LAURA E. DUFFY United States Attorney 2 PHILLIP L. B. HALPERN Chief, Major Frauds and Special Prosecutions Section 3 Assistant U.S. Attorney California State Bar No. 133370 1 4 Federal Office Building 880 Front Street, Room 6293 San Diego, California 92101-8893 6 Telephone: (619) 546-6964 Email: Phillip.Halpern@usdoj.gov 5 7 8 Attorneys for Plaintiff United States of America 9 10 UNITED STATES DISTRICT COURT 11 SOUTHERN DISTRICT OF CALIFORNIA 12 13 14 UNITED STATES OF AMERICA, 15 16 17 v. Plaintiff, NATHAN JACOBSON (18), et al., Defendants. 18 19 20 ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) Criminal Case No. 07cr2016-JLS GOVERNMENT'S STATUS REPORT AUGMENTING THE RECORD AND OPPOSING BAIL PENDING SENTENCE, FOLLOWING DEFENDANT'S PRIOR FAILURE TO APPEAR AND HIS EXTRADITION TO THE UNITED STATES. Date: Time: Courtroom: Judge: August 26, 2013 3:00 p.m. Number 1E Hon. William McCurine, Jr. 21 22 COMES NOW the plaintiff, UNITED STATES OF AMERICA, by and through 23 its counsel, Laura E. Duffy, United States Attorney, and Phillip L.B. Halpern, Assistant 24 U.S. Attorney, and hereby respectfully files this Status Report Regarding Bail in order 25 to ensure that this Court has all the relevant facts necessary for it to rule on Defendant 26 Nathan Jacobson's Motion for Bail. This Status Report is based on the file and records 27 of this case, together with the argument presented during a prior hearing before Judge 28 Irma E. Gonzalez. 1 I. 2 INTRODUCTION 3 In a seductively misleading "status report," Defendant Nathan Jacobson accuses 4 the government of an "end run around Judge Gonzalez's order" in seeking "a materially 5 higher bail amount than he is able to meet, perhaps as high as $5 million." Defendant's 6 Status Report at 3.1/ The only end run, however, is the defendant's end run around a 7 complete recitation of the proceedings in the district court. A fair reading of the record 8 reveals that the United States is arguing for bail based on Judge Gonzalez's specific 9 finding - omitted from the Defendant's status report - that Nathan Jacobson is a very 10 real flight risk.2/ The reality is that the government seeks a bail of $5 million based upon 11 the district court's considered opinion that only a substantial bail in this range will be 12 sufficient to ensure Jacobson's appearance. 13 II. 14 STATEMENT OF FACTS 15 The Defendant was charged with and pled guilty to criminal offenses related to the 16 operation of an online drug distribution network known as "Affpower." Over 17 approximately 18 months, this organization received more than one million customer 18 orders for controlled substances, illegally sold these prescription drugs to more than 19 600,000 customers in the United States, and generated criminal proceeds in excess of 20 $126 million. 21 Defendant played an absolutely central role in this massive conspiracy. His 22 company, Rx Payments, made the illegal sale of drugs (to customers who lacked a 23 24 1/ 26 2/ In what apparently is becoming a trend, for the second time in three weeks, Jacobson filed his papers late on a Friday afternoon before a Monday hearing without so 25 much as giving opposing counsel a courtesy call. Interestingly, this finding was made after defense counsel boldly asserted that he had demonstrated that his client was not a flight risk. Judge Gonzalez, however, stopped 27 counsel in mid-argument and made sure the record reflected that she disagreed with 28 counsel and believed the exact opposite - that Jacobson was a flight risk. 2 1 personal physician willing to write them prescriptions) possible by processing online 2 credit card transactions that accounted for most of the sales. Jacobson was not only 3 Chairman of the Board of Rx Payments, but managed its day-to-day operations, which 4 as its name suggests includes acting as an online payment processor for online 5 prescription drug sales. 6 On May 7, 2008, Defendant entered a guilty plea to a single count of the 7 Indictment (Count 237) charging him with conspiracy to commit money laundering. This 8 offense carries a maximum sentence of 20 years. As part of his plea agreement, Jacobson 9 agreed to forfeit to the United States Government $4.5 million (out of total criminal 10 proceeds of $126,201,175.96), which represented the profits he personally earned from 11 his illegal activities. The Defendant also agreed to cooperate with the United States in 12 the investigation of other criminal activity. In part to facilitate this cooperation, the Court 13 permitted him to remain out of custody and to travel outside the United States pending 14 sentencing. Among his conditions of release, Jacobson was to appear before the Court 15 and the United States Probation Office as instructed. 16 Although Jacobson cooperated with U.S. law enforcement agencies for a period, 17 his cooperation began to wane and become unproductive by early 2012. At that time, the 18 government asked the Court to schedule Jacobson's case for sentencing. Jacobson 19 acknowledging his sentencing date and the necessity of returning to San Diego to be 20 interviewed by the United States Probation Office. Nevertheless, he flagrantly ignored 21 the orders of the Court and began a concerted effort to obstruct justice and delay, or 22 entirely avoid, his day of reckoning. 23 On May 11, 2012, Jacobson sent an email to the Probation office stating he would 24 not be attending his scheduled interview (which he had repeatedly delayed). In 25 attempting to justify his failure to appear, he lied to the Probation Officers. His false and 26 misleading statements included, that: (1) there was an ongoing criminal investigation of 27 his Canadian lawyer and another of his lawyer-business counselors; (2) there was 28 3 1 reasonable evidence to believe that his lawyer "conspired with the US Prosecutor . . . in 2 order to falsely obtain a guilty plea" from him; (3) evidence existed that one million 3 dollars that he forfeited was illegally paid into a "whistleblower" account; and (4) his 4 legal files were sold by his attorney to Ukrainian organized crime members. 5 On or about July 26, 2012, Jacobson sent a letter to Judge Gonzales repeating many 6 of the same lies, including that he was the victim of a conspiracy perpetrated by his 7 former attorney. At that time, Defendant had more than sufficient assets to hire a new 8 attorney (if he truly believed that his prior attorney was in a conspiracy with the United 9 States government), but yet chose to not do so.3/ On July 30, 2012, he failed to appear 10 for his sentencing and Judge Gonzalez issued a warrant for his arrest. 11 In response, Jacobson retained new counsel, who began immediately negotiating 12 terms for his surrender. As an article of good faith, government prosecutors did not 13 charge Jacobson with bail jumping, making false statements, or obstructing justice prior 14 to seeking his extradition. Although we have no doubt that Jacobson's present counsel 15 were negotiating in good faith, it became equally clear that Jacobson was not. He simply 16 refused to surrender; and after our extradition package was filed, he refused to submit to 17 extradition. 18 Despite the clear record, Jacobson's prior pleading suggested that he did not 19 contest his extradition. Defendant's Motion for Bail at 10. Even giving Defendant the 20 benefit of the doubt, this statement could be considered true only in the most technical 21 sense. As noted by the Department of Justice attorney handling his extradition: 22 23 24 While it is true that Jacobson maintained from the outset that he did not intend to contest extradition, the matter was adjourned repeatedly for this to happen to the point that we successfully had the court (over Jacobson's objection) set a date for an extradition hearing to prevent any further foot dragging on his part . . . 25 26 3/ It is very probable that Jacobson was unable to find an attorney who would support his refusal to return to the United States based upon his deluded conspiracy 28 theory. 27 4 1 The record is clear that Jacobson did nothing to expedite his extradition prior to his being 2 placed in custody. Although Jacobson now wants the Court to believe otherwise, he 3 could have consented to surrender at any time following his arrest, but waited the better 4 part of a year until the writing on the wall was clear to even the most myopic. 5 III. 6 LEGAL AUTHORITY 7 The United States has found no cases in which a defendant who failed to appear 8 and had to be extradited to the United States was subsequently granted bail pending trial 9 or sentencing. In asking this Court to issue the first such ruling in the nation, Jacobson 10 cites one case bearing on the issue of risk of flight.4/ 11 His sole support, United States v. Salvagno, 314 F. Supp. 2d 115 (NDNY, 2004), 12 comes from an almost decade old district court case from upstate New York. See 13 Defendant's Motion for Bail at 10. In that case, the district court granted pre-trial bail 14 to two defendants who appeared to reside in the United States (not a foreign country) and 15 were charged with environmental crimes. The Salvagno court found the defendants were 16 not a flight risk when one had to remain in the United States as he was the kidney doner 17 for his child and the other had cancer in addition to having to care for his sick wife, who 18 also had cancer. 19 In the present case, the Defendant: (1) resides in a foreign country; (2) has a child 20 and wife outside the United States; (3) has admitted his guilt to a complicated financial 21 crime; (4) demonstrated the ability to transfer millions of dollars in criminal proceeds; 22 (5) set up dummy corporations; (6) utilized multiple foreign bank accounts; and (7) faces 23 a significant sentence. Comparing this case to Salvagno is ludicrous. More to the point, 24 25 4/ In his initial motion, Defendant also failed to inform the district court that he bears the burden of establishing that he is not a flight risk. See Defendant's Motion for 26 Bail at 8. Although it was undoubtedly unintentional, the correct standard was further obscured by his citation (immediately after defining the standard) to United States v. 27 Motamedi, 767 F.2d 1403 (9th Cir. 1985) - a pretrial release case in which the government 28 bears the burden of proving that a defendant is not a flight risk. 5 1 it underlines the importance of ensuring that any bail set by the Court be sufficiently high 2 so as to guarantee Jacobson's appearance - and counterbalance his prior failures to appear 3 and his expressed and repeated failure to obey the order's of this Court. 4 IV. 5 ARGUMENT 6 The United States agrees with Judge Gonzalez that Jacobson continues to be a 7 flight risk. He faces a significant sentence and has the means to flee.5/ He is a dual 8 citizen of Canada and Israel, with homes in both countries, and previously served with 9 the Israeli Special Forces. By his own admission, he has extensive business and personal 10 contacts throughout the world including Israel, Russia, Costa Rica, Myanmar, and 11 Ukraine. Jacobson has also made it clear that he has ties to elements of organized crime 12 in both Israel and Russia. At least as of a few years ago, he was a multi-millionaire, with 13 assets located in different countries. Most disturbingly, it would not be surprising, if 14 Canada failed to extradite him a second time if we let him loose. 15 It has been conclusively established that Jacobson will not appear if he feels it is 16 not in his best interests. This has been demonstrated by his prior behavior and is now 17 beyond any argument. In addition, he has made it clear that he has no compunction about 18 lying to the Court if he believes it be advantageous. With this sterling track record, we 19 agree with Judge Gonzalez that only a significant bail approaching or equaling $5 million 20 is required to secure his appearance.6/ 21 5/ Jacobson might be willing to stick around long enough to see if he can "game" the system as he has done so his entire business career. However, once he realizes that 23 his Motion to Withdraw is going nowhere fast, there is no reason to think that he won't take off (rather than submit to what could be a sentence approaching 10 years) and use 24 his business contacts to repay any sureties that forfeited personal funds. 22 6/ Jacobson suggests that Judge Gonzales "initially proposed $4-5 million" as the bail amount. Defendant's Status Report at 3. It is government counsel's recollection 26 (which is admittedly dimming with advanced age) that she initially proposed $5 million (not $4-5 million). Only after counsel indicated that this figure might be too high did she 27 imply that she might be willing to accept a lesser amount. She did not specify what this amount would be, but certainly implied that it would need to be in the $4-5 million area. 25 28 (continued...) 6 1 III. 2 CONCLUSION 3 For all of the above reasons, the United States respectfully requests that the Court 4 order that Mr. Jacobson be detained, unless he can post a fully secured bond of no less 5 than $5 million. 6 7 DATE: August 25, 2013 8 Respectfully submitted, 9 LAURA E. DUFFY United States Attorney 10 11 /s/ Phillip L.B. Halpern PHILLIP L. B. HALPERN Assistant U.S. Attorney 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 6/ (...continued) If this matter continues to be disputed, the government urges that the court not rule until 28 reviewing the transcript (which has been ordered). 7 1 UNITED STATES DISTRICT COURT 2 SOUTHERN DISTRICT OF CALIFORNIA 3 UNITED STATES OF AMERICA, 4 5 6 7 Plaintiff, v. NATHAN JACOBSON (18), Defendant. 8 Criminal Case No. 07CR2016-JLS ) ) ) ) ) ) ) ) ) ) ) Date: August 26, 2013 Time: 3:00 p.m. Honorable William McCurine, Jr. CERTIFICATE OF SERVICE 9 10 11 12 13 14 15 16 17 18 19 IT IS HEREBY CERTIFIED THAT: I, PHILLIP L.B. HALPERN, 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 92101-8893. I am not a party to the above-entitled action. I have caused service of the Government's Status Report Augmenting the Record and Opposing Bail Pending Sentence, Following Defendant's Prior Failure to Appear and His Extradition to the United States and this Certificate of Service on the following parties by electronically filing the foregoing with the Clerk of the District Court using its ECF System, which electronically notifies them: 20 21 22 Michael A. Attansio and Jon F. Cieslak 4401 Eastgate Mall San Diego, CA 92121 23 24 25 I declare under penalty of perjury that the foregoing is true and correct. Executed on August 25, 2013. 26 /s/ Phillip L.B. Halpern PHILLIP L.B. HALPERN Assistant United States Attorney 27 28 8