Petition for Writ of Certiorari — Custable v. United States

Supreme Court brief2011

Ask Donna

What actually matters in this document.

Text

Supreme Court. U.S.

FILED .

RA ) No. «10 “631 NOV 9- 2010

~~ SFFICE OF THE CLERK

In The

Supreme Court of the Anited States

FRANK CUSTABLE,

Petittoner.

UNITED STATES,

Respondent

On Petition For Writ Of Certiorari

To The United States Court Of Appeals

For The Seventh Circuit

MARC W. MARTIN* JEFFREY B. STEINBACK

*Counsel of Record 53 West Jackson Blvd.

MARC MARTIN, LTD. Suite 1442

53 West Jackson Blvd. Chicago, 1L 60604

Suite 1420 (847) 624-9600

Chicago, IL 60604

(312) 408-1111

mwm711@mac.com

Counsel for Petitioner Frank Custable

COCKLE LAW BRIEF PRINTING CO. (800) 225 6964

OR CALL COLLECT (402) 342-2831

QUESTIONS PRESENTED

1. Whether the Ex Post Facto Clause is violated

by the imposition of an enhanced sentence based on

United States Sentencing Guidelines that were not

in effect when the petitioner committed the offenses.

2. Whether the Ex Post Facto Clause is violated

by the application of the United States Sentencing

Guidelines’ one-book rule to enhance Guidelines for

offenses committed before the enactment of revised

Guidelines.

PARTIES TO THE PROCEEDING

Petitioner and Christine Favara were parties in

the Seventh Circuit. Petitioner is the only party in

this Court.

TABLE OF CONTENTS

QUESTIONS PRESENTED ..........................

PARTIES TO THE PROCEEDING

OPINIONS BELOW

JURISDICTION

CONSTITUTIONAL AND STATUTORY PRO-

VISIONS INVOLVED.............. Se er re en

STATEMENT

REASONS FOR GRANTING THE PETITION ....

The Circuits Have Become Deeply Di-

vided On Whether The Ex Post Facto

Clause Precludes Retroactive Application

Of Disadvantageous Sentencing Guide-

While the Seventh Circuit has held

that the Ex Post Facto Clause cate-

gorically is not implicated at a Post-

Booker sentencing, the D.C., Second,

Third, Fourth and Sixth Circuits

have ruled otherwise ....................:- ae

The First, Fifth, Eighth, Ninth and

Tenth Circuits have voiced opinions

on the issue in dicta

The Seventh Circuit has wrongly

construed this Court’s ex post facto

TABLE OF CONTENTS — Continued

Page

D. This Court’s review 1s warranted

because the constitutional question

presented recurs often and cannot

be resolved by the Sentencing Com-

Rani tccndeansicncvidcoact neucevreeseenacetaes ys 30

E. The time has come for this Court to

resolve the circuit split........................ 32

Il. The Circuits Are Also Divided On The

Question Of Whether Application Of The

“One-Book” Rule May Violate The Ex

Pe Fm CO wiccacaimiccewcceducSiviccocstescvinds 33

III. This Case Is An Appropriate Vehicle To

Resolve Important Ex Post Facto Issues

LFRIGOE E00 GUO TIIIGD asin sescndeccccesacssesasesecs 38

Ete NI es caicuscaveccauaasscinavex:soecyedcvelesteesaics cot 40

APPENDIX

Opinion of the United States Court of Appeals

Be | 1 | Sh ee App. 1

Minute Order of the United States District

Court for the Northern District of [llinois

Denying Petitioner’s Motion to Correct

INN 5 cidencwicsinais ss cansukas nceane as eee App. 13

Judgment of the United States District Court

for the Northern District of Illinois.............. App. 16

TABLE OF CONTENTS — Continued

Petitioner’s Guilty Plea Declaration in the

United States District Court for the North-

oe BR ye Cit rE App. 28

Transcript Excerpts of Sentencing Hearing in

the United States District Court for the

Northern District of Tlinois.................0..0...... App. 55

Transcript of Imposition of Sentence by the

United States District Court for the North-

ern District of Illinois..................... Rn Rates Sop App. 60

TABLE OF AUTHORITIES

Page

CASES

Caider v. Bull, $ U.S. SBS (1'7O8) ....cccccoccsccccessccce: 10, 37

California Department of Corrections v.

Morales, 514 U.S. 499 (1995).........00 25, 26, 39

Collins v. Youngblood, 497 U.S. 37 (1990)................. 24

Cummings v. Missouri, 71 U.S. 277 (1867) ...............24

Gall v. United States, 552 U.S. 38 (2007).......... passim

Garner v. Jones, 529 U.S. 244 (2000)..... 20, 25, 26, 28, 29

Gryger v. Burke, 334 U.S. 728 (1948).................ceeceees 36

Johnson v. United States, 529 U.S. 694 (2000) .........38

Kyle v. Lindsay, 2007 WL 1450402 (M.D. Pa.

I eee ok ooo crise cka Si en sik nhgunsenaseeuseabune 28

Lynce v. Mathis, 519 U.S. 433 (1997)............ iis 26, 39

Miller v. Florida, 482 U.S. 423 (1987) ............... passim

Nelson v. United States, 129 S.Ct. 890 (2009).............5

Rita v. United States, 551 U.S. 338

TT rec veri i cnatcatnsinkbasaeuasexstuancnveess ventas 5, 6, 16, 24, 28

Spears v. United States, 129 S.Ct. 840 (2009).............5

Stogner v. California, 539 U.S. 607 (2003)................ 24

United States v. Aguilar-Huerta, 576 F.3d 365

INI I 0 ov icc acancnccackurcevanesensesisunaninenoyedoxonvexs 28

United States v. Anderson, 570 F.3d 1025 (8th

re ht sa vadsdunuveiveraunsaivisviies 21

TABLE OF AUTHORITIES — Continued

United States v. Austin, 479 F.3d 363 (5th Cir.

RRS RAC AREAS DAREN RSA BDA. PRE FOE Mn 0 ON Sa 23

United States v. Bailey, 123 F.3d 1381 (11th

RB: gy PRE Ay ae nA ee Nhe Ba Atte NYA ES ae a 35

United States v. Baretz, 411 F.3d 867 (7th Cir.

aE Seer nee ee an CE, ae en a ee 12

United States v. Bertolt, 40 F.3d 1384 (3d Cir

RESIS SS rar eran epee ev Cue om CSR, PORE ee. ORE Met at seep 5

United States v. Black, 338 Fed.Appx. 235 (3d

I CO se L5

United States v. Booker, 543 U.S. 220 (2005).... passim

United States v. Carter, 490 F.3d 641 (8th Cir.

RSA Laie se loys RSE IUee RP LER HO UT REE a EN NPE Pee 21

United States v. Castillo-Estevez, 597 F.3d 238

I I he

United States v. Cooper, 35 F.3d 1248 (8th Cir.

1994), vacated, 514 U.S. 1094 (1995), re-

instated, 63 F.3d 761 (8th Cir. 1995)..........0.000000.... 35

United States v. Deegan, 605 F.3d 625 (8th Cir.

Re ro ete ence ane MEAN eeat NE ONTO Si. 33

United States v. Demaree, 459 F.3d 791 (7th Cir.

2006), cert. denied, 551 U.S. 1167 (2007)....... passim

United States v. Faison, 2010 WL 3548847 (2d

a ee LEE DONUT? 20

United States v. Gilman, 478 F.3d 440 (1st Cir.

- 5 RISE pr even Se nny weer ane IMEI hen eevee aD: 21

TABLE OF AUTHORITIES — Continued

United States v. Hensley, 574 F.3d 384 (7th Cir.

2009), cert. denied, 130 S.Ct. 1284 (January

25, 2010)

United States v. Hill, 563 F.3d 572 (7th Cir.

2009), cert. denied, 130 S.Ct. 623 (November

16, 2009)

United States v. Jaca-Nazario, 521 F.3d 50 (1st

Cir. 2008)

United States v. Jennings, 358 Fed.Appx. 367

(3d Cir. 2009)

United States v. Kumar, 617 F.3d 612 (2d Cir.

2010) passim

United States v. Lanham, 617 F.3d 873 (6th

Cir. 2010) aes 11, 19, 39

United States v. Lewis, 235 F.3d 215 (4th Cir.

United States v. Lewis, 603 F.Supp. 2d 874

(E.D. Va. 2009)

United States v. Lewis, 606 F.3d 193 (4th Cir.

2010) 11, 17, 18, 25, 39

United States v. Nurek, 578 F.3d 618 (7th Cir.

MD dcaccetiud vccenanices ans Léceeeeuiuediiu wae 9, 14

United States v. Ortiz, F.3d , 2010 WL

3419898 (2d Cir. 2010) 11, 19, 20

TABLE OF AUTHORITIES — Continued

United States v. Ortland, 109 F.3d 539 (9th Cir

1997)

United States v. Panice, 598 F.3d 426 (7th Cir

United States v. Patterson, 576 F.3d 431 (7th

Cir. 2009), cert. denied, 130 S.Ct. 1284 (Jan

uary 25, 2010)

United States v. Rising Sun, 522 F.3d 989 (9th

Cir. 2008)

United States v. Rodarte-Vasquez, 488 F.3d 316

eS ee

United States v. Schnell, 982 F.2d 216 (7th Cir

United States v. Seacott, 15 F.3d 1380 (7th Cir.

United States v. Stevens, 462 F.3d 1169 (9th

er cusecoccececces

United States v. Suarez. 911 F.2d 1016 (5th Cir

United States v. Sullivan, 255 F.3d 1256 (10th

Cir. 2001)

United States v. Thompson, 518 F.3d 832 (10th

Jir.), cert. denied, 129 S.Ct. 487 (2008) ..

United States v. Turner, 548 F.3d 1094 (D.C.

TT cuunseecocccecce an passim

United States v. Vivit, 214 F.3d 908 (7th Cir.

2000) teas Li Rae”

TABLE OF AUTHORITIES — Continued

Page

United States v. Vrdolyak, 593 F.3d 676 (7th

Cir. 2010). | 28

United States v. Wood, 486 F.3d 781 (3d Cir

2007) LD, lob

Weaver v. Graham, 450 U.S. 24 (1981) 35

STATUTES

15 U.S.C. § 77x 6

18 U.S.C. § 401 6

18 U.S.C. § 13841 6

18 U.S.C. § 1348 . 6

18 U.S.C. § 1503 6

18 U.S.C. § 1505 6

18 U.S.C. § 3553 passim

28 U.S.C. § 991 53

28 U.S.C. § 994 4. 32

Sentencing Reform Act of 1984, Pub. L. No

98-473, 98 Stat. 1987...... = 3,4, 5

Sarbanes-Oxley Act of 2002, Pub. L. No. 107

204 . |

TABLE OF AU'THORITIES — Continued

MISCELLANE¢

Hensley 1 (/nited States, No. 09-480. Bnef in

Opposition to Certiorari (U.S.) 16

Hensley v. United States, No. 09-480. Petition

for Certiorari (U.S.)

l/nited States v. Custable, 02 CR 1105-01 (N.D

[i1.)

United States v. Lanham, Nos. 08-6504, O&

6506, 09-5094, 09-5095, Docket (6th Cir.)

lU/nited States v. Lewis. Nos. 09-433. 09-4474

Docket (4th Cir.)

D. Berman, Sentencing Law and Policy Blog

(December 5, 2008, April 17, 2009, March 12

2010, May 27, 2010 and August 24, 2010)

J. Dillon, Doubting Demaree, 110 W. Va. L. Re

1033 (2008)

M Hosken, Kx Post Facto Protection Remain

in a Post-Booker Sentencing World, N.Y

Crim. Defense (August 28, 2010)

LD). Levy Defending Demaree: The kx Post Kacto

Clause Lack of Control Over the Kederal

Sentencing Guidelines After Booker 17

Fordham L. Rev. 2623 (2009)

|e Post Booker Retroac tive Applu ation Of

Federal Sentencing Guidelines, 83 Chi. Kent

L. Rev. 395 (2008)

TABLE OF AU'THORITH (Lontinued

(;

re. Ga IA. ] te

‘ ) (y I6b1.) } yr

/ ly iK1.] 3 +,

| i) i} ( )

(Const.. Article |. section 9 '

PETITION FOR A WRIT OF CERTIORARI

Petitioner Frank Custable respectfully petitions

for a writ of certiorari to review the judgment of the

United States Court of Appeals for the Seventh

Circuit.

— ¢ -——_-—__—

OPINION BELOW

The opinion of the United States Court of

Appeals for the Seventh Circuit (Pet. App. 1-12) is

published at 615 F.3d 824.

JURISDICTION

The judgment of the court of appeals was entered

on August 11, 2010. The jurisdiction of this Court is

invoked under 28 U.S.C. § 1254(1).

* —

CONSTITUTIONAL AND

STATUTORY PROVISIONS INVOLVED

Article I, section 9, clause 3 of the United States

Constitution provides in pertinent part, “No

ex post facto Law shall be passed.”

United States Sentencing Guidelines § 1B1.11

provides:

Use of Guidelines Manual in Effect on

Date of Sentencing (Policy Statement)

(a)

The court shall use the Guidelines

Manual in effect on the date that the

defendant is sentenced.

(1) If the court determines that use of

the Guidelines Manual in effect on the

date that the defendant is sentenced

would violate the ex post facto clause of

the United States Constitution, the court

shall use the Guidelines Manual in

effect on the date that the offense of

conviction was committed.

(2) The Guidelines Manual in effect on

a particular date shall be applied in its

entirety. The court shall not apply, for

example, one guideline section from one

edition of the Guidelines Manual and

another guideline section from a differ-

ent edition of the Guidelines Manual.

However, if a court applies an earlier

edition of the Guidelines Manual, the

court shall consider subsequent amend-

ments, to the extent that such amend-

ments are clarifying rather’ than

substantive changes.

(3) If the defendant is convicted of two

offenses, the first committed before, and

the second after, a revised edition of the

Guidelines Manual became effective, the

revised edition of the Guidelines Manual!

is to be applied to both offenses.

STATEMENT

In sentencing petitioner to 262 months in prison

on fraud and obstruction related convictions, the

district court, over petitioner’s objections, relied on

the United States Sentencing Guidelines Manual in

effect on the date of sentencing. Guidelines in effect

when petitioner committed the fraud offenses, how-

ever, produced a significantly lower sentencing range.

The relationship between the Ex Post Facto

Clause and amended, more onerous Guidelines has

sharply divided the circuits. The Seventh Circuit,

where petitioner was sentenced, has categorically

rejected application of the Ex Post Facto Clause under

circumstances such as those presented here. Even

after United States v. Booker, 543 U.S. 220 (2005),

however, retroactive application of the Guidelines, as

a practical matter, substantially risks increased

punishment.

1. Through the Sentencing Reform Act of 1984

(“SRA”), Pub. L. No. 98-473, 98 Stat. 1987, Congress

established and delegated authority to the United

States Sentencing Commission to prepare Sentencing

Guidelines to “further the basic purposes of criminal

punishment: deterrence, incapacitation, just pun-

ishment, and rehabilitation.” U.S.S.G., 1. Original

Introduction To The Guidelines Manual, 2. Statutory

Mission. Following legislative directives, the Sen-

tencing Commission initially submitted Guidelines

to Congress in April 1987. /d. at 1, Authority. “After

the prescribed period of Congressional review, the

guidelines took effect on November 1, 1987, and

appllied] to all offenses committed on or after that

date.” Jd. at 2. Statutory Mission.

Absent enactment of emergency Guidelines pur-

suant to legislative directive, the Sentencing Commis-

sion annually submits revised Guidelines to Congress

by May Ist. 28 U.S.C. § 994(p). “Such . .. amendment

or modification ... shall take effect on a date speci-

fied by the Commission, which shall be no earlier

than 180 days after being so submitted and no later

than the first day of November of the calendar year in

which the amendment or modification is submitted,

except to the extent that the effective date is revised

or the amendment is otherwise modified or disap-

proved by Act of Congress.” Jd.

2. Under Guidelines in effect until October 31,

2003, the fraud convictions at issue here called for a

base offense level of 6. U.S.S.G. § 2Bl1.1(a) (2002).

Under Guidelines in effect until January 24, 2003, a

4-level increase to the offense level for fraud convic-

tions was required if the offense involved more than

50 victims. U.S.S.G. § 2B1.1(b)(2).

Pursuant to the Sarbanes-Oxley Act of 2002, Pub.

L. No. 107-204, the Sentencing Commission, inter alia,

passed an emergency amendment effective January

25, 2003, requiring a 6-level increase to the offense

level for fraud if the offense “involved 250 or more

victims.” U.S.S.G., App. C., Amend. 647 (creating

U.S.S.G. § 2B1.1(b)(2\(C)). In an amendment effective

November 1, 2003, also pursuant to Sarbanes-Oxley,

the base offense level for fraud was increased from

6 to 7 “if (A) the defendant was convicted of an offense

referenced to this guideline; and (B) that offense of

conviction has a statutory maximum term of impris-

onment of 20 years or more.” U.S.8S.G., App. C.,

Amend. 653 (creating U.S.S.G. § 2B1.1(a)(1)).

3. United States v. Booker, 543 U.S. 220 (2005),

eradicated the mandatory nature of the United States

Sentencing Guidelines on Sixth Amendment grounds.

Booker did not dispense with the Guidelines alto-

gether — they remain an important part of the Fed-

eral sentencing process on a non-mandatory basis.

While the sentencing court must initially consult the

Guidelines and determine the appropriate sentencing

range, the sentencing judge cannot presume correct-

ness of a sentence within the Guidelines range.

Nelson v. United States, 129 S.Ct. 890 (2009) (per

curtam); Gall v. United States, 552 U.S. 38 (2007):

Rita v. United States, 551 U.S. 338, 351 (2007): see

also Spears v. United States, 129 S.Ct. 840, 843-44

(2009). Rather, the SRA still requires “a sentencing

court to consider Guidelines ranges. ... but it permits

the courts to tailor the sentence in light of other

statutory concerns as well.” 543 U.S. at 245-46.

With respect to appellate review post-Booker,

sentences are to be reviewed for reasonableness

under an abuse of discretion standard. Kimbrough v.

United States, 552 U.S. 85, 111 (2007); Gall, 552 U.S.

at 41; Booker, 543 U.S. at 262. An appellate court

“may, but is not required to, apply a presumption of

reasonableness” to a sentence within the Guidelines

range. Gall, 552 U.S. at 51; see also Rita, 551 U.S. at

347 (appellate presumption is not “binding,” and may

be rebutted by a showing that a sentence is unrea-

sonable in light of 18 U.S.C. § 3553(a) factors).

4. In April 2005, petitioner, eight other individ-

uals and two companies controlled by petitioner were

named as defendants in a 22-count indictment. R. 1.

Counts 1-17 alleged a series of wire and mail fraud

offenses. 18 U.S.C. §§ 1341, 1343. Counts 18 and 19

charged petitioner and others with filing false state-

ments with the Securities and Exchange Commission

(“SEC”). 15 U.S.C. § 77x. The indictment also con-

tained two obstruction of justice counts, 18 U.S.C.

§§ 1503(a) and 1505, and one contempt count. 18

U.S.C. § 401.

Petitioner entered a blind guilty plea to Counts

1-8, and 11-22.’ In a written declaration, petitioner

admitted to conduct charged in the indictment. Pet.

App. 28-54. As petitioner admitted, the wire/

securities fraud scheme lasted between April 2001

and June 2002. During that period, petitioner ille-

gally acquired “penny” shares of financially-distressed,

publicly-traded companies, caused the market to be

' Although petitioner was charged in Counts 9 and 10, he

did not plead guilty to those counts and they were ultimately

dismissed. 7/11/09 Tr. 3; 6/9/09 Tr. 13

stimulated artificially through spam e-mail, and then

attempted to sell the stock for a profit. In acquiring

the stock, petitioner circumvented securities registra-

tion laws by filing false SEC forms.

One of the obstruction of justice charges related

to the communication of false information to the SEC

by a co-schemer in July 2002. The remaining obstruc-

tion charge and contempt count related to petitioner’s

violations of an asset freeze order entered in a civil

case brought by the SEC. The illegal withdrawals

from the bank accounts at issue occurred in March

and April 2003. Pet. App. 44-45. Petitioner’s violation

of the asset freeze order was used in aggravation in

an earlier obstruction of justice case in which peti-

tioner was the defendant, United States v. Custable,

02 CR 1105-01 (N.D. Ill.) (Anderson, J.). 5/19/09

Tr. 38-43; R. 352.

5. In his written guilty plea declaration, peti-

tioner asserted that the 2001 version of Guidelines

governed. Pet. App. 45-46. The Presentence Investi-

gation Report (“PSR”) however, recommended appli-

cation of the 2008 Guidelines based on United States

v. Demaree, 459 F.3d 791 (7th Cir. 2006), cert. denied,

551 U.S. 1167 (2007). PSR 8. The PSR concluded that

petitioner’s base offense level should be set at 38.

Because the petitioner fell in criminal history cate-

gory II, the ensuing advisory sentencing range under

the Guidelines was 262-327 months imprisonment.

The PSR noted that “[t]he November 2002 edition of

the Guidelines Manual, which was in effect during

the commission of the offense, appears to be more

favorable to the defendant,” and concluded that the

total offense level would be 35 under those Guide-

lines. PSR 8, 29.

In his sentencing submission to the district court,

petitioner again urged use of the 2001 Guidelines.

R. 338. Petitioner argued that use of current Guide-

lines would violate the Ex Post Facto Clause. The

government, on the other hand, requested the court

to use the current Guidelines. R. 340.

At the initial sentencing hearing, the district

court recited the PSR’s 2008 Guidelines calculations

(Pet. App. 56-57), which it later accepted in full. See

United States v. Custable, No. 09-2593, Deft’s Brief,

Required Short App. (7th Cir.). The court determined,

inter alia, that the base offense level was 7, and

further increased petitioner’s base offense level by 6

levels because the offense involved more than 250

victims. Consistent with the PSR, the district court

set the final offense level at 38, criminal history

category II. /d.

In sentencing petitioner, the district court de-

scribed the Guidelines range as “quite high.” Pet.

App. at 63. Although the court found petitioner to

have “been very forthcoming and... provided exten

sive cooperation” to the government, it did not deviate

downward from the Guidelines range. Jd. The court

found it necessary to impose a lengthy sentence

within the Guidelines range, and sentenced petitioner

to 262 months imprisonment. /d. at 18, 67, 72.

Petitioner thereafter filed a motion to correct the

sentence. R. 352. Petitioner reasserted that retroactive

application of disadvantageous Guidelines violated

the Ex Post Facto Clause. The district court denied

the motion. Pet. App. 13-15. The court found that

Demaree foreclosed granting any relief on ex post

facto grounds.

6. Petitioner appealed, raising multiple points

relating to his sentence. The Seventh Circuit affirmed.

Pet. App. 1-12. The court of appeals rejected peti-

tioner’s ex post facto claim, stating as follows:

Finally, we dispose of Custable’s argument

that the court’s reliance on the 2008 version

of the Guidelines violates the Constitutional

prohibition against ex post facto lavs.

Custable claims that the 2008 Guidelines

impose a more serious offense level, and thus

a harsher sentence, than the Guidelines in

effect in 2001 or 2002 when he committed

the offenses. Section 2Bl1.1 of the 2002

Guidelines calls for a base offense level of

six, and a four-point enhancement for the

number of victims, instead of the six-point

increase Custable received under the 2008

Guidelines. But this argument is foreclosed

by United States v. Demaree, 459 F.3d 791,

795 (7th Cir. 2006). In Demaree, we held

that, because the Guidelines are only adviso

ry in nature, a court’s use of a later version

does not offend ex post facto. Jd. We find no

reason to abandon that conclusion today.

United States v. Nurek, 578 F.3d 618, 626

(7th Cir. 2009): see also United States uv.

Panice, 598 F.3d 426, 435 (7th Cir. 2010).

Pet. App. 8-9.

REASONS FOR GRANTING THE PETITION

For over two hundred years, the Ex Post Facto

Clause has been interpreted to preclude retrospective

application of “[e]very law that changes the punish-

ment, and inflicts a greater punishment, than the law

annexed to the crime, when committed.” Calder v.

Bull, 3 U.S. 386, 390 (1798) (Chase, J.). Indeed, in

Miller v. Florida, 482 U.S. 423 (1987), this Court

unanimously held that retroactive application of

State Sentencing Guidelines (enacted in a fashion

structurally similar to the United States Sentencing

Guidelines) violated the Ex Post Facto Clause appli-

cable to the States.

Prior to United States v. Booker, 53 U.S. 220

(2005), the circuits had unanimously agreed that the

Ex Post Facto Clause precluded retroactive applica-

tion of Guidelines that were more stringent than

those in effect when the defendant committed the

offense. The circuits, however, divided on the issue of

whether the Ex Post Facto Clause precludes applica-

tion of the one-book rule in U.S.S.G. §1B1.11 to

enhance a defendant’s sentence for particular offenses

occurring before the enactment of a Guidelines en-

hancement. Following Booker, the circuits became

firmly divided on the former proposition, and the

circuit split on the latter has not dissipated

In compliance with United States v. Demaree, 459

F.3d 791 (7th Cir. 2006), cert. denied, 551 U.S. 1167

(2007), the district court here increased petitioner’s

offense level for fraud by a total of three levels based

on Guidelines not in effect when petitioner engaged

in the fraud scheme. In United States v. Turner,

548 F.3d 1094 (D.C. Cir. 2008), the D.C. Circuit de

finitively rejected Demaree. The Seventh Circuit has

since consistently rejected requests to reconsider

Demaree, including in petitioner’s appeal. Pet. App

8-9.

The circuit split has become more pronounced in

the aftermath of Turner and Demaree. The Fourth

and Sixth Circuits recently spurned government

appeals in cases in which sentencing courts had

applied Guidelines in effect at the time of the offense,

as opposed to those in effect at sentencing. United

States v. Lanham, 617 F.3d 873 (6th Cir. 2010);

United States v. Lewis, 606 F.3d 193 (4th Cir. 2010)

The Second Circuit also recently rejected Demaree,

United States v. Ortiz, F.3d , 2010 WL 3419898

(2d Cir. 2010), and issued a decision on the one-book

rule, United States v. Kumar, 617 F.3d 612 (2d Cir

2010).

The Circuits Have Become Deeply Divid-

ed On Whether The £x Post Facto Clause

Precludes Retroactive Application Of Dis-

advantageous Sentencing Guidelines

A. While the Seventh Circuit has held

that the Ex Post Facto Clause categor-

ically is not implicated at a Post-

Booker sentencing, the D.C., Second,

Third, Fourth and Sixth Circuits have

ruled otherwise

Prior to United States v. Booker, 543 U.S. 220

2005), the courts of appeal had agreed that the

Post Facto Clause precluded a sentencing court from

using the Guidelines in effect on the date of sen

tencing if those Guidelines called for a higher sen

tence than those in effect when the defendant

committed the offense. See, e.g., United States v

Seacott, 15 F.3d 1380, 1386 (7th Cir. 1994); United

States v. Schnell, 982 F.2d 216, 218 (7th Cir. 1992)

(collecting cases). This unified approach initially

continued to apply post-Booker, including in the

Seventh Circuit. See, e.g., United States v. Baretz, 411

F.3d 867, 873-77 (7th Cir. 2005). United States '

Demaree, 459 F.3d 791 (7th Cir. 2006), cert. denied,

551 U.S. 1167 (2007), changed that

Seventh Circuit In Demaree, the district

court applied the Guidelines in effect on the date of

sentencing, but stated that it would have imposed

a lower sentence, if it could have used the Guidelines

in effect when the offense was committed. The

appeal raised the question of Booker’s effect when a

Guidelines revision renders the sentencing range

disadvantageous to a defendant as compared to the

Guidelines in effect when the crime was committed

The government conceded that the defendant should

have been sentenced under the earlier version of the

Guidelines. The Seventh Circuit refused to accept the

concession, and ruled that the Guidelines in effect on

the date of sentencing should be used in sentencing

even if they were more disadvantageous than those in

effect at the time of the offense.

Speaking through Judge Posner, the Seventh

Circuit acknowledged that Congress could not evade

ex post facto prohibitions “by delegating penal author

ity to an agency.” Demaree, 459 F.3d at 793

Miller v. Florida, 482 U.S. 423 (1987), the Seventh

Circuit noted that, pre- and post-Booker, the courts of

In view of

appeal had held that “changes in the [Federal] guide

lines could not be applied to defendants who had

committed their crimes before the changes if the

changes would increase the sentence.” Jd. at 793

Citing this Court’s ex post facto decisions, the court

acceded

Any of these formulas, interpreted literally

would encompass a change in even voluntary

sentencing guidelines, for official guideline

even if purely advisory are bound to in

fluence judges’ sentencing decisions. Most

federal sentences, as the parties note, con

tinue after Booker to be within the guide

lines’ sentencing range:

ld. at 794 (emphasis added)

ised to accept rovernment cCOnce ion oO] AN @a2

Le Violation on grounds that “it is a disservice

Lo courts to interpret their verbal formulas without

reference to context. Jd ‘he court olf appeal reu

oned that this Court's decision in Miller was distin

uishable because district courts were not required to

presume the Guideline ntence, and had untet

tered discretion, subject to “lhght” appellate review

LO Impose a sentence oul ide the Guidelines ranve. [i

it JOH According to the Se enth Circuit. the retronse

tive application of disadvantageous Guidelines in the

long rum would only have “a purely semantic effect

nce A entencing court could look to a revi

(ruideline as a reason to impose a higher sentence. /d

he court concluded that the ea NOSE facto clau

hould apply only t law ind regulation that bind

rather than advise i principle well established wit!

reference to parol ruideline Whos retroacti

ipplicatior hallenved under Live

la a

Liter ; i \} u l¢ Mant

ncludin pelilione! ner nave ontinued to advat

~p f Jact entencing wm eo U/nite

}? ( 4 eld 426 eh thy Coy O10) [/)

Stale Vurek 78 Ad OLS. 675-76 (7th Cr ATES.

ert. denied, 130 S.Ct. 2093 (April 19, 2010); Unit

Slate [ atte (}7 76 | a 13] fth ¢ r ALE DS, ‘ ( ry

denied 130 S.Ct i284 (January ) AGREE C/riste

Slat ak i hi \ i } i te S44 t thy . | Z00% cert

dey ( i Ri { .f fou hanuary } POLO [

States v. Hill, 563 F.3d 572 (7th Cir. 2009), cert.

denied, 130 S.Ct. 623 (November 16, 2009). The

Seventh Circuit has consistently refused to reconsider

Demaree. As stated by the Seventh Circuit in this case:

“In Demaree, we held that, because the Guidelines

are only advisory in nature, a court’s use of a later

version does not offend ex post facto ... We find no

reason to abandon that conclusion today.” Pet. App. 9.

2. Third Circuit In United States v. Wood,

486 F.3d 781, 789-91 (3d Cir. 2007), the government

conceded that the plain error test had been satisfied

where the district court had applied a post-Booker

Guidelines enhancement not in effect at the time of

the offense. Unlike the Seventh Circuit, the Third

Circuit accepted the government’s concession and

remanded for resentencing. The Wood opinion did not

cite or discuss Demaree.’

3. D.C. Circuit The D.C. Circuit expressly re-

jected Demaree in United States v. Turner, 548 F.3d

1094 (D.C. Cir. 2008). When the Turner defendant

committed his offense in 2001, the Guidelines base

offense level was 10, carrying a sentencing range of

21 to 27 months imprisonment. By 2006, the base

offense level had increased to 14, and the sentencing

range to 33 to 41 months imprisonment. Jd. at 1096.

* Subsequent Third Circuit cases have cited Wood for the

proposition that the Ex Post Facto Clause precludes retroactive

application of harsher Guidelines. See United States v. Jennings,

358 Fed.Appx. 367, 367 n. 1 (3d Cir. 2009) (per curiam); United

States v. Black, 338 Fed.Appx. 235, 237 (3d Cir. 2009).

The district court applied the Guidelines in effect

on the date of sentencing (2006), and imposed a

33-month prison sentence.

Because the Guidelines still serve as an “anchor”

and starting point, the D.C. Circuit reasoned that a

Guidelines version decision significantly affects

sentence severity, thereby implicating the Hx Post

Facto Clause. Jd. at 1099-1100. Because use of the

later Guidelines created a substantial risk of a higher

sentence, the court ruled that the Hx Post Facto

Clause had been violated. Jd. at 1100. Rejecting the

notion that Booker required a different result, the

court observed that, as a practical matter, the appel-

late presumption discussed in Rita v. United States,

551 U.S. 338, 351 (2007), prompted judges to impose

sentences within the Guidelines range. Jd. at 1099.

Citing Sentencing Commission statistics, the court

also noted that “most federal sentences fall within

Guidelines ranges even after Booker,” and that the

“Impact of Booker” on judges’ deviation from the

Guidelines has been “minor.” Jd.

4. Fourth Circuit As noted, the Department

of Justice conceded ex post facto sentencing errors in

Demaree and Wood. The Department thereafter

changed course. In August 2008, the Solicitor General

instructed the government to assert that the Ex Post

Facto Clause did not impede application of Guidelines

in effect on the date of sentencing, even if the Guide-

lines in effect at the time of the offense produced a

lower sentencing range. See Hensley v. United States,

No. 09-480, Brief in Opposition to Certiorari 15

(U.S.). In accordance with its revised position, the

government appealed a case in the Fourth Circuit in

which the district court had applied Guidelines in

effect at the time of the offense, rather than more

stringent Guidelines in effect on the date of sentenc-

ing. See United States v. Lewis, 603 F.Supp. 2d 874

(E.D. Va. 2009).

The Fourth Circuit joined the D.C. Circuit “in

concluding ... that the retroactive application of

severity-enhancing Guidelines amendments contra-

venes the Ex Post Facto Clause.” United States v.

Lewis, 606 F.3d 193, 199 (4th Cir. 2010). The court

concluded that the correct ex post facto test is

whether, “practically speaking,” the revised Guide-

lines “created a significant risk of increased punish-

ment for Lewis.” Jd. at 200. The court disagreed with

the government’s argument that a sentencing court’s

post-Booker discretion obviated ex post facto concerns

since a sentencing court still must “begin all sentenc-

ing proceedings by correctly calculating the applica-

ble Guidelines range,” /d. at 200 (quoting Gall uv.

United States, 552 U.S. 38, 49 (2007)), and its failure

to do so constitutes error. The standard of review

applicable to sentencing claims, and the district

court’s obligation to provide sufficiently compelling

reasons for variances from the Guidelines, buttressed

this determination. The court further looked to statis-

tics to “emphasize the practical effect of the advisory

Guidelines” on sentencing decisions. Jd. at 201-02.

In this regard, the court pointed out that 81.9 percent

of sentences in the Fourth Circuit during fiscal year

2009 fell within the advisory Guidelines range or a

government-sponsored departure, and found this

“undercut the Government’s characterization” of the

Guidelines as “merely providing helpful advice.” /d.

at 202.

The Fourth Circuit was also “unconvinced by the

Seventh Circuit’s contrary reasoning in Demaree.” Id.

“On the contrary, we are more persuaded by the D.C.

Circuit’s description of the Guidelines as an impor-

tant ‘anchor’ for a sentencing judge,” said the Lewis

court. Id. The court criticized Demaree for taking “an

overly narrow view of the scope of the Ex Post Facto

Clause.” Jd. In addition, the Fourth Circuit took issue

with the Seventh Circuit’s description of the sen-

tencing and appellate processes.

The Fourth Circuit held that a defendant is not

required to “show definitively” that he would have

received a higher sentence if the court had used later

Guidelines. Jd. at 203. Rather, the appropriate analy-

sis is whether the application of the revised Guide-

lines poses a “significant risk” of an increased

sentence. Jd. Finding Lewis had made the required

showing, the court of appeals refused to overturn the

district court’s use of earlier, more advantageous

Guidelines.

In Lewis, Chief District Judge Goodwin, sitting

by designation, dissented on the ex post facto issue.

The government filed a petition for rehearing en

banc, which was denied on July 26, 2010. United

States v. Lewis, Nos. 09-4343, 09-4474, Docket Entry

#53 (4th Cir.). The government did not petition for

certiorari in Lewis.

5. Sixth Circuit United States v. Lanham,

617 F.3d 873 (6th Cir. 2010), brought another gov-

ernment sentencing appeal. The Lanham defendants

committed their offenses in 2003 when the 2002

Guidelines were in effect. Jd. at 889. The 2008 Guide-

lines in effect at sentencing resulted in a higher base

offense level. On appeal, the government maintained

that use of the 2008 Guidelines would not have

violated the Ex Post Facto Clause. The government

argued that Booker had derailed Miller v. Florida,

482 U.S. 423 (1987), as well as earlier circuit prece-

dent finding that ex post facto principles precluded

retroactive application of more onerous Guidelines.

The Sixth Circuit rejected this argument. It found

that the presence of discretion “does not displace the

protections of the Ex Post Facto Clause.” 617 F.3d at

889 (citations omitted). The court of appeals empha-

sized that “[t]he Sentencing Guidelines are still

relevant and are a starting point for determining a

defendant’s sentence.... As a result, the advisory

nature of the Guidelines does not completely elimi-

nate Ex Post Facto concerns.” Jd. at 889-90.

On October 7, 2010, the government filed a

petition for en banc rehearing. United States v. Lan-

ham, Nos. 08-6504, 08-6506, 09-5094, 09-5095, Doc-

ument 006110754186 (6th Cir.). As of the date this

petition went to press, the Sixth Circuit has not taken

any action on the government’s rehearing petition.

6. Second Circuit Prior to United States v.

Ortiz, __ F.3d ___, 2010 WL 3419898 (2d Cir. 2010),

the post-RBooker ex post facto sentencing issue had

been an open question in the Second Circuit. See

United States v. Kumar, 617 F.3d 612, 642 (2d Cir.

2010) (Sack, J., concurring and dissenting). In Ortiz,

the Second Circuit addressed “whether, and under

what circumstances, a more onerous guideline, issued

by the United States Sentencing Commission after

the date of an offense, renders a sentence imposed

under the advisory Guidelines regime in violation of

the Ex Post Facto Clause.” 2010 WL 3419898, *1.

After surveying the circuit split, the Second Circuit

rejected the Seventh Circuit’s categorical rejection of

post-Booker ex post facto sentencing claims. Id. at *4.

Instead, the Second Circuit adopted the “substantial

risk” approach employed by the D.C. Circuit in

Turner. Id. The Second Circuit found that this test

remained “faithful to Supreme Court jurisprudence

explaining that the Clause protects against a post-

offense change that ‘create[s] a significant risk of

increas[ing] [the] punishment.’” Jd. (quoting Garner

v. Jones, 529 U.S. 244, 255 (2000)).°

B. The First, Fifth, Eighth, Ninth and

Tenth Circuits have voiced opinions

on the issue in dicta

Other circuits have discussed in dicta whether the

Ex Post Facto Clause precludes retroactive application

* The Ortiz court determined the defendant was not entitled

to remand since the district court had imposed a sentence below

the unamended Guidelines range. In United States v. Faison,

2010 WL 3548847 (2d Cir. 2010), the Second Circuit vacated and

remanded a sentence for consideration of an ex post facto point

in view of Ortiz.

of disadvantageous, revised Guidelines in the wake of

United States v. Booker, 543 U.S. 220 (2005). The

First, Eighth, Ninth and Tenth Circuits have sug-

gested or assumed that the Ex Post Facto Clause is

implicated in a post-Booker sentencing proceeding.

Only the Fifth Circuit has intimated otherwise.

1. First Circuit In United States v. Gilman,

478 F.3d 440, 449 (1st Cir. 2007), the court stated in

dicta that the holding in United States v. Demaree,

459 F.3d 791 (7th Cir. 2006), cert. denied, 551 U.S.

1167 (2007), was “doubtful in this circuit.” More

recently, the First Circuit declared that it “expect(s]

that the Ex Post Facto Clause requires application of

the older Guidelines if those would be more lenient.”

United States v. Jaca-Nazario, 521 F.3d 50, 56 (1st

Cir. 2008).

2. Eighth Circuit In United States v. Ander.

son, 570 F.3d 1025, 1034 n. 7 (8th Cir. 2009), the court

assumed, without deciding, that the Ex Post Facto

Clause applies to Guidelines determinations post-

Booker. In United States v. Carter, 490 F.3d 641,

645-46 (8th Cir. 2006), the court suggested in dicta

that, after Booker, “retrospective application of the

Guidelines implicates the ex post facto clause.”

In United States v. Deegan, 605 F.3d 625, 631-32

(8th Cir. 2010), the district court used Guidelines in

effect when the crime was committed. At sentencing,

the district court mentioned later Guidelines that

would have almost doubled the sentencing range. On

appeal, the defendant submitted that the district

hat ha

court had erred in mentioning (but not applying) later

Guidelines. The Eighth Circuit acknowledged the

dichotomy between Demaree and Turner, and deemed

the role of the Ex Post Facto Clause post-Booker “an

open question in this circuit.” Jd. at 632. With respect

to defendant’s appellate objection, the Deegan court

found that defendant had not so objected at sen-

tencing, and saw “no obvious error in the court’s

consideration of [the] information” contained in the

later Guidelines. 605 F.3d at 632.

3. Ninth Circuit The Ninth Circuit has

suggested that the advisory Guidelines implicate the

Ex Post Facto Clause. In United States v. Stevens, 462

F.3d 1169, 1172 (9th Cir. 2006), the court vacated and

remanded a sentence that had been calculated by

reference to a substantive Guidelines amendment

that had not been in effect when the defendant com-

mitted the offense. The court in United States v.

Rising Sun, 522 F.3d 989, 993 n.1 (9th Cir. 2008),

stated in dicta that the district court had correctly

determined that the Ex Post Facto Clause would be

implicated by retrospective application of Guidelines

that were more onerous than those in effect at the

time of the offense.

4. Tenth Circuit In United States v. Thomp-

son, 518 F.3d 832 (10th Cir.), cert. denied, 129 S.Ct.

487 (2008), the court addressed a post-Booker ex post

facto sentencing claim under the plain error standard

of review. The court ruled that the defendant had

not shown district court error in Guidelines selec-

tion. Quoting pre-Booker precedent, the court stated,

“the ex post facto clause ‘bars the sentencing court

from retroactively applying an amended guideline

provision when that amendment disadvantages the

defendant.’” Id. at 869-70 (citation omitted).

5. Fifth Circuit In United States v. Castillo

Estevez, 597 F.3d 238 (5th Cir. 2010), the defendant

contended that the application of 2008, as opposed to

2007, Guidelines violated the Ex Post Facto Clause.

The Fifth Circuit reviewed the point for plain error.

Id. at 240. While the Fifth Circuit had held (pre-

Booker) that retrospective application of disadvanta-

geous Guidelines violates the Ex Post Facto Clause,

United States v. Suarez, 911 F.2d 1016, 1021 (5th Cir.

1990), the court commented that the defendant’s

argument overlooked that Booker had rendered the

Guidelines advisory. Castillo-Estevez, 597 F.3d at 240.

The court acknowledged the circuit conflict, and cited

Chief Judge Jones’ concurring opinion in United

States v. Rodarte-Vasquez, 488 F.3d 316 (5th Cir.

2007), which had embraced Demaree. The Castillo-

Estevez court, however, did not determine “whether

ex post facto claims arising from the application

of evolving sentencing guidelines are viable after

Booker,” 597 F.3d at 241, since the alleged error did

not rise to the level of plain error. Cf. United States v.

Austin, 479 F.3d 363 (5th Cir. 2007) (acknowledging

in dicta that retrospective application of disadvanta-

geous Guidelines might pose ex post facto problems).

C. The Seventh Circuit has wrongly con-

strued this Court’s ex post facto juris-

prudence

The Seventh Circuit’s position cannot be recon-

ciled with Miller v. Florida, 482 U.S. 423 (1987),

which unanimously found that retroactive application

of disadvantageous Sentencing Guidelines violated

the Ex Post Facto Clause applicable to the States. It

is true the Miller Court described Florida’s Guidelines

as decrecing a “presumptive” sentencing range, and

Rita v. United States, 551 U.S. 338, 354-55 (2007),

determined that a federal sentencing court should not

presume a sentence within the Guidelines range to be

correct. But this Court’s ex post facto jurisprudence is

clear: substance prevails over form. Collins v. Young-

blood, 497 U.S. 37, 46 (1990) (attaching a “proce-

dural” label to a law does not exempt the law from ex

post facto scrutiny since “[s]ubtle ex post facto viola-

tions are no more permissible than overt ones”);

Cummings v. Missouri, 71 U.S. 277, 325 (1867) (“the

Constitution deals with substance, not shadows... ”);

see also Stogner v. California, 539 U.S. 607, 616

(2003). Even after United States v. Booker, 543 U.S.

220 (2005), the Guidelines carry weight at sen-

tencing; a sentencing judge cannot altogether ignore

them, and must start the process by correctly calcu-

lating the Guidelines. Gall v. United States, 552 U.S.

38, 49 (2007).

The Seventh Circuit relied upon the sentencing

judge’s “unfettered” discretion as a reason for refus-

ing to dub the Guidelines “binding” laws subject to

ex post facto restraints. United States v. Demaree, 459

F.3d 791, 795 (7th Cir. 2006), cert. denied, 551 U.S.

1167 (2007). Garner v. Jones, 529 U.S. 244, 255

(2000), however, makes clear that the presence of

discretion does not displace an ex post facto objection.

This Court’s most recent ex post facto cases also

evidence that the correct test — one that has not been

applied by the Seventh Circuit — is whether there is a

“substantial risk” that retroactive application of a

penal law will increase punishment. /d. at 250-52,

255; California Department of Corrections v. Morales,

514 U.S. 499, 509 (1995). Critical for ex post facto

purposes is the practical consequence of retroactive

application of a law. Garner, 529 U.S. at 255.

Petitioner has satisfied this Court’s formulation.

In practice, the Guidelines produce an “anchor” likely

to influence the actual sentence. United States v.

Lewis, 606 F.3d 193, 202 (4th Cir. 2010); United

States v. Turner, 548 F.3d 1094, 1099-1100 (D.C. Cir.

2008). That was the case here: the district court

imposed a sentence within the range dictated by

higher Guidelines in effect on the date of sentencing,

and steadfastly refused to be guided by a lower

Guidelines range in effect at the time of the fraud

offenses. Practically speaking, the district court

increased petitioner’s sentence through use of Guide-

lines not in effect when petitioner committed the

fraud offenses. Contrary to the Seventh Circuit’s

position, retroactive application of an altered “sub-

stantive ‘formula’ used to calculate the applicable

sentencing range” violates the Hx Post Facto Clause.

Morales, 514 U.S. at 505; see also Lynce v. Mathis,

519 U.S. 433, 446-47 (1997) (retroactive application of

good time cancellation statute “unquestionably dis-

advantaged petitioner [and] ... prolonged his impris-

onment”); Miller, 482 U.S. at 432-33 (“[pletitioner .. .

was ‘substantially disadvantaged’ by the retrospective

application of the revised guidelines to his crime”).”

In Garner, this Court stated that the “genera!

operation” of an amended law could substantially risk

increased punishment. 529 U.S. at 255. As petitioner

demonstrated below, that was the case here. The

United States Sentencing Commission’s Final Report

on Impact of United States v. Booker showed that

most sentences were within the Guidelines range

“The Demaree court also resisted applying the Ex Post

Facto Clause to post-Booker sentencings on “semantic” grounds

459 F.3d at 795. That is, a judge who desires to apply a sentence

within a new, more stringent Guidelines range could say she

used the new Guideline information to pick a sentence consis

tent with 18 U.S.C. § 3553(a). The D.C. Circuit has rejected this

rationale. Turner, 549 F.3d at 1099 (“we reject the idea that dis-

trict judges will misrepresent the true basis for their actions”).

It is also ironic that the Seventh Circuit deemed “unattrac-

tive” the government’s quest to commit judges to the Guidelines

by conceding the ex post facto violation. Demaree, 459 F.3d at

795. “This produces the paradox that while the ex post facto

clause is intended to protect criminal defendants, it is here

invoked by the government in the hope that it will lead to longer

sentences.” Jd. But that is the effect of Demaree. As exemplified

by this case, more stringent Guidelines in effect on the date of

sentencing yielded a longer sentence than would have been

imposed if the Guidelines in effect at the time of the fraud

offenses had been used.

after United States v. Booker, 543 U.S. 220 (2005)

see United States v. Custable, No. 09-2593, Deft's

Brief 41 (7th Cir.). Other data confirmed that sen

tences under the Guidelines range were in the minor

ity on a national basis. See Custable, supra 41-42

(citing United States Sentencing Commission, Post

Kimbrough/Gall Data Report, Table 1 (2009) (report

ing below Guidelines sentences based purely on

§ 3553(a) factors in 6.5% cases post-Booker, and in

9.4% cases following Kimbrough v. United States, 552

U.S. 85 (2007), and Gall v. United States, 552 U.S. 38

(2007)). Petitioner also pointed out that below

Guidelines sentencing in the Seventh Circuit based

purely on § 3553(a) factors had occurred in 8.9% cases

post-Booker, and in 16.1% cases post-Kimbrough/

Gall). Custable, supra 41 n. 9 (citing Post Kimbrough

Gall Data Report, Table 1-7).’

The Seventh Circuit also relied on “light” appel

late review of post-Booker sentences to justify it:

position. See Demaree, 495 F.3d at 795. The Sev

enth Circuit, however, subsequently clarified that

’ According to data released by the Sentencing Commission

following the filing of petitioner’s Seventh Circuit brief, this

trend has not abated. The majority of sentences (on a national

basis) imposed during the second and third quarters of 2009

were within the Guidelines range or consistent with a govern

ment sponsored departure motion. See http://ussc.gov/se_ cases/

USSC_2008_Quarter_Report_2nd.pdf; http://www.ussc.gov/sc_cases/

USSC_2008 Quarter_Report 3rd.pdf. Below-Guidelines sentences

for non-government sponsored reasons occurred in 13.1% of

sentencinys in the third quarter of 2008, and in 12.7% of the

sentencings in the second quarter of 2008. Id

nlencing review “is now to be robust, albeit defer

ential.” United Siates v. Aputlar-Huerta, 576 F.3d

365, 367 (7th Cir. 2009) (emphasis added). Not only

must the judge start the sentencing process by cor

rectly calculating the Guidelines, but Guideline

calculations are subject to “plenary” appellate review

See United States v. Vrdolyak, 593 F.3d 676, 683 (7th

Cir. 2010) (citing Gall, 552 U.S. at 51). As the D.C

Circuit correctly perceived, the appellate review post

Rita is more likely to produce sentences within the

Guidelines range. Turner, 548 F.3d at 1099

The Demaree court also predicated its holding on

the relationship between parole guidelines and the Ma

Post Facto Clause. But this Court has not held that

parole guidelines are off-limit to the x Post Facto

Clause. See Kyle v. Lindsay, 2007 WI, 1450¢'2, *3

n. 6 (M.D. Pa. 2007). In fact, Garner remande rive

petitioner the opportunity to seek discovery on the

issue of whether the practical retroactive implemen

tation of a parole rule significantly risked increased

punishment. 529 U.S. at 257

As petitioner cited to the Seventh Circuit, few within

Guidelines sentences had been overturned on appeal. See

Custable, supra 41 (citing 2008 Sourcebook, Table 57 (reporting

a 94.4% alffirmance rate on a national basis in cases in which

defendants appealed a sentence based on § 3553(a) factors

during fiscal year 2008); 2007 Sourcebook, Table 57 (reporting: a

96.9% affirmance rate on a national basis in cases in which

defendants appealed a sentence based on § 3553(a) factors

during fiscal year 2007). On the other hand, “[wihen the pov

crnment appeals, below guideline sentences on § 3553

grounds are reversed more often than not.” Custable, supra 41

Garner also held that an agency’s policies are

relevant to the ex post facto analysis, and faulted the

court of appeals for not considering a parole board’s

internal policy statement. Jd. at 256. “At a minimum,

policy statements, along with the Board’s actual

practices, provide important instruction” on the issue

of whether the significant risk test has been met. /d.

Here, a Guidelines policy statement expressly con-

templates Ex Post Facto Clause relevance. See

U.S.S.G. §1B1.11(b)(1). The Seventh Circuit has

not squarely addressed this policy statement, or

explained its non-pertinence in a post-Booker sen-

tencing.

Finally, it is no answer to say that 18 U.S.C.

§ 3553(a)(4)(A)(Gii) requires a court to apply the Guide-

lines in effect on the date of sentencing. First, this

statute was enacted before this Court’s decision in

Miller. Second, § 3553(a)(5)(B) expressly requires the

court to apply relevant Sentencing Commission policy

statements in effect on the date of sentencing. By its

policy statement in §1B1.11, the Sentencing Com-

mission clearly envisions that the Hx Post Facto

Clause may be implicated at sentencing.

D. This Court’s review is warranted

because the constitutional question

presented recurs often and cannot

be resolved by the Sentencing Com-

mission

The question presented herein frequently recurs.

This much is evident from the discussion above. See

also Hensley v. United States, No. 09-480, Petition for

Certiorari 20-22 n. 8 (U.S.) (citing over 55 cases in

which the ex post facto sentencing issue had arisen

since Booker). Nearly every circuit has either issued a

ruling, or voiced an opinion in dicta on the question of

whether, following United States v. Booker, 543 U.S.

220 (2005), a sentencing judge should calculate

Guidelines on the basis of those in effect at sen-

tencing if they produce a higher advisory sentencing

range than the ones in effect when the defendant

committed the offense.’

" The importance of the issue is also evident from legal and

scholarly commentary. See D. Berman, Sentencing Law and

Policy Blog (December 5, 2008, April 17, 2009, March 12, 2010,

May 27, 2010 and August 24, 2010), available at http://

sentencing.typepad.com; J. Dillon, Doubting Demaree, 110 W.

Va. L. Rev. 1033 (2008); M. Hosken, Ex Post Facto Protection

Remains tn a Post-Booker Sentencing World, N.Y. Crim. Defense

(August 28, 2010), available at http://newyorkcriminaldefense

blogspot.com/2010/08/ex-post-facto-protection-remains-in.html; D.

Levy, Defending Demaree: The Ex Post Facto Clause’s Lack of

Control Over the Federal Sentencing Guidelines After Booker, 77

Fordham L. Rev. 2623 (2009); Ex-Post-Booker: Retroactive Appli-

cation of Federal Sentencing Guidelines, 83 Chi. Kent L. Rev

395 (2008).

Given that Congress regularly proposes upward

revisions to the Guidelines, see U.S.8.G., App. C

(2010), the issue will continue to arise. It is in the

interest of fair sentencing policy for a single national

standard to be employed. Until this Court ends the

circuit split, courts will answer the question pre-

sented herein differently depending on the sentencing

court's geographic location. Defendants in the Sev-

enth Circuit, and likely the Fifth Circuit, will have

their Guidelines calculated through use of the Guide-

lines in effect on the day of sentencing — even if

Guidelines in effect when the crimes were committed

yield a lower sentencing range. Similarly situated

defendants in other circuits will or likely will have

their Guidelines computed on the basis of the Guide-

lines in effect at the time of the offense.

This is not a problem the Sentencing Commission

can resolve. Since 1992, U.S.S.G. § 1B1.11(b)(1) has

been in effect. This policy statement requires a sen-

tencing court to apply a single Guidelines Manual in

effect on the date of sentencing unless the “court

determines that use of the Guidelines Manual in

effect on the date that the defendant is sentenced

would violate the ex post facto clause of the United

States Constitution.” The Sentencing Commission

has not revised this policy statement in any of the

annual amendments submitted to Congress following

Booker, or United States v. Demaree, 459 F.3d 791,

795 (7th Cir. 2006), cert. denied, 551 U.S. 1167 (2007).

While the Sentencing Commission may take a side in

a circuit split, it lacks authority to overrule a court of

appeals decision. See 28 U.S.C. § 994 (setting forth

Sentencing Commission’s duties). By its continued

commitment to § 1B1.11(b)(1), the Sentencing Com-

mission recognizes that the Ex Post Facto Clause

retains viability post-Booker.

E. The time has come for this Court to

resolve the circuit split

In Hensley, a Seventh Circuit defendant applied

for certiorari on grounds that a higher sentencing

range had been retroactively applied in his case.

Hensley v. United States, No. 09-480 (U.S.). In a

response to this certiorari petition filed in October

2009, the Solicitor General acknowledged the split

between Demaree and Turner, but took the position

that the “conflict does not currently warrant inter-

vention by this Court.” Hensley, supra, U.S. Brief In

Opposition 9. The government portended future

review of the question:

If the conflict between the Seventh and D.C.

Circuits persists, the issue may eventually

warrant this Court’s resolution in an appro-

priate case. But until the D.C. Circuit has an

opportunity to revisit its views, in light of

both this Court’s recent decisions and the

changed position of the United States, the

conflict does not warrant the Court’s review.

Id. at 15.

This Court denied certiorari in Hensley, 130 S.Ct.

1284, as well as in other cases raising the ex post

facto question presented herein. Hensley, supra, U.S.

Brief In Opposition 9 (citing cases); supra, 14. Since

those cases, the circuit division has matured. Given

the recent decisions of the Second, Fourth and Sixth

Circuits, the dispute is now more than just between

the Seventh and D.C. Circuits. Because of the recent

emergence of a clear circuit conflict, and the en-

trenchment of Demaree in the Seventh Circuit, the

case for this Court’s review is much stronger now

than it was earlier.

Because liberty is implicated at sentencing, the

issue presented here is obviously important. It is

unfair that defendants, say, in Chicago, Milwaukee or

Indianapolis receive longer prison sentences than

similarly situated defendants in Washington, D.C.,

Richmond or Detroit. If Congress’ goal of eliminating

sentencing disparity on a national basis, 18 U.S.C.

§ 3553(a)(6), 28 U.S.C. § 991(b)(1)(B), U.S.S.G. § 1A1.1,

Application Note, and Booker, 543 U.S. at 264, means

anything, then the length of a prison sentence should

not be substantially affected by the geographic loca-

tion of the sentencing court.

II. The Circuits Are Also Divided On The

Question Of Whether Application Of The

“One-Book” Rule May Violate The Ex Post

Facto Clause

Both before and after United States v. Booker,

543 U.S. 220 (2005), the circuits have decisively

split on an additional ex post facto Guidelines issue:

whether application of the one-book rule in U.S.S.G.

§ 1B1.11(b)(2) and (3) violates “the Hx Post Facto

clause when applied to the sentencing of offenses

committed both before and after the publication of the

Guidelines.” United States v. Kumar, 617 F.3d 612,

628 (2d Cir. 2010). In the Seventh Circuit, United

States v. Demaree, 459 F.3d 791, 795 (7th Cir. 2006),

cert. denied, 551 U.S. 1167 (2007), obviously sub-

sumes a negative answer to this question. In addi-

tion, in United States v. Vivit, 214 F.3d 908, 919 (7th

Cir. 2000), the Seventh Circuit rejected the argument

that the Ex Post Facto Clause could vitiate the one-

book rule.*

The issue is illustrated by the Second Circuit’s

recent 2-1 ruling in Kumar. There, the defendants

participated in a fraud scheme that ended in 2000. In

August and September 2003, the defendants commit-

ted obstruction of justice by making false statements

about the fraud to prosecutors and the SEC. Defend-

ants pled guilty. At sentencing, the district court

applied the 2005 Guidelines, which resulted in a

substantial disadvantage since Guidelines in effect

at the time of the fraud produced a much lower

sentencing range.

* A concurring opinion in Vivit theorized that the “gymnas-

tics” performed by the majority were unnecessary because the

Guidelines were not “laws” subject to ex post facto restraints.

214 F.3d 924 (Easterbrook, J., concurring).

The Second Circuit affirmed. It noted that “(a]

majority of circuit courts has held that the one-book

rule does not contravene the Ex Post Facto clause, ‘at

least as applied to a series of similar offenses.’” 617

F.3d at 626 (citation omitted). The Second Circuit

elucidated that the Fourth, Fifth, Eighth, Tenth and

Eleventh Circuits agree with the Seventh Circuit’s

approach as discussed in Vivit. Id. Cases on this side

of the equation include: United States v. Sullivan, 255

F.3d 1256, 1262-63 (10th Cir. 2001); United States v.

Lewis, 235 F.3d 215, 218 (4th Cir. 2000); United

States v. Kimler, 167 F.3d 889, 893-95 (5th Cir. 1999);

United States v. Bailey, 123 F.3d 1381, 1404-05 (11th

Cir. 1997); United States v. Cooper, 35 F.3d 1248,

1254-55 (8th Cir. 1994), vacated, 514 U.S. 1094

(1995), reinstated, 63 F.3d 761, 762 (8th Cir. 1995)

(per curiam). “The Third and Ninth circuits, however,

have rejected the Commission’s position as incompat-

ible with the Ex Post Facto clause.” 617 F.3d at 626.

The cases on this side of the equation are: United

States v. Ortland, 109 F.3d 539, 547 (9th Cir. 1997);

United States v. Bertoli, 40 F.3d 1384, 1404 (3d Cir.

1994).

The majority in Kumar sided with cases finding

no ex post facto violation when the one-book rule

results in application of a single Guidelines Manual

to offenses committed before and after revisions. Id.

The Second Circuit ruled that an ex post facto viola-

tion turns on the deprivation of fair notice, as opposed

to a right to less punishment. /d. (citing Weaver uv.

Graham, 450 U.S. 24, 30 (1981)). The court reasoned

that the one-book rule placed the defendants on

notice prior to their commission of obstruction offens-

es. The court also analogized the one-book to recidi-

“vism statutes. Jd. at 629 (citing Gryger v. Burke, 334

U.S. 728 (1948)).

Judge Sack dissented. He discerned “inherent

tension between the one-book rule and the Ex Post

Facto clause.” Id. at 641-42. Concerning the notice

issue, Judge Sack wrote, “it seems to me that the

notice that the defendants received here was notice as

to punishment for the wrong crime.” Jd. at 643. The

revised Guidelines provided “inconsequential notice,”

according to the dissent, since the defendants were

subjected to increased sentencing ranges for already-

completed crimes. /d.; see also Sullivan, 255 F.3d at

1266 (Kelly, J., dissenting). Judge Sack disputed that

the one-book rule provided sufficient notice. 617 F.3d

at 648 (quoting Miller v. Florida, 482 U.S. 423, 431

(1987) (“[t]he constitutional prohibition against ex

post facto laws cannot be avoided merely by adding to

a law notice that it might be changed”)). In addition,

the dissent found the majority’s reliance on recidi-

vism laws unpersuasive since the later crime trig-

gered an “‘additional penalty for ... earlier crimes.’”

Id. at 649 (quoting Gryger, 334 U.S. at 732) (empha-

sis supplied in Kumar). Judge Sack further stressed

that this Court requires “fair notice,” and reasoned

that the notice provided to the defendants was

not. Id. at 648, 650. Judge Sack thus concluded that

the retroactive application of revised Guidelines

to the defendants’ fraud offenses transgressed the

well entrenched prohibition of “inflictiing] a greater

punishment, than the law annexed to the crime,

when committed.” Jd. at 650 (citing Calder v. Bull, 3

U.S. 386, 390 (1798) (Chase, J.)).

The role of the one-book rule and the Ex Post

Facto Clause is also at issue in this case. The issue

arises in connection with the 6-level enhancement for

fraud offenses involving more than 250 victims.

U.S.S.G. § 2B1.1(b)(2)(C). There was no dispute that

the fraud scheme ended in June 2002. See Pet. App.

9, 16, 29-43. After the fraud scheme ended, the Sen-

tencing Commission passed an emergency amend-

ment, effective January 25, 2003, creating the 6-level

enhancement in § 2B1.1(b)(2)(C). (Prior Guidelines

had directed a 4-level increase for fraud offenses in-

volving more than 50 victims. U.S.S.G. § 2B1.1(b)(2)

(2001).) In March and April 2003, following passage of

§ 2B1.1(b)(2X(C), petitioner committed obstruction

and contempt by violating an asset freeze order

entered in a civil case filed by the SEC. Pet. App.

44-45.

Like Kumar, this case involves a situation in

which the fraud Guidelines were enhanced (insofar

as the “more than 250 victims” upward adjustment

is concerned) not on the basis of the Guidelines in

effect when petitioner committed fraud, but because

of later obstruction offenses. (Notably, obstruction

Guidelines were not upwardly revised after peti-

tioner’s fraud and his sentencing date.) The issue of

whether application of the one-book rule violates the

Ex Post Facto Clause in this circumstance has divided

lower courts since the onset of the Guidelines. The

circuit split discussed above evidences that the issue

recurs. It is worthy of this Court’s review, and pro-

vides this Court with an opportunity to resolve both

circuit splits regarding the Ex Post Facto Clause and

the Guidelines.

III. This Case Is An Appropriate Vehicle To

Resolve Important Ex Post Facto Issues

Under The Guidelines

This case is suitable for this Court’s review. A

central concern of the Ex Post Facto Clause is impli-

cated — retroactive application of a penal law that

increased punishment. See, e.g., Johnson v. United

States, 529 U.S. 694, 699 (2000) (describing retroac-

tive application of laws increasing punishment to be

the “heart of the Ex Post Facto Clause”). There is no

question that more onerous Guidelines in effect when

petitioner was sentenced (but not when he committed

any of the fraud offenses) triggered the aggravated

offense level score. In sentencing the petitioner, the

district court did not pick the 262-month prison

sentence out of “thin air.” United States v. Turner, 548

F.3d 1094, 1100 (D.C. Cir. 2008). To the contrary, the

262-month prison term was the bottom of the Guide-

lines range in effect on the date of sentencing. While

the district court described the sentencing range as

“quite high,” Pet. App. 63, it did not deviate down-

ward, or consult earlier Guidelines that would have

produced a lower sentencing range. The later, more

stringent Guidelines had the practical effect of in-

creasing the amount of time petitioner must spend in

prison. Because the Guidelines in effect when peti-

tioner committed the fraud offenses produced a lower

offense level score, petitioner’s ex post facto claim is

neither speculative nor attenuated. Cf. Lynce uv.

Mathis, 519 U.S. 433, 450 (1997) (Thomas, J., con-

curring); California Department of Corrections v.

Morales, 514 U.S. 499, 509 (1995).

Petitioner recognizes that the government has

filed a petition for rehearing en banc in United States

v. Lanham, 617 F.3d 873 (6th Cir. 2010). If the Sixth

Circuit votes to hear that case, certiorari should not

be denied in this case. As discussed above, the circuit

split is now well entrenched. Because the Seventh

Circuit has steadfastly refused to reconsider its

position on the relationship between the Ex Post

Facto Clause and the Guidelines, any further Sixth

Circuit review could not cure the circuit split.

If the government ultimately applies for certio-

rari in Lanham, this case presents a better vehicle for

review. Lanham only raises the issue of whether the

Ex Post Facto Clause permits retroactive application

of Guidelines in effect on the date of sentencing, but

not when the offense was committed. Lanham did not

address the relationship between the Ex Post Facto

Clause and the one-book rule, U.S.S.G. § 1B1.11(b)(2)

and (3). While this case raises the former issue with

respect to the fraud base offense level, it also raises

a one-book issue in connection with the “more than

250 victims” enhancement, U.S.S.G. § 2B1.1(b)(2)(C),

which was not in effect during the fraud, but was in

effect when petitioner violated the asset freeze order

This case thus presents the Court with an opportu-

nity to address both ex post facto/Guidelines issues

that have been plaguing the lower courts for some

time, and to construe § 1B1.11 as a whole.

Co ——EE

CONCLUSION

WHEREFORE, based on the foregoing, Petitioner

Frank Custable respectfully moves this Honorable

Court to grant certiorari, vacate the judgment, re-

mand for reconsideration and/or order any other

appropriate relief.

Respectfully submitted,

Marc W. MARTIN*

*Counsel of Record

JEFFREY B. STEINBACK

53 West Jackson Blvd

MARC MARTIN, LTD.

53 West Jackson Blvd

Suite 1420

Chicago, IL 60604

(312) 408-1111

mwm711@mac.com

Suite 1442

Chicago, IL 60604

(847) 624-9600

Counsel for Petitioner Frank Custable

United States Court of Appeal

Seventh Circuit

UNITED STATES of Americ:

Plaintiff Appellee,

Christine FAVARA and Frank Cu

Defendants-Appellants

Nos. 09-2589, 09-2593.

Argued Feb. 23, 2010

Decided Aug. 11, 2010

John F. Podliska (argued), Office of the United Stat«

Attorney, Chicago, [L, for Plaintiff-Appellee

John J. Muldoon (argued), Muldoon & Muldoon, Chi

cago, IL, for Defendant-Appellant Christine Favara

Marc W. Martin (argued), Marc Martin, Ltd., Chicago

IL. and Jeffrey B. Steinback, Law Office of Jeffrey B

Steinback, Chicago, IL for Defendant-Appellant

frank Custable, Jr

Before BAUER, POSNER and SYKES, Circuit Judge

BAUER, Circuit Judge

Christine Favara and Frank Custable were

convicted of fraudulently acquiring and selling corpo

rate securities. The district court sentenced Favara to

70 months in prison and Custable, the organizer of

the scheme, to 262 months in prison. They appeal

their sentences as unreasonable. For the reason

stated below. we affirm

App

i. BACKGROUND

A. Frank Custable

In June 2008, Custable pleaded guilty to seven

Leen counts of wire and securities fraud for a scheme

in which he fraudulently obtained restricted shares of

tock in failing companies, concealed the transaction

from the SEC, and then disseminated false infor

mation to create a market for the share

In addition to the fraud charges. Custable plead

ed guilty to obstruction of justice and contempt of

court, stemming from his conduct during the SE¢

investigation of the stock scheme and its ensuing civil

uit against him. One of the obstruction count

charged Custable and his attorney, Frank Luce, with

an attempt to thwart the investigation by falsely

telling the SEC that Luce represented one ol

Custable’s former employs es and that the employee

would not cooperate with the ayency’s investigation

The contempt count and the second obstruction count

reflected Custable’s transfer and expenditure of a

ets that had been frozen during the SEC civil suit, in

contravention of a federal court ordet

After he pleaded guilty, the court sentenced

Custable to 262 months in prison, within the recom

mended Guideline range. On appeal, Custable argue

that the district court miscalculated his offense level.

enhanced his sentence twice for his violation of the

asset freeze order, improperly used a later version of

the Cruide line . and bmn po ed an unrea onably har n

App. 3

sentence. Only the last three arguments were made

in the district court.

B. Christine Favara

Favara was an executive who worked with Cus-

table to facilitate the stock transactions and falsify

consulting contracts and SEC registration documents.

In 2008, she pleaded guilty to a single count of securi-

ties fraud.

Before her guilty plea, and while free on bond in

this case, Favara posed as an investment advisor and

stole at least $155,000 in retirement funds from a

client. She was again indicted for fraud, this time in

the Eastern District of California, and her bond in

this case was revoked. When Favara agreed to plead

guilty, the government dismissed the California

indictment.

At sentencing, the court acknowledged Favara’s

difficult childhood, her bipolar disorder and other

arguments for a lenient sentence. But it held that the

seriousness of the offenses warranted a sentence

within the Guideline range and sentenced Favara to

70 months in prison, at the low end of the recom-

mended range.

Favara timely appealed. She argues that the

judge failed to adequately consider the advisory

nature of the Guidelines and her arguments for a

lenient sentence.

App. 4

II. DISCUSSION

In this appeal, the parties ask us to evaluate the

fairness of the district court’s sentencing procedures

and the overall reasonableness of their sentences. We

review the district court’s imposition of within-

Guidelines sentences for abuse of discretion. United

States v. Poetz, 582 F.3d 835, 837 (7th Cir.2009). We

review de novo the procedures used during sen-

tencing, including the court’s consideration of the

factors in 18 U.S.C. § 3553. Id.

A. Custable

Custable provides four reasons why his sentence

is unreasonable. First, he complains that the pre-

sentence investigation report (“PSR”) overstated his

offense level, which should have been six, and not

seven. And so he asks us to remand so the district

court can resentence him under the new, lower of-

fense level.

We typically review de novo the district court’s

sentencing procedures. United States v. Garrett, 528

F.3d 525, 527 (7th Cir.2008). Custable never objected

in the district court to the base offense level, so we

deem his arguments forfeited and review for plain

error. Id. See also United States v. Jaimes-Jaimes,

406 F.3d 845, 848-49 (7th Cir.2005). On plain error

review, we first determine whether there was error,

whether it was plain, and whether it affected sub-

stantial rights. Garrett, 528 F.3d at 527. If these

criteria are met, we then have discretion to grant

App. 5

relief if the error “seriously affected the fairness,

integrity, or public reputation of judicial proceedings.”

United States v. Sawyer, 521 F.3d 792, 796 (7th

Cir.2008) (quoting United States v. Olano, 507 U.S.

725, 736, 113 S.Ct. 1770, 123 L.Ed.2d 508 (1993)).

Even if we were to remand Custable’s case with in-

structions to reduce his base offense level, there is no

reason to believe a correction would affect the sen-

tence, so any error is harmless. See Garrett, 528 F.3d

at 527.

The PSR broke the counts against Custable into

two groups, one composed of the fraud and contempt

counts and the other containing the two obstruction

counts. When a defendant is sentenced for more than

one group of counts, the Guidelines prescribe the

method whereby a court determines the “combined

offense level” for the groups, with the goal of using

the most serious offense as the starting point and

“provid[ing] incremental punishment for significant

additional criminal conduct.” U.S. Sentencing Guide-

lines Manual ch. 3, pt. D, introductory cmt. Under

these rules, when two groups of counts are both

sufficiently serious such that the offense level for one

group is only “5 to 8 levels less serious” than that of

the most serious group, the defendant’s total offense

level is raised by one level. See id. § 3D1.4(b).

This is precisely the situation in Custable’s case.

As calculated by the PSR and adopted by the district

court, the offense level for the group of fraud and

contempt counts was forty-one, nine levels above that

of the obstruction group, which was _ thirty-two.

App. 6

Reducing by one the offense level for his fraud counts

will simply trigger the above grouping rule and result

in the addition of a level to Custable’s combined

offense level, negating any reduction in the Guideline

range. See id. We have no reason to believe that an

error that did not affect the Guideline range affected

the district court’s sentencing decision as the district

court stated its intention to impose a sentence within

the applicable Guideline range. Any error is thus

harmless.

We next turn to Custable’s second claim, that the

PSR impermissibly double-counted when it increased

his offense level for violating a judicial order, id.

§ 2B1.1(b)(8)(c), and for obstructing justice, id.

§ 3C1.1. The rule against double-counting prevents a

district court from imposing “two or more upward

adjustments within the same Guideline range when

both are premised on the same conduct.” United

States v. Blum, 534 F.3d 608, 612 (7th Cir.2008)

(citing United States v. Schmeilski, 408 F.3d 917, 919

‘ The PSR set the offense level for Custable’s second group

of counts, the obstruction group, at 32. Reducing by one the

offense level for the fraud/contempt group will result in an

offense level of 40. The offense level applicable to the obstruction

counts will thus be “8 levels less serious than the Group with the

highest offense level,” see U.S.S.G. § 3D1.4(b), and Custable’s

total offense level will be adjusted upward by one level.

Though the parties propose various ways to regroup the

counts, none of them eliminates the need for two groups, one

containing the fraud and another containing at least one

obstruction count. See id. § 3D1.2 cmt. n. 5.

App. 7

(7th Cir.2005)). Here, the district court’s application

of both enhancements was not double counting be-

cause each was based on distinct conduct, one for

transferring frozen funds in violation of a judicial

order and the other for interfering with the SEC’s

investigation.

Third, Custable argues that the district court

failed to account for his cooperation with the govern-

ment or adequately consider the factors under 18

U.S.C. § 3553(a), and that the court violated the

Constitution’s prohibition against ex post facto laws

by sentencing him under a later, harsher version of

the Guidelines than that in effect at the time of the

crimes. As a result, Custable says his sentence is

unreasonable. As discussed above, we review the

district court’s sentencing procedures, including its

consideration of the § 3553 factors de novo, United

States v. Corson, 579 F.3d 804, 813 (7th Cir.2009), and

the substantive reasonableness of Custable’s sentence

for abuse of discretion. Poetz, 582 F.3d at 837.

In light of the Sentencing Guidelines’ advisory

nature, a district court must give meaningful con-

sideration to the § 3553 factors, as well as the Guide-

lines range, and the sentence must be “objectively

reasonable in light of the statutory factors and the

individual circumstances of the case.” United States v.

Shannon, 518 F.3d 494, 496 (7th Cir.2008). Rather

than address each factor, the district court need only

provide an adequate statement of its reasons why the

selected sentence is appropriate. Jd. (citing United

States v. Harris, 490 F.3d 589, 597 (7th Cir.2007)).

App. 8

Though it ultimately imposed a sentence within

the Guidelines range, the district court adequately

considered the § 3553 factors and we do not find the

sentence unreasonable. In addition to discussing its

reasons at length during the sentencing hearing, the

court provided a detailed written statement with its

sentencing order. The court’s statements indicate its

consideration of Custable’s cooperation with the

government, which it termed “substantial” and “ex-

tensive.” It also considered Custable’s family circum-

stances and acceptance of responsibility. The court’s

reasoned consideration of the § 3553 factors and the

individual circumstances of Custable’s case comports

with its discretion to fashion a sentence “sufficient

but not greater than necessary” to satisfy the objec-

tives of the Guidelines. 18 U.S.C. § 3553(a). The mere

fact that the defendant cooperated with the govern-

ment did not bind the court to impose a lenient

sentence. The court found significant Custable’s

history of unlawful financial dealings, his role as

“mastermind” of the scheme, the level of planning

required, and his failure to repatriate from an off-

shore bank account the proceeds of his scheme. We do

not find unreasonable its determination that these

factors tipped the balance in favor of a_ within-

Guidelines sentence.

Finally, we dispose of Custable’s argument that

the court’s reliance on the 2008 version of the Guide-

lines violates the Constitutional prohibition against

ex post facto laws. Custable claims that the 2008

Guidelines impose a more serious offense level, and

App. 9

thus a harsher sentence, than the Guidelines in effect

in 2001 or 2002 when he committed the offenses.

Section 2B1.1 of the 2002 Guidelines calls for a base

offense level of six, and a four-point enhancement for

the number of victims, instead of the six-point in-

crease Custable received under the 2008 Guidelines.

But this argument is foreclosed by United States v.

Demaree, 459 F.3d 791, 795 (7th Cir.2006). In Dema-

ree, we held that, because the Guidelines are only

advisory in nature, a court’s use of a later version

does not offend ex post facto. Jd. We find no reason to

abandon that conclusion today. United States uv.

Nurek, 578 F.3d 618, 626 (7th Cir.2009); see also

United States v. Panice, 598 F.3d 426, 435 (7th

Cir.2010).

B. Favara

Favara similarly challenges the reasonableness

of her sentence. She argues that the judge treated the

Sentencing Guidelines as mandatory and thus failed

to adequately consider her arguments for a below-

Guidelines sentence, especially the role her now

controlled bipolar disorder played in her fraudulent

conduct.

We presume the district court’s imposition of a

within-Guidelines sentence is reasonable and review

it for abuse of discretion. Poetz, 582 F.3d at 837. We

review de novo its procedures during sentencing,

including the court’s consideration of the § 3553

factors. Id.

App. 10

Judge Manning, in correcting an error in the

initial Guideline calculation, stated that her “intent

was to impose the low end of the Guideline range.”

Favara savs this statement is evidence that the judge

presumed the reasonableness of the Guidelines and

did not adequately consider arguments in favor of a

below-Guidelines sentence.

Though the district judge indicated her intent to

set Favara’s sentence at the low end of the range,

when viewed in context, the judge’s comment and

the resulting sentence were based on her view that

a within-Guideline sentence was appropriate in

Favara’s case. See United States v. Diaz, 533 F.3d

574, 577 (7th Cir.2008). The judge recognized her

discretion to impose a sentence below the Guidelines,

if warranted. At the second sentencing hearing, the

judge acknowledged her discretion to depart from the

Guidelines, saying, “I can impose whatever sentence

I deem appropriate under [§ ] 3553.” That she also

attached a thirteen-point explanation, based on

Favara’s unique circumstances, as to why a within-

Guidelines sentence was appropriate in this case

further indicates her recognition of the Guidelines’

advisory nature.

Judge Manning’s written statement that Favara’s

difficult past “favors leniency,” further shows that she

recognized her discretion, but thought leniency was

not appropriate. Further buttressing this view is the

fact that the judge imposed a_ bottom-of-the-

Guidelines sentence despite her recognition of several

aggravating factors — including Favara’s theft of an

App. 11

elderly couple’s retirement savings while on bond in

the present case — that warranted a “very tough

sentence.” The judge clearly recognized the advisory

nature of the Guidelines and appropriately based her

sentence on the facts of Favara’s case.

Favara next presents a series of arguments that

the judge gave inadequate consideration to her bi-

polar disorder, and that Favara committed the offense

“while suffering from a significantly reduced mental

capacity.” As we indicate above, the judge indeed

considered Favara’s illness. She permitted a psychi-

atric evaluation and delayed sentencing to allow

Favara to present the report. Both at the sentencing

hearing and in her written memorandum explaining

the sentence, the judge acknowledged that Favara’s

bipolar disorder was a factor contributing to the

offenses and favored leniency. But she went on to

state that the seriousness of Favara’s conduct and her

inability to remain compliant with treatment despite

a longstanding awareness of the bipolar disorder

favored a harsh sentence. The law requires no more.

The discretion to impose a below-Guidelines sentence

is in the judge’s hands. A sentencing judge must

indicate her consideration of arguments in favor of

mitigation under § 3553. But she is not required to

reduce the sentence anytime a defendant presents

evidence that mental illness was a factor. See United

States v. Campos, 541 F.3d 735, 750-51 (7th Cir.2008)

(defendant must rebut presumption that within-

Guidelines sentence is reasonable).

App. 12

Finally, Favara’s 70-month sentence was not

unwarrantedly disparate from her co-defendants,

several of whom received probation. Section 3553

requires the judge to consider, among other things,

whether a particular sentence would create unwar-

ranted disparities with other defendants, but only

among defendants with “similar records who have

been found guilty of similar conduct.” 18 U.S.C.

§ 3553(a)(6) (emphasis added). Favara omits the

emphasized language from her brief, but that makes

it no less fatal to her argument. The judge indicated

in her written explanation that she considered the

disparity, but found it warranted in light of the

seriousness of the offenses, Favara’s history, and the

fact that she embezzled $150,000 while awaiting

trial. “Unlike the other co-defendants ... Favara’s

conduct followed a long history of other fraudulent

behavior.” The judge thus adequately considered any

disparity between Favara’s sentence and those of her

co-defendants and in any event Favara’s conduct and

record warranted such a disparity.

(ii. CONCLUSION

The error in Frank Custable’s offense level

calculation was harmless. Neither his nor Christine

Favara’s sentences are unreasonable. We affirm.

App. 13

United States District Court,

Northern District of Illinois

Name of Assigned Judge |

or Magistrate Judge

Sitting Judge if Other

than Assigned Judge

CASE NUMBER 05 CR 340

DATE June 15, 2009

CASE TITLE U.S. v. Custable

Blanche M. Manning

_ ——

DOCKET ENTRY TEXT

For the reasons stated below, the defendant’s motion

to correct his sentence pursuant to Fed. R. Crim. P

35(a) [352-1] is denied.

B |For further details

see text below. |

—E

00:00

STATEMENT

Frank Custable has filed a motion to correct his

sentence under Fed. R. Crim. P. 35(a). As an initial

matter, the court notes that Custable has failed to

comply with this court’s standing order, which states

that motions must be filed at least three days prior to

the date for which they are noticed. Any future mo-

tions by Custable that do not comply with the court’s

standing order are subject to being stricken.

App. 14

Custable argues that his sentence should be

changed for two reasons. First, he contends that the

court’s use of the version of the Sentencing Guidelines

in effect at the time of sentencing violates the Hx Post

Facto clause of the U.S. Constitution and that the

court should use the version of the Guidelines in

effect at the time of the offense. As Custable acknowl-

edges, this argument is foreclosed by United States

v. Demaree, 459 F.3d 791 (7th Cir. 2006). See also

United States v. Hill, 563 F.3d 572, 582 (7th Cir.

2009) (“{T|here is no ex post facto problem posed by

applying the version of the Guidelines in effect at the

time of the defendant’s sentencing, even if that ver-

sion incorporates disadvantageous revisions that took

effect after the defendant committed the offense.”).

Second, Custable argues that the court’s sentence

on Count 22 violates the Double Jeopardy Clause of

the U.S. Constitution because the conduct which

formed the basis for Count 22 is conduct that he

asserts was used in aggravation by Judge Andersen

in sentencing Custable in case no. 02 CR 1105. Again,

however, Custable’s argument fails in light of rele-

vant precedent. Witte v. United States, 515 U.S. 389,

403-05 (1995) (“[Pletitioner’s double jeopardy theory

that consideration of uncharged conduct in arriving

at a sentence within the statutorily authorized pun-

ishment range constitutes “punishment” for that

conduct — is not supported by our precedents, which

make clear that a defendant in that situation is

punished, for double jeopardy purposes, only for the

offense of which the defendant is convicted.”). See also

App I )

United States v. Troxell, 887 F.2d 830, 836 (7th Cir

1989) (finding no double jeopardy violation where

court considered defendant’s violation of conditions of

release — including fleeing the jurisdiction and failing

to appear at sentencing — in sentencing defendant on

narcotics charge and defendant was then indicted and

sentenced separately for failing to appear at sen

tencing hearing). As with all of the factors raised

by Custable, the court fully considered Custable’s

argument under § 3553 in arriving at a sentence that

was sufficient but not greater than necessary to serve

the purposes of sentencing.

Custable’s motion to correct hi entence

denied

App. L6

UNITED STATES DISTRI

Northern District of Illino:

UNITED STATES )JUDGMENT INA

OF AMERICA ) CRIMINAL CASE

' (Filed Jun. 9, 2009)

table, . Case Number! O05 CR

USM Number 15078

Jeffrey Steinbeck

, Defendant’s Attorney

THE DEFENDANT:

pleaded guilty to count

Ll. 12. ko, 14. LO, 16, Ll,

the indictment

pleaded nolo contendere to count

which was accepted by the court

was found guilty on count(s)

after a plea of not guilty

‘

The defendant is adjudicated guilty of these offen

Title & Nature of Offense

Section Offense Knded Count

18 USC $1343 Wire Fraud 6/30/2002

Securities fraud 6/30/2002

Obstruction 6/30/200'

of Just ice

The defendant is sentenced as provided in page

340

2 through 1] of this judgment. The sentence

App. 17

imposed pursuant to the Sentencing Reform Act of

1984.

L] The defendant has been found not guilty on

count(s)

Ml Count(s) all remaining LlisM are

dismissed on the motion of the United States.

It is ordered that the defendant must notify the

United States attorney for this district within 30 days

of any change of name, residence, or mailing address

until all fines, restitution, costs, and _ special

assessments imposed by this judgment are fully paid.

If ordered to pay restitution, the defendant must

notify the court and United States attorney of

material changes in economic circumstances.

6/9/2009

Date of Imposition of Judgment — a

/s/_ Blanche M. Manning

Signature of Judge

U.S. District

Blanche M. Manning Court Judge

Name of Judge Title of Judge

6/1 2.2009

Date

App. 18

ADDITIONAL COUNTS OF CONVICTION

Offense

Title & Section Nature of Offense Ended Count

18 USC §1503(a) Obstruction 6/30/2002 21

of Justice

18 USC §401(3) Criminal Contempt 6/30/2002

of Court

IMPRISONMENT

The defendant is hereby committed to the

custody of the United States Bureau of Prisons to be

imprisoned for a total term of:

as to counts 1, 2, 3, 4, 5, 6, 7, 8, 11, 12, 13, 14, 15, 16,

17, 18, 19, 20; 60 months,

as to count 21; 120 months,

as to count 22; 262 months; all said counts shall run

concurrently.

The court makes the following recommendations

to the Bureau of Prisons:

The defendant is remanded to the custody of the

United States Marshal.

The defendant shall surrender to the United

States Marshal for this district:

[J at. =Uam. Lip.m. on

[] as notified by the United States Marshal.

App. 19

[] The defendant shall surrender for service of

sentence at the institution designated by the

Bureau of Prisons:

[] before 2 p.m.

(] as notified by the United States Marshal.

[J as notified by the Probation or Pretrial

Services Office.

RETURN

I have executed this judgment as follows:

Defendant delivered on to

a. , with a certified copy of this judgment.

UNITED STATES MARSHAL

By:

~ DEPUTY UNITED STATES MARSHAL

SUPERVISED RELEASE

Upon release from imprisonment, the defendant shall

be on supervised release for a term of:

3 years as to counts 1, 2, 3, 4, 5, 6, 7, 8, 11, 12, 13, 14,

15, 16, 17, 18, 19, 20, 21, and 22, said counts to run

concurrently. Drug tests shall not exceed more than

104 tests per year. Defendant shall provide the

probation officer with access to any requested ner-

sonal or business financial information. If defendant

is unemployed after the first 60 days of supervision,

or if unemployed for 60 days after termination or

App. 20

lay-off from employment, the defendant shall perform

at least 20 hours of community service work per week

at the discretion and direction of the U. S. Probation

Office until gainfully employed. Defendant shall not

incur new credit charges or open additional lines of

credit without the approval of the probation officer.

Defendant shall refrain from obtaining employment

having fiduciary responsibilities, without the

approval of the probation officer. Upon completion of

the terms of incarceration, any fine balance shall

become a condition of supervised release, and the

payment schedule will be 10% of defendant's net

monthly income.

The defendant must report to the probation office

in the district to which the defendant is released

within 72 hours of release from the custody of the

Bureau of Prisons.

The defendant shall not commit another federal.

state, or local crime.

The defendant shall not unlawfully possess a con-

trolled substance. The defendant shall refrain from

any unlawful use of a controlled substance. The

defendant shall submit to one drug test within 15

days of release from imprisonment and at least two

periodic drug tests thereafter, as determined by the

court.

[] The above drug testing condition is suspended,

based on the court’s determination that the

defendant poses a low risk of future substance

abuse. (Check, if applicable.)

App. 21

The defendant shall not possess a firearm,

ammunition, destructive device, or any other

dangerous weapon. (Check, if applicable.)

The defendant shall cooperate in the collection of

DNA as directed by the probation officer. (Check,

if applicable.)

The defendant shall comply with the

requirements of the Sex Offender Registration

and Notification Act (42 U.S.C. § 16901, et seq.)

as directed by the probation officer, the Bureau of

Prisons, or any state sex offender registration

agency in which he or she resides, works, is a

student, or was convicted of a qualifying offense.

(Check, tf applicable.)

The defendant shall participate in an approved

program for domestic violence. (Check, if appli-

cable.)

If this judgment imposes a fine or restitution, it

is a condition of supervised release that the defen-

dant pay in accordance with the Schedule of Pay-

ments sheet of this judgment.

The defendant must comply with the standard

conditions that have been adopted by this court as

well as with any additional conditions on the

attached page.

STANDARD CONDITIONS OF SUPERVISION

1) the defendant shall not leave the judicial district

without the permission of the court or probation

officer;

App. 22

the defendant shall report to the probation officer

and shall submit a truthful and complete written

report within the first five days of each month;

the defendant shall answer truthfully all

inquiries by the probation officer and follow the

instructions of the probation officer;

the defendant shall support his or her

depenuents and meet other family respon-

sibilities;

the defendant shall work regularly at a lawful

occupation, unless excused by the probation

officer for schooling, training, cr other acceptable

reasons;

the defendant shall notify the probation officer at

least ten days prior to any change in residence or

employment;

the defendant shall refrain from excessive use of

alcohol and shall not purchase, possess, use,

distribute, or administer any controlled sub-

stance or any paraphernalia related to any

controlled substances, except as prescribed by a

physician;

the defendant shall not frequent places where

controlled substances are illegally sold, used,

distributed, or administered;

the defendant shall not associate with any

persons engaged in criminal activity and shall

not associate with any person convicted of a

felony, unl. ss granted permission to do so by the

probation officer;

App. 23

the defendant shall permit a probation officer to

visit him or her at any time at home or elsewhere

and shall permit confiscation of any contraband

observed in plain view by the probation officer;

the defendant shall notify the probation officer

within seventy-two hours of being arrested or

ques'ioned by a law enforcement officer;

the defendant shall not enter into any agreement

to act as an informer or a special agent of a law

enforcement agency without the permission of

the court; and

as directed by the probation officer, the

defendant shall notify third parties of risks that

may be occasioned by the defendant’s criminal

record or personal history or characteristics and

shall permit the probation officer to make such

notifications and to confirm the defendant’s

compliance with such notification requirement.

CRIMINAL MONETARY PENALTIES

The defendant must pay the total criminal

monetary penalties under the schedule of payments

on Sheet 6.

Assessment Fine Restitution

TOTALS § $ 2,000.00 $ 20,000.00 $

L) The determination of restitution is deferred until

es . An Amended Judgment in a Criminal

Case (AO 245C) will be entered after such

determination.

App. 24

() The defendant must make restitution (including

community restitution) to the following payees in

the amount listed below.

If the defendant makes a partial payment, each

payee shall receive an approximately propor-

tioned payment, unless specified otherwise in the

priority order or percentage payment column

below. However, pursuant to 18 U.S.C. § 3664(i),

all nonfederal victims must be paid before the

United States is paid.

Total Restitution Priority or

Name of Payee Loss* Ordered Percentage

TOTALS $ 0.00 $ 0.00

() Restitution amount ordered pursuant to plea

agreement $

(J The defendant must pay interest on restitution

and a fine of more than $2,500, unless the

restitution or fine is paid in full before the

fifteenth day after the date of judgment,

pursuant to 18 U.S.C. § 3612(f). All of the

payment options on Sheet 6 may be subject to

penalties for delinquency and default, pursuant

to 18 U.S.C. § 3612(g).

* Findings for the total amount of losses are required under

Chapters 109A, 110, 110A, and 11%A of Title 18 for offenses

committed on or after September 13, 1994, but before April 23,

1996.

App. 25

V_l The court determined that the defendant does

not have the ability to pay interest and it is

ordered that:

Vl the interest requirement is waived for the

Mi fine CJ restitution.

L) the interest requirement for the

(J fine UC) restitution is modified as follows:

SCHEDULE OF PAYMENTS

Having assessed the defendant’s ability to pay,

payment of the total criminal monetary penalties

shall be due as follows:

A ™ Lump sum payment of $ 22,000.00 _ due

immediately, balance due

(J notlaterthan __ , or

(J) in accordance L)C,L) D,UIE, or

L) F below; or

B () Payment to begin immediately

(may be combined with (JC, UD, orl) F

below); or

C (J) Payment in equal _ _ (e.g., weekly,

monthly, quarterly) installme nts of ¢ —_

overaperiodof CC, months or

years),tocommence __—————CCé(.., BO OF GO

days) after the date of this judgment; or

D () Payment in equal __ __(e.g., weekly,

monthly, quarte rly) installments of $ a

over a period of _ (e.g., months or

years), to commence (e.g., 30 or 60

App. 26

days) after release from imprisonment to a

term of supervision; or

E (J Payment during the term of supervised

release will commence within > —s 6° 2

30 or 60 days) after release from imprison-

ment. The court will set the payment plan

based on an assessment of the defendant’s

ability to pay at that time; or

F ™ Special instructions regarding the payment of

criminal monetary penalties:

Upon completion of the terms of incar-

ceration, any fine balance shall become a

condition of supervised release, and the

payment schedule will be 10% of defendant’s

net monthly income. Costs of incarceration

and supervision are waived.

Unless the court has expressly ordered otherwise, if

this judgment imposes imprisonment, payment of

criminal monetary penalties is due during imprison-

ment. All criminal monetary penalties, except those

payments made through the Federal Bureau of

Prisons’ Inmate Financial Responsibility Program,

are made to the clerk of the court.

The defendant shall receive credit for all payments

previously made toward any criminal monetary

penalties imposed

App. 27

Joint and Several!

Defendant and Co-Defendant Names and Case

Numbers (including defendant number), Total

Amount, Joint and Several Amount, and corre

sponding payee, if appropriate.

The defendant shall pay the cost of prosecution

The defendant shall pay the following court

cost(s):

The defendant shall forfeit the defendant’s

interest in the following property to the United

States:

Payments shall be applied in the following order: (1)

assessment, (2) restitution principal, (3) restitution

interest, (4) fine principal, (5) fine interest, (6) com

munity restitution, (7) penalties, and (8) costs, in

cluding cost of prosecution and court cost:

App. 28

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

UNITED STATES

OF AMERICA )

Plaintiff, )No. 05 CR 340-1]

. ) The Honorable Blanche Manning

\Judge Presiding

FRANK CUSTABLE,

Defendant.

DEFENDANT, FRANK CUSTABLDWL’S,

DECLARATION IN SUPPORT OF

HIS PLEA OF GUILTY

(Filed Jul. 11, 2008)

l. The defendant acknowledges that he has

been charged in an indictment with (a) mail and wire

fraud, in violation of 18 U.S.C. §§ 1341 and 1343,

(b) making false statements in a registration state

ment filed with the Securities and Exchange Com

mission (“SEC”), in violation of 15 U.S.C. § 77x, (c)

obstruction of both an SEC proceeding and a federal

district court proceeding, in violation of 18 U.S.C

§§ 1505 and 1503(a) and (4) contempt of a court date

in violation of 18 U.S.C. § 401(3)

2. The defendant has read the charges against

him contained in the indictment, and those charge:

have been fully explained to him by his attorney

App ZY

3 The defendant fully understands the nature

and elements of the crimes with which he has been

charged

4 The defendant will enter a voluntary plea ol

guilty to Counts One through Twenty-Two of the

indictment in this case, charging mail fraud and

ecuritiecs fraud, respectively

The defendant will plead guilty to Count

One through Light and Counts Eleven through

Twenty-Two because he is in fact guilty of the charges

contained in Counts One through Eight and Count

Kleven through Twenty-Two of the indictment. In

pleading guilty, the defendant admits the following

facts, which establishes his guilt beyond a reasonable

doubt

Beginning no later than April 2001, and continu

ing until at least June 2002, in the Northern District

of Illinois, Eastern Division, and elsewhere, the dé

fendant knowingly devised and intended to devise a

cheme to defraud and to obtain money and property

by means of materially false and fraudulent pretenss

representations, promises and omissions. On variou

dates in this frame, at Addison, in the Northern

District of Illinois, Kastern Division, and elsewher

the defendant for the purpose of executing and at

tempting to execule the above-described cheme

knowingly caused to be transmitted in interstat

commerce, for example on March 14 002. from

Murray, Utah, to Addison, Illinois, by means of wir

ind ri ommunication Writing rr)

App 30)

ignals and sounds, namely a facsimile transmission

containing a sworn and notarized affidavit signed by

co-defendant Gary Heesch ‘lating that Wasatch

Pharmaceuticals, Inc. (“Wasatch”) owed 30 million

shares of Wasat h stock Lo Individual A for SCPTVICCS

rendered to Wasatch prior to December 1999, when in

truth and fact, compensation in this amount was not

due and owing, in violation of Title 18, United State

Code, Sections 1343 and 2

As an additional example, on May LO, 2002, thi

defendant along with co-defendants Sara Wetzel,

Gary Heesch and David Giles caused untrue state

ments to be made, and material facts which were

necessary to make statements not misleading, to be

omitted, in a Form S-8 registration statement filed on

behalf of Wasatch Pharmaceutical, Inc. (“Wasatch”), a

publicly-traded corporation organized under the laws

of Utah. The registration statement was “led with

the Securities and Exchange Commission under thi

securities Act of 1993. The 5-8 registration statement

falsely represented that Individual B would provid

consulting services to Wasatch in exchange for issu

ance to Individual B of 380 million shares of common

‘tock in Wasatch, when in fact, as the defendant

knew no such services were desired by Wasatch

Individual B was not qualified lo provide uch sel

vices, and the offer of securitK was really made in

connection with a transaction to raise capital for

Wasatch. Accordingly, the S mistration statement

was made in violation of Ti 15. United States Code

ection {7%

App. 31

Specifically, and as explained in more detail

below, the defendant admits that during the period

alleged in the indictment, he was engaged in a

scheme to commit securities fraud by illegally acquir-

ing the stock of publicly-traded companies, causing

the market for those stocks to be artificially stimu-

lated and then attempting to sell the stock at a profit.

To acquire the stock, the defendant used several,

methods of circumventing the registration provisions

of the securities laws, including the filing of Form S-8

registration statement that contained misrepresenta-

tions about consulting services, evading the require-

ments of Rule 144 by falsely claiming that stock was

being issued to certain individuals as compensation

for services rendered more than two years previously,

and making improper loans that were collateralized

by shares of otherwise restricted stock. The defendant

admits that he and the entities he controlled realized

a profit through the scheme to defraud.

Defendant CUSTABLE admits that he founded

and was president of both Suburban Capital Corpora-

tion (“SCC”) and North Coast Investments, Inc.

(“NCI”). SCC and NCI shared office space in Addison,

Illinois, and CUSTABLE controlled all of their opera-

tion. CUSTABLE hired co-defendant Sara Wetzel in

about 1998 to work at one of SCC’s predecessor

companies, and she worked as his assistant at both

SCC and NCI once they began to operate. Among

other things, Wetzel was in nearly daily contact with

the companies that were a part of the scheme and

CUSTABLE often had Wetzel fax to the companies

App. 32

documents that were integral to the scheme. She also

had contact with co-defendant Jesse Boskoff and

understood that his role was to publicize the compa-

nies, often using false or misleading information, so

that the market for the stocks would remain liquid,

allowing the shares acquired by CUSTABLE to be

sold more easily.

I. Acquiring the Steck

A. Form S-8 Shares

Defendant, CUSTABLE admits that he under-

stood that a publicly-traded company was permitted

to use Form S-8 to register shares and issue freely-

trading shares as compensation to a consultant who

had performed services for the company. CUSTABLE

further understood that the services rendered by the

consultant had to be bona fide services and that the

services could not be for the purpese of promoting or

maintaining a market for the company’s stock.

CUSTABLE also knew that the services could not be

provided in connection with a capital-raising transac-

tion on behalf of the company. If any one of these

requirements were not met, then no freely-trading,

shares could be issued under Form S-8. CUSTABLE

discussed the Form S-8 requirements with, among

others, co-defendants Robert Luce and David Calkins.

Both Luce and Calkins explained to CUSTABLE and

discussed with him the requirements for issuing

Form S-8 stock. Furthermore CUSTABLE had con-

versations with others at the various companies

App. 33

about Form S-8 and the requirements there under,

including conversations with co-defendants Heesch,

Giles, Nordling and Favara. Sometimes Luce was a

party to such co.versations, in which case, Luce

would frequently take the lead in explaining the

requirements of Form S-8 to the individuals at the

companies.

CUSTABLE and the other defendants (except

Boskoff ) engaged in transactions that were designed

to appear to be legitimate Form S-8 transactions. In

reality, however, these transactions were capital-

raising transactions in which a company received

cash from CUSTABLE or an entity he controlled, in

exchange for issuing Form S-8 stock to individuals

who were purportedly providing consulting services to

the company pursuant to boilerplate consulting

contracts that were drafted by Luce or another attor-

ney hired by CUSTABLE and that were approved by

CUSTABLE. With notable exceptions, the purported

consultants were not qualified to provide bona fide

services to the company, and, in fact, did not provide

consulting services. Generally, CUSTABLE, sometimes

in consultation with individuals at the company,

would determine the number of shares that were to

be issued under Form S-8 in exchange for the pur-

ported consulting services. The number of shares

selected had no relationship to the services actually

provided to the company by the purported consuit-

ants.

The individuals at the companies, including

defendants Calkins, Heesch, Giles, Nordling and

App. 34

Favara, at CUSTABLE’S request, each signed con-

sulting agreements with individuals whom they know

either generally worked for CUSTABLE or had been

chosen by him and whom they knew were generally

not qualified to render consulting services. In fact,

the individuals at the companies on a number of

occasions told CUSTABLE and others that they did

not actually want any consulting services; rather they

explained to CUSTABLE and others, what they

wanted to receive for their companies was money, and

so the consulting agreements often were simply a

vehicle used to effect the transfer of funds from

CUSTABLE to the companies. CUSTABLE had

conversations in which this understanding was

expressly discussed with, among others, Calkins and

Favara.

The Forms 8-8, which generally included copies

of the consulting agreements were prepared by Luce

and another attorney hired by CUSTABLE and

then filed electronically with the SEC. Luce was

familiar with some of the individuals listed in the

agreements as consultants, including Wetzel and a

person identified in the indictment as Individual B,

and defendant understood that Luce knew that many

of these individuals were not qualified to render the

services called for under the contracts. In addition,

CUSTABLE often discussed with Luce the payment

of funds to the companies in exchange for the issu-

ance of the Forms S-8 shares, and thus Luce knew

that the transactions were capital-raising trans-

actions for the companies.

App. 35

Although CUSTABLE did not expressly describe

the requirements of Forms S-8 to Wetzel, in the

course of performing her work at SCC and NCI she

understood (and CUSTABLE would sometimes tell

her) that in order for a company to te able to issue

Form S-8 stock, a consulting agreement needed to be

in place with the company, even where, as was fre-

quently the case, the company expressed to Wetzel

that it did not want the purported consulting ser-

vices. CUSTABLE was aware that representatives

from the companies often told Wetzel that they were

entering into the Form 8-8 transaction for the sole

purpose of raising funds. On _ several occasions,

CUSTABLE selected Wetzel herself to act as a con-

sultant and to enter into contracts with, among others,

ShareCom, Wasatch, Pacel and Premier Axium. In

these contracts, Wetzel agreed to provide consulting

services to the companies. In addition, on at least one

occasion, CUSTABLE told an individual who was

purportedly acting as a consultant (identified in the

indictment as Individual B) that Individual B was not

supposed to actually provide consulting services, but

merely to serve as a strawman and conduit to allow

CUSTABLE to receive Form S-8 stock from the

companies. Wetzel was present when CUSTABLE

told this to Individual B.

Pursuant to the Form S-8 transactions, co-

defendants Calkins, Heesch, Giles, Nordling and

Favara received on behalf of their companies cash

from CUSTABLE in exchange for providing the

App. 36

purported consultants with stock issued under Form

-8.

B. Friendly Shareholder Transactions

Defendant CUSTABLE admits that he under-

stood that generally a publicly-traded company was

required to issue restricted stock unless it had filed a

registration statement with the SEC. CUSTABLE,

knew, however, that under SEC Rule 144, a company

could issue freely-trading shares to certain non-

affiliates without filing a registration statement if

those non-affiliates were being issued the stock in

satisfaction of a debt that had arisen two or more

years before the transfer. Once the non-affiliate had

these shares, he or she could then transfer them to

someone else and the shares would remain free-

trading. CUSTABLE first learned about this kind of

transaction from defendant Luce in early 2001.

Around that time, CUSTABLE also discussed such

transactions with defendant Calkins, who told

CUSTABLE that he already knew about them and

explained to him how they could be exploited.

CUSTABLE and co-defendants Wetzel, Luce,

Calkins, Heesch, Giles, Favara and Nordling engaged

in transactions that appeared on the surface to be

legitimate non-affiliate transfers of stock, but which,

in reality, were designed to funnel stock to

CUSTABLE and to other individuals who, because

they were promoting the stock, could not be compen-

sated with shares issued under Form 8-8. To engage

App. 37

in these transactions, the company would identity a

person to whom it falsely claimed it owed a debt that

arose two or more years previously. Luce or another

attorney, Individual J, hired by CUSTABLE would

then draft the required attorney opinion letter that

would falsely state that the debt did, in fact, arise two

or more years previously. Using this fraudulent

opinion letter, the company would then direct its

transfer agent to issue freely-trading shares to the

identified person, the so-called friendly shareholder.

This person would then transfer the shares to

CUSTABLE or to other individuals or entities

CUSTABLE directed. CUSTABLE generally deter-

mined the individuals who would receive shares from

the friendly shareholder and the number of shares

that each individual would receive. Some of these

individuals were promoters of the stock who could not

otherwise receive shares issued under Form S-8.

CUSTABLE discussed these transactions with Wetzel,

Luce, Calkins, Heesch, Giles, Favara and Nordling.

For example, in about July and August 2001,

Calkins identified an individual whom he intended to

use as a “friendly shareholder.” This individua! was

not owed any compensation from Pacel fro work

performed more than two years previously, and

Calkins and CUSTABLE discussed the fact with each

other, as wel! as with Luce. Nevertheless, Luce wrote

an attorney opinion letter in which Luce falsely

stated that Pacel could issue 17.5 million freely-

trading shares to the individual because the indi-

vidual was owed compensation for work done two

App. 38

years previously. At CUSTABLE’s direction, Calkins

then directed that the Pacel transfer agent issue the

17.5 million shares. At the same time, CUSTABLE

also gave Calkins the names of three individuals who

were to receive these 17.5 million shares from the so-

called “friendly shareholder” and the number of

shares that each such individual would receive.

Specifically, CUSTABLE directed that the majority

of the shares (10,000,000) be transferred to Indi-

vidual D, a person who worked for CUSTABLE and

who would dispose of the shares as directed by

CUSTABLE, providing the proceeds to CUSTABLE.

CUSTABLE also directed that some of the 17.5 mil-

lion shares be transferred to defendant Boskoff in

exchange for promoting Pacel stock. Calkins then

caused the transfer agent to issue the shares to the

individuals in the amounts directed by CUSTABLE.

Similarly, in about March 2002, defendants

Heesch and Giles identified an individual whom they

claimed to be owned compensation by Wasatch for

services rendered more than two years previously. In

fact, as Heesch and Giles well know, this individual,

identified in the indictment as Individual A, was not

owned compensation from Wasatch, and CUSTABLE

discussed this fact with, among others, Heesch and

an attorney. Nevertheless, Heesch falsely represented

that the friendly shareholder was owed such compen-

sation and the other attorney wrote an opinion letter

to that effect, which authorized the Wasatch transfer

agent to issue 30 million shares of Wasatch to Indi-

vidual 4 CUSTABLE and Wetzel received copies of

App. 39

these false documents. CUSTABLE determined how

Individual A disposed of the 30 million shares.

Pursuant to the friendly shareholder trans-

actions, defendant CUSTABLE, and co-defendants

Luce, Wetzel, Calkins, Heesch, Gils, Nordling and

Favara authorized the issuance of shares to friendly

shareholders, who then, at CUSTABLE’s direction,

transferred the shares to other individuals and to

stock promoters.

Il. Promoting the Stock

Once defendant CUSTABLE had obtained control

over restricted stock, and had converted it to freely-

trading stock, he faced a further obstacle in selling it.

The companies to which CUSTABLE was providing

financing were traded on the OTC Electronic Bulletin

Board, and all of the them were experiencing finan-

cial difficulties. Accordingly, there was little or no

market for the stock CUSTABLE had acquired from

them, even after its apparent status had been

changed to freely trading stock.

In order to create a market for his shares, defend-

ant CUSTABLE enlisted co-defendant Jesse Boskoff

to send out thousands of unsolicited electronic mail

messages (“spam”) to the public, often containing

materially false and misleading information about

the companies’ past performance and current finan-

cial condition, as well as unreasonably optimistic

projections of the companies’ future performance.

App. 40

Defendant CUSTABLE was referred to defendant

Boskoff in 2001 by an acquaintance, who told him

that Boskoff operated a company called Metro Media,

and was very good at promoting companies over the

internet. CUSTABLE called Boskoff and told him

that he needed to get out of stock he owned in ten

different companies. Boskoff told him that Boskoff

could help CUSTABLE out by sending emails and

“fax blasts” to potential investors.

One of the stocks defendant CUSTABLE was

eager to sell was Sharecom. This stock was illiquid,

meaning that there were little or no market or sales

volume in the stock. CUSTABLE told Boskoff that he

wanted to sell his stock in Sharecom. Boskoff’s

company, Metro Media Research, entered into a

contract with Sharecom to do promotional work.

Boskoff started sending mass email press re-

leases about Sharecom to the public about November

2001. The spam emails Boskoff sent about Sharecom

contained materially false information about reve-

nues. Boskoff composed the text of the promotional

emails. Boskoff told CUSTABLE that he had merely

cut and pasted old information about Sharecom that

Boskoff found on the internet and in SEC filings. The

spam emails Boskoff sent out claimed falsely that

Sharecom was “currently booking revenues of $45,000

per month.” That information was no longer accurate

due to deterioration of the company’s financial posi-

tion. Boskoff knew that the statements about revenue

were false, and that Sharecom was conducting little

or no current business, but his emails were designed

App. 41

to create market volume so Custable and Boskoff

could sell their stock in Sharecom.

Because of the mass spam transmissions, de-

fendant Bradley Nordling’s internet service provider

became jammed with complaints. As a _ result,

Nordling became concerned that his website might be

terminated. Nordling asked CUSTABLE to make

Boskoff stop sending out the fraudulent promotional

emails, but CUSTABLE wanted the spam emails to

continue, since they increased trading volume for the

stock and allowed CUSTABLE to sell off his

Sharecom stock.

Boskoff received two payments of $30,000 each

from Sharecom for his activities in promoting the

stock. One of these payments came from money

provided by CUSTABLE to Sharecom as part of a

fraudulent deal for S-8 stock issued for non-existent

consulting services. CUSTABLE had had the money

put into an escrow account controlled by co-defendant

Luce. The money was only released after CUSTABLE

was able to sell his Sharecom stock. Luce knew that

Boskoff was sending out false information in his

promotional spam about Sharecom because defendant

Nordling had told Luce about it. Luce knew that the

$30,000 payment from his escrow account was going

to Boskoff and also knew the purpose of the payment.

Boskoff was given Sharecom stock as an addi-

tional part of his compensation for promoting its

shares. At CUSTABLE’s direction, the stock that

Nordling and Sharecom had issued to Individual H as

App. 42

part of a “friendly party” transaction, was transferred

to Boskoff.

Defendant CUSTABLE also put Boskoff in touch

with co-defendant David Calkins, so Boskoff could

promote the stock of Pacel. CUSTABLE was holding

Pacel stock that he had obtained from Calkins

through intermediaries, including Individual D,

posing as consultants to Pacel, but the stock was

illiquid. CUSTABLE told Calkins that he would not

give him any more money until he was able to sell the

Pacel stock. CUSTABLE took part in a three-way

conversation between himself, Boskoff and Calkins,

in which Calkins provided Boskoff with information

about Pacel. Boskoff used this information, together

with information from SEC filings and from the

internet, to compose promotional spam email which

he transmitted to the public.

CUSTABLE also introduced soskoff to co

defendant Christine Favara, Chief of Executive

Officer of Premier Axium. Premier Axium, like all thi

companies CUSTABLE referred to Boskoff, was in

desperate financial straits, and CUSTABLE made

that fact known to _ Boskoff. Boskoff had _ told

CUSTABLE that Boskoff promoted “aggressively.”

CUSTABLE wanted aggressive promotion, since he

could not sell his stock unless Boskoff was able to

increase trading volume.

CUSTABLE also introduced co-defendant Boskoff

to defendant Gary Heesch at Wasatch Pharmaceu

ticals. CUSTABLE hoped that Boskoff’s spam emails

App 43

would move the market price, so that he could sell his

stock in Wasatch at a profit. Boskoff sent CUSTABLE

a copy of the draft agreement he entered into with

Wasatch, which called for Boskoff to be compensated

lil. Disposing of the Stock

The defendant caused stock acquired through

S-8, “friendly shareholder,” and these company loan

transactions to be deposited in brokerage accounts in

the names of others. The defendant did this to avoid

reporting obligations to the SEC that would have

arisen if he had been known to hold over 5% of the

stock of any of the companies, and additional obliga

tions that would have arisen had he been known to

hold over 10% of any of them. Accordingly, defendant

CUSTABLE directed co-defendant Sara Wetzel to

open brokerage accounts in the names of co-defendant

Wetzel, Individual B, Individual! D, Individual I and

others. Stock acquired through the transactions that

are the subject of the indictment was deposited into

these accounts, sometimes without the knowledge ol

the nominal account holder. Although the account

were in the names of others, the defendant retained

full control of the stock, which he usually exercised

through Wetzel, and determined the time and man

ner in which the stock was disposed of

IV. The SEC Investigation

In early 2002, defendant CUSTABLE and co

defendant Luce became aware that the Securities and

App. 44

Exchange Commission (SEC) had begun an investiga

tion of the activities which form part of the factual

basis for the charge to which CUSTABLE is plead

ing guilty. After he learned of the investigation,

CUSTABLE was contacted by a former employee,

Individual B. CUSTABLE was concerned, because he

knew that at his direction defendant Sara Wetzel had

told Individual B to sign fraudulent consulting

agreements, which compensated Individual B with

millions of shares of stock in Wasatch, in exchanye for

consulting duties which Individual B never intended

Lo perform

CUSTTABLE alled defendant Robert Luce ex

pressing his concerns over the prospect of Individual

B's cooperation with the SEC. Luce was CUSTABLE’:

own attorney. CUSTABLE advised Luce that the SEC

had contacted Individual B. Luce told CUSTABLE

that Luce would “defuse” the SEC investigation. Luce

also said that he would contact the SkC and tell them

that Individual B would assert his rights under the

Fifth Amendment. Luce was CUSTABLI&t’s own at

torney, had not been retained by Individual B to

represent him, and had not even met or spoken with

Individual B. Luce did contact the SEC and tell them

that Individual B was asserting hi hifth Amendment

rights and would not talk to them

V. The SEC Lawsuit

On March 28, 2003, CUSTABLIt was served wit!

n fede i} court order irecZAinv al a c*] im connection

App. 45

with federal lawsuit brought against him by the SEC,

SEC v Frank J. CUSTABLE, Jr., et al, 03 C 2182

(Northern District of Illinois). The order was applicd

to CUSTABLE’s company, Suburban Capital, and to

defendant Sara Wetzel. Wetzel was served on or

about March 29, 2003. The order was entered by a

United States District Judge, and _ prohibited

CUSTABLE, Wetzel and Suburban Capital from

transferring, dissipating or concealing any property

in the possession of any of them.

Although he knew that moving money out of the

accounts of Suburban Capital was prohibited by the

asset freeze order, about three days after being served

with the order, CUSTABLE withdrew $10,000 from

the operating account of Suburban Capital and

deposited it into an account over which he alone had

signatory authority. He used this money to pay per-

sonal expenses. In addition, CUSTABLE instructed

co-defendant Sara Wetzel to withdraw funds from

accounts of Suburban Capital which both he and she

knew to have been frozen by the court order.

The preceding facts are offered solely for the

purpose of establishing a factual basis for the defen-

dant’s plea of guilty; they do not contain all of the

information known by the defendant concerning the

charged crimes.

6. For purposes of calculating the guidelines

promulgated by the United States Sentencing Com-

mission pursuant to 28 U.S.C. § 994, it is the defen-

dant’s position that the following guidelines from the

App. 46

2001 Sentencing Manual are used as they are more

favorable to the defendant than the current guideline

manual:

(a) Pursuant to USSG § 2Bl.l(a), the base

offense level is 6.

(b) The defendant’s position is that the loss was

less than $2.5 million and that either a 16-level

increase is appropriate under USSG § 2B1.1(b)(I) if

the loss is determined to be between $1 million and

$2.5 million or a 14-level increase is apprepriate

under USSG § 2B1.1(b)(1)(H) if the loss is determined

to be between $400,000 and $1 million.

level increase in the offense level is required by

USSG § 2B1.1(b)(2)(A).

(d) It is the Government’s position that the

offense involved sophisticated means, and that there-

fore a 2-level increase in the offense level is required

by USSG § 2B1.1(b)(8). The defendant remains free to

disagree with this 2-level increase.

(e) Because the defendant was an organizer and

leader of a criminal activity that involved five or more

participants and was otherwise extensive, a 4-level

increase in the offense level is required pursuant to

USSG § 3B1.1(a).

(f) Because the defendant willfully obstructed

and impeded the administration of justice, in the

related lawsuit brought by the SEC, a 2-level increase

App. 47

in the offense level is required by USSG Section

3C1.1.

(g) The defendant has clearly demonstrated a

recognition and affirmative acceptance of personal

responsibility for his criminal conduct. If the govern-

ment does not receive additional evidence in conflict

with this provision, and if the defendant continues to

accept responsibility for his actions within the mean-

ing of USSG § 8E1.1, a 2-level reduction in the of-

fense level is appropriate.

(h) The defendant has notified the government

timely of his intention to enter a plea of guilty, there-

by permitting the government to avoid preparing for

trial and permitting the Court to allocate its re-

sources efficiently, within the meaning of USSG

§ 3E1.1(b). An additional one-point reduction in the

offense level is therefore appropriate, provided the

Court determines the offense level to be 16 or greater

prior to the operation of USSG § 3E1.1(a).

7. On June 7, 2004, the defendant was con-

victed in the United States District Court for the

Northern District of Illinois of obstruction of justice.

On May 16, 2005, he was sentenced to ten months

imprisonment. Ordinarily, for this, a defendant would

receive 2 criminal history points and his criminal

history category would be a category II. However,

pursuant to guideline section USSG 4A1.2(a)(1),

where the prior conviction is part of the instant

offense or same course of conduct, it is not to be

considered a “prior sentence” for the purpose of

App. 48

computing the criminal history. Therefore, it is the

defendant’s position that he has 0 criminal points and

criminai history category of I. Additionally, it is the

defendant’s position that under the operation of

USSG § 5G1.3(b) that the defendant should receive

credit for the 10 months of imprisonment he has

served in connection with this June 7, 2004 sentence.

Therefore, if there is a 16-level enhancement for

loss, the base offense level is 31; and with a criminal

history category of I, the guideline range is 108-135.

If it is determined there is a 14-level enhance-

ment for loss, the base offense level is 29, and with a

criminal history category of I, the guideline range is

87-108.

8. The defendant, his attorney, and the govern-

ment acknowledge that the above calculations are

preliminary in nature and based on facts known to

the government as of the time of this Agreement. The

defendant understands that the Probation Depart-

ment will conduct its own investigation, that the

Court ultimately determines the facts and law rele-

vant to sentencing, and that the Court’s determina-

tions govern the final Sentencing Guidelines

calculation. Accordingly, the validity of this Agree-

ment is not contingent upon the probation officer’s or

the Court’s concurrence with the above calculations.

9. The defendant understands that, in impos-

ing the sentence, the Court will be guided by the

United States Sentencing Guidelines. The defendant

understands that the Guidelines are advisory, not

App. 49

mandatory, but that the Court must consider the

Guidelines in determining a reasonable sentence.

10. Errors in calculations or interpretation of

any of the guidelines may be corrected by either party

prior to sentencing. The parties may correct these

errors or misinterpretations either by stipulation or

by a statement to the probation office or Court or both

setting forth the disagreement as to the correct

guidelines and their application. The validity of this

Agreement will not be affected by such corrections,

and the defendant shall not have a right to withdraw

his plea on the basis of such corrections.

11. The defendant understands that each count

to which he will plead guilty carries a maximum

penalty of five years imprisonment and a maximum

fine of $250,000 or a maximum fine totaling twice the

defendant’s gross gain from this fraud scheme or the

gross loss caused by the fraud scheme, whichever is

greater, and any restitution that the Court may re-

quire. The total possible penalty is therefore 100 years

imprisonment, and a maximum fine of $5,250,000

(5,000,000 /s/ TPG /s/ JBS /s/ EES] or four times the

gain or loss caused by the offense. Defendant under-

stands that these counts also carry a term of super-

vised release of at least two but not more than three

years, which the court may specify.

12. The defendant understands that in accord

with federal law, Title 18, United States Code, Sec-

tion 3013, upon entry of judgment of conviction, the

defendant will be assessed $100 for each count to

App. 50

which he has pled guilty, in addition to any other

penalty imposed. The defendant agrees to pay the

special assessment(s] of $2;200 [$2000 /s/ JBS /s/ TPG

/s/ EES] at the time of sentencing with a check or

money order made payable to the Clerk of the U.S.

District Court.

13. The defendant understands that by plead-

ing guilty he surrenders certain rights, including the

following:

(a) If the defendant persisted in a plea of

not guilty to the charges against him, he would have

the right to a public and speedy trial. The trial could

be either a jury trial or a trial by the judge sitting

without a jury. The defendant has a right to a jury

trial. However, in order that the trial be conducted by

the judge sitting without a jury, the defendant, the

government, and the judge all must agree that the

trial be conducted by the judge without a jury.

(b) If the trial is a jury trial, the jury would

be composed of twelve laypersons selected at random.

The defendant and his attorney would have a say in

who the jurors would be by removing prospective

jurors for cause where actual bias or other disqualifi-

cation is shown, or without cause by exercising so-

called peremptory challenges. The jury would have to

agree unanimously before it could return a verdict of

either guilty or not guilty. The jury would be instruct-

ed that the defendant is presumed innocent, and that

it could not convict him unless, after hearing all the

evidence, it was persuaded of the defendant’s guilt

App. 51

beyond a reasonable doubt and that it was to consider

each count of the indictment separately.

jury, the judge would find the facts and determine,

after hearing all the evidence, and considering each

count separately, whether or not the judge was per-

suaded of the defendant’s guilt beyond a reasonable

doubt.

(d) At a trial, whether by a jury or a judge,

the government would be required to present its

witnesses and other evidence against the defendant.

The defendant would be able to confront those gov-

ernment witnesses and his attorney would be able to

cross-examine them. In turn, the defendant could

present witnesses and other evidence in his own

behalf. If the witnesses for the defendant would not

appear voluntarily, he could require their attendance

through the subpoena power of the Court.

(e) At a trial, the defendant would have a

privilege against self-incrimination so that he could

decline to testify, and no inference of guilt could be

drawn from his refusal to testify. If the defendant

desired to do so, he could testify in his own behalf.

14. The defendant understands that by plead-

ing guilty he is waiving all the rights set forth in the

prior paragraph. The defendant’s attorney has ex-

plained those rights to him and the consequences of

his waiver of those rights. Defendant further under-

stands that he ‘s waiving all appellate issues that

App. 52

might have been available if he had exercised his

right to trial.

15. The defendant understands that the indict-

ment and this Plea Agreement are matters of public

record and may be disclosed to any party.

16. The defendant understands that the United

States Attorney’s Office will fully apprise the District

Court and the United States Probation Office of the

nature, scope, and extent of the defendant’s conduct

regarding the charges against him, and related

matters, including all matters in aggravation and

mitigation relevant to the issue of sentencing.

17. The defendant agrees that he will fully and

truthfully cooperate with the government in any

matter which he is called upon to cooperate. This

cooperation shall include providing compiete and

truthful information in any investigation and pretrial

preparation, and complete and truthful testimony if

called upon to testify, before any federal grand jury

and United States District Court proceeding.

18. At the time of sentencing, the defendant

understands that the Government shall make known

to the sentencing judge the extent of the defendant’s

cooperation. The defendant understands that the

decision concerning what sentence to impose rests

solely with the Court.

19. Regarding restitution, the defendant under-

stands that it is the government’s position that the

number of victims is so large as to make restitution

App. 53

impractible, and that the complexity of the factual

issues in determining the identities and losses of the

individual victims would complicate or prolong the

sentencing process to a degree that the need to pro-

vide restitution is outweighed by the burden on the

sentencing process, within the meaning of 18 U.S.C.

§ 3663A(c)(3).

20. The defendant and his attorney acknowl-

edge that no threats, promises or representations

have been made, nor understandings reached, other

than those set forth in this plea declaration, to cause

the defendant to plead guilty.

21. The defendant agrees that this plea declara-

tion shall be filed and become part of the record in

this case.

22. The defendant acknowledges that he has

read this plea declaration and carefully reviewed

each provision with his attorney. The defendant

further acknowledges that he understands and volun-

tarily accepts each and every term and condition of

this plea declaration.

/s/ Frank Custable

FRANK CUSTABLE

Defendant

/s/ Terence P. Gillespie

TERENCE P. GILLESPIE

Attorney for Defendant

/s/ Earl KE. Stayhorn

EARL E. STAYHORN

Attorney for Defendant

App. 54

/s/ Jeffrey B. Steinback

JEFFREY B. STEINBACK

Attorney for Defendant

App. 55

IN THE UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

UNITED STATES

No. 05 CR 340-1

)

OF AMERICA, )

VS. Chicago, Illinois

FRANK CUSTABLE, ) May 14, 2009

1:30 p.m.

Defendant. ?

TRANSCRIPT OF PROCEEDINGS BEFORE THE

HONORABLE BLANCHE M. MANNING

APPEARANCES:

For the Government: MR. JOHN F. PODLISKA

MR. CHRISTOPHER K.

VEATCH

MS. SHOSHANA L. GILLERS

(United States Attorney’s Office,

219 South Dearborn Street,

5th Floor,

Chicago, Illinois 60604)

For the Defendant: MR. JEFFREY B. STEINBACK

MS. RACHELA. KATZ

(Jeffrey B. Steinback, Attorney at

Law,

53 West Jackson Boulevard,

Suite 1454,

Chicago, Illinois 60604)

App. 56

MR. BEAU B. BRINDLEY,

(Law Offices of Beau B. Brindley,

53 West Jackson Boulevard,

Suite 1605,

Chicago, Illinois 60604)

PATRICK J. MULLEN

Official Court Reporter

219 South Dearborn Street, Room 2128,

Chicago, Illinois 60604

(312) 435-5565

* * *

(6) THE COURT: Very well. We'll make

that correction.

MR. SMITH: Yes, Your Honor.

THE COURT: Are there any other errors,

counsel?

MR. STEINBACK: No, Your Honor.

MR. PODLISKA: We have no others, Your

Honor.

THE COURT: All right. The guideline

calculations as set forth in the presentence report are

as follows. For Counts 1 through 8, 11 through 19,

and Count 22, the base offense level is 7. With respect

to the specific offense characteristics, the offense level

would be increased by 18 due to the fact of the esti-

mated loss, the market loss caused and the profit

made, that being more than 2,500,000 and less than

$7 million. Based on the number of victims, that

being 250 victims, there’s a_ six-level increase.

App. 57

Because there was allegedly a violation of a judicial

order by Mr. Custable, there would be a two-level

increase.

The probation officer has dubbed the scheme a

sophisticated means and has added a two-level in-

crease. Because Mr. Custable was the organizer,

leader, and manager, and it was an extensive scheme

that involved at least nine individuals, it will be

further increased by four levels. There was an at-

tempt to obstruct justice during the investigation;

therefore, there would be a two-level increase, bring-

ing the adjusted offense for those counts to 41.

As to Counts 20 and 21, obstruction of justice, the

[7] base offense level is 30. The defendant supervised

the actions of other individuals in their attempt to

obstruct justice, and there would be a _ two-level

increase. The adjusted offense level for those two

counts would be 32.

In grouping them, the combined adjusted offense

level is 41. Defendant pled guilty and notified the

Government of his intent to do so, so he would be

entitled to a three-level reduction. So that brings it

down to a level 38.

All right. Counsel, do you wish to ~ are there any

legal issues that you wish to address here?

MR. STEINBACK: Your Honor, counsel

who’s present with me is going to address a couple of

the issues.

THE COURT: Fine.

App. 58

MR. STEINBACK: The rest of the matters

I will take up under 3553.

THE COURT: — All right. Counsel?

MR. BRINDLEY: Your Honor, the issue

that I’d like to address is the issue of the amount of

loss established in the presentence report. One thing

that needs to be noted and was noted in our submis-

sion to Your Honor regarding sentencing is that

certainly whatever the amount of loss is must be

mitigated and reduced by the value of services that

were literally rendered.

In this matter, I think it’s uncontested. It came

out at the trial of Mr. Heesch. I don’t think there’s

any

* * ”

184] Program. I also assisted on tutelage for

GED. | received 12 certificates during my incarcera-

tion for my participation in these programs as well as

the victim impact program.

I realize the harm that I’ve caused my family and

loved ones and others for the crimes that I commit-

ted, and I promise the Court that I will never commit

an illegal act again.

THE COURT: ‘Thank you, sir.

This case in terms of sentencing is really one of

the most interesting and difficult ones that I can

think of that I’ve heard in my 15 or so years on this

bench. I knew everybody is anticipating a ruling at

App. 59

this moment, and I’m sure that’s why you’re here. You

think I was going to rule today, and I had planned to

do that, but I really need to think about this. I need

to give it a lot of thought. I need to really think in

terms of 3553. I need to think in terms of the guide-

lines. I need to think in terms of the very positive

things that I’ve heard about the defendant. It really

takes a lot of thought here.

Consequently, I say all that to say that I’m going

to put this over for a few days so that I can give it

some very thorough consideration. I'll make it as

convenient as possible. Let’s see, today is the 14th. I

would suggest the afternoon of May 21st if you're all

available that day.

MR. PODLISKA: That’s fine.

App. 60

IN THE UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

UNITED STATES

No. 05 CR 340-1

)

OF AMERICA, )

VS. Chicago, Illinois

FRANK CUSTABLE, ) June 9, 2009

1:30 p.m.

Defendant. ?

TRANSCRIPT OF PROCEEDINGS BEFORE THE

HONORABLE BLANCHE M. MANNING

APPEARANCES:

For the Government: MR. JOHN F. PODLISKA

(United States Attorney’s Office,

219 South Dearborn Street,

5th Floor,

Chicago, Illinois 60604)

For the Defendant: MR. JEFFREY B. STEINBACK

MS. RACHELA. KATZ

(Jeffrey B. Steinback, Attorney at

Law,

53 West Jackson Boulevard,

Suite 1454,

Chicago, Illinois 60604)

PATRICK J. MULLEN

Official Court Reporter

219 South Dearborn Street, Room 2128,

Chicago, Illinois 60604

(312) 435-5565

App. 61

[2] THE CLERK: 05 CR 340, U.S.A. versus

Frank Custable for sentencing.

MR. PODLISKA: Good _ afternoon, Your

Honor. John Podliska for the United States.

THE COURT: Good afternoon.

MR. STEINBACK: Good afternoon, Your

Honor. Jeff Steinback for Frank Custable.

THE COURT: Good afternoon.

MR. STEINBACK: Mr. Custable is present

in court.

THE COURT: All right.

MS. FOWLIE: Good afternoon, Your Honor.

Rebecca Fowlie for U.S. Probation.

THE COURT: Good afternoon. This matter

is before the Court today for sentencing. Are both

sides ready to proceed?

MR. PODLISKA: Yes, Your Honor.

MR. STEINBACK: § Yes, Your Honor.

THE COURT: All right. Pve read the

presentence investigation report. Well, actually, we’ve

been over a great deal of this.

MR. PODLISKA: Yes, we have, Your Honor.

THE COURT: So I believe I’ve been over

what the guidelines are as set forth in the presentence

App. 62

report, and I believe you’ve spoken in mitigation, is

that correct?

MR. STEINBACK: I have, Your Honor.

[3] THE COURT: And you in aggravation?

MR. PODLISKA: The Government has

addressed the Court as well, and Mr. Custable was

given his opportunity to address the Court as well.

THE COURT: Is there anything else you’d

like to say, Mr. Custable?

THE DEFENDANT: Your Honor, Id like to

just apologize to the Court and the Government, of

course. I’d like to — you know, I did everything possi-

ble to make the best effort I could to help the Gov-

ernment out any way possible to make up for my

crime. I have two small children, and I’ve put them in

a very, very bad situation. I apologize to the Court.

THE COURT: All right. Thank you, Mr.

Custable.

All right. In considering the appropriate sentence

for Mr. Custable, I have to sentence him to an amount

of time that’s sufficient but not greater than neces-

sary to comply with the purposes of 3553(a)(2) of Title

18. Those are, number one, to reflect the seriousness

of the offense, to promote respect for the law, to

provide just punishment for the offense, to afford

adequate deterrence from criminal conduct, protect

the public from further crimes of the defendant, and

to provide the defendant with needed educational or

App. 63

vocational training, medical care, or other correction-

al treatment in the most effective manner.

I’ve had a considerable amount of time to think

about [4] the various considerations under section

3553 as set forth both by the defendant and by the

Government in great detail at our last hearing. As an

initial matter, I would note that the advisory guide-

line range is quite high, 262 months to 327 months.

Now, I do acknowledge that you, Mr. Custable,

have accepted responsibility for this criminal conduct

and that you were given a three-level reduction in

your offense level pursuant to section 3E1.1 of the

guidelines. You’ve provided substantial cooperation to

the Government. In fact, I think you’ve been very

forthcoming and have provided extensive cooperation.

Nevertheless, I guess, there are many things that

the Court cannot ignore. Most important is that you,

Mr. Custable, were the mastermind behind the

scheme involved in this entire offense. While you

went to great lengths at the last hearing to bleme

other people, including Individual J and co-defendant

Luce, for telling you about how one might take ad-

vantage of certain loopholes in the securities laws

and regulations, it’s one thing to know how to commit

a crime and it’s quite another to do it.

The Court finds that your attempts to deflect

blame on others, your attempts to deflect the blame

on others to be particularly disingenuous, given your

critical role in this offense. You made this scheme

happen. It wouldn’t have [5] happened without you.

App. 64

You spoke to knowledgeable individuals about

how to manipulate the law, and you played on com-

panies that were in financial difficulty and in vulner-

able positions who were willing to accept your offer of

fast cash to implement the false S-8 stock transac-

tions. You tracked down Jesse Boskoff to assist in

inflating the value of the stock after you fraudulently

acquired it, and there is evidence that you created

offshore companies to hide your assets outside the

reach of the United States courts.

So, Mr. Custable, this was not a one-time crime,

like someone going into a bank and robbing a bank

one time, which could be characterized as an anomaly

in an otherwise law-abiding life. This was a well-

thought-out crime that took place over several years

and required a great deal of planning and precise

execution. While your co-defendants were involved at

their own accord, you orchestrated this scheme every

step of the way. It simply would not have happened

without you.

Now, the Court acknowledges that it must avoid

unwarranted sentencing disparities in fashioning a

sentence for you. Although the other defendants,

except for Christine Favara, I believe, have received

varying periods of probation, any disparity between

your sentence and that of the other defendants is not

unwarranted because the other defendants were not

nearly as culpable as you are. As I stated earlier, you

[6] concocted this whole scheme. You implemented

this whole scheme underlying the instant offenses.

App. 65

You also went to great pains both in your sen-

tencing memorandum and in your presentation at the

last court hearing to tell the Court what a good son,

father, and husband you have been. Indeed, certain

aspects of your personal history point to a loyal,

caring, responsible man who would do anything to

help those that you love, but your commitment to

your family simply can’t override the detrimental

effects of your serious unlawful conduct. Indeed, your

history demonstrates that you have failed to learn

from past mistakes.

For example, in 2005, I believe it was, you were

sentenced by Judge Andersen to ten months in the

Bureau of Prisons for obstructing justice after you

misled the court and the SEC about your ability to

pay a $60,000 fine imposed in an SEC civil case, SEC

versus Custable.

Additionally, I would note as part of the instant

offense you pled guilty to Counts 21 and 22 of the

present indictment which charged obstruction of

justice and criminal contempt. These two counts stem

from your violation of an asset freeze order in another

SEC civil case which was pending before Judge

Gottschall, I believe it was.

In addition, Mr. Custable, you have several

other security laws violations, including a 1991

violation of the Indiana Securities Act, a 1992 cen-

sure by the National [7] Association of Securities

Dealers, a 1992 censure by the State of Wisconsin for

your failure to disclose your disciplinary history and

App. 66

other misrepresentations related to your sale of

mortgage-related investments. These ongoing viola-

tions indicate to the Court that a lengthier sentence

is absolutely necessary to deter you and to protect the

public from further crimes by you.

The Court has also taken into account the Gov-

ernment’s evidence that you established offshore

bank accounts to conceal assets that you had not yet

patriated as ordered by Judge Gottschall in the case

of SEC versus Custable and by the magistrate judge

in this case.

MR. STEINBACK: Your Honor, may I make

one brief point?

THE COURT: Sure.

MR. STEINBACK: The Judge Gottschall

case that Your Honor just referred to in Counts 20

and 21, we spent some time discussing that, and that

matter was brought to the full attention of Judge

Andersen.

THE COURT: Im sorry?

MR. STEINBACK: The matter of Counts 20

and 21, the substance of the matter was fully, as were

the other SEC matters, brought to the attention of

Judge Andersen in connection with Judge Andersen’s

sentencing.

THE COURT: Okay.

[8] MR. STEINBACK: Since Judge Ander-

sen’s sentencing, it isn’t like there’s been any new

App. 67

misconduct. We’re talking here about situations that

occurred essentially in 2001, and there has been

nothing since then except ongoing cooperation with

the Government and Mr. Custable working very hard

in prison and out to right these wrongs. I didn’t want

that to be lost in this.

THE COURT: Im totally aware of how

much he has cooperated with the Government. There

is no question about that, and the Court certainly

takes that into consideration. There’s no question

about that.

MR. STEINBACK: Thank you.

THE COURT: Is that all?

MR. STEINBACK: Yes, yes.

THE COURT: All right. So, Mr. Custable,

at this time I’m going to commit you to the custody of

the Bureau of Prisons in the following manner. As to

Counts 1 through 8 and 11 through 20 and Count 22,

I will impose a sentence of concurrent terms of 60

months on each count, concurrent with other counts.

As to Count 21, I will impose a sentence of 120

months concurrent with other counts. As to Count 22,

I will impose a term of 262 months concurrent with

other counts.

I’m also ordering that you pay a fine of $20,000

which will be due immediately. I will waive the inter-

est, and I will waive the — I'll waive the interest. I

find that the defendant doesn’t have the ability to pay

the interest on this. [9] I will also waive the cost of

App. 68

incarceration and supervision. You must pay a special

assessment in the amount of $2,000 which is due

immediately.

Once you are released from incarceration, you

will be placed on a concurrent term of three years

supervised release on Counts 1 through 8 and 11

through 22. Within 72 hours of your release from the

Bureau of Prisons, you are to report in person to the

probation office in the district to which you will be

released.

While you’re on supervised release, Mr. Custable,

you understand that you cannot commit any further

criminal offenses, federal, state, local, crimes of any

nature. You’re to comply with all the standard condi-

tions that this Court has adopted.

Additionally, you’re to refrain, of course, from the

unlawful use of any controlled substance. You will be

subject to a drug test within 15 days of your release

from incarceration and thereafter at the direction of

your probation officer, not to exceed 104 such tests

per year. You can never possess a firearm or other

destructive device. If called upon to do so, you are to

cooperace in the collection of a DNA sample.

Additionally, you are to provide the probation

office at their request with access to any of your

personal or business financial information. You’re not

to incur any new [10] credit charges or open addition-

al lines of credit without the approval of your proba-

tion officer unless you’re in compliance with your

payment schedule. You are to refrain from obtaining

App. 69

employment having fiduciary responsibilities without

the approval of your probation officer.

Upon completion of your term of incarceration,

any balance of your fine will become a condition of

your supervised release, and your monthly payment

schedule will be 10 percent of your net monthly

salary or income.

If you’re unemployed after the first 60 days of

supervision or if you’re unemployed for 60 days after

termination or layoff from any employment, you are

to perform at least 20 hours of community service

work per week at the direction and within the discre-

tion of the probation officer until you are gainfully

employed.

Are there any questions, sir?

THE DEFENDANT: No, Your Honor.

MR. STEINBACK: Your Honor, when we

were last before the Court and the Court asked for

time to contemplate all the materials that were

presented to it and the arguments, one of the things

that Your Honor said that I recall was that there were

many good things that Mr. Custable had undertaken

in his life.

THE COURT: That’s true.

MR. STEINBACK: And it gave the Court

some pause. [11] Essentially, Your Honor’s decision

does not provide for any departure from the bottom of

the guideline range for cooperation nor any of the

App. 70

3553(a) factors that I thought the Court was going to

mull over in the interim.

THE COURT: I did mull over it, counsel.

MR. STEINBACK: I was hopeful that there

would be some accounting for the years of cooperation

and the testimony that was truthful and candid. So

that the record is clear at least, my arguments with

respect to the involvement of others was factual, not

to suggest that Frank was not intimately involved. I

had said he was, but others who had been involved

were involved to the extent that I had outlined they

were and without objection from the Government

concerning their roles.

So if there is any disingenuity, it was entirely my

responsibility. It was not Mr. Custable saying those

things. It was my own analysis based on the infor-

mation that was contained in the 302s and the dis-

course that had occurred in the lengthy debriefings

about the roles of those people which were as sub-

stantial as I had identified them to be.

This was not in any way an effort to minimize

Frank’s involvement but to explain how this worked

as an integrated whole, not as one separate piece

where Frank was involved with one aspect, the

lawyers had engineered and written up how this

could be done, the businesses had their role, and the

market makers had their role. Each had a role in

this.

App. 71

[12] While Frank’s was the most culpable role, I

think with his cooperation and given what I regard

and what I think the Government regards as the

substantial involvement of at least one of the lawyers

and the substantial involvement of another un-

charged lawyer and the substantial involvement of

the market maker, relatively speaking, I guess I’m

asking and urging Your Honor to build in a little hope

into what is otherwise a fairly hopeless kind of sen-

tence for a man who’s in Frank’s situation.

THE COURT: Counsel, as I indicated, I did

take all of those matters into consideration. However,

I simply cannot ignore his role, the fact that he

master-minded this entire scheme. I took all of the

those matters into account that you’re talking about.

I definitely considered them, but it did not overcome

it. I think the guideline sentence is the appropriate

sentence in this case, and that will be the order.

I would advise you, Mr. Custable, you do have the

right to appeal. Should yo

This text is long and has been trimmed here. Open the source document for the complete record.

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.