# Petition for Writ of Certiorari — Custable v. United States > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386017_2732%3A1 ## Record - **Collection:** Supreme Court brief - **Document type:** Petition for Writ of Certiorari - **Published:** January 1, 2011 - **Citation:** 563 U.S. 917 ## 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 .... 9 The Circuits Have Become Deeply Di- vided On Whether The Ex Post Facto Clause Precludes Retroactive Application Of Disadvantageous Sentencing Guide- A. 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 10 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 vl 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 I 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 6 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 ae (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). LZ 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 [ 15 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). 16 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 ae (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 18 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. 19 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. 20 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. 21 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 Pb 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, 23 “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). 24 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. 26 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 29 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. 30 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). 31 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 32 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 33 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: 34 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). 35 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 36 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.’” ce 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 37 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 38 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 39 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), 40 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 14 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. {P 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 accoun [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386017_2732%3A1. Public record. Not legal advice.