restitution in the amount of 20 $3,515,000 to SDCBC, representing net unauthorized funds received of $1,650,000 and 21 net unauthorized loan proceeds of $1,865,000. 22 23 24 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 25 Imposing a sentence of 60-months incarceration, consistent with Adjusted 26 Offense Level 24 and Criminal History Category II (57-71 months) would be sufficient 27 28 7 12-CR-0153-MMA Case 3:14-cr-00153-MMA Document 17 Filed 04/22/14 Page 8 of 12 1 but not greater than necessary to account for the nature and circumstances of the offense 2 and the characteristics of the defendant, reflect the seriousness of defendant's crimes, 3 promote respect for the law, provide just punishment for the offenses, afford sufficient 4 general and specific deterrence, and avoid unwarranted sentencing disparities. 5 Far from a heartland fraud case, defendant’s conduct was callous and predatory. 6 After spending considerable time in prison in the early 1990s, SDCBC gave defendant a 7 8 9 10 second chance, a shot at redemption, or put in defendant’s 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. 11 12 13 14 15 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 16 talking head on TV, and funding a Hollywood blockbuster about his life. Not content 17 simply making a movie about himself, defendant insisted that he star in the movie 18 alongside well-known Hollywood actors James Caan and Ving Rhames. 19 In the pursuit of the personification of Barry Minkow, nothing was sacrosanct. 20 From counseling a grieving family and then stealing the $75,000 honorarium donated in 21 the deceased’s memory, to preying on a single, elderly woman raising her 22 granddaughter, defendant used every deceit imaginable to slowly bleed SDCBC as an 23 institution and its congregants personally of every last dollar. 24 Inserted into the familiar rubric of the Sentencing Guidelines, the nature and 25 circumstances of the offense are extraordinary and aggravated. The scheme was 26 enduring, and the means used to accomplish it were sophisticated. Yet it was the 27 28 8 12-CR-0153-MMA Case 3:14-cr-00153-MMA Document 17 Filed 04/22/14 Page 9 of 12 1 predation of a pastor upon his trusting flock that set this crime apart, made even more 2 remarkable because of the “do-over” SDCBC had bestowed upon the defendant. 3 These facts alone easily justify a sentence of 60-months incarceration. 4 The history and characteristics of the defendant are well-known and counsel as 5 well for the imposition of the recommended sentence of 60-months incarceration. The 6 words set forth in Exhibits D-I echo resoundingly here: “sociopath”, “no conscience,” 7 8 9 10 “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 11 12 13 14 15 16 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 defendant’s intent. 17 Defendant ultimately asks again and again for a “do-over.” Yet SDCBC granted 18 the defendant that do-over, and to show for that act of compassion, SDCBC was 19 victimized financially and emotionally over the course of a decade. Relevant now in 20 the context of defendant’s request for yet another “do-over”, as so many have 21 cautioned: “Fool me once, shame on you. Fool me twice, shame on me.” 22 That this 60-month sentence should run consecutive to his undischarged term 23 from the Southern District of Florida is beyond serious argument. In his one-page 24 request for this extraordinary relief – essential asking to the Court to impose little or no 25 jail time for the devastation wrought on SDCBC and its followers – defendant 26 understandably cites no statute, case law, or other recognized basis to justify this result. 27 28 9 12-CR-0153-MMA Case 3:14-cr-00153-MMA Document 17 Filed 04/22/14 Page 10 of 12 1 This scheme began in 2001, well-prior to the “short and distort” securities fraud 2 (occurring in 2008-09) for which he is currently incarcerated, and it lasted after the 3 securities fraud had ended. The victims of the two crimes are vastly different, there a 4 publicly traded corporation and its shareholders, and here, a community bible church 5 and its congregants. The schemes themselves also bore no resemblance whatsoever. 6 7 8 9 10 It is unsurprising, therefore, that the Court in the Southern District of Florida did not impose sentence considering defendant’s 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 11 12 13 14 15 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 16 promote respect for the law by this scofflaw defendant. So, instead, it must protect the 17 public from further crimes by the defendant and provide just punishment, condemning 18 the depravity and accounting for not just the financial losses, but the emotional 19 destruction endured by SDCBC and its congregation. 20 21 22 23 24 25 26 27 28 10 14-CR-0153-MMA Case 3:14-cr-00153-MMA Document 17 Filed 04/22/14 Page 11 of 12 CONCLUSION 1 2 Accordingly, the United States respectfully requests that the Court sentence 3 defendant to a period of incarceration of 60 months, a period of supervised release of 4 three years, and a $100 special assessment. No criminal fine is warranted; however, 5 the United States requests that defendant be ordered to pay restitution to SDCBC in the 6 sum of $3,515,000 and to pay back taxes and penalties as assessed by the IRS. 7 8 DATED: April 21, 2014 9 10 Respectfully submitted 11 12 /s/ Mark W. Pletcher Mark W. Pletcher Assistant U.S. Attorney 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 11 14-CR-0153-MMA Case 3:14-cr-00153-MMA Document 17 Filed 04/22/14 Page 12 of 12 1 IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF CALIFORNIA 2 3 4 UNITED STATES OF AMERICA 5 6 7 8 v. Case No.: 14-CR-0153-MMA ) ) ) ) CERTIFICATE OF SERVICE ) ) ) BARRY MINKOW, Defendant. ) 9 10 IT IS HEREBY CERTIFIED THAT: 11 I, Mark W. Pletcher, am a citizen of the United States and am at least eighteen years 12 of age. My business address is 880 Front Street, Room 6293, San Diego, California 13 92101. I am not a party to the above-entitled action. 14 I have caused service on Mark Adams, Esq. of the Memorandum of the United 15 States in Support of Sentencing by electronically filing the foregoing with the Clerk of the 16 District Court using its ECF System, which electronically notifies him. 17 18 I declare under penalty of perjury that the foregoing is true and correct. Executed on April 22, 2014. 19 /s/ Mark W. Pletcher MARK W. PLETCHER Assistant U.S. Attorney 20 21 22 23 24 25 26 27 28 12 14-CR-0153-MMA